(iv) The ways in which postsecondary education is regulated by public agencies.

(c) Meets the following criteria:

(1) Is feasible, has sound project design, and is likely to attain expected results with expected expenditures;

(2) Will, if appropriate, be supported financially by sources other than the Fund, including the applicant itself; and

(3) Has the potential for having available financial resources for continuation beyond the period of Fund support, if appropriate.

(20 U.S.C. 1221d)

§ 1501.7 Applications for assistance.

(a) An application for assistance under this part must be filed with the Fund on or before the closing date or dates announced by the Fund for each fiscal

year.

(b) Except as provided in paragraph (d) of this section, an application must have a title page providing the following information:

(1) Name and address of applicant.

(2) Name, address, title, phone number, and signature of applicant's authorizing officer.

(3) Name, address, title, and phone number of proposed project director. (4) Dates of proposed project, including evaluation time.

(7) A brief, one-paragraph description of the proposal.

(c) Except as provided in paragraph (d) of this section, an application must contain the following information, in a format to be selected by the applicant: (1) A diagnosis of the problem addressed, including a description of the problem and, as applicable, a discussion of pertinent empirical data and past attempts to deal with the problem.

(2) A description of the proposed project, including its methodology and schedule, qualifications of the persons who would conduct it, its short-term and long-term objectives, and its specific allocation of available funds in the form of a budget.

(3) A statement as to (i) expected financial support, if any, during the period of Fund support from sources other than the Fund, including the applicant itself, and (ii) if appropriate, expected sources of financial support, including that of the applicant itself, after the period of Fund support has elapsed.

(4) A statement of the significance of the proposed project, with specific reference to the manner in which the project relates to the Fund's objectives.

(5) An evaluation plan, including the criteria by which the project will be evaluated, the methods and schedules for such evaluation, and the cost of such evaluation.

(d) A State or local government seeking assistance under this part must apply in accordance with such procedures, and using such forms, as the Fund may specially prescribe in conformity with pertinent directives of the Office of Management and Budget. Much of the material required of such applicants pursuant to such directives is similar to the material required of applicants proceeding under paragraphs (b) and (c) of this section.

(e) Prior to its disposition of applications for assistance under this part, the Fund may obtain the review and advice of qualified persons not employed by the Department of Health, Education, and Welfare. Any such review shall be in addition to the review of applications by the Fund in accordance with such procedures as it may establish, including consultation with the Board of Advisers to the Fund. (f) No application for assistance under this part to an institution of postsecondary education shall be approved until the Fund has submitted it to the State postsecondary education commission, if there is one, established or designated pursuant to section 1202 of the Higher Education Act of 1965 in the State in which the institution is located and afforded the commission an opportunity to submit its comments and recommendations as to the application to the Fund. (g) No application for assistance under this part shall be approved until the procedure for implementing the evaluation plan required under paragraph (c) of this section or, as applicable, paragraph (d) of this section has been established and a schedule for the submission of reports on such evaluation by the applicant

to the Fund has been agreed upon. (20 U.S.C. 1221d; OMB Circular No. A-102, Attachment M)

§ 1501.8 Retention of records.

(a) Records. Each recipient shall keep intact and accessible records relating to the receipt and expenditure of Federal funds (and to the expenditure of the recipient's contribution to the cost of the project, if any), including all accounting records and related original and supporting documents that substantiate direct and indirect costs charged to the award.

(b) Period of retention. (1) Except as provided in paragraph (b) (2) and (d) of this section, the records specified in paragraph (a) of this section shall be retained for 3 years after the date of the submission of the final expenditure report or, with respect to a grant or contract which is renewed annually, for 3 years after the date of the submission of an annual expenditure report.

(2) Records for nonexpendable personal property which was acquired with Federal funds shall be retained for 3 years after its final disposition.

(c) Microfilm copies. Recipients may substitute microfilm copies in lieu of original records in meeting the requirements of this section.

(d) Audit questions. The records involved in any claim or expenditure which has been questioned by Federal audit shall be further retained until resolution of any such audit questions.

(e) Audit and examination. The secretary of Health, Education, and Welfare and the Comptroller General of the United States, or any of their duly authorized representatives, shall have access for the purpose of audit and examination to all such records and to any other pertinent books, documents, papers, and records of the recipient. (OMB Circular No. A-73; OMB Circular No. A-102, Attachment C; 20 U.S.C. 1221d)

§ 1501.9 Audits.

