[Federal Register: April 15, 1999 (Volume 64, Number 72)] [Rules and Regulations] [Page 18661-18710] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr15ap99-19] [[Page 18661]] _______________________________________________________________________ Part II Department of Labor _______________________________________________________________________ Employment and Training Administration _______________________________________________________________________ 20 CFR Part 652, et al. Workforce Investment Act; Interim Final Rule [[Page 18662]] DEPARTMENT OF LABOR Employment and Training Administration 20 CFR Part 652 and Parts 660 through 671 RIN 1205-AB20 Workforce Investment Act AGENCY: Employment and Training Administration (ETA), Labor. ACTION: Interim Final Rule; request for comments. ----------------------------------------------------------------------- SUMMARY: The Department of Labor (DOL) is issuing an Interim Final Rule implementing provisions of titles I, III and V of the Workforce Investment Act. Through these regulations, the Department implements the first major reform of the nation's job training system in more than 15 years. Key components of this reform include streamlining services through a One-Stop service delivery, empowering individuals through information and access to training resources through Individual Training Accounts, providing universal access to core services, increasing accountability for results, ensuring a strong role for Local Boards and the private sector in the workforce investment system, facilitating State and local flexibility, and improving youth programs. DATES: This Interim Final Rule will become effective on May 17, 1999. Comment Period: Comments must be submitted by July 14, 1999. The Department cannot guarantee that comments received after this date will be considered. Comments that are less than 10 pages in length may be transmitted via a facsimile at (202) 219-0323 provided that submission of written text follows. Commenters wishing acknowledgment of receipt of their comments must submit them by certified mail, return receipt requested. Also, comments may be sent electronically using the Internet web page at http://usworkforce.org. ADDRESSES: Submit written comments to the Employment and Training Administration, Workforce Investment Act Implementation Taskforce, 200 Constitution Avenue, NW, Room S5513, Washington, DC 20210, Attention: Eric Johnson. All comments will be available for public inspection and copying during normal business hours at the Employment and Training Administration, Workforce Investment Act Implementation Taskforce, 200 Constitution Avenue, NW, Room S5513, Washington, DC 20210. Copies of the Interim Final Rule are available in alternate formats of large print and electronic file on computer disk, which may be obtained at the above-stated address. The Interim Final Rule is also available on the WIA website at http://usworkforce.org In compliance with 28 U.S.C. 2112(a), the Employment and Training Administration designates the Associate Solicitor for Employment and Training Services, Office of the Solicitor, U.S. Department of Labor, 200 Constitution Avenue, NW, Room N-2101, Washington, DC 20210, as the recipient of petitions to review this Interim Final Rule. FOR FURTHER INFORMATION CONTACT: Mr. Eric Johnson, Workforce Investment Act Implementation Taskforce Office, U.S. Department of Labor, 200 Constitution Avenue, NW, Room S5513, Washington, DC 20210, Telephone: (202) 219-0316 (voice) (this is not a toll-free number) or 1-800-326- 2577 (TDD). SUPPLEMENTARY INFORMATION: Paperwork Reduction Act Certain sections of this Interim Final Rule, such as Secs. 667.300, 667.900, 668.800, and 669.570 contain information collection requirements. As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the Department of Labor has submitted a copy of these sections to the Office of Management and Budget for its review. Comments must be submitted by May 17, 1999 to: Desk Officer for the Department of Labor, Employment Training Administration, Office of Management and Budget, 725 17th Street, NW (Rm 10235), Washington DC 20503. Affected parties do not have to comply with the information collection requirements in this document until DOL publishes in the Federal Register the control numbers assigned by the Office of Management and Budget (OMB). Publication of the control numbers notifies the public that OMB has approved this information collection requirement under the Paperwork Reduction Act of 1995. An OMB control number (1205-0398) was issued for the WIA state planning guidance authorized under 20 CFR 661.220, and published at 64 FR 9402 (Feb. 25, 1999). I. Background A. WIA Principles On August 7, 1998, President Clinton signed the Workforce Investment Act of 1998 (WIA), comprehensive reform legislation that supersedes the Job Training Partnership Act (JTPA) and amends the Wagner-Peyser Act. The WIA also contains the Adult Education and Family Literacy Act (title II) and the Rehabilitation Act Amendments of 1998 (title IV). Guidance or regulations implementing titles II and IV will be issued by the Department of Education. The WIA reforms Federal job training programs and creates a new, comprehensive workforce investment system. The reformed system is intended to be customer-focused, to help Americans access the tools they need to manage their careers through information and high quality services, and to help U.S. companies find skilled workers. This new law embodies seven key principles. They are: Streamlining services through better integration at the street level in the One-Stop delivery system. Programs and providers will co-locate, coordinate and integrate activities and information, so that the system as a whole is coherent and accessible for individuals and businesses alike. Empowering individuals in several ways. First, eligible adults are given financial power to use Individual Training Accounts (ITA's) at qualified institutions. These ITA's supplement financial aid already available through other sources, or, if no other financial aid is available, they may pay for all the costs of training. Second, individuals are empowered with greater levels of information and guidance, through a system of consumer reports providing key information on the performance outcomes of training and education providers. Third, individuals are empowered through the advice, guidance, and support available through the One-Stop system, and the activities of One-Stop partners. Universal access. Any individual will have access to the One-Stop system and to core employment-related services. Information about job vacancies, career options, student financial aid, relevant employment trends, and instruction on how to conduct a job search, write a resume, or interview with an employer is available to any job seeker in the U.S., or anyone who wants to advance his or her career. Increased accountability. The goal of the Act is to increase employment, retention, and earnings of participants, and in doing so, improve the quality of the workforce to sustain economic growth, enhance productivity and competitiveness, and reduce welfare dependency. Consistent with this goal, the Act identifies core indicators of performance that State and local entities managing the workforce investment system must meet--or suffer sanctions. However, State and local entities [[Page 18663]] exceeding the performance levels can receive incentive funds. Training providers and their programs also have to demonstrate successful performance to remain eligible to receive funds under the Act. And participants, with their ITA's, have the opportunity to make training choices based on program outcomes. To survive in the market, training providers must make accountability for performance and customer satisfaction a top priority. Strong role for local workforce investment boards and the private sector, with local, business-led boards acting as ``boards of directors,'' focusing on strategic planning, policy development and oversight of the local workforce investment system. Business and labor have an immediate and direct stake in the quality of the workforce investment system. Their active involvement is critical to the provision of essential data on what skills are in demand, what jobs are available, what career fields are expanding, and the identification and development of programs that best meet local employer needs. Highly successful private industry councils under JTPA exhibit these characteristics now. Under WIA, this will become the norm. State and local flexibility. States and localities have increased flexibility, with significant authority reserved for the Governor and chief elected officials, to build on existing reforms in order to implement innovative and comprehensive workforce investment systems tailored to meet the particular needs of local and regional labor markets. Improved youth programs linked more closely to local labor market needs and community youth programs and services, and with strong connections between academic and occupational learning. Youth programs include activities that promote youth development and citizenship, such as leadership development through voluntary community service opportunities; adult mentoring and followup; and targeted opportunities for youth living in high poverty areas. Many States and local areas have already taken great strides in implementing these principles, supported by grants from the Department of Labor to build One-Stop service delivery systems and school-to-work transition systems. The Act builds on these reforms and ensures that they will be available throughout the country. The Department wishes to emphasize that it considers the reforms embodied in the Workforce Investment Act to be pivotal, and not ``business as usual.'' This legislation provides unprecedented opportunity for major reforms that can result in a reinvigorated, integrated workforce investment system. States and local communities, together with business, labor, community-based organizations, educational institutions, and other partners, must seize this historic opportunity by thinking expansively as they design a customer-focused, comprehensive delivery system. The success of the reformed workforce investment system is dependent on the development of true partnerships and honest collaboration at all levels and among all stakeholders. While the Workforce Investment Act and these regulations assign specific roles and responsibilities to specific entities, for the system to realize its potential necessitates moving beyond current categorical configurations and institutional interests. Also, it is imperative that input is received from all stakeholders and the public at each stage of the development of State and local workforce investment systems. The cornerstone of the new workforce investment system is One-Stop service delivery which unifies numerous training, education and employment programs into a single, customer-friendly system in each community. The underlying notion of One-Stop is the coordination of programs, services and governance structures so that the customer has access to a seamless system of workforce investment services. It is envisioned that a variety of programs could use common intake, case management and job development systems in order to take full advantage of the One-Stops' potential for efficiency and effectiveness. A wide range of services from a variety of training and employment programs will be available to meet the needs of employers and job seekers. The challenge in making One-Stop live up to its potential is to make sure that the State and Local Boards can effectively coordinate and collaborate with the network of other service agencies, including TANF agencies, transportation agencies and providers, metropolitan planning organizations, child care agencies, nonprofit and community partners, and the broad range of partners who work with youth. B. Early Implementation Many States have expressed interest in which features of WIA may be phased-in after approval of the State workforce investment plan, and how long they will have before they must be in full compliance. The planning guidance (which was published in the Federal Register on February 25, 1999) and regulations specify that States may submit a State workforce investment plan to the Department for approval at any time between April 1, 1999 and April 1, 2000. For those States that plan to transition to WIA prior to July 1, 2000, and do not have all policies, procedures and systems fully developed, the State may submit a Transition Plan that outlines when the State expects to have each of the WIA components (for example, the One-Stop system, or the Individual Training Account system) fully operational. All components must be in place by July 1, 2000. Under this option, the Department will conditionally approve the State workforce investment plan. The State workforce investment plan will be fully approved once all of the WIA components are in place. This option provides some flexibility for early implementing States, while ensuring that full implementation is completed for all States by July 1, 2000. States and local areas may use the current waiver authority and allowable activities under JTPA, to plan for and implement WIA reforms. Activities that are allowable during this phase include: (1) Strategic planning; (2) establishment of State and local workforce investment boards; (3) consultation with One-Stop partners; (4) establishment of ITA systems; and (5) establishment of consumer report systems. Because JTPA title II youth funds are available for obligation on April 1, 1999, the Calendar Year 1999 Summer Youth Employment and Training Program, and JTPA title II-C youth program allocations have been made and are to be allocated by States to local areas under the JTPA rules. The Department will issue transition guidance which will provide further direction and specification. A 90 percent hold harmless provision for within-State allocations for the youth and adult funding streams, that is based on allocations in the first two years of WIA operation, becomes effective in the third year a State operates under WIA. Structured to facilitate creation of new local areas by freeing States from allocation formulas established under JTPA, there is no hold harmless provision effective in the first two years of a state's WIA implementation that would cover the transition period from JTPA. The lack of a hold harmless provision during this period could result in some instability during the early stages of WIA implementation. However, Governors do have options available to promote stability. For program year 1999 only, the Governor may elect to utilize the [[Page 18664]] JTPA hold harmless provision. However, in doing so, the two year hold harmless is delayed for one year. Therefore, if a State elects to use this option, the two year hold harmless would apply for PY 2000 and 2001 unless Congress decides to address this area with a technical amendment. Also, Governors may use some of their 15 percent State reserve funds to assist local areas that are negatively impacted by the WIA funding formulas, or choose to adopt an adult or youth within-State allocation formula that incorporates additional targeting factors, provided for in sections 128 and 133 of WIA. C. Rule Format The format, as well as the substance, of the Interim Final Rule, reflects the Administration's commitment to regulatory reform and to writing regulations that are reader-friendly. The Department has attempted to make these regulations clear and easy to understand, as well as to anticipate