program remains in effect, the local educational agency will expend for employment of its students an amount in State or local funds that is at least equal to the average annual expenditure for work-study programs of a similar nature during the 3 fiscal years preceding the fiscal year in which the work-study program of such local educational agency was approved. Amended June 29, 1965.

§ 104.26 Approval of work-study programs.

The State plan shall: (a) Set forth the policies and procedures to be followed by the State board in approving work-study programs submitted by local educational agencies and meeting the requirements of § 104.25; (b) set forth principles for determining the priority to be accorded applications from local educational agencies for work-study programs, giving preference to applications submitted by local educational agencies serving communities having substantial numbers of youths who have dropped out of school or who are unemployed; and (c) provide, insofar as financial resources are available, for the undertaking of such programs in the order determined by the application of such principles.

E

Subpart C-Federal Financial Participation

GENERAL

§ 104.27 Application of Federal requirements.

Federal funds may be used to share only in expenditures which are made in accordance with the State plan and which meet the requirements of the acts and the regulations in this part. State and local funds used to match these Federal funds must also meet such requirements. As used in these regulations, phrases such as "expenditures may be made under the plan..." or "funds may be expended . . ." mean that the Federal allotments are available for payment of the Federal share thereof.

§ 104.28 Transfer of allotments.

(a) Any portion of any amount allotted to a State in the current fiscal year for use in a particular field of vocational education under the SmithHughes, George-Barden, and supplementary vocational education acts may, upon the Commissioner's approval as described in paragraph (c) of this section, be transferred to or combined with (1) one or more of the other allotments to such State for the same fiscal year for use in a particular field of vocational education under the Smith-Hughes, George-Barden, or supplementary acts, or (2) the allotment to such State in the same fiscal year under section 3 of the 1963 act. The amount so transferred is then subject to the same conditions and requirements as the allotment to which it is transferred, and is no longer subject to the conditions and requirements as the allotment from which it was transferred. Thus, any reference in these regulations to "funds allotted under the act or acts" refers also to funds transferred to the same allotment under such act or acts.

(b) A State board desiring to transfer funds from one allotment to another shall submit to the Commissioner a request for such a transfer. The annual estimate of the State board submitted pursuant to § 104.55 (a) may include a request for any desired transfer of funds from one allotment to another, or special requests for that purpose may be made to the U.S. Office of Education subsequent to the submission of the annual estimate. Such requests shall indicate how the current annual estimate will be affected by the transfer and will provide information to permit application of the following criteria:

(1) The transfer will provide vocational training which is more realistic in the light of actual or anticipated manpower needs and employment opportunities.

(2) The transfer will more nearly achieve the objective that all persons in all groups and in all communities of the State will have access to vocational training.

(3) The transfer will assure vocational training of high quality.

(4) The transfer will provide vocational training which is suited to the needs, abilities, and interests of the students who would benefit from such training.

If the State board requests transfer of funds to allotments under section 3 of the 1963 act, the request shall indicate how the funds will be allocated to the various uses set forth in § 104.41 (b) or in section 4(a) of the 1963 act.

(c) The Commissioner shall approve the State board's request for transfer of funds if he is statisfied that the transfer will promote the objectives set forth in paragraph (b) of this section. Such approval or disapproval shall be based upon the information submitted by the State board with its request pursuant to paragraph (b) of this section, or any other estimates, reports, and information available to the Commissioner which have been submitted by the State board or obtained by the Commissioner through independent investigation.

(d) For the purposes of this section, an allotment under the SmithHughes, George-Barden, or supplementary acts from which funds may be transferred refers to the State's share of each appropriation of Federal funds under these acts.

§ 104.29 Date of allowable expenditures.

Since the Federal Government participates only in amounts expended under the State plan, Federal financial participation shall be available only for expenditures which are made after the effective date of the State plan (as defined in § 104.2(a)), except as provided with respect to workstudy programs in § 104.45(b). Amended June 29, 1965.

§ 104.30 Allotment availability.

Federal funds allotted or reallotted to a State under the acts shall be available only for expenditures for program activities or construction projects which are carried on under the plan and which are attributable to the fiscal year for which such allotments or reallotments are made. (See § 104.33.) Amended June 29, 1965.

§ 104.31 Application of State rules.

Subject to the provisions and limitations of the acts and regulations in this part, Federal financial participation under the State plan shall be available only for expenditures made in accordance with applicable State and local laws, rules, regulations, and standards governing expenditures by the States and their political subdivisions, or agencies thereof.

§ 104.32 State fiscal and accounting procedures.

(a) General. The State plan shall set forth such fiscal control and fund accounting procedures as may be necessary to assure proper disbursement of and accounting for Federal funds paid to the States, including se funds paid by the State to local educational agencies. Such procedures sha be in accordance with applicable State laws and regulations which sha be set forth in the plan or an appendix thereto. Accounts and supporting documents relating to any vocational education program involving Federa financial participation shall be adequate to permit an accurate and expedi tious audit of the program.

(b) Audit of local expenditures. All expenditures of local educational agencies claimed for Federal financial participation shall be audited either by the State or by appropriate auditors at the local level. The State plan shall indicate how the expenditures of local educational agencies and other agencies participating in the State plan will be audited; and, if the audit is to be carried out at the local level, how the State agency will secure information necessary to assure proper use of funds expended under the acts by such local educational agencies.

§ 104.33 Determination of fiscal year's allotment to which expenditure is chargeable.

(a) Each allotment or reallotment to a State under the acts is made with respect to a fiscal year commencing on July 1 and ending the following June 30.

(b) For the purpose of earning the Federal allotments under the acts, State and local laws and regulations shall be followed by the State in determining to which Federal fiscal year an expenditure by the State board, local educational agency, or other participating agency or institution is chargeable, except as provided in paragraphs (c), (d), and the last sentence in this paragraph. Each State shall therefore use the accounting basis applicable to its State or local accounting. The State plan shall specify for State and local expenditures the particular accounting basis to be so used indicating precisely the acts or occurrences necessary to charge an expenditure to a particular time period for States or local purposes, and cite the authority under State law for such a basis. If the State or local educational agencies utilize a basis other than a cash accounting basis, the State plan shall indicate the time period or other factors governing the liquidation of obligations. In order for the State or local educational agencies to be on an obligation basis, an obligation shall mean only a bona fide commitment which is supported by a contract or other evidence of legal liability consistent with State purchasing procedures.

(c) For the purpose of the regulations of this part, an "expenditure" shall not include administrative approval of a program or project by the State board or local educational agency, or the advance or reimbursement by the State board of funds which are or will be expended by a local educational agency or other participating agency or institution under the State plan. None of such actions may be used as a basis for determining to which Federal fiscal year an expenditure by such board, agency, or institution is chargeable for the purpose of earning the Federal allotment, except as provided in paragraph (d) with respect to construction projects and paragraph (e) with respect to work-study programs.

(d) Notwithstanding the provisions of paragraphs (b) and (c) of this section, the State plan shall specify the basis for charging costs of construction to a Federal fiscal year which indicates precisely the acts or occurrences necessary to charge such costs to a particular time or time period and which is not in conflict with State and local laws, rules, regulations, and standards. (See § 104.31.) If such a basis results in charging the costs of construction to a date prior to that of entering into a construction contract, the State plan shall also indicate within what reasonable period of time after the date of charging the Federal allotment such construction contract must be entered into.

(e) Notwithstanding the provisions of paragraphs (b) and (c) of this

section, expenditures for special summer work-study projects shall be charged to the allotment under section 13 of the act for the fiscal year in which such projects have been approved for expenditure during the months of July and August immediately following such fiscal year. Amended June 29, 1965.

§ 104.34 Payment of funds to local educational agency.

The State plan shall provide whether funds are paid to local educational agencies or other agencies and institutions concerned with vocational education under the State plan on the basis of either (a) a reimbursement for actual expenditures already incurred or (b) an advance prior to the expendi ture of funds, or both. Under the Smith-Hughes Act and title I of the GeorgeBarden Act, no funds may be used to make payments in advance of expenditures.

§ 104.35 Proration of costs.

To cover situations where an expenditure is only partly attributable to an eligible purpose or activity under the State plan or where an expenditure is attributable to two or more eligible purposes or activities, the State plan shall specify a justifiable basis for identifying such expenditures and the method to be used in prorating the expenditure between the eligible and noneligible purposes or activities or among the various eligible and noneligible activities, as the case may be. The State board shall also maintain records, documented on an after-the-fact basis, to substantiate the proration of expenditures for applicable items such as salaries, travel, rent, supplies. and equipment. (See also § 104.44 (b) and (c).)

§ 104.36 Fiscal audit and retention of records.

All fiscal transactions by a State which involve Federal funds under the acts are subject to audit by the Commissioner in order to determine whether expenditures have been made in accordance with the acts, the regulations in this part, and the State plan. State and local educational agencies receiving grants under the acts shall keep accessible and intact all records supporting claims for Federal grants or relating to the accountability of the grantee for expenditures of Federal grants and of matching funds, until notified of the completion of program reviews and of the fiscal audit covering such records. Inventory and records supporting accountability for and disposition of school facilities constructed and nonconsumable equipment costing $100 or more purchased under the State plan (whether from Federal or matching funds) shall be maintained until notified in writing of the completion of the review and audit covering the disposition of such school facilities and equipment.

§ 104.37 Disposition of facilities and equipment.

(a) Whenever area vocational education school facilities or items f equipment, each initially costing $100 or more, in which cost the Federa Government has participated (whether with funds derived from Feders grants or State or local matching funds), are sold or no longer used fo a purpose permitted under the acts, the Federal Government shall be credite. with its proportionate share of the value of such facilities and equipme at that time, the value being determined on the basis of the sale price in the