proved on an "Application for Donation of Surplus Personal Property", Standard Form 123, or (2) listed on a shipping document.

(j) "State Agency" means the agency designated by State statute or executive order to make the certifications concerning, and distribution of, donable property to eligible applicants within the State as provided for in section 203(j) of the Act. § 14.2 Basic policy.

It is the policy of the Department to strengthen and promote the improvement of operations of State Agencies so as to achieve maximum efficiency, responsibility and equity in the distribution and utilization of surplus property for health, educational, and civil defense purposes.

§ 14.3 Geographic scope.

This part is applicable to States within the United States, the District of Columbia, the Commonwealth of Puerto Rico, and the territories and possessions of the United States. § 14.4

Organization.

(a) Each State Agency shall be ad-. ministered under the direction and supervision of a chief executive officer who shall be responsible for carrying out all phases of the State's program in accordance with the approved Plan submitted pursuant to § 14.5.

(b) Each State Agency shall maintain a staff adequate to enable it to carry out the program as set forth in its approved Plan of Operation.

§ 14.5 Plan of Operation.

(a) Each State Agency shall submit to the appropriate regional office of the Department for its approval at least three signed copies of its Plan of Operation which shall conform to the provisions of this part, and Parts 12 and 13 of this subtitle. Such Plans shall be in effect and shall be binding upon the State Agency beginning with the date of approval by the Department. No aliocations of donable property shall be made to such State Agency, and no donable property shall, except as directed by the Department, be distributed by such State Agency under section 203 of the Act, if it is determined by the Department that the State Agency is not operating in conformance with the Department's regulations. No subsequent amendments to, nor modifications of, approved Plans shall be placed in effect

without prior approval of the Department. Approval of a Plan of Operation shall not be effective for a period in excess of 5 years from the date of approval. The Department may approve Plans, or parts thereof, for lesser periods of time, as determined by the Department in each case. Each State Agency shall, not later than 90 days following the effective date of any change in the Department's regulations which affects a State Plan, submit to the appropriate regional office for its approval, at least three copies, executed by the responsible official(s), of all sections of its State Plan amended to conform with the changes in the Department's regulations. Sixty days prior to the expiration date of a State Plan of Operation the State Agency shall submit to the appropriate regional office a complete new Plan or supplements as appropriate, or request by letter to the regional office that the existing Plan be approved for an additional 1 to 5 years.

(b) The Plan of Operation shall include the following in this order:

(1) Copies of State statutes and/or executive orders establishing the State Agency and its authority to:

(i) Acquire, warehouse, and distribute donable personal property to eligible organizations under section 203 of the Act and to execute the certifications and agreements required by that section of the Act and the Federal Government.

(ii) Assess and collect service charges from eligible participating organizations if such charges are contemplated.

(ii) Enter into cooperative agreements as provided for by section 203 (n) of the Act, if the State Agency contemplates entering into such agreements.

(iv) Where express statutory authority does not exist or is ambiguous, or where authority exists by virtue of executive order, the State Agency Plan shall also include the opinion of the State's Attorney General as to the existence of such authority.

(2) A statement of (i) the Agency's authority for the deposit and investment of service charge funds; (ii) the types of depositories and/or investments of such funds; and (iii) authority for the disbursement of funds and the liquidation of investments.

(3) (i) [Reserved]

(ii) Chart(s) showing (a) organizational units of the State Agency; (b) functions of such units; and (c) major lines of supervisory authority.

(4) Procedures for accounting for surplus property allocated, received, warehoused, and distributed. These must include the following: (i) Provision for recording and reporting shortages and overages of property both when it is taken into State Agency custody and at the time of inventory verifications; (ii) provision for periodic verification of property on hand (at least annually); (iii) provision for any necessary adjustments to inventory records and/or stock record cards at least annually and upon written authority by the Agency Director: (a) A file shall be maintained by the State Agencies covering all adjustments with justifications therefore, and be made available for inspection by any authorized Federal official; (b) such justification shall, as a minimum, reflect that all reasonable efforts have been expended to ascertain when, where, how, or why the property is missing, damaged or otherwise unaccounted for; and (c) regional offices shall be furnished a copy of the adjustment to inventory records, with justification, at the time the adjustment is made, on any item of property having an acquisition cost of $2,500 or more; (iv) a means of tracing property from receiving documents to disposal documents; and (v) a system of readily determining the quantity of various types of property donated to individual donees.

(5) An explanation of how service charges are determined. This shall include a maximum charge not in excess of $500 for any single item to cover indirect administrative expenses. In addition to the $500 service charge for any single item, State Agencies for Surplus Property may collect direct expenses for labor in removing installed equipment, packing and crating, loading, transportation, rehabilitation, and delivery of property to the donee. Charges in excess of the above must be justified in writing and be approved by the Department in advance of billing the donee on an individual case basis.

(6) Procedure for ascertaining the eligibility of applicants.

(7) Procedure for establishing the authority of representatives of eligible donees to receive surplus property and execute the required certifications and agreements on behalf of applicants.

(8) Procedure for determining the need and usability of surplus property by eligible organizations and the fair and equitable distribution thereof; such

procedure must include: (i) Provisions for visits with at least 25 percent of the donees who are eligible but who have not received any surplus property during the past 12 months (this requirement can be satisfied by having the institutions' representatives visit the State Agency Distribution Center; explaining the donation program at group meetings, conferences, or seminars conducted by donation personnel; personal letters or telephone conversations with, or visits to the institutions for the purpose of explaining the program); (ii) the periodic circularization of information about the donable property program to all eligible donees at least once each year; and (iii) a continuing review of the records of property distributed to donees to insure that all such property is distributed on an equitable basis and that such property is useful and needed by the recipient.

(9) Procedure for obtaining the certifications and agreements required by §§ 13.6(b) (1), (2) and (3), 13.9, and 13.10 of this subtitle.

(10) Procedure for utilization surveys at educational and health institutions to ascertain that property with a single item acquisition cost of $2,500 or more, donated to them, is being used in accordance with their certifications and agreements. This procedure shall include provision for reports on such surveys.

(11) Samples of all forms used by the State Agency.

(c) [Reserved]

§ 14.6 Books and records.

(a) The fiscal accounting of the State Agency shall be accomplished by a double entry system. The system shall contain a chart of accounts, a general ledger with accounts for all assets, liabilities, income, and expense, and journals, or their equivalent, for the original record of transactions. Accounting records shall be maintained in a manner that will identify and separately account for funds accumulated from service charges against donee institutions and organizations.

(b) Financial records and all other books and records of the State Agency shall be subject to inspection by representatives of the Department.

(c) Each State Agency shall maintain accurate accountability records of all donable property approved for transfer to the State Agency and donable property received, warehoused, and distributed by it. Accountability records of all

single items having an acquisition cost of $2,500 or more shall be kept separate from those of lesser amounts.

(d) Records and documents pertaining to the eligibility of donee institutions and organizations shall be maintained in the form and manner prescribed by the Department.

(e) All official records of the State Agency shall be kept for a minimum period of 5 years. However, records pertaining to property containing restrictions for more than 4 years shall be kept 1 year beyond the specified periods of restrictions. In those cases where property is in compliance status at the expiration of the period of restriction the records will be retained for at least 1 year after the compliance case has been closed. § 14.7

Service charges and funds.

(a) Service charges, as a whole, for the care and handling of donable surplus property shall be limited to the amount necessary to pay actual expenses of current operations and to purchase necessary equipment, plus the accumulation and maintenance of a working capital reserve. The service charge assessed by a State Agency for the transfer of any single item of donable surplus property shall be reasonable in relation to the costs incident to the transfer.

(b) A State Agency's working capital reserve shall be computed as follows:

(1) Add together the following items of current assets:

(i) Cash on hand and in depositories; (ii) Investments (readily convertible into cash);

(iii) Accounts receivable.

(2) From the total of the above described current assets, deduct all liabilities that are due (including installments that fall due) within 1 year, and any obligations represented by funds not accumulated from service charges which are required to be returned eventually to the source from which they were derived.

(c) The working capital reserve chall not exceed an amount equivalent to the actual cost of operation during the immediate past fiscal year except with the written approval of the Department.

(d) Integrity of funds accumulated from service charges against donee institutions and organizations, including income accruing from their investments shall be maintained, and such funds shall be used only for the operations of the

Surplus Property Utilization Program and shall not be available for any other purpose. Records and accounts shall be maintained by the State Agency of monies expended for the construction of warehouses, the purchase of fixtures, equipment, trucks, etc., for State Agency operations from service charge funds. When any of this property is no longer needed it shall be disposed of by trading the item for a like item, by public bid sale or under other arrangements approved by the Department. All monies received from sale of such property shall be deposited in the service charge fund. Service charge funds may be used to purchase replacement parts for the purpose of rehabilitating Federal surplus property. Service charge funds may not be used to purchase property solely for donation purposes. No property or equipment procured by the State Agency through expenditure of service charge funds shall be transferred to or used, part-time or otherwise, by any agency or instrumentality of the State other than the State Agency, unless such use is compensated for on a reasonable charge basis and the proceeds deposited to the service charge account.

(e) A State Agency shall accept payment of service charges only in the form of warrants, checks, or other official instruments drawn or issued by, and in the name of, the respective donee institutions or organizations.

(f) Funds accumulated by a State Agency from service charges against donee institutions and organizations, over and above the working capital reserve as provided for in this part, shall be refunded to donee institutions and organizations (1) on a pro rata basis (based upon total charges collected during the preceding fiscal year) or (2) by reduced service charges during the current and the next ensuing fiscal year. § 14.8 Audits.

The operations and financial affairs of the State Agency shall be audited at least every two years by an appropriate State authority or by a licensed public accountant. Signed copies of the reports of audits of the State Agencies shall be forwarded to or made available to the appropriate regional office of the Department.

§ 14.9 Handling of property.

(a) All acquisition, warehousing, and distribution functions shall be a direct

part of the State Agency's operation and shall be under the direction and control of a single executive officer.

(b) All distribution of donable property to eligible civil defense organizations will be made only in accordance with pertinent regulations of the Office · of Civil Defense.

(c) Donable surplus property shall be compared with the respective Standard Form 123 and pertinent shipping documents immediately upon receipt, and any shortage or overage shall be reported to the agency from which the property was obtained and a copy of the report shall be transmitted to the appropriate regional office of the Department, in accordance with procedures set forth in the Surplus Property Utilization Manual issued by the Department.

(d) State Agencies shall maintain adequate provision for protecting property in their custody, including reasonable protection against the hazards of fire, theft, vandalism, and weather.

(e) State Agencies shall, at least annually, report to the appropriate Regional Representative all surplus property which has been in their custody longer than 12 months. Such reports shall be made within 60 days following periodic verification of property on hand as required by the Plan of Operation.

§ 14.10 Eligibility.

Findings by State Agencies as to the eligibility of applicants to acquire donable property in accordance with the requirements of section 203 (j) of the Act and regulations issued thereunder shall be based upon applications by the governing bodies of the applicant institutions stating the nature and purpose of the institutions and shall be recorded and such record preserved in accordance with the provisions of § 14.6(d). § 14.11

Utilization and compliance responsibility.

(a) Each State Agency shall assist the Department in effecting utilization and compliance by health and educational donees with the terms and conditions established for any single item of donated property having an acquisition cost of $2,500 or more, and shall make an on-site investigation of the use of such item as least once during the period of Federal restrictions. The SASP shall fully document its investigations and make its report of investigation

available for review by any authorized Federal official.

(b) State Agencies shall take reasonable measures to assure that single items of personal property with an acquisition cost of less than $2,500 that are donated under the provisions of the Act for health or educational purposes are actually used for such purposes.

(c) Where information received by a State Agency indicates fraud or misuse of surplus property donated for health, educational or civil defense purposes, the circumstances pertaining thereto shall be reported immediately to the Department. Upon request by the appropriate Regional Representative, State Agencies shall make appropriate investigations of alleged fraud or misuse of surplus personal property donated for health and educational purposes.

(d) State Agencies shall report immediately to the appropriate law enforcement authorities and to the respective Regional Representative any theft, fraud or indication of fraud in connection with any donable property in its custody and shall investigate and/or settle any such case only with the concurrence of the Regional Representative. § 14.12

Assistance to the Department.

Each State Agency shall cooperate with the Department by releasing property from its custody upon request, and will assist the Department in obtaining voluntary release by donee institutions of property needed for defense or emergency use.

If the Department determines that a State Agency is not operating in accordance with its approved Plan of Operation or these Minimum Standards, allocation of property to the State Agency may be suspended until the nonconformance is corrected to the satisfaction of the Department.

§ 14.14 Amendments.

The Department reserves the right at any time to modify or amend these Minimum Standards. Upon issuance of amendments hereto requiring State Agencies to modify their operations, reasonable opportunity will be afforded the State Agencies to conform their operations to such amended standards. § 14.15 Temporary suspension.

Compliance with the requirements imposed by the first sentence in each of

Congress has directed that blind persons licensed by State Agencies under the provisions of the Randolph-Sheppard Vending Stand Act, be authorized, and, so far as feasible, be given preference to operate vending stands on any Federal property where such vending stands may be properly and satisfactorily operated by blind persons. Section 4(a), Public Law 565, 68 Stat. 663 (20 U.S.C. 107). That law further directs the head of each department or agency in control of the maintenance, operation, and protection of Federal property to prescribe regulations, with the approval of the President, to assure that preference including assignment of vending machine income to achieve and protect that preference.

§ 20.2 Department policy on permits for vending stands.

(a) Pursuant to these responsibilities and subject to paragraph (b) of this section, it will be the policy of this Department with respect to property of which it is in control of the maintenance, operation, and protection, to issue a permit authorizing the operation of such vending stands (which term includes vending machines) without charge for space or necessary utilities as, in the opinion of the State licensing agency, are suitable for operation by a licensed blind person and for which the State licensing agency makes application.

(b) The application of a State licensing agency for a permit may be denied or revoked if the Secretary determines that the interest of the United States would be adversely affected or this Department unduly inconvenienced by its issuance or continuance. Loss of revenue by reason of granting a rent-free permit for operation of a vending stand by a licensed blind person shall not be a basis for denying such permit as unduly inconveniencing this Department or adversely affecting the interest of the United States. If a constituent believes factors other than loss of revenue justify denial or revocation of a permit for the operation of a vending stand by a licensed blind person, it shall refer the matter to the Secretary, together with the recommendation of the Director of the Office of Vocational Rehabilitation.

(c) No permit, lease, or other arrangement for the operation of a vending stand (which term includes vending machines) on property, the maintenance, operation, and protection of which is in a constituent, shall be entered into or renewed without first consulting the State licensing agency, unless express permission is given therefor by the head of the constituent after consultation with the Director of the Office of Vocational Rehabilitation.

(d) After a permit to operate a vending stand is in effect, no article shall be offered for sale on the property (through over the counter sales, by vending machine, or otherwise) which competes with articles approved for sale under the permit, except that this regulation shall not prevent a cafeteria or restaurant from selling articles of a type considered as food and usually sold as part of a meal, nor shall it prevent the