issues that may arise and to provide appropriate direction. To this end, the regulatory text is presented in a ``question and answer'' format. The Department has organized the regulations in a way that will help those who must implement the new system to recognize the various steps they must take as they develop the organization and services that make up the workforce investment system. In many cases, the provisions of WIA are not repeated in these regulations. As requested by some interested parties, however, in a number of instances, it was determined that the regulations would provide context and be more reader-friendly if the Act's provisions were included in an answer rather than merely cross-referencing the statute. Section 506(c)(1) of the Act requires the Secretary of Labor to issue this Interim Final Rule implementing provisions of the WIA under the Department's purview within 180 days of enactment. WIA also requires that final regulations be published by December 31, 1999. Under Secretary of Labor's Order No. 4-75, the Assistant Secretary for Employment and Training has been delegated the responsibility to carry out WIA policies, programs, and activities for the Secretary of Labor. Given the short time frame imposed, the Department has employed a variety of means to initiate extensive coordination with other Federal agencies that have roles and responsibilities under the Workforce Investment Act. In addition, the Department of Labor, the Department of Education, the Department of Health and Human Services, the Department of Transportation, and the Department of Housing and Urban Development continue to meet on a regular basis to resolve issues surrounding the development of the Interim Final Rule and WIA implementation. The Department also requested and received input from a broad range of sources regarding guidance on how to comply with a number of WIA statutory provisions. The Department solicited broad input on WIA implementation through a variety of mechanisms: establishing a website to encourage input; publishing a Federal Register notice on September 15, 1998, conducting regional and national panel discussions in October 1998; publishing a White Paper announcing goals and principles governing implementation; posting issues on the usworkforce.org website; sharing a discussion draft of regulatory issues with stakeholders; holding town hall meetings across the country in December 1998; conducting several workgroups in December 1998; and issuing draft Planning Guidance in December 1998. A number of the suggestions received are discussed in the Summary and Explanation of the individual provisions of the Interim Final Rule. However, because of the large volume of suggestions received and the short time allowed for preparation of the regulations, as well as the fact that suggestions continue to be received, it was not possible to address each one. Where input has not been addressed, it will be considered along with comments on the Interim Final Rule before publication of the Final Rule. Also, the Department will ensure that there are other opportunities for public input and dialogue on the important issues surrounding implementation of the Workforce Investment Act prior to the publication of the Final Rule. The Department has determined that this Interim Final Rule, as promulgated, complies with the WIA statutory mandate and provides effective direction for the implementation of WIA programs. ETA will review all comments received in the development of and response to the Interim Final Rule, as well as the experience of early implementing States, in considering what further action is necessary in promulgating a Final Rule. II. Summary and Explanation This section describes and explains the specific provisions of the Interim Final Rule. The explanatory text, in general, adheres closely to the corresponding WIA statutory and regulatory language. A supporting rationale is provided in those instances where the Rule promulgates specific provisions to fulfill the requirements of the WIA statute. The Department has set regulations only where they are necessary to clarify or to explain how the Department intends to interpret the WIA statute, to provide context for interpretations or to provide a clear statement of the Act's requirements. In several instances--for example, the Indian and Native American Programs, and Migrant and Seasonal Farmworker Programs--the regulations were developed in consultation with advisory councils and are more comprehensive in order to assist those grantees. Consistent with the Act, the Interim Final Rule provides the States and local governments with the primary responsibility to initiate and develop program implementation procedures and policy guidance regarding WIA administration. The Department has not defined what constitutes many of the activities under the Act in order to provide policy-making flexibility to States and local areas. Section 661.120 formalizes this flexibility in the regulations. Description of Regulatory Provisions The Rule adds 12 new parts to the Code of Federal Regulations, and a new subpart to the existing Wagner-Peyser Act regulations. Parts 660- 672 are organized by subject matter; for example, 661 describes State and local system design, 667 contains administrative requirements applicable to WIA title I funds, and 669 describes requirements particularly applicable to Migrant and Seasonal Farmworker programs. This discussion section follows that organizational structure. Part 660--Introduction to the Regulations for the Workforce Investment Systems Under Title I of the Workforce Investment Act Part 660 discusses the purpose of title I of the Workforce Investment Act, explains the format of the regulations governing title I, and provides definitions which are not found in the Act. Sections 101, 142, 166(b), 167(h) 301 and 502 of the Act contain additional definitions. Among the regulatory definitions, the Department has defined the term ``register'' in order to clarify that programs do not need to register participants until they receive a core service beyond those that are self-service or informational. This point in time also corresponds to the point when the EEO data must be collected, when the eligibility definition begins, and when the participants are counted for performance measurement purposes. [[Page 18665]] Part 661--Statewide and Local Governance of the Workforce Investment System Under Title I of the Workforce Investment Act Introduction This part covers the critical underpinnings of how the workforce investment system is organized under WIA at the State and local levels. Specifically, it consists of four subparts--General Governance, State Governance, Local Governance Provisions and Waiver Provisions. The General Governance subpart broadly describes the WIA system and sets forth the roles of the governmental partners. The State and local subparts cover the State and local workforce investment boards and the designation process, including alternative entities, and the planning requirements. The waiver subpart discusses the processes for obtaining general and work-flex waivers. Subpart A--General Governance Provisions 1. Subpart A describes the workforce investment system, and sets forth the roles of the government partners in the system: the Federal government, State governments and local governments. The workforce investment system is the method of delivery of workforce investment activities to individuals under title I of WIA, and is composed of State and local workforce investment boards, local workforce investment areas, and the One-Stop system. Through the One-Stop system, the workforce investment system is a gateway to a wide variety of employment, training, educational and other human resource programs. In the Department's view, close cooperation and coordination among the Federal, State and local government partners are essential to the system's success in providing services to those who need them. Sections 661.110 and 661.120, describe, in general terms, the roles of the government partners. The Department sees one of its roles as Federal partner as providing leadership, guidance and support to the system, so that State and local governmental partners can better respond to the needs of customers. To that end, the WIA regulations are intended to provide a framework in which States and local partners may design systems and deliver services in ways that best achieve the goals of WIA based on particular need. Thus, whenever possible, items such as design options and categories of service are not narrowly defined in the regulations. Section 660.120 provides authority to State and local governments to establish their own policies, interpretations, guidelines and definitions relating to program operations under title I, as long as they are not inconsistent with WIA or the regulations, and, in the case of local governments, not inconsistent with State policies. To assist with such interpretations, the Department, with the participation of other Federal agencies, as appropriate, will issue technical assistance guidance to help States and localities interpret WIA and the regulations. Such guidance is not intended to limit State flexibility, but rather is intended to provide helpful models on which States and local governments can rely to ensure that their own interpretations are not inconsistent with the Act and regulations. Subpart B--State Governance Provisions 1. State Workforce Investment Board: Sections 661.200--661.210 describe the membership requirements and responsibilities of the State Workforce Investment Board (State Board) and procedures regarding designation of an alternative entity to perform the functions of the State Board. The role of the State Board is to assist the Governor in the development of the State workforce investment plan (State Plan) and to carry out the additional functions described in WIA section 111(d). Section 661.200 describes the membership requirements of the State Board. This section clarifies that State Boards must contain two or more members from each of the representative categories described in sections 111(b)(1)(C)(iii)-(v) of WIA. These categories are labor organizations, individuals and organizations that have experience with youth activities, and individuals and organizations that have experience and expertise in the delivery of workforce investment activities. The Rule requires that, in appointing representatives with experience in workforce investment activities, special consideration be given to chief executive officers of community colleges and community- based organizations in the State. The Department acknowledges the special expertise that the community college system brings to the workforce investment system. The Department foresees a strong role for community colleges across states and in local areas and encourages states and local areas to appoint presidents and executive officers of the state community college system and local community colleges to the State and Local Workforce Investment Boards. The Department also emphasizes the importance of including the director of the state agency responsible for TANF on the State Board, in order to foster linkages between WIA and TANF, and to facilitate participation of TANF in One- Stop systems in the state. The Department also received suggestions concerning the representation of the State Vocational Rehabilitation Services program, a required One-Stop partner, on the State Board. Individuals with disabilities represent a large untapped potential workforce, and the workforce needs of this group is of significant importance to the Department and other Federal agencies. To signal the importance of this issue, the Presidential Taskforce on Employment of Adults with Disabilities was formed in 1998. In light of this emphasis on increasing the employment rate for individuals with disabilities as well as the complexity of the organizational requirements applicable to this program, the director of the designated State unit under section 101(a)(2)(B)(ii)(II) of the Rehabilitation Act, if a State has such a unit, should be considered the lead State agency official with responsibility for the State's vocational rehabilitation program and, therefore, should serve on the State Board. In addition, a program operated by a State agency for the blind or by a designated State unit for the blind should be considered a separate program for purposes of appointing members to the State Board under WIA section 111. Among the contributions the unit head(s) would make as a member of the State Board is assisting in the development of the State performance measures. The expertise of the unit head(s) would be particularly useful since the Department, in coordination with the Department of Education, will be working on the development of an additional performance indicator focusing on individuals with disabilities that may be used by States under title I of WIA. The Department of Labor and the Department of Education will work with the States as they develop and implement their State plans to ensure the effective delivery of services under the WIA to individuals with disabilities. The Department will also be conducting a study of WIA implementation that will include a review of the manner and extent to which Vocational Rehabilitation programs are integrated in the workforce investment system, and how effectively the system serves individuals with disabilities. As discussed below, regarding local workforce investment board (Local Board) membership requirements, the [[Page 18666]] Department received substantial input expressing concern that the statutory membership requirements relating to the State and local boards will lead to large, unmanageable State and Local Boards. In contrast, others thought larger boards would be better in representing a wider array of interests. The Department recognizes this concern, and, although constrained by the statutory requirements that each category of membership contain more than one representative and a business majority, the Department has avoided adding additional requirements relating to the number of members required. The Department believes that problems associated with large board size can be addressed in a number of ways, such as the use of committees. The Department will be providing technical assistance on creative approaches State and Local Boards may wish to consider in addressing this issue. 