(m) "Nonprofit," when used with respect to a rehabilitation facility or a workshop, means a rehabilitation facility or a workshop, respectively, owned and operated by a corporation or association, no part of the net earnings of which inures, or may lawfully inure, to the benefit of any private shareholder or individual, and the income of which is exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1954.

(n) "Occupational license" means any license, permit, or other written authority required by a State, city, or other governmental unit to be obtained in order to enter an occupation.

(0) "Physical or mental disability" means a physical or mental condition which materially limits, contributes to limiting or, if not corrected, will probably result in limiting an individual's activities or functioning. It includes behavioral disorders characterized by deviant social behavior or impaired ability to carry out normal relationships with family and community which may result from vocational, educational, cultural, social, environmental, or other factors.

(p) "Physical restoration services" means those medical and medically related services which are necessary to correct or substantially modify within a reasonable period of time a physical or mental condition which is stable or slowly progressive, and includes: (1) Medical or surgical treatment by general practitioners or medical specialists; (2) psychiatric treatment; (3) dentistry; (4) nursing services; (5) hospitalization (either inpatient or outpatient care) and clinic services; (6) convalescent, nursing or rest home care; (7) drugs and supplies; (8) prosthetic devices essential to obtaining or retaining employment; (9) physical therapy; (10) occupational therapy; (11) medically directed speech or hearing therapy; (12) physical rehabilitation in a rehabilitation facility; (13) treatment of medical complications and emergencies, either acute or chronic, which are associated with or arise out of the provision of physical restoration services, or are inherent in the condition under treatment; and (14) other medical or medically related rehabilitation services. The provision that the condition is stable or slowly progressive does not apply when physical restoration services are provided in order to determine the rehabilitation potential.

(q) "Prosthetic device" means any appliance designed to support or take the place of a part of the body, or to increase the acuity of a sensory organ.

(r) "Rehabilitation facility" means a facility, operated for the primary purposes of assisting in the rehabilitation of handicapped individuals, (1) which provides one or more of the following types of services: Testing, fitting, or training in the use of prosthetic devices; prevocational or conditioning therapy; physical or occupational therapy; adjustment training; evaluation, treatment, or control of special disabilities; or (2) through which is provided an integrated program of medical, psychological, social and vocational evaluation and services, under competent professional supervision: Provided, That the major portion of such evaluation and services is furnished within the facility, and that all medical and related health services are prescribed by, or are under the formal supervision of, persons licensed to practice medicine or surgery in the State.

(s) "Secretary" means the Secretary of Health, Education, and Welfare.

(t) "Small business enterprise" means a small business operated by blind or other severely handicapped persons under the management and supervision of the State agency or its nominee. Such businesses include only those selling, manufacturing, processing, servicing, agricultural, and other activities which are suitable and practical for the most effective utilization of the skills and aptitudes of blind or other severely handicapped persons and provide substantial gainful employment or self-employment commensurate with the time devoted by the operator or operators to the business, the cost of establishing the business and other factors of an economic nature.

(u) "State" means the several States, the District of Columbia, the Virgin Islands, Puerto Rico, and Guam.

(v) "State agency" or "State vocational rehabilitation agency" means the sole State agency designated to administer (or supervise local administration of) the State plan for vocational rehabilitation services. The term includes the State agency for the blind, if designated as the sole State agency with respect to that part of the plan relating to the vocational rehabilitation of the blind.

(w) "Substantial handicap to employ. ment" means that a physical or mental

disability (in the light of attendant medical, psychological, vocational, educational, cultural, social, or environmental factors) impedes an individual's occupational performance, by preventing his obtaining, retaining, or preparing for a gainful occupation consistent with his capacities and abilities.

(x) (1) "Vocational rehabilitation services" means any goods and services necessary to render a handicapped individual fit to engage in a gainful occupation, including (i) diagnostic and related services (including transportation) required for the determination of eligibility for and the nature and scope of services to be provided; (ii) counseling; (iii) physical restoration services; (iv) training; (v) books and training materials (including tools); (vi) maintenance; (vii) placement; (viii) tools, equipment, initial stocks and supplies, including equipment and initial stocks and supplies for vending stands; (ix) management services and supervision provided by the State agency and acquisition of vending stands or other equipment and initial stocks and supplies, for small business enterprises, operated under the supervision of the State agency, by the severely handicapped; (x) transportation; (xi) occupational licenses; (xii) reader services for the blind; (xiii) interpreter services for the deaf; and (xiv) other goods and services necessary to render a handicapped individual fit to engage in a gainful occupation.