(a) All expenditures by recipients shall be audited by the recipient or at the recipient's direction to determine, at a minimum, the fiscal integrity of financial transactions and reports, and the compliance with laws and regulations.

(b) The recipient shall schedule such audits with reasonable frequency, usually annually, but not less frequently than once every 2 years, considering the nature, size, and complexity of the activity.

(c) Copies of audit reports shall be made available to the Fund to assure that proper use has been made of the funds expended. The results of such audits will be used to review the recipient's 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.

(d) Each recipient shall use a single auditor for all of its expenditures under Federal education assistance programs, regardless of the number of Federal agencies providing such assistance. (20 U.S.C. 1221d; OMB Circular No. A-102, Attachment G, 2, Attachment C, 1)

§ 1501.10 Limitations on costs.

The amount of the award shall be set forth in the grant award or contract document. The total cost to the Federal Government will not exceed the amount set forth in the grant award or contract document. The Federal Government shall not be obligated to reimburse the recipient for costs incurred in excess of such amount unless and until the Fund has notified the recipient in writing that such amount has been increased and has specified such increased amount in a revised grant award or contract document. Such revised amount shall thereupon constitute the revised total cost of the performance of the grant or contract that may be borne by the Federal Government. (31 U.S.C. 200) § 1501.11 Reporting.

The recipient shall comply with the schedule for reporting on its evaluation of the project agreed upon pursuant to § 1501.7 (g). (20 U.S.C. 1221d; OMB Circular No. A-102, Attachment M)

§ 1501.12 Final accounting.

(a) In addition to such other accounting as the Fund may require the recipient shall render, with respect to the project, a full account of funds expended, obligated, and remaining.

(b) A report of such accounting shall be submitted to the Fund within 90 days of the expiration or termination of the grant or contract, and the recipient

shall remit within 30 days of the receipt of a written request therefor any amounts found by the Fund to be due. Such period may be extended at the discretion of the Fund upon the written request of the recipient. (20 U.S.C. 1221d; 31 U.S.C. 628)

[FR Doc. 73-5775; Filed 3-26-73; 8:45 a.m.]

Mr. O'HARA. As a close reading will indicate, there are, in most of these other sections of the law, a requirement that commissions appointed pursuant to section 1202 be utilized. There is clear room for honest difference of opinion as to whether or not the absence of 1202 commissions stays the operation of these provisions of law. But we can discuss that later.

Subsequent to the enactment of the 1972 legislation, the Office of Education appointed a task force, chaired by Mr. John Phillips, from whom we will hear on Thursday, to develop an issues paper outlining the nature and scope of the commissions and setting further regulations for their appointment, operation, and funding.

These proposed regulations were circulated very widely within the education community, and aroused a substantial amount of commentsome of it highly critical, some of it favorable. The staff is directed to place in the record at an appropriate place, the original issues paper. [See p. 125 et seq.]

After the period of comment, the task force continued to revise the guidelines. On March 7, the recipients of the first paper were startled to receive a letter from Commissioner Ottina, as follows:

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE,

OFFICE OF EDUCATION, Washington, D.C., March 7, 1973.

DEAR COLLEAGUE: The purpose of this letter is to bring you up to date on recent developments concerning the State Postsecondary Education Commissions authorized under Section 1202 of the Higher Education Act, as amended.

We received almost 500 substantive responses to our invitation of December 4 for interested parties to comment on the Preliminary Report from the Task Force on State Postsecondary Education Commissions. These comments were analyzed by the Task Force during the period of December 18-January 12, and a Revised Report, including preliminary draft regulations, was transmitted from the Task Force to this office on February 1.

The Education Amendments of 1972 had envisioned major functions and responsibilities for the State Postsecondary Education Commissions in connection with the new authorizations for Comprehensive Statewide Planning (HEA Section 1203), Community College Education (HEA Title X, Part A), Occupational Education (HEA title X, Part B), and Improvement of Postsecondary Education (GEPA Section 404). In addition, the law had authorized the Section 1202 State Commissions to serve as State administrative/planning Commissions for existing programs in Community Services and Continuing Education (HEA Title I), Equipment for Undergraduate Instruction (HEA Title VI), and Grants for Construction of Undergraduate Academic Facilities (HEA Title VII). However, the Federal Budget for FY 74 provides almost no functions for the Section 1202 State Commissions to perform. The community service, instructional equipment and academic facilities grant programs are scheduled to be terminated, and no funding is provided to implement any of the community college or occupational education authorities. Furthermore, while the Budget does provide $15 million to support projects and programs for improvement of postsecondary education, it is our opinion that the implementation of the improvement of postsecondary education authority alone does not warrant the establishment of the Commissions at this time.

Under the circumstances, it has been determined that we should indefinitely defer our plans for distribution of the Revised Report of the Task Force, and suspend all activity relative to establishment of the Section 1202 State Commissions.

We want to express our thanks to all of you who have made suggestions and comments concerning the Section 1202 State Commissions, and to assure you that your thoughts have been taken seriously into account in the revisions to date.

Sincerely,

JOHN OTTINA, Acting U.S. Commissioner of Education.

This decision was not greeted with unmixed cheers or disappointment. There are some who consider the original guidelines to have been unacceptable, and would have probably welcomed the revised guidelines. Others may feel the opposite way. There is no consensus in the community, and certainly no final judgment by the chairman of this committee, as to the wisdom of Commissioner Ottina's decision. On that, we will take testimony and defer judgment.

But there are some things on which I am ready to make a judgment

now.

First, I object rather firmly to some of the phraseology in Commissioner Ottina's letter.

He says, "The community service, instructional equipment and academic facilities programs are scheduled to be terminated and no funding is provided to implement" title X.

Mr. Öttina here makes a common mistake. He mistakes the proposals in the budget for decisions by the institution authorized by the Constitution to make such decisions.

The provisions of law which the Commissioner says are "scheduled to terminate" do have a termination date in the law, as do most other grant programs.

But the decision as to termination will be made, in accordance with the Constitution, by the Congress, not by the Office of Education, not by the Office of Management and Budget, and not by the President acting on his own.

The same thing is true with regard to title X. It is true that the budget contains no funds for title X. And, given the political facts, it is possible that there will not be any title X funds appropriated in the immediate future.

But that does not give even my friend John Ottina the right to talk as though the decision had already been made, and the Congress can simply be ignored.

This hearing, I hope, will be primarily directed toward the substantive questions involved. But I think we should all bear these constitutional issues in mind throughout.

If section 1202 can be suspended by administrative fiat, the administration can ask in the budget for another example, not for a repeal of or an amendment to section 411 (b) but for a dispensation from it, then the concept of rule by law is rendered shakier. And we cannot afford in these days to tolerate any action, however motivated, no matter who commands it, which tends to diminish respect for the law.

Our first witness today is Mr. Aims McGuinness, executive assistant to the chancellor, University of Maine.

Mr. McGuinness is not testifying this morning in his capacity as a member of that great university system, however. We have asked him to testify on the history and background of section 1202. Last year, when the House and Senate, and subsequently the committee on con

ference were considering the education amendment, Mr. McGuinness concentrated on following the development of the State commissions, and is widely thought of, in academic and legislative circles, as an expert on the history of that section and the intention of the Congress.

He has been asked to testify this morning, in the hope that he will not grind any particular ax, but instead act as our instructor in this basic course on section 1202.

Mr. McGuinness, please take your place at the witness stand.

STATEMENT OF AIMS C. McGUINNESS, JR., EXECUTIVE ASSISTANT TO THE CHANCELLOR, UNIVERSITY OF MAINE

Mr. McGUINNESS. Thank you, Mr. Chairman.

I want to restate in my own words the last point you made in your introduction: That I do not appear as a representative of a particular institution or association and therefore will attempt, as best I can, to express the different points of view that have been expressed throughout the legislative history of section 1202.

I intend to cover four points in my presentation.

First, I will briefly review the provisions of the law and the interrelationships among those provisions.

Second, I will give you an overview of the sequence of events as I recall them, beginning from the period just prior to the conference, through to the present developments.

Third, I will list some of the pros and cons which I believe you will hear on whether or not implementation should continue.

And, fourth, I will list some of the issues which I believe will still be outstanding and will be presented to you by other witnesses in the next few days.

I have not prepared a written statement; however, I have prepared several exhibits which outline the principal points that I will make in several parts of the presentation.

I would like to turn first to what I have as exhibit 1, which is a large chart outlining the various sections of the bill. I might say to begin with that one of the most difficult tasks has been to explain to people the complexities of the various elements of this legislation: how they relate to each other, and how they will actually work together in administration. Much of the debate in the implementation has resulted from this complexity.

[Exhibit 1 follows:]