2. Alternative Entities: The Department believes that changing from existing JTPA boards and councils to State Boards meeting the requirements of WIA section 111(b) is essential to the reforms of WIA. The Department encourages all States to create new, fully functional State Boards as early as possible, and is committed to providing assistance to States to make such changes. In order to accommodate States that have already begun to reform their boards prior to the enactment of WIA, the statute provides an option to use an existing entity to carry out the functions of the State Board. Section 661.210 describes the requirements relating to the appointment of this alternative entity. Because of questions regarding the application of these requirements, paragraph (b) of Sec. 661.210 makes clear that an alternative entity must meet each of the three criteria set forth in WIA section 111(e). The three criteria are that the entity: (1) Was in existence on December 31, 1997; (2)(a) was established pursuant to section 122 or title VII of the Job Training Partnership Act, as in effect on December 31, 1997, or (b) is substantially similar to the State Board as described in subsections (a), (b), and (c) of WIA section 111; and (3) includes representatives of business in the state and representatives of labor organizations in the state. An entity which fails to meet any one of the criteria is not eligible to perform the functions of the State Board. A key requirement for an alternative entity that was not created under JTPA, is that it be substantially similar to the Boards required under WIA. The Department considered various ways to define the term ``substantially similar'' but, in the end, decided to leave the term undefined. All groups required for membership on Workforce Investment Boards are equally important and the Department sees alternative entities as a transitional phase during which states can operate until a new Board is appointed. While an alternative entity need not contain the identical membership structure required of State Boards, in the Department's view it is important that each of the groups listed in WIA section 111(b) have a role in the workforce investment system if the system is to be successful. Therefore, the Rule requires that if the Governor identifies an alternative entity, the State Plan must explain how the State will ensure the ongoing participation of any omitted membership groups in the functions of State workforce investment system. While this Rule does not mean that omitted groups must be seated on an alternative entity, it does require that the State Plan describe how these groups will have an opportunity for meaningful input into decisions made by the State Board. Paragraph (d) of Sec. 661.210 amplifies the requirement that an alternative entity must have been established by and in existence on December 31, 1997. Because of this requirement, modifications to the alternative entity are not allowed; a change to the membership structure after December 31, 1997 will invalidate the entity's eligibility as an alternative entity. The membership structure is not considered to be changed when an existing member leaves the board and a replacement member is appointed. However, the membership structure is considered to be changed when a change is made to the organizational structure of the State Board that requires a change (whether the change is formally made or not) in the State Board's charter or to a similar document that defines the organizational structure of the State Board, such as appointing members of a category not previously represented. In such a case, the entity would no longer be eligible to perform the functions of the State Board and a new entity, meeting all the requirements of section 111 of WIA must be created. This prevents piecemeal modification of alternative entities that would add certain section 111(b) membership categories but not others. 3. State Workforce Investment Plan Requirements: Sections 661.220 and 661.230, describe the requirements for submission, approval and modification of the State workforce investment plan. The State Plan must be submitted in accordance with planning guidelines to be issued by the Secretary, and must be developed through an open public comment process. The State Plan must document the timeline and the steps taken to ensure the opportunity for meaningful public comment. The Department intends that the information contained in the State Plan be subject to the broadest possible stakeholder involvement in policy development and the broadest possible range of public comment. The planning guidelines set forth the information needed for the Secretary to make an informed judgment as to whether a State Plan is consistent with WIA. The Rule restates the statutory language regarding the process for State Plan approval. All plans must be approved within 90 days unless the Secretary determines in writing that the State Plan is inconsistent with the provisions of title I of WIA and its implementing regulations or it does not satisfy the State Plan approval requirements of the Wagner-Peyser Act and its implementing regulations. This reflects changes made by the technical corrections added in the Omnibus Appropriations Act for FY 1999, which clarified that the State plan will not be approved if it fails to meet the requirements of either WIA or the Wagner-Peyser Act rather than only when it fails to meet both. Failure to have completed negotiations with the Secretary of Labor on performance measures means the plan is not consistent with title I of WIA. A state's failure to have an effective strategy in place to ensure the development of a fully operational One-Stop delivery system in the state also means the state plan is not consistent with WIA title I. An important part of this strategy is an impasse procedure designed to facilitate collaboration and coordination between One-Stop partners at the local level. 4. State Plan Modifications: Section 661.230 provides the approval process for State Plan modifications. It clarifies that modifications may be made at any time during the life of the State Plan, and must be made upon certain conditions. Because the State Plan is a five year strategic plan and designed to be a living document, it is likely that assumptions based upon such things as State or Federal policy, economic conditions, performance goals, State and local organizational structures and/or State and local needs may change during the course of the State Plan. The provision for a five year State Plan was intended to reduce paperwork burdens on the States. Accordingly, only significant changes require a modification. Examples are: changes in performance indicators, changes in the [[Page 18667]] methodology used to determine local allocation of funds, or changes to the membership structure of the State Board or alternative entity. Modifications triggered by significant changes will be subject to the same review process as the original State Plan. While it is impossible to foresee all such changes that may occur during a five year period, through timely modifications of the State Plan, State strategies can continue to guide Local Board policy development. The Secretary must approve all State Plan modifications unless the disapproval criteria in Sec. 661.220 are met. 5. Local Workforce Investment Area Designation Requirements: Sections 661.250 through 661.280 discuss the requirements applicable to the designation of local workforce investment areas. The Rule tracks the statutory language regarding the State Board recommendation and Governor's approval process for designation. It refers to the statutory provisions regarding automatic designation of areas with a population of 500,000 or more (that request designation) at section 116(a)(2) of WIA and temporary and subsequent designation of JTPA service delivery areas meeting certain performance criteria (that request designation) at section 116(a)(3) of WIA. The statute prohibits the Department from further regulating on the standards and criteria for temporary and subsequent designation and requires the Department to provide the States with technical assistance to make the designations. The regulations restate the statutory language regarding the rights of areas to appeal the denial of a request for automatic or temporary and subsequent designation as a local workforce investment area. 6. Regional Planning Activities: Section 661.290 describes the circumstances in which the State may require Local Boards to take part in regional planning activities. This provision permits States to undertake methods to improve performance across area boundaries by requiring local areas to engage in a regional planning process to share employment-related information and to coordinate the provision of local services pursuant to that regional planning. The regulation follows the statutory language regarding the requirements for regional planning, and permits regional planning to occur across State boundaries. Section 661.290 clarifies that Local Boards which are part of State-designated regional planning areas must participate in regional planning activities. However, to strike a balance, the regulation also provides that regional planning and performance requirements may not substitute for the local planning and performance requirements unless the affected chief elected officials and the Governor agree to that substitution. Subpart C--Local Governance Provisions This Subpart covers the designation of local workforce investment areas and the responsibilities and membership requirements of local boards. 1. Role of the Local Workforce Investment Board: Under WIA, the Local Board, in partnership with the chief elected official, is responsible for setting policy and overseeing workforce investment programs for a workforce investment area. Sections 661.300 and 661.305 reiterate the roles and responsibilities of Local Boards. There was some concern expressed that the Local Board activities be carried out in an open manner which encourages public comment and participation. The Department responds to these concerns by restating the WIA section 117(e) ``sunshine provision'' in Sec. 661.305(d). 2. Local Boards as Service Providers: Section 117(f)(1) of WIA places limitations on Local Boards' direct provision of core services, intensive services, or training services. In response to requests for clarification, Sec. 661.310(c) specifies that the prohibition related to providing core, intensive and training services by the Local Board also applies to the staff of the Local Board. This regulation also cites the statutory provision allowing a Local Board to be designated or certified as a One-Stop operator only with the agreement of the chief elected official and the Governor. 3. Membership Requirements: Section 661.315 of the regulations addresses the membership requirements for the Local Board that are contained in section 117(b) of WIA. There were suggestions on several issues related to the required membership of the Local Board, particularly as to how the terms ``representatives'' and ``including'' would be defined. Representatives: Some parties expressed the view that the term ``representatives,'' as used in section 117(b)(2)(A) (ii)-(v) of WIA, requires that there be multiple representatives from each of the specified entities. While others wanted a more restrictive definition, the regulations specify that the Local Board must contain two or more members representing the categories described in section 117(b)(2)(A) (ii)-(v) of WIA. These categories cover different types of local educational entities, labor organizations, community-based organizations (including those representing individuals with disabilities and veterans), and economic development agencies. Including: There also were many questions on the meaning of the term ``including'' as it is used in WIA section 117(b). Some expressed the view that each of the entities following the word ``including'' in section 117(b)(2)(A)(ii), (iv), and (v) of WIA must be a required member of the Local Board, while others disagreed with this interpretation. The regulations address this issue by requiring that special consideration be given to including representatives of community colleges in the selection of members representing local educational entities; to including representatives of organizations representing individuals with disabilities and veterans, in selection of members representing community-based organizations; and representatives of private sector economic development entities in selecting representatives of economic development agencies. The regulations do not mandate a membership seat for each such entity. Board Size: The Department heard many concerns that the statutory membership requirements relating to Local Boards will lead to large, unwieldy, and unmanageable Local Boards. The Department recognizes this concern, and while the Department is constrained by the statutory requirements that each category of membership contain more than one representative and that the board contain a business majority, the Department has not added additional regulatory requirements on the number of members required. The Department believes that problems associated with large board size can be addressed in a number of ways, such as through the use of committees. The Department will provide technical assistance on creative approaches State and Local Boards may wish to consider in addressing this issue. 4. Alternative Entity: The Department believes that changing from existing JTPA Private Industry Councils to local workforce investment boards is essential to the reforms of WIA. The Department strongly encourages all eligible areas to create new, fully functional Local Boards as early as possible, and is committed to providing assistance to facilitate such changes. However, the Department recognizes that the statute provides an option to use an existing entity to carry out the functions of the Local Board. Section 661.330 describes the requirements relating to the appointment of such an alternative entity. Because of questions regarding [[Page 18668]] the application of these requirements, paragraph (a) of Sec. 661.330 makes clear that an alternative entity must meet each of the four criteria set forth in WIA section 117(i), including the requirement that the alternative entity must have been established by December 31, 1997. An entity which fails to meet any one of these criteria is not eligible to perform the functions of the Local Board. While an alternative entity need not contain the identical membership structure as that required of Local Boards, section 117(i)(1)(c)(ii) does require the alternative entity to be substantially similar to the Local Boards. In the Department's view it is extremely important that each of the groups listed in section 117(b)(2) have an active role in the workforce investment system if the system is to be successful. Therefore, the Rule requires that the alternative entity be identified in the State Plan and the local workforce investment plan, and that these workforce investment plans explain the manner in which the Local Board will ensure the ongoing participation of any omitted membership groups in the local workforce investment area. While this Rule does not require that such groups be seated on the Board, it does require the State and local workforce investment plans to describe the means by which such groups will have periodic regular meaningful opportunities for input into decisions made by the Local Board. Paragraph (c) of Sec. 661.330 amplifies the requirement that an alternative entity must have been established by and in existence on December 31, 1997. Because of this requirement, modifications of the alternative entity are not allowed; any change to the membership structure will invalidate the entity's eligibility as an alternative entity. The membership structure is not considered to be changed when an existing member leaves the Local Board and a replacement member is appointed. However, it is considered to be changed when a change is made to the organizational structure of the Local Board that requires a change (whether the change is formally made or not) in the Local Board's charter or to a similar document that defines the organizational structure of the Local Board, such as appointing members of a category not previously represented. In that case, the entity is no longer eligible to perform the functions of the Local Board and a new entity, meeting all the requirements of section 117 of WIA must be created. This prevents piecemeal modification of alternative entities that would add certain WIA section 117(b)(2) membership categories, but not others. 5. Youth Council: Section 117(h) of WIA establishes youth councils as a subgroup of the Local Boards. Youth councils are an innovative new entity intended to broaden participation in the design and delivery of youth services at the local level. Section 661.335 describes the relationship of the youth council to the Local Board as well as the membership requirements and Sec. 661.340 explains the responsibilities of the youth council, as described in section 117(h) of WIA. 6. Local Workforce Investment Plan: Sections 661.345 and 661.350 describe the requirements for the submission of the local workforce investment plan (Local Plan) and the contents of the Local Plan. Section 661.350 enumerates the Local Plan components outlined in WIA section 118(b). The Local Plan also must include information on the process for directing the One-Stop operators to give priority to low- income individuals and recipients of public assistance in the event that adult funds are limited, as required by WIA section 134(d)(4)(E). This priority is discussed in more detail under Sec. 663.600. Section 118 of WIA indicates that Local Plans cover a five year period. Some parties suggested that modifications to the local plan will likely be needed within the five year span. The Department concurs, and the regulations permit the Governor to require local plan modifications and, at Sec. 661.355, offer a few examples of when such modifications might be required by the Governor. Section 661.355 states that the Governor must establish procedures for Local Plan modifications. Subpart D--Waivers and Workflex Subpart D indicates the elements of WIA and the Wagner-Peyser Act that may and may not be waived under either the General Waiver Authority or the Work Flex provision. The purpose of the general statutory and regulatory waiver authority provided by section 189(i)(4) and workforce flexibility waiver authority provided at section 192 is to give flexibility to States and local areas in the design and implementation of consolidated workforce development programs under WIA. The regulations specify that the Secretary does not intend to waive any of the key elements of the reform principles embodied in the Act (listed in the background section of this preamble and in Sec. 661.400), except in extremely unusual circumstances. It also specifies that the provisions that incorporate the reform principles embodied in the Act may not be waived under the Work Flex authority. Part 662--Description of the One-Stop System Under Title I of the Workforce Investment Act Introduction The establishment of a One-Stop delivery system for workforce development services is a cornerstone of the reforms contained in title I of WIA. This delivery system streamlines access to numerous workforce investment and educational and other human resource services, activities and programs. The Act's requirements build on reform efforts that are already underway in all States through the Department's One- Stop grant initiative. Rather than requiring individuals and employers to seek workforce development information and services at several different locations, which is often costly, discouraging and confusing, WIA requires States and communities to integrate multiple workforce development programs and resources for individuals at the ``street level'' through a user friendly One-Stop delivery system. This system will simplify and expand access to services for job seekers and employers. The Act specifies nineteen required One-Stop partners and an additional five optional partners to streamline access to a range of employment and training services. WIA requires coordination among all Department of Labor funded programs as well as other workforce investment programs administered by the Departments of Education, Health and Human Services, and Housing and Urban Development. WIA also encourages participation in the One-Stop delivery system by other relevant programs, such as those administered by the Departments of Agriculture, Health and Human Services, and Transportation, as well as the Corporation for National and Community Service. In addition, local areas are authorized to add additional partners as local needs may require. All of these Federal Agencies will continue to work together to ensure effective communication and collaboration at the Federal level in support of One-Stop service delivery. Subpart A--One-Stop Delivery System 1. Structure: Subpart A describes the structure of a One-Stop delivery system. The regulation, at Sec. 662.100, describes the One- Stop system as a seamless system of service delivery that is created through the collaboration of entities responsible for separate workforce development funding streams. The One-Stop system is designed to enhance access to services and improve outcomes for individuals seeking [[Page 18669]] assistance. The regulation specifically defines the system as consisting of one or more comprehensive, physical One-Stop centers in a local area that provides the core services specified in WIA section 134(d)(2) and that provide access to the other activities and programs provided under WIA and by each One-Stop partner. In locating each comprehensive center, Local Boards should coordinate with the broader community, including transportation agencies, to ensure that the centers are accessible to their customers. In addition to the comprehensive centers, the regulation notes that WIA allows for three other arrangements to supplement the comprehensive center. These supplemental arrangements include: (1) A network of affiliated sites that provide one or more of the programs, services and activities of the partners; (2) a network of One-Stop partners through which the partners provide services linked to an affiliated site and through which all individuals are provided information on the availability of core services in the local area; and (3) specialized centers that address specific needs. In essence, this structure may be described as a ``one right door and no wrong door'' approach. One-Stop partners have an obligation to ensure that core services that are appropriate for their particular populations are made available at one comprehensive center. If an individual enters the system through one of the network sites rather than the comprehensive One-Stop center, the individual may still obtain certain services at the network site and information about how and where all the other services provided through the One-Stop system may be obtained. Subpart B--One Stop Partners 1. Responsibilities: Subpart B identifies the One-Stop partners and their responsibilities in the One-Stop delivery system. The required partners are entities that carry out the workforce development programs. They are specifically identified in section 121(b)(1) of WIA and Sec. 662.200. The regulation at Sec. 662.200(a)(1)(i through vii) separately specifies the funding streams under title I that are included as required partners. The regulations also identify the other required programs, with some clarification of the particular sections of certain Acts (for example, the Vocational Rehabilitation Act and the Carl D. Perkins Act) that authorize the program that must participate. Section 662.210 identifies additional partners that may be a part of the One-Stop system at local option. Entities--The regulation at Sec. 662.220 provides a general definition of the ``entity'' that carries out the specified programs and serves as the partner. In light of the responsibilities of the partners, which are described below and include decisions regarding the use and administration of program resources, the regulation defines the entity as the grant recipient or other entity or organization responsible for administering the program's funds in the local area. The term ``entity'' does not include service providers that contract with or are subrecipients of the local entity. The regulation notes that for programs that do not have local administrative entities, the responsible State agency may be the One-Stop partner. In addition, the regulation specifies the appropriate entity to serve as partner for the Adult Education and Vocational Rehabilitation programs. Entities that serve as the partner under the Indian and Native American, Migrant and Seasonal Farmworker, Job Corps, and Youth programs are identified in the sections of the regulations applicable to those programs. Partner Responsibilities--This subpart also describes and elaborates on the statutory responsibilities of the partners. The regulation at Sec. 662.230 identifies the five provisions of the Act that describe these responsibilities. One of the key responsibilities of each partner is to make available at the comprehensive center through the One-Stop system appropriate core services that are applicable to the partner's program. The regulation at Sec. 662.240 lists the core services that are described in section 134(d)(2) of WIA, and defines ``applicable'' to mean the services from that list that are authorized and provided under the partner programs. The extent to which core services are applicable to a partner program, as well as the manner in which services are provided, are determined by the program's authorizing statute. Availability of Services--The regulation at Sec. 662.250 describes where and to what extent the One-Stop partners must make available the applicable core services. Since section 134(c) of WIA requires that core services be provided, at a minimum, at one comprehensive physical center, the regulation requires that the applicable core services attributable to the partner's program be made available by each partner at that comprehensive center. To avoid duplication of services traditionally provided under the Wagner-Peyser Act, this requirement is limited to those applicable core services that are in addition to the basic labor exchange services traditionally provided in the local area under the Wagner-Peyser program. While a partner would not, for example, be required to duplicate an assessment provided under the Wagner-Peyser Act, the partner would be expected to be responsible for any needed assessment that includes additional elements specifically tailored to participants under the partner's program. However, the adult and dislocated worker program partners are required to make all of the core services available at the center. Flexibility--The regulations also provide significant flexibility regarding how the core services are to be made available at the One- Stop center by allowing for services to be provided through appropriate technology at the center, through co-location of personnel, cross- training of staff, or through contractual or other arrangements between the partner and the service providers at the center. 2. Proportional Responsibility: The regulation also provides that the responsibility for the provision of and financing for applicable core services is to be proportionate to the use of services at the center by individuals attributable to the partners' programs. The regulation further provides that the individuals attributable to a partners' program may include individuals referred through the center and enrolled in the partner's program after the receipt of core services, individuals enrolled prior to the receipt of core services, individuals who meet the eligibility criteria for the partner's program and who receive an applicable core service, or individuals who meet an alternative definition described in the Memorandum of Understanding (MOU), described in subpart C. This ``proportionate responsibility'' provision is intended to provide an equitable principle for sharing responsibility among the partners. The regulation provides that the specific method for determining proportionate responsibility (for example, surveys) must be described in the MOU. Additional Sites--The regulation provides that core services may be provided at sites in addition to the comprehensive center under the MOU. Therefore, it is not required that partners provide applicable core services exclusively at a One-Stop center. If an individual seeks core services at the One-Stop center rather than at the partner's site, they should be made available to him or her without referral to another location, but a partner is not required to route all of its participants through the comprehensive One-Stop center. Access to Services--The regulation at Sec. 662.260 provides that, in addition to the provision of core services, the One- [[Page 18670]] Stop partners must use the One-Stop system to provide access to the partners' other activities and programs. This access must be described in the MOU. This requirement is essential to ensuring a seamless, comprehensive workforce development system that identifies the service options available to individuals and takes the critical next step of facilitating access to these services. 3. Cost Sharing: The regulation at Sec. 662.270 provides that the particular arrangements for funding the services provided through the One-Stop system and the operating costs of the One-Stop system must be described in the MOU. Each partner must contribute a fair share of the operating costs based on the use of the One-Stop delivery system by individuals attributable to the partner's program. This is an equitable principle and there are a number of methods that may be used for allocating costs among partners that are consistent with this principle and the OMB circulars. To promote efficiency and optimal performance, partner contributions for the administrative costs of the system may be re-evaluated annually through the memorandum of understanding process. The regulation identifies a number of methodologies, including cost pooling, indirect cost allocation, and activity based cost allocation plans, that may be used. The Department, in consultation with other affected Federal agencies, intends to issue guidance or technical assistance relating to cost allocation methods to assist in this area. Allocation Process--The regulation at Sec. 662.280 clarifies that the requirements of each partner's authorizing legislation continue to apply under the One-Stop system. Therefore, while the overall effect of linking One-Stop partners in the One-Stop system is to create universal access to core services, the resources of each partner may only be used to provide services that are authorized and provided under the partner's program to individuals who are eligible under the program. As noted above, consistent with this principle, there are a variety of methods for allocating costs among programs. In sum, this regulation is intended to clarify that participation in the One-Stop delivery system is a requirement that is in addition to, rather than in lieu of, the other requirements applicable to the partner program under each authorizing law. Subpart C--Memorandum of Understanding Subpart C describes the operation of the local One-Stop system. Section 662.300 addresses the Memorandum of Understanding (MOU) that must be executed between the Local Board and the One-Stop partners. Section 662.310 states that the local areas may develop a single umbrella MOU covering all partners and the Local Board, or separate MOU's between partners and the Local Board. In many areas, the umbrella approach may be the preferred means to facilitate a comprehensive and equitable resolution of the operational issues relating to the One- Stop. The regulation also emphasizes that it is a legal obligation for the partners and the Local Board to engage in good faith negotiation and reach agreement on the MOU. The partners and the Local Boards may seek the assistance of the appropriate State agencies, the Governor, State Board or the appropriate parties in reaching agreement. The State agencies, the State Board, and the Governor may also consult with the appropriate Federal agencies to address impasse situations after exhausting other alternatives. If an impasse has not been resolved, parties that fail to execute an MOU may not be permitted to serve on the Local Board. In addition, if a Local Board has not executed an MOU with all required parties, the local area is not eligible for State incentive grants awarded for local coordination. Subpart D--One-Stop Operator This subpart addresses the role and selection of One-Stop operators. The operators are responsible for administering the One-Stop centers and their role may range from simply coordinating service providers in the center to being the primary provider of services at the center. The role is determined by the Local Board. In areas where there is more than one comprehensive One-Stop center, there may be separate operators for each center or one operator for multiple centers. The operator may be selected by the Local Board through a competitive process, or the Local Board may designate a consortium that includes three or more required One-Stop partners as an operator. The Local Board itself may serve as a One-Stop operator only with the consent of the chief elected official and the Governor. This subpart also addresses the ``grandfathering'' of existing One-Stop operators. The regulations provide some continuity for areas that have already established One-Stop systems while ensuring that fundamental features of the new One-Stop system are incorporated. A local area does not have to comply with the One-Stop operator selection procedures if the One- Stop delivery system, of which the operator is a part, existed before August 7, 1998 (the date of the WIA's enactment); if the One-Stop system includes all of the required One-Stop partners; and if an MOU is executed consistent with the requirements of the Act. Part 663--Adult and Dislocated Worker Activities Under Title I of the Workforce Investment Act Introduction This part of the regulations describes requirements relating to the services that are available for adults and dislocated workers. Along with Wagner-Peyser labor exchange services, the required adult and dislocated worker services, described as core, intensive, and training services, form the backbone of the One-Stop delivery system. The WIA goal of universal access to core services is achieved through close integration of services provided by the Wagner-Peyser, WIA adult and dislocated worker partners and other partners in the One-Stop center and system. Intensive and training services are available to individuals who meet the eligibility requirements for the funding streams and who are determined to need these services to achieve employment, or in the case of employed individuals, to obtain or retain self-sufficient employment. Supportive services, to enable individuals to participate in these other activities, including needs-related payments for individuals in training, may also be provided. These regulations also introduce the Individual Training Account (ITA), which is a key reform element of the Workforce Investment Act. Individuals are expected to take a proactive role in choosing the training services which meet their needs. They will be provided with quality information on providers of training and, armed with effective case management and an ITA as the payment mechanism, they will have the opportunity to choose the training provider that best meets their needs. Subpart A--One-Stop System 1. Role of the Adult and Dislocated Worker Program in the One-Stop System: The regulation at Sec. 663.100 provides that the One-Stop system is the basic delivery system for services to adults and dislocated workers. The concept of a single system that provides universal access to certain services to all individuals age 18 or older is a key tenet of the Workforce Investment Act. The regulation reflects the emphasis in WIA to consolidate and coordinate services. The grant recipient(s) for the adult and dislocated worker program is a required partner and is subject to Sec. 662.210 [[Page 18671]] regarding required partner responsibilities. Access to services through the One-Stop system ensures that individual needs are identified and, to the extent possible, met. The consolidation of and access to services will result in improved services for both adults and dislocated workers. 2. Registration and Eligibility: Sections 663.105 through 663.120 address registration and basic eligibility requirements. In response to concerns regarding the timing of eligibility determination for services in a One-Stop system, the Department has provided general guidance in the regulation at Sec. 663.105 on when adults and dislocated workers must be registered. Sections 663.110 and 663.120 contain the basic eligibility criteria for adults and dislocated workers, respectively. Individuals who are primarily seeking information and do not seek direct, one-on-one staff assistance, do not need to be registered. However, when an individual seeks more than minimal assistance from staff in taking the next steps toward self-sufficient employment, then eligibility must be determined. Registration is the point at which information that is used in performance measurement begins to be collected. In addition, equal employment opportunity data must be collected on individuals when any assessment or discretionary decision regarding a specific individual is made. Such assessments or decisions include: Decisions regarding service or program eligibility, either positive or negative; and decisions made on the part of any workforce investment system employee which lead to a targeting of services for the individual. The Department will issue further guidance regarding this data collection. Additional information needed to determine eligibility for other assistance available at the One-Stop site may also be determined at the same time. Program operators should determine the information that they need for cost allocation purposes and when they can most efficiently collect it. Electronic records systems allow information to be collected incrementally as higher levels of assistance are provided. 3. Displaced Homemaker Eligibility: In response to inquiries regarding assistance to displaced homemakers, the regulation at Sec. 663.120 clarifies that a displaced homemaker who has been dependent on the income of another family member but is no longer supported by that income, is unemployed or underemployed and is experiencing difficulty in obtaining or upgrading employment, may receive assistance with funds available to Local Boards for services to dislocated workers. 4. Title I Funds: Section 663.145 clarifies how title I adult and dislocated worker funds are used to contribute to the provision of core services, and to provide intensive and training services through the One-Stop delivery system. All three types of services must be provided, but the Local Boards determine the mix of the three services. 5. Sequence of Services: WIA provides for three levels of services: Core, intensive, and training, with service at one level being a prerequisite to moving to the next level. There was a great deal of concern expressed about how this tiered approach would be implemented. Many were particularly concerned that the Department might require a ``failed'' job search or a minimum time period in one level of service before moving on to the next level. The regulations establish the concept of a tiered approach but allow significant flexibility at the local level. The Department, in response to the comments received, did not establish a minimum number of ``failed'' job applications or a minimum time period but, instead, allows localities to establish gateway activities that lead from participation in core to intensive and training services. Any core service, such as an initial assessment or job search and placement assistance, could be the gateway activity. In intensive services, the gateway activity could be the development of an individual employment plan, individual counseling and career planning or another intensive service. Key to these gateway activities is the determination, made at the local level, that intensive or training services are required for the participant to achieve the goal of obtaining or retaining self-sufficient employment. The three levels of services are discussed separately in the regulations. 6. Core Services: The regulations at Secs. 663.150 to 663.165 discuss the core services. All of the core services that are listed in the Act must be made available in each local area through the One-Stop system. Followup services must be available for a minimum of 12 months after employment begins, to registered participants who are placed in unsubsidized employment. Among the core services available is information on targeted assistance available through the One-Stop system for specific groups of workers, such as Migrant and Seasonal Farm Workers, and veterans. Core services also include assistance in establishing eligibility for the Welfare-to-Work program and programs of financial aid for training and education programs. The specific form of this assistance is determined at the local level based on the participant's needs and in coordination with the other partner programs. This assistance may include: referrals to specific agencies; information relating to, or provision of, required applications or other forms; or specific on-site assistance. Another core service is the provision of information relating to the availability of supportive services, including child care and transportation, available in the local area, and referral to such services as appropriate. The Department encourages Local Boards to establish strong linkages with a variety of supportive service programs, including Food Stamps, Medicaid programs, and CHIP. Such programs provide key supports for low-income working families and families making the transition from welfare to self-sufficiency. The Department also encourages Local Boards to establish strong linkages to child support agencies and organizations serving fathers. WIA services can help raise the employment and earnings of non- custodial fathers and fathers living with their children so that they can better support their children. Child support payments help low income single parents stabilize and raise their income. At the same time, it is important for One-Stop programs to be aware of the child support requirements on non-custodial parents who may receive services. Subpart B--Intensive Services 1. Intensive Services for Adults and Dislocated Workers: The regulation at Sec. 663.200 discusses intensive services. The regulation provides that intensive services beyond those listed in the Act may also be provided. Out-of-area job search expenses, relocation expenses, internships, and work experience are specifically mentioned to clarify that they are among the additional intensive services that may be provided. Intensive services are intended to identify obstacles to employment through a comprehensive assessment or individual employment plan in order to determine specific services needed, such as counseling and career planning, referrals to community services, and, if appropriate, referrals to training. 2. Participation in Intensive Services: Section 663.220 explains that intensive services are provided to unemployed adults and dislocated workers who are unable to obtain employment through core services and require these services to obtain or retain employment, and employed workers who need services to obtain or retain employment that leads [[Page 18672]] to self-sufficiency. The regulations at Secs. 663.240 through 663.250 specify that an individual must receive at least one intensive service, such as the development of an individual employment plan with a case manager or individual counseling and career planning, before the individual may receive training services and that there is no Federally required minimum time for participation in intensive services. Each person in intensive services should have a case management file, either hard copy, electronic or both. Section 663.240 explains that the case file must contain a determination of need for training services, as identified through the intensive service received. 3. Self-sufficiency: This regulation, at Sec. 663.230, discusses how ``self-sufficiency'' should be determined. WIA requires a determination that employed adults and dislocated workers need intensive or training services to obtain or retain employment that allows for self-sufficiency as a condition for providing those services. Recognizing that there are different local conditions that should be considered in this determination, the regulation provides maximum flexibility, requiring only that self-sufficiency mean employment that pays at least the lower living standard income level. State Boards or Local Boards must set the criteria for determining whether employment leads to self-sufficiency. Such factors as family size and local economic conditions may be included in the criteria. It may often occur that dislocated workers require a wage higher than the lower living standard income level to maintain self-sufficiency. Therefore, the Rule allows self-sufficiency for a dislocated worker to be defined in relation to a percentage of the lay-off wage. Subpart C--Training Services 1. Training Services: Training services are discussed at Secs. 663.300 and 663.320. Training services are designed to equip individuals to enter the workforce and retain employment. Under JTPA, a dislocated worker participating in training under title III of JTPA is deemed to be in training with the approval of the State Unemployment Compensation Agency. With such approval, unemployment compensation cannot be denied to the individual solely on the basis that the individual is not available for work because he or she is in training. Although there is no comparable provision in WIA, this JTPA provision will remain in effect during the transition period under the Secretary's authority to guide that transition from JTPA to WIA. The Department will seek an amendment adding similar language to WIA which would deem all adults participating in training under title I of WIA to be in approved training for the purposes of unemployment compensation qualification. 2. Determining the Need for Training: The regulations at Sec. 663.310 provide that the One-Stop operator or partner determines the need for training based on an individual (1) meeting the eligibility requirements for intensive services; (2) being unable to obtain or retain employment through such services; and (3) being determined after an interview, evaluation or assessment to be in need of training. Section 663.310 requires that, to receive training, an individual must select a program of services directly linked to occupations in demand in the area, based on information provided by the One-Stop operator or partner. If individuals are willing to relocate, they may receive training in occupations in demand in another area. 3. Requirements When Other Grant Assistance is Available to Participants. Section 663.320 implements the requirements of WIA section 134(d)(4)(B), which limits the use of WIA funds for training services to instances when there is no or inadequate grant assistance from other sources available to pay for those costs. The statute specifically requires that funds not be used to pay for the costs of training when Pell Grant funds or grant assistance from other sources are available to pay the costs. This section is intended to give effect to this WIA requirement and still give effect to title IV of the Higher Education Act (HEA) as amended (20 U.S.C. 1087uu), which prohibits taking into account either a Pell Grant or other Federal student financial assistance when determining an individual's eligibility for, or the amount of, any other Federal funding assistance program. Section 134(d)(4)(B) of WIA requires the coordination of training costs with funds available under other Federal programs. To avoid duplicate payment of costs when an individual is eligible for both WIA and other assistance, including a Pell Grant, Sec. 663.320(b) requires that program operators and training providers coordinate by entering into arrangements with the entities administering the alternate sources of funds, including eligible providers administering Pell Grants. These entities should consider all available sources of funds, excluding loans, in determining an individual's overall need for WIA funds. The exact mix of funds should be determined based on the availability of funding for either training costs or supportive services, with the goal of ensuring that the costs of the training program the participant selects are fully paid and that necessary supportive services are available so that the training can be completed successfully. This determination should focus on the needs of the participant; simply reducing the amount of WIA funds by the amount of Pell Grant funds is not permitted. Participation in a training program funded under WIA may not be conditioned on applying for or using a loan to help finance training costs. With such coordination and arrangements, the WIA counselor is likely to know the amount of WIA funds available to the WIA participant when calculating the amount of financial assistance needed for the participant to complete the training program successfully. The WIA counselor needs to work with the WIA participant to calculate the total funding resources available as well as to assess the full ``education and education related costs'' (training and supportive services costs) incurred if the participant is to complete the chosen program. This also ensures both that duplicate payments of training costs are not made and that the amount of WIA funded training is not reduced by the amount of Federal student financial assistance in violation of 20 U.S.C. 1087uu. It is important to note that the Pell Grant is not school-based; rather, it is a portable grant for which preliminary eligibility can, and should, be determined before the participant enrolls in a particular school or training program. The application for determining eligibility and ultimately the amount of the grant, should be readily available at all One-Stop centers for assistance in the completion of these ``gateway'' financial aid applications. Section 663.320(c) implements the requirements of WIA section 134(d)(4)(B)(ii). This section permits a WIA participant to enroll in a training program with WIA funds while an application for Pell Grant funds is pending, but requires that the local workforce investment area be reimbursed for the amount of the Pell Grant used for training if the application is approved. Since Pell Grants are intended to provide for both tuition and other education-related costs, the Rule also clarifies that only the portion provided for tuition is subject to reimbursement. In the limited cases where contracts are used rather than ITA's, the contracts negotiated by the One-Stop center must prohibit training institutions or [[Page 18673]] organizations from holding the student liable for outstanding charges. Otherwise, the performance agreements would be undercut because the incentive for the institution or organization to perform would be removed. Also, the practice of withholding Pell Grants from students is prohibited by the U.S. Department of Education. Subpart D--Individual Training Accounts 1. Definition of an Individual Training Account: Information regarding Individual Training Accounts (ITA) is contained in Secs. 663.400 through 663.430. A key reform tenet of the Workforce Investment Act is that adults and dislocated workers who have been determined to need training, may access training with an Individual Training Account. The regulation at Sec. 663.410 provides a definition for an ITA that seeks to provide maximum flexibility to State and local program operators in managing ITA's. These regulations do not establish the procedures for making payments, restrictions on the duration or amounts of the ITA, or policies regarding exceptions to the limits, but provide that authority to the State or Local Boards. However, this authority to restrict the duration of ITA's or restrict funding amounts should not be used to establish limits that arbitrarily exclude eligible providers. 2. Exceptions to ITA's: The Act at section 134(d)(4)(G)(ii) and Sec. 663.430 of the regulations provide that, under certain limited circumstances, contracts for training rather than ITA's may be used. Specifically, on-the-job training contracts with employers and customized training contracts are authorized. Contracts may also be used when there is an insufficient number of eligible providers in a local area. This exception applies primarily to rural areas. The exceptions to ITA's are to be used infrequently. The Act reforms the local service delivery system by eliminating the current practice of assigning participants to contracted training services and instead establishing a system that maximizes customer choice in the selection of training providers. When the Local Board determines there are an insufficient number of eligible providers in the local area to accomplish the purposes of a system of ITA's, and intends to use contracts for services, there must be at least a 30 day public comment period for interested providers. Contracts for Special Populations--Contracts for training are also authorized when the Local Board determines that there are special populations that face multiple barriers to employment, as identified in Sec. 663.430(b), and that there is a training services program of demonstrated effectiveness offered by an eligible provider. Section 663.430(a)(3) explains that an eligible provider in this case is a community based organization (CBO) or other private organization. The Department has received many suggestions about this exception and the extent to which it may be used. This exception is intended to meet special needs and should be used infrequently. Those training providers operating under the ITA exceptions still must qualify as eligible providers, as required at Sec. 663.505. The Department believes that effective eligible training providers, including CBO's and other training providers, can and will compete for individual training accounts and, that providers should view the use of ITA's as an opportunity to expand their customer base. Criteria for ``Demonstrated Effectiveness''--The regulation at Sec. 663.430(a)(3) provides that when the exception for special populations is used, the Local Board must apply criteria it develops to determine ``demonstrated effectiveness,'' particularly as it applies to the special participant population it proposes to serve. This determination is in addition to meeting the requirements for qualifying as an eligible training provider. The provisions in the regulation are illustrative and Local Boards should develop specific criteria applicable to their local areas. Subpart E--Eligible Training Providers 1. Subpart E describes the methods by which organizations qualify as eligible providers of training services under WIA. It also describes the roles and responsibilities of Local Boards and the State in managing this process. Although no single entity has full responsibility for the entire process, the State must play a leadership role in ensuring the success of the eligible provider system. The Governor establishes minimum performance levels for initial determination of non-Higher Education Act/registered apprenticeship providers and for all subsequent eligibility determinations. The Local Board may establish additional local performance levels for subsequent eligibility determinations. The eligible provider process requires a collaborative effort among the State, Local Boards, and other partners. The regulations attempt to amplify and clarify the intent of the Act, by linking statutory language on eligible providers in WIA section 122 with section 134 provisions covering Individual Training Accounts. In Sec. 663.505, the regulations clarify that all training providers, including those operating under the ITA exceptions, must qualify as eligible providers, except for those engaged in on-the-job and customized training (for which the Governor should establish qualifying procedures as discussed in Sec. 663.595). Finally, in order to ensure the strong relationship between the eligible provider process and program performance, the regulation at Sec. 663.530 establishes a maximum eighteen month period for an organization's initial determination as an eligible provider. The Department heard concern that some traditional providers of training under previous workforce programs, such as community-based organizations, would face difficulties in participating in this system. The regulations clarify that such organizations have the opportunity to deliver training funded under WIA, provided they deliver services that customers value and meet training performance requirements. It is important that States provide access to these organizations in order to maximize customer choice. States should provide access to a broad and diverse set of providers, including CBO's, while maintaining the quality and integrity of training services. Subpart F--Priority and Special Populations 1. Priority Under Limited Adult Funding: This subpart contains requirements related to the statutorily-required priority for the use of adult funds when funds are limited. WIA section 134(d)(4)(E) states that in the event that funds allocated to a local area for adult employment and training activities are limited, priority shall be given to recipients of public assistance and other low-income individuals for intensive services and training services. The appropriate Local Board and the Governor must direct the One-Stop operators in the local area with regard to making determinations related to such priority. The Department assumes that adult funding is generally limited because there are not enough adult funds available to provide services to all of the adults who could benefit from such services. However, the Department also recognizes that conditions are different from one area to another and funds might not be limited in all areas. Because of this, the regulation requires that all Local Boards must consider the availability of funds in their area. In making this determination, the availability of other Federal funding, such as TANF and Welfare-to-Work [[Page 18674]] funds, should be taken into consideration. Unless the Local Board determines that funds are not limited in the local area, the priority requirement will be in effect. States and Local Boards must work together to establish the criteria that must be used in making this determination. States and Local Boards also may administer their priority for adult recipients of public assistance and other low income adults so as not to preclude providing intensive and training services to other individuals. A substantial number of parties expressed views on the priority issue. Many believed that the Department should not write any regulations that would, in effect, establish a nationwide priority. Some believed that the Department should not write any regulations at all on this section of the statute. However, the Department believes that the interpretation of this requirement is of such importance that there must be regulations. This section reiterates the statutory language that provides States and Local Boards with the authority to determine the criteria to be applied when making the determination that there are sufficient funds available so that the priority is not in effect. Section 663.610 clarifies that the statutory priority only applies to adult funds for intensive and training services, and not to dislocated worker funds. 2. Welfare-to-Work and Temporary Assistance to Needy Families as Part of One-Stop: At Sec. 663.620, the regulation discusses the relationship of the Welfare-to-Work program and the Temporary Assistance to Needy Families (TANF) program to the One-Stop delivery system. Welfare-to-Work is a required partner to which the One-Stop partner regulations apply. The TANF agency is specifically suggested as an additional partner. Both programs can benefit from close cooperation with the One-Stop delivery system because their respective participants will have access to a much broader range of services to promote employment retention and self-sufficiency. Subpart G--On-the-Job Training and Customized Training 1. Sections 663.700 through 663.720 are the regulatory provisions for conducting on-the-job (OJT) and customized training activities. They include specific information regarding general, contract, and employer payment requirements. The Department received input advocating OJT regulations which do not restrict the duration of OJT and which permit eligible employed workers to also receive this training. Unlike JTPA, OJT is not limited to six months. However, as specified in WIA section 101(31)(C), it is limited in duration as appropriate for the occupation being trained for. Section 663.705 establishes requirements that permit OJT contracts for employed workers. Some parties called for minimal regulations in this area; however, there were a few who suggested the need for information regarding documentation requirements to avoid audit exceptions. Section 663.710 provides that employers are not required to document the extraordinary costs associated with providing OJT, and no further documentation requirements are established. Instead, program operators should put emphasis on the development and/or selection of OJT assignments that meet the identified needs of the participants. Subpart H--Supportive Services 1. Flexibility in the Provision of Supportive Services: The regulations in subpart H define the scope and purpose of supportive services and the requirements governing their disbursement. A fundamental principle of WIA is to provide local areas with the authority to make policy and administrative decisions as well as the flexibility to tailor the workforce investment system to meet the needs of the local community. To ensure this flexibility, the regulations afford local areas the discretion to provide supportive services as they deem appropriate with limitations only in the areas defined in the Act. Local Boards are required to develop policies and procedures addressing coordination with other entities to ensure non-duplication of resources and services, as well as any limits on the amount and duration of such services. Attention should be given to developing policies and procedures that ensure that the supportive services provided are not available through other agencies and that they are necessary for the individual to participate in title I activities. 2. Needs-Related Payments: There were a number of issues regarding the eligibility requirements for dislocated workers to receive needs- related payments that came to our attention, including the concern that training enrollment requirements restrict the numbers of individuals eligible to receive this income support which they need to participate in training. Studies show that early entry into training for dislocated workers who require it is a key factor in reducing the period of unemployment during the adjustment process. Early intervention strategies and policies are best implemented through quality rapid response assistance which includes comprehensive core services, and the provision of other reemployment assistance, including intensive and training services, as soon as the need can be identified, preferably before layoff. The statute authorizes all levels of assistance under title I of WIA to many workers six months (180 days) before layoff, or at least as soon as a layoff notice is received. Providing these workers with access to quality information regarding all adjustment assistance available in the community, including any deadlines that must be met, is critical for workers to make intelligent reemployment choices. Thus, many of the concerns raised can be resolved through the use of early intervention strategies. The Department has decided to issue only limited regulations on needs-related payments eligibility at Sec. 663.815 through Sec. 663.840. Part 664--Youth Activities Under Title I Introduction The youth regulations attempt to reflect the intent of the legislation by moving away from one-time, short-term interventions and moving to a systematic approach that offers youth a broad range of coordinated services. Such offerings include opportunities for assistance in both academic and occupational learning; developing leadership skills; and preparing for further education, additional training, and eventual employment. Rather than supporting separate, categorical programs, the youth regulations are written to facilitate the provision of a menu of varied services that may be provided in combination or alone at different times during a youth's development. Legislation creating the youth council, the local entity responsible for recommending and coordinating youth policies and programs, intends that the youth council be a catalyst for such broad change. The regulations support that legislative intent. Flexibility for local program operators in conducting youth programs is key to the legislation and these regulations. The Department encourages local decision making in terms of policy, youth program design within the statutory framework, and determining appropriate program offerings for each individual youth. It is the Department's expectation that these offerings will provide needed guidance for youth that is balanced with appropriate [[Page 18675]] consideration of each youth's involvement in his or her training and educational plan. Further, the regulations support strong connections between youth program activities and the One-Stop service delivery system, so that youth learn early in their development how to access the services of the One-Stop system and continue to use those services throughout their working lives. Subpart A--Youth Councils 1. This subpart explains the purpose of youth councils. The youth council is a new feature of the workforce investment system that helps develop youth employment and training policy, brings a youth development perspective to the establishment of such policy, establishes linkages with other local youth services organizations, and takes into account a range of issues that can have an impact on the success of youth in the labor market. Working with the youth council, the Local Board has responsibility for oversight of youth programs. It may be advantageous for Local Boards to delegate responsibility for oversight of youth programs to youth councils which have expertise in youth issues, as is permitted by Sec. 664.110. Subpart B--Eligibility for Youth Services 1. Definition of Sixth Eligibility Barrier: Under section 101(13)(C)(vi) of the Act, a low income youth is eligible for services if he or she ``requires additional assistance to complete an educational program, or to secure and hold employment.'' The regulation at Sec. 664.210 envisions that Local Boards will define this term, however, if State policy is set regarding this provision, the policy must be described in the State Plan. 2. Registering Youth Participants: Section 664.215 provides that all youth participants be registered by collecting information for supporting eligibility determinations, as well as EEO data. The EEO data must be collected on individuals when any assessment or discretionary decision regarding an individual is made. Such assessments include decisions regarding service or program eligibility, either positive or negative, and decisions made on the part of any workforce investment system employee which lead to a targeting of services for the individual. The Department will issue further guidance regarding this data collection requirement. 3. Non-Income Eligible Youth: Section 129(c)(5) of the Act provides that up to five percent of youth participants served in a local area may be individuals who do not meet income criteria for eligible youth, provided that they meet one or more of the criteria specified in section 129(c)(5) of the Act and the regulations at Sec. 664.220. Local Boards may define the term ``serious barriers to employment'' and describe it in the Local Plan. 4. Eligibility under the National School Lunch Program: Eligibility for free school lunches is not a substitute for income eligibility under the Act. The Department received suggestions that program operators be allowed to use eligibility for free lunch as a substitute for determining eligibility under the Act, and encouraging the Department to seek a technical amendment that would include such a provision in the legislation. The Department recognizes the importance of this issue, yet lacks statutory authority to change the Act's income eligibility requirements. 5. Eligibility of Youth with Disabilities: Section 664.250 provides that a disabled individual whose family income exceeds maximum income levels under the Act may qualify for services if the individual's own income meets the income criteria established in WIA section 101(25)(F), or the eligibility criteria for cash payments under any Federal, State or Local public assistance program. (WIA section 101(25)(B).) Subpart C--Out of School Youth 1. Defining Out-of-School Youth: Sections 664.300, 664.310, and 664.320 address issues related to out-of-school youth. Section 101(33) of the Act defines ``out-of-school youth'' as: eligible youth who are school dropouts or who have received a secondary school diploma or its equivalent, but are basic skills deficient, unemployed, or underemployed. Youth enrolled in alternative schools are not school dropouts. The Department received a number of requests that it seek a technical amendment that would allow youth attending alternative schools to be included in the definition of ``dropout,'' noting that this would permit Local Boards to provide services to more youth in alternative educational environments and to design programs that take advantage of local resources and best meet the needs of local youth. While recognizing the importance of local flexibility and of serving youth in alternative school settings, the Department lacks statutory authority to change definitions established under the Act. Section 664.310 of the regulations clarifies this issue. 2. Funds for Summer Activities for Out-of-School Youth: The Department received a number of inquiries asking if summer activities are exempt from the requirement that 30 percent of youth funds be spent on services for out-of-school youth. Transition guidance will address how the 30% requirement applies to the Program Year 1999 JTPA summer funds. Section 664.320 clarifies that there is no exemption from this requirement for summer activities. There is no separate summer program under the Act. A single allocation of youth funds is available to local areas for year-round and summer activities. Thirty percent of the total youth allocation must be spent on services for out-of-school youth. This 30 percent, like the remaining 70 percent, may or may not be proportional between summer and year-round activities, as determined by the Local Board in consultation with the chief elected official. Subpart D--Youth Program Design, Elements, and Parameters 1. Program Design: Features of the youth program design are outlined in section 129(c) of the Act. While there are three program design categories and ten program elements are required, there is individual program design flexibility and flexibility in determining the definition, scope, and characteristics of the elements. Program Design Categories--Under section 129(c)(1), three categories provide the framework for youth program design. They are: (1) An objective assessment of each participant; (2) individual service strategies; and (3) services that prepare youth for postsecondary educational opportunities, link academic and occupational learning, prepare youth for employment, and provide connections to intermediary organizations linked to the job market and employers. Linkages to Entities--Youth councils and programs are required to establish linkages to entities that will foster the participation of eligible youth. Suggested linkages are included in Sec. 664.400(c). Information and Referrals--Section 129(c)(3) of the Act requires that Local Boards ensure that eligible youth receive information and referrals, including information on the full array of appropriate services available to them and referrals to appropriate training and educational programs. Youth program providers must ensure that eligible applicants who do not meet the enrollment requirements of their program or who cannot be served by their program are referred for additional assessment and program placement. This language was included in Sec. 664.400(d) of the regulations to emphasize the importance of referrals as [[Page 18676]] a part of overall youth program design. To further promote the concept of seamless One-Stop service delivery, One-Stop operators are encouraged to send those youth assessments that are completed at the One-Stop center to other training and educational programs to which the youth is referred. 2. Program elements: Section 129(c)(2) of the Act lists 10 program elements that must be generally available to youth through local programs. The Department received requests for clarification that not all of the 10 youth program elements must be provided to every youth participant, and this interpretation is included in Sec. 664.410(b). Local program operators must determine what program elements will be provided to each youth participant based on the participant's objective assessment and service strategy; however, it is envisioned that each youth will participate in more than one of the ten program elements required as part of any local youth program, and all youth must receive follow-up services. For example, even if it is determined appropriate that a youth participate in only summer employment activities, he or she would still receive at least 12 months of followup services. Followup service requirements are fully described in Sec. 664.450. Sections 664.420 through 664.470 further define and discuss five program elements: leadership development, positive social behaviors, supportive services, followup services, and work experiences. Leadership Development--The Act states that youth programs must provide leadership development opportunities, and gives the following examples of such activities: community service and peer-centered activities encouraging responsibility and other positive social behaviors during non-school hours. Some additional examples of leadership development activities are outlined in Sec. 664.420 which elaborates on the definition of leadership development opportunities. The development of leadership abilities might address team work, decision making, personal responsibility, and citizenship training, as well positive social behavior training in areas such as positive attitudinal development, self esteem building, issues of cultural diversity, and other skills and attributes that would help youth to lead effectively, responsibly, and by example. Supportive Services--The Act states that youth programs must provide supportive services. Section 101(46) of the Act defines supportive services to include services such as transportation, child care, dependent care, housing, and needs-related payments, that are necessary to participate in activities authorized under the Act. Section 664.440 elaborates on the definition of supportive services as it applies to youth. Such services may include: linkages to community services; referrals to medical services; and assistance with work attire and work-related tool costs, including such items as eye glasses and protective eye gear. Followup Services--The Act states that followup services will be provided for not less than 12 months after the completion of participation, as appropriate. Section 664.450(b) clarifies that all youth participants must receive some form of followup services. Such services must be for a minimum of 12 months. Followup services for youth who participate in only summer employment activities may, however, be less intensive than for those youth who participate in other types of activities. Program operators are encouraged to consider the intensity of the services provided and the needs of the individual youth in determining the appropriate level of followup services. This section also provides that followup may include leadership development or supportive service activities, as well as other allowable activities, and provides additional examples of permissible followup services. Evaluation studies such as Abt Associates' Final Report on the National JTPA Study, have shown disappointing results for short-term job training programs for youth. Meanwhile, programs such as STRIVE and the Children's Village have shown much success with longer-term followup strategies. A 1993 study by MDRC showed that the Center for Employment Training, which features close ties to the private sector and a strong job placement component with followup with employers, increased the earnings of enrollees by $3,000 a year over a control group during the last two years of a four-year evaluation. Work Experiences--Sections 664.460 and 664.470 address work experiences for youth. Work experiences are planned, structured learning experiences that take place in a workplace for a limited period of time. No specific time period is specified. As provided in section 129(c)(2)(D) of the Act, work experiences may be paid or unpaid, as appropriate. Section 664.460 states that work experiences may be in the private for-profit sector, the nonprofit sector, or the public sector, and gives examples of the types of activities that work experiences may include, such as On-the-Job Training (OJT). While OJT is likely not an appropriate activity for most youth under age 18, it may be used as a service strategy for such youth based on the needs identified in an objective assessment of an individual youth participant. Section 664.470 provides that youth funds may be used to pay the wages of youth in work experience. Youth funds may be used to pay the wages of youth in work experiences, including in the private, for-profit sector, under conditions designed to protect youth and incumbent workers when the purpose of the work experiences is to provide youth with opportunities for career exploration and skill development and not to benefit the employer. If an unpaid work experience creates an employer/employee relationship, federal wage standards may apply. This relationship is determined under the Fair Labor Standards Act. Subpart E--Concurrent Enrollment 1. Concurrent Enrollment in Youth and Adult Programs: Under the Act, an eligible youth is an individual 14 through 21 years of age. Adults are defined in the Act as individuals age 18 and older. The Department received suggestions that local program operators be allowed to decide whether youth or adult services are appropriate for individuals aged 18 through 21 based on individual participant assessments and service strategies. The Department encourages local flexibility in serving both youth and adult participants, and thus included this clarification in the regulations. Section 664.500(b) clarifies that eligible youth who are 18 through 21 years old may participate in youth and adult programs concurrently, as appropriate for the individual. Such individuals must meet the eligibility requirements under the applicable youth or adult criteria for the services received. Local program operators must identify and track the funding streams for services provided to individuals who participate in youth and adult programs concurrently, ensuring non-duplication of services. 2. Individual Training Accounts for Youth: Section 664.510 states that ITA's are not an authorized use of youth funds. The ITA is the currency of a market-based system that enables adults to select the service providers most suited to their needs based on information about the past performance of such providers. Under the Act, ITA's are not authorized for youth below age 18. Providers of youth services are competitively selected based on predetermined criteria, the judgment of Local Boards, and recommendations of youth councils about the providers' ability to meet the needs of youth [[Page 18677]] participants. Youth aged 18 through 21 can access ITA's under the adult or dislocated worker program, if appropriate. Subpart F--Summer Employment Opportunities 1. Summer Employment Activities: This subpart provides clarification about summer youth employment. Although all Local Boards must offer summer employment opportunities for eligible youth as one of the ten required program elements listed in WIA section 129(c)(2) and Sec. 664.410, the proportion of youth funds used for summer employment is determined by the Local Board in consultation with the chief elected official. Section 664.600 elaborates on the activities that must be included in all summer employment opportunities, including direct linkages to academic and occupational learning, as well as followup services for at least 12 months. Numerous inquiries were received about whether the Act would allow cities and counties to continue to operate their summer activities. Section 664.610 provides that this practice is still allowed, and clarifies that if summer employment opportunities are provided by entities other than the grant recipient/fiscal agent, the providers must be selected by awarding a grant or contract on a competitive basis based on recommendations of the youth council and on criteria contained in the State plan. 2. Application of Performance Indicators: In terms of performance measurement, the Department received requests for clarification on whether all of the core indicators listed in the Act apply to the summer program element as well as to youth activities that are longer in duration. It is important to note that the core indicators specified in section 136 of the Act apply to all youth program activities. This is consistent with the intent of the Act to move from a focus on separate, categorical programs to a more systematic approach to workforce investment and serving the needs of youth. Summer employment opportunities then, are to be viewed as one element among many available to youth as a part of a menu of activities offered by the Local Board. Section 664.620 indicates that summer activities, as part of the overall youth program, are required to meet the same core indicators of performance as the other youth activities. Subpart G--One-Stop Career Center Services to Youth 1. The Connection between the Title I Youth Program and the One- Stop Delivery System: This subpart explains that the chief elected official (as the local grant recipient for the youth program), as a required One-Stop partner, is subject to the One-Stop provisions related to such partners described in part 662 of the regulations and is responsible for connecting the youth program and its activities to the One-Stop system. In addition to the provisions of part 662, connections between the youth program and the One-Stop system may include those that facilitate: The coordination of youth activities; Connections to the job market and employers; Access for eligible youth to information and services; and Other activities designed to achieve the purposes of the youth program. The Department received requests for clarification on connecting youth program activities to the One-Stop delivery system; however, some parties felt that the youth program, as a One-Stop partner, should not be made to conform to the same One-Stop partner requirements as other partners. The Rule attempts to clarify the role of the youth program in the One-Stop center through a cross-reference to the One-Stop regulations found in 20 CFR, part 662. 2. Universal Access to One-Stop Centers for Youth under 18: Under section 134(d)(2) of the Act, adults have access to core services in One-Stop centers without regard to eligibility. Adults are defined under the Act as persons aged 18 and above. Section 664.710 of the regulations clarifies that local area youth, including youth under age 18 who are not eligible under the title I youth program, may receive services through the One-Stop centers; however, services for such youth must be funded from sources that do not restrict eligibility for services, such as Wagner-Peyser. The Department believes that the intent of the Act is to introduce youth, particularly out-of-school youth, to the services of the One-Stop system early in their development and to encourage the use of the One-Stop system as an entry point to obtaining education, training, and job search services. Subpart H--Youth Opportunity Grant Programs This subpart explains that competitive procedures for awarding Youth Opportunity Grants will be established by the Secretary. It also restates statutory language regarding the eligibility of Local Boards and other entities in high poverty areas to apply for Youth Opportunity Grants. Provisions of the Act regarding eligibility for services under Youth Opportunity Grants and the process for establishing performance measures are clarified at Secs. 664.800 to 664.830. The Department views these grants as a distinct opportunity to provide a variety of needed services to youth in high poverty areas, building on the current successful activities and innovations already at work in many communities. Part 665--Statewide Activities Under Title I of the Workforce Investment Act Introduction This part addresses the funds reserved at the State level for workforce investment activities under sections 128(a) and 133(2) of WIA. Subpart A--General Description This subpart provides a general description of Statewide activities conducted with up to 15 percent reserved from youth, adult and dislocated worker funding streams (``15 percent funds''), and up to an additional 25 percent of dislocated worker funds reserved for Statewide activities from annual allotments to the State. 1. Section 665.110(b) explains that the 15 percent reserved funds may be pooled and expended on workforce investment activities without regard to the source of the funding. For example, funds reserved from the adult funding stream may be used to carry out Statewide youth activities and vice versa. The Department believes that the use of these funds can provide critical leadership in the development and continuous improvement of a comprehensive workforce investment system for each State and, as a result, create a national system to which job seekers and workers can look for expert assistance, and employers can look for a qualified workforce. Subpart B--Required and Allowable Statewide Workforce Investment Activities This subpart discusses required and optional activities conducted with funds reserved from the three title I funding streams (youth, adults, and dislocated workers). 1. Required Activities: Section 665.200 identifies the eight activities which each State is required to carry out with its reserved funds from the three funding streams. The Governor must reserve funding for these activities, but has discretion to determine the amount reserved, up to the maximum 15 percent of each funding stream. One use of these funds is administration, subject to the five percent administrative cost [[Page 18678]] limitation at 20 CFR 667.210(a)(1). This section clarifies that while there is no specific amount for each of the seven of the eight required activities to be carried out with the 15 percent funds, it is expected that the State will expend a sufficient amount to ensure effective implementation of those activities. The eighth required activity, rapid response, is discussed in subpart C. 2. Optional Activities: Section 665.210 also identifies activities which each State is allowed to carry out with the 15 percent funds. For the first time, States have the discretion to conduct research and demonstration projects, and incumbent worker projects, including the establishment and implementation of an employer loan program. Section 665.220 makes clear that employed (incumbent) workers served under projects funded with these reserve funds are not required to meet the requirements that training is needed to lead to a self-sufficient wage applicable to employed adult or dislocated workers served with local formula funds. Subpart C--Rapid Response Activities This subpart addresses the use of funds that must be reserved (up to 25 percent of dislocated worker funds allotted to States under section 132(b)(2)(B) of WIA) to provide rapid response assistance. 1. Section 665.300 describes what are rapid response activities and who is responsible for providing them. Rapid response assistance commences at the site of dislocation as soon as a State has received a WARN notice, a public announcement or other information that a mass dislocation or plant closure is scheduled to take place. The Department believes that this early intervention feature for dislocated workers, if provided in a comprehensive and systematic manner through collaboration between the State and Local Boards, One-Stop partners and other applicable entities, is critical to enabling workers to minimize the duration of unemployment following layoff. The Department strongly urges States and Local Boards to implement processes that allow for core services to be an integral part of rapid response assistance, preferably on-site, if the size of the dislocation or other factors warrant it. Further, WIA defines a dislocated worker at section 101(9) in a way that permits formula funds to be used for intensive and training services for workers: (1) As soon as they have layoff notices; or (2) six months (180 days) prior to layoff if employed at a facility that has made a general announcement that it will close within 180 days. The Department believes that this is a critical period for workers, States, Local Boards, One-Stop operators and partners to begin to make important decisions. One important decision is whether there are sufficient formula funds in the State (at the State or local levels) to adequately serve the workers being dislocated, or whether national emergency grant funds must be requested in a timely manner so that all services are available to the workers when they need them. 2. In response to numerous concerns regarding whether rapid response funds may be used beyond those types of required rapid response assistance described in the Act and Sec. 665.310, the Department has elaborated on the authorized rapid response activities in the regulation at Sec. 665.320. These additional activities were recommended by experts consulted on this topic. 3. Section 665.330 addresses the linkage of rapid response assistance and WIA title I assistance to NAFTA-Transitional Adjustment Assistance (NAFTA-TAA). This linkage is an important feature of the One-Stop delivery system, and a requirement under NAFTA-TAA. Part 666--Performance Accountability Under Title I of the Workforce Investment Act Introduction This part presents the performance accountability requirements under title I of the Act. This part of the regulations primarily summarizes the statutory language in the Act and clarifies a few key areas based on input the Department has received. WIA's purpose is to provide workforce investment activities that improve the quality of the workforce. The Department is strongly committed to a systemwide continuous improvement approach, grounded upon proven quality principles and practices. The regulations identify some of the major issues where further guidance will be provided. Subpart A--State Measures of Performance 1. Indicators: Section 666.100 identifies the 15 core indicators of performance and the two customer satisfaction indicators that States are required to address in title I grant applications. The 15 core indicators represent the four core indicators that will be applied separately for the three population categories (adult, dislocated workers and eligible youth age 19 through 21) for a total of 12 indicators and the three youth indicators. There is one customer satisfaction indicator for participants and one for employers. Section 666.110 clarifies that Governors may develop additional performance indicators to be negotiated with Local Boards and that these additional indicators must be included in the State Plan. 2. Definitions: Section 666.100(b) also explains that the Departments of Labor and Education will issue more detailed definitions for the title I and title II indicators after further consultation with representatives identified in section 502(b) of WIA. The Departments will consult further on the indicator definitions, including taking into account factors such as the degree of difficulty and expense of collecting data and reporting on the measures. 3. Negotiations: As noted at Sec. 666.120(a), the Department will provide further guidance on each of these areas after additional consultation. Section 666.120(b) addresses the requirement that States must submit expected or proposed levels of performance for the core indicators and customer satisfaction indicators for years one through three of the State Plan. The Department may require States to express levels of improvement as a percentage improvement over the previous year's actual performance. The Department recognizes that continuous improvement is more than incremental increases in performance and will develop a comprehensive and rigorous approach to integrate continuous improvement at all levels of the workforce investment system. The Department received input that underscored this need to view continuous improvement as a system building activity, not a compliance activity. 4. Participants Included in Measures: The Department was requested to clarify when a customer becomes a participant for the purpose of applying the core indicators of performance. Section 666.140 explains that all individuals, except for those adults and dislocated workers who receive services that are self-service or primarily informational, must be registered and included in the core indicators of performance. The Department will issue guidance to further specify which activities and services require registration and which ones do not. In addition, Sec. 666.140(b) implements the requirement that a standardized