(2) "Vocational rehabilitation services" (for purposes of the determination of rehabilitation potential) also means any goods or services, including the items specified in subparagraph (1) (1) through (vi), (x), (xii), (xiii) and (xiv) of this paragraph, which are provided to an individual who has a physical or mental disability which constitutes a substantial handicap to employment, during the period specified by the Commissioner (§ 401.21) to be necessary for, and which are provided for the purpose of ascertaining whether it may reasonably be expected that such individual will be rendered fit to engage in a gainful occupation through the provision of goods and services described in subparagraph (1) of this paragraph.

(3) The term also covers the establishment of workshops for the severely handicapped and the establishment of rehabilitation facilities.

(y) "Workshop" means a place where any manufacture or handiwork is carried on, and which is operated for the primary purpose of providing gainful employment to the severely handicapped (1) as an interim step in the rehabilitation process for those who cannot be readily absorbed in the competitive labor market; or (2) during such time as employment opportunities for them in the competitive labor market do not exist. Subpart B-State Plans for Vocational Rehabilitation

STATE PLAN CONTENT: ADMINISTRATION § 401.2 The State plan: general require

ments.

(a) Purpose. A basic condition to the certification of Federal funds to a State for vocational rehabilitation services is a State plan found to meet Federal requirements. This plan shall constitute a description of the State's vocational rehabilitation program. The State plan shall meet the requirements as to content hereinafter stated. It shall provide for financial participation by the State, and shall provide that it will be in effect in all political subdivisions of the State except as specifically provided in § 401.9. The Commissioner shall approve any plan meeting the requirements of the act and of this part.

(b) Form. The general form and content of the State plans are set forth in the State Plan Guide which is distributed to all State agencies administering vocational rehabilitation programs.

(c) Amendment. The plan shall provide that it will be amended whenever necessary to reflect a material change in any phase of State law, organization, policy, or agency operations and that such amendments will be submitted to the Vocational Rehabilitation Administration before it is put into effect, or within a reasonable time thereafter.

(d) Separate part relating to rehabilitation of the blind. If, as hereinafter provided for, a State agency for the blind administers or supervises the administration of that part of the State plan relating to the rehabilitation of the blind, such part of the State plan shall meet all requirements as to submission, amendment, and content prescribed by the act and this part, as though it were a separate State plan.

§ 401.3 Approval of State plans and amendments.

Both the original plan and all amendments thereto shall be submitted to the regional representative of the Vocational Rehabilitation Administration.

(a) New or substantially revised plans. New or substantially revised plans are reviewed by the regional representative who consults with the State agency regarding any suggested revisions. The regional representative forwards the plan to the central office of the Vocational Rehabilitation Administration where the appropriate divisions review and recommend the action to be taken. The Assistant Commissioner, Program Services, determines the action to be taken and advises the State.

(b) Plan amendments. An amendment to a plan is reviewed by the regional representative who determines whether it is approvable. If approvable, the regional representative incorporates it into the approved State plan and advises the State. If he considers an amendment not to be approvable and is unable to secure necessary changes by the State, he submits the amendment to the central office of the Vocational Rehabilitation Administration for appropriate action.

§ 401.4 Withholding of funds.

(a) When withheld. When after reasonable notice and opportunity for hearing to the State agency it is found that (1) the plan has been so changed that it no longer complies with the requirements of section 5(a) of the Vocational Rehabilitation Act, or (2) in the administration of the plan there is a failure to comply substantially with any such provision, further payments under section 2 or 3 may be withheld or limited as provided by section 5(c) of the Vocational Rehabilitation Act. The State agency is notified of the action taken.

(b) Judicial review. The decision to withhold payments described in paragraph (a) of this section may be appealed to the United States district court for the district in which the capital of the State is located. The court will review the action on the record in accordance with the provisions of the Administrative Procedure Act.

(c) Informal discussions. Hearings described in paragraph (a) of this section are generally not called until after reasonable effort has been made by regional and central office representatives

to resolve the questions involved by conference and discussion with State offcials. Formal notification of the date and place of a hearing does not foreclose further negotiations with State officials. § 401.5 State agency for administration.

(a) Designation of sole State agency. The State plan shall designate a sole State agency to administer the State plan for vocational rehabilitation services in the State or to supervise its administration in a political subdivision of the State by a sole local agency of such political subdivision. This agency shall be one of the agencies specified in paragraph (b) of this section, except that the State agency for the blind, as specified in paragraph (c) of this section, may be designated as the sole State agency with respect to that part of the program relating to the vocational rehabilitation of the blind.

(b) Designated State agency. The designated State agency, except for a designated State agency for the blind as specified in paragraph (c) of this section, shall be:

(1) A State agency primarily concerned with vocational rehabilitation, or vocational and other rehabilitation, of disabled individuals; such agency must be an independent State commission, board, or other agency whose major function is vocational rehabilitation, or Vocational and other rehabilitation, of disabled individuals, with authority, subject to the supervision which derives from the office of the Governor, to define the scope of the program within the provisions of State and Federal law, and to direct its administration without external administrative controls.

(2) The State agency administering or supervising the administration of education or vocational education in the State;

or

(3) A State agency which includes at least two other major organizational units each of which administers one or more of the major public education, public health, public welfare, or labor programs of the State.

(c) Designated State agency for the blind. Where the State commission for the blind, or other agency which provides assistance or services to the adult blind, is authorized under State law to administer or supervise the administration of vocational rehabilitation services to the blind, such commission or agency may be designated as the sole State

agency to administer the part of the plan under which vocational rehabilitation services are provided for the blind or to supervise the administration of such part in a political subdivision of the State by = a sole local agency of such political subdivision.

(d) Authority. The State plan shall set forth the authority under State law for the administration or supervision of the administration of the program by the State agency, and the legal basis for administration by local rehabilitation agencies if applicable. In this connection, copies of all laws and interpretations thereof by appropriate State officials, directly pertinent to the administration or supervision of the vocational rehabilitation program, shall be submitted as a part of the plan.

(e) Responsibility for administration. The State plan shall provide that all decisions affecting the eligibility of clients, the determination of rehabilitation potential or the nature and scope of vocational rehabilitation services to be provided will be made by the State agency, or by a local rehabilitation agency under its supervision, and that this responsibility will not be delegated to any other agency or individual.

§ 401.6 Organization for administration.

(a) Organization. The State plan shall describe the organizational structure of the State agency, including descriptions of organizational units, the functions assigned to each, and the relationships among units in the vocational rehabilitation program. The organizational structure shall provide for all the vocational rehabilitation functions for which the State agency is responsible, for clear lines of administrative and supervisory authority, and shall be suited to the size of the vocational rehabilitation program and the geographic areas in which the program must operate. The State plan shall also describe methods of administration which will provide for the coordination and integration of activities, adequate controls over operations, channels for the development and interpretation of policies and standards, and effective supervision of staff under the vocational rehabilitation program. The organizational structure and the methods of administration shall facilitate program operations, and shall insure the provision of all necessary vocational rehabilitation services available under the State plan to re

habilitation clients, including services necessary to determine rehabilitation potential.

(b) Organizational unit. Where the designated State agency is of the type specified in § 401.5 (b) (2) or (3), or § 401.5(c), the State plan shall provide that the agency (or each agency, where two such agencies are designated) shall include a vocational rehabilitation organizational unit which: (1) Is primarily concerned with vocational rehabilitation, or vocational and other rehabilitation, of disabled individuals, and is responsible for the vocational rehabilitation program of such State agency, (2) has a full-time administrator in accordance with § 401.7, and (3) has a staff employed on such rehabilitation work of such organizational unit all or substantially all of whom are employed full time on such work.

(c) Location of organizational unit. The State plan shall provide that the organizational unit, specified in paragraph (b) of this section, shall be located at an organizational level and shall have an organizational status within the State agency comparable to that of other major organizational units of such agency or, in the case of an agency described in § 401.5(b) (2), the unit shall be so located and have such status or the administrator of such unit shall be the executive officer of such State agency. In evaluating the comparability of the organizational level and the organizational status of the unit, the Commissioner will give consideration to such factors as the directness of the reporting line from the administrator of the organizational unit for rehabilitation to the chief officer of the designated State agency; the title, status and grade of the administrator of the organizational unit for rehabilitation as compared with those of the heads of other organizational units of the State agency; the extent to which the administrator of the organizational unit for rehabilitation can determine the scope and policies of the vocational rehabilitation program; and the kind and degree of authority delegated to him for the administration of the vocational rehabilitation program.

(d) Applicability to a single State agency. In the case of a State which has not designated a separate State agency for the blind as provided for in § 401.5, such State may, if it so desires, assign responsibility for the part of the plan under which vocational rehabilitation

services are provided for the blind to one organizational unit of the designated sole State agency and assign responsibility for the rest of the plan to another organizational unit of such agency, with the provisions of paragraphs (b) and (c) of this section applying separately to each of such units.

(e) Effective date. The State plan must comