ever is greater, may be expended by the State educational agency for planning and for proper and efficient administration of the State plan pursuant to § 121.127(a) (2) and by local educational agencies for planning at the local level pursuant to § 121.127 (b)(2).

(20 U.S.C. 1413(a) (1))

§ 121.127 Allowable expenditures.

(a) State educational agencies. Funds under part B of the Act may be used by the State educational agency for such expenditures as are reasonably necessary (1) for the conduct by it of programs or projects for the education of handicapped children (including evaluation and dissemination of the results thereof), and (2), subject to the limitations in § 121.126, for (i) administration of the State plan and for planning at the State level, including planning or assisting in the planning of programs or projects for the education of handicapped children; (ii) approval, supervision, monitoring, and evaluation of local programs and projects for the education of handicapped children; (iii) technical assistance to local educational agencies with respect to the measurements of educational achievement and evaluation of the effectiveness of programs and projects pursuant to § 121.105 (e)(5); (iv) dissemination and utilization of the results of educational research and demonstrations; and (v) other State leadership activities and consultative services.

(b) Local educational agencies. Funds made available under part B of the Act to local educational agencies may be used by those agencies for such expenditures as are reasonably necessary for activities directly related to (1) the conduct of programs and projects for the education of handicapped children which are approved by the State educational agency (including the evaluation and dissemination of the results thereof), and (2) subject to the limitations in § 121.126, the planning of such programs and projects.

(c) Categories. Categories of allowable expenditures referred to in paragraphs (a) and (b) of this section shall be determined in accordance with, and governed by, the principles and procedures set forth in 41 CFR Subpart 1-15.7 (OMB Circular No. A-87; Exhibit X-5-60-1 of the Department Grants Administration

Manual), and shall include, but not be limited to the following:

(1) Salaries, wages, and other personal service costs of permanent and temporary staff employees and consultants for the performance of services reasonably necessary for the program under part B of the Act, including the costs of regular contributions of employers to retirement, workmen's compensation, and welfare funds, and payments for leave earned with respect to time so spent;

(2) Insurance coverage, to the extent consistent with the general policies of the State or local educational agency and with sound business practice: and the bonding of employees who handle part B funds;

(3) Communications;
(4) Utilities;

(5) Data processing services; (6) The purchase of consumable supplies, including stationery;

printed and published materials;

(8) Travel and transportation expenses;

(9) Acquisition (by purchase, lease, or lease-purchase) and maintenance and repair of necessary equipment;

(10) Maintenance and repair of property acquired with Part B funds, to the extent necessary to keep such property in an efficient operating condition;

(11) Minor alterations in previously completed building space used or to be used in the program under part B of the Act when such alterations are needed to make effective use of equipment;

(12) The rental of space in privately and publicly owned buildings to the extent such space is in fact used for activities under part B of the Act, subject to the following provisions:

(i) The expenditures for the space are necessary and properly related to the activities of the program;

(ii) The State or local educational agency will, during the period of occupancy, receive the benefits of the expenditures commensurate with such expenditures;

(iii) The amounts paid are not in excess of comparable rental in the particular locality;

(iv) Expenditures represent a current cost;

(v) In the case of publicly owned buildings, like charges are made to other State or local agencies occupying similar space for similar purposes;

(13) Establishing and maintaining accounting, auditing, and other information systems required for the management of projects assisted under part B of the Act;

(14) Subject to the limitations in §§ 121.3 and 121.129, the construction of school facilities essential to the successful carrying out of approved programs or projects.

(d) Religion. None of the funds under part B of the Act may be used for religious worship or instruction.

(20 U.S.C. 1404, 1413, 1414, 41 CFR Subpart 1-15.7)

§ 121.128 Title to and control

property and funds.

over

(a) Incidental use. The incidental use of property acquired with funds provided under this subpart for purposes other than those provided in part B of the Act is permitted only for related educational purposes on public premises and only so long as such a use does not interfere with the use of such property in a program or project carried out under part B of the Act.

(b) Private schools. Use of funds provided under part B of the Act and property derived therefrom shall not inure to the benefit of any private school. Equipment acquired with funds under part B of the Act may be placed on private school premises for a limited period of time, but the title to and administrative control over such equipment must be retained and exercised by a public agency. In exercising that administrative control, the public agency shall not only keep records of, and account for, the equipment but shall also assure itself that the equipment is being used solely for the purposes of the program or project, and remove the equipment from the private school premises when necessary to avoid its being used for other purposes or when it is no longer needed for the purposes of the program or project.

(c) Public agency control. The State educational agency will obtain from a local educational agency administering a program or project under part B of the Act a satisfactory assurance that the funds provided under part B of the Act, and property derived therefrom, will at all times be under the control of, and be administered by, a public agency in

accordance with the provisions of the Act and the regulations in this part.

(d) Custody. The State Treasurer (or if there is no State Treasurer, the officer designated by the State to exercise similar functions for the State) shall be responsible for receiving, and for the proper safeguarding, of all Federal funds granted to the State under the Act. (20 U.S.C. 1404, 1413 (a) (2), (3), (8)) § 121.129 Construction.

A program or project for the education of handicapped children under part B of the Act may not include the construction of school facilities with funds provided under such part unless such construction (a) is demonstrated as essential to assure the success of that program or project and (b) complies with other requirements of part B of the Act and the regulations in this part with respect to construction.

(a) Funds provided under this subpart may not include expenditures for equipment unless (1) such equipment is demonstrated as essential to the provision of services to handicapped children, and (2) the recipient of such funds has a staff trained to use the requested equipment or has made provision for adequate staff training in the use of such equipment.

(b) In the purchase of equipment pursuant to this section, if a financial advantage is realized through bargains, rebates, discounts, bonuses, free pieces (not devoted to the project as approved), or other circumstances, the fair value of such financial advantage shall not be an allowable expenditure under § 121.127. (20 U.S.C. 1404, 1413)

§ 121.131 Use of Federal funds and liquidation of obligations by State or local educational agencies.

(a) Period for use. Federal funds under part B of the Act made available to State and local educational agencies for a fiscal year shall remain available for use by such State and local educational agencies in accordance with paragraph (c) of this section during that fiscal year. Grants for construction of school facilities shall remain available for use for that purpose for a reasonable period of time as determined pursuant to § 121.3(c).

(b) Carryovers. In accordance with section 405(b) (20 U.S.C. 1225(b)) of the General Education Provisions Act (Public Law 90-247, title IV, as amended), any Federal funds made available under part B of the Act to State and local educational agencies, which funds are not obligated and expended prior to the beginning of the fiscal year succeeding the fiscal year for which they were made available, shall remain available for obligation and expenditure during such succeeding fiscal year.

(c) Determinations of use. For the purpose of this section a use of funds under part B of the Act by a State or local educational agency will be determined on the basis of documentary evidence of binding commitments for the acquisition of goods or property, for the construction of school facilities, or for the performance of work. However, the use of funds for personal services, for services performed by public utilities, for travel, and for the rental of equipment and facilities shall be determined on the basis of the time such services were rendered, such travel was performed, and such rented equipment and facilities were used, respectively.

(d) State plan. Federal funds under part B of the Act, except funds made available expressly for the development of State plans, shall not be available for use with respect to binding commitments (other than those relating to personal services, utility services, travel, or the rental of equipment or facilities) entered into, or with respect to personal services, utility services, travel, or the rental of equipment or facilities rendered or performed by a State educational agency, prior to the effective date of the State plan.

(e) Liquidation. Obligations entered into by State and local educational agencies and payable out of funds under part B of the Act shall be liquidated during the fiscal year following the fiscal year in which such funds are obligated in accordance with this section unless prior to the end of that following fiscal year the State educational agency reports to the Commissioner the reasons why certain obligations cannot be timely liquidated and, on the basis thereof, the Commissioner extends the time for so liquidating those obligations. (20 U.S.C. 1413, 1225)

§ 121.132 State fiscal control and audit.

All expenditures by State and local educational agencies of Federal funds under part B of the Act shall be audited either by an appropriate State audit agency or by an independent certified public accountant or independent licensed public accountant, certified or licensed by a regulatory authority of a State or other subdivision of the United States. Such State and local audits shall be in accordance with generally accepted auditing standards, which shall be no less in scope and coverage than those standards which may be prescribed by the Department. Copies of audit reports shall be made available to the State agency to assure that proper use has been made of the funds expended. The results of such audits will be used to review State agency records and shall be made available to Federal auditors. Federal auditors shall be given access to such records or other documents as may be necessary to review the results of such audits.

(20 U.S.C. 1232c, 1413)
§ 121.133 Proration of costs.

Funds under part B of the Act are available only with respect to that portion of any expenditures which is attributable to an activity under the State plan. The State educational agency shall provide for a basis for identifying and a method to be used in prorating expenditures in determining those attributable solely to State plan activities. The State agency shall include in the description of its projected program activities submitted to the Commissioner pursuant to § 121.104, its projected expenditures for salaries attributable to State plan activities. The State agency must also maintain records (documented on an afterthe-fact basis) to substantiate the proration of expenditures for applicable items such as salaries, travel, rent, and equipment.

(20 U.S.C. 1232c, 1413, 1414) § 121.134

support.

Maintenance of level of

In developing policies and procedures required to be set forth in a State plan pursuant to § 121.103(b)(1), the State educational agency shall take into consideration the total or per capita average amount of State, local, and private school funds budgeted for expenditures in the current fiscal year for the education of handicapped children as compared with the total or per capita average amount of State, local, and private school funds actually expended for the education of handicapped children in the two most recent fiscal years for which the information is available, with allowances made for decreases in enrollment of handicapped children, contributions of large sums of money from outside sources on a short-term basis, and unusually large amounts of funds expended for such long-term purposes as the acquisition of equipment and the construction of school facilities.

(a) General. The amount of any State's allotment under part B of the Act for any fiscal year which the Commissioner determines will not be required for such fiscal year shall be available for reallotment, from time to time, on such dates during such year as the Commissioner may fix, to other States in proportion to the original allotments to such States under part B of the Act for that year but with such proportionate amount for any of such other States being reduced to the extent it exceeds the sum the Commissioner estimates such State needs and will be able to use for such year; and the total of such reductions shall be similarly reallotted among the States whose proportionate amounts were not so reduced. Any amount reallotted to a State under this section during a year shall be deemed part of its allotment under part B of the Act for that year.

(b) Statements of anticipated need. In order to provide a basis for reallotment by the Commissioner under part B of the Act, each State agency administering a program under part B of the Act shall, if requested, submit to the Commissioner by such date or dates as he may specify a statement or statements showing the anticipated need during the current fiscal year for the amount previously allotted, or any amount needed to be added thereto. The statement or statements shall contain such further information as the Commissioner may request for the purpose of making reallotments. (20 U.S.C. 1412(c))

Subpart E-Equipment and Teaching Materials 123.35 Title to equipment and teaching ma

terials. 123.36 Use and control. 123.37 Inventories of equipment. 123.38 Copyrights and patents. 123.39-123.43 (Reserved]

Subpart F-Joint Project Applications

123.44 Budgets. 123.45-123.49 (Reserved]

Subpart G-Eligibility of Children To Participate 123.50 Participation by children from families other than low-income families.

123.51 Participation by children from environments where English is the dominant language.

AUTHORITY: The provisions of this Part 123 issued under 5 U.S.C. 301; secs. 702-708, 81 Stat. 816-819; 20 U.S.C. 880b-880b-6.

SOURCE: The provisions of this Part 123 appear at 34 F.R. 201, Jan. 7, 1969, unless otherwise noted.

(a) "Act" means the Elementary and Secondary Education Act of 1965, Public Law 89-10, as amended, title VII of which is known as the "Bilingual Education Act".

(b) "Bilingual education" means the use of two languages, one of which is English, as mediums of instruction.

(c) "Children of limited Englishspeaking ability" means children who come from environments where the dominant language is one other than English.

(d) "Commissioner" means the U.S. Commissioner of Education.

re

(e) "Cultural and educational sources" includes, but is not limited to, State educational agencies, institutions of higher education, nonprofit private schools, public and nonprofit private agencies such as libraries, museums, musical and artistic organizations, and educational radio and television.

(f) "Dominant language" means with respect to a child the language commonly used in the child's home or community.

(g) "Dropout" means a person who withdraws from school membership before completing his elementary and secondary school education.

(h) "Elementary school" means a day or residential school which provides elementary education, as determined under State law.

(i) "Fiscal year" is the period of time which begins July 1 and ends June 30 of the following year.

(j) "High concentration" means a concentration of substantial numbers of children of limited English-speaking abilities from families with incomes below $3,000 per year or receiving payments under a program of aid to families with dependent children under a State plan approved under title IV of the Social Security Act.

(k) "Inservice training" means shortterm or part-time training in the instruction of children of limited English-speaking ability for persons while participating as teachers, teacher-aides, or other ancillary education personnel in bilingual education programs in elementary (including preelementary) or secondary schools, or in accredited trade, vocational, or technical schools.

(1) "Institution of higher education" means an educational institution in any State which (1) admits as regular students only persons having a certificate of graduation from a school providing secondary education, or the recognized equivalent of such a certificate; (2) is legally authorized within such a State to provide a program of education beyond secondary education; (3) provides an educational program for which it awards a bachelor's degree, or provides not less than a 2-year program which is acceptable for full credit toward such a degree, or offers a 2-year program in engineering, mathematics, or the physical or biological sciences which is designed to prepare a student to work as a technician and at a semiprofessional level in engineering, scientific, or other technological fields which require the understanding and application of basic engineering, scientific, or mathematical principles or knowledge; (4) is a public or other nonprofit institution, and (5) is accredited by a nationally recognized accrediting agency or association included on the list of such agencies or associations published by the Commissioner, or, if not so accredited, is an institution whose credits are accepted, on transfer, by not less than three institutions which are so accredited, for credit on the same basis as if transferred from an institution so accredited. In the case of an institution offering a 2-year program in engineering, mathematics, or the physical or biological sciences which is designed to prepare the student to work as a technician and at a semiprofessional level in engineering, scientific, or technological fields which require the understanding and application of basic engineering, scientific, or mathematical principles or knowledge, if the Commissioner determines that there is no nationally recognized accrediting agency or association qualified to accredit such institutions, he shall appoint an advisory committee, composed of persons specially qualified to evaluate training provided by such institutions, which shall prescribe the standards of content, scope, and quality which must be met in order to qualify such institutions to participate under this Act and shall also determine whether particular institutions meet such standards.

(m) "Local educational agency' means a public board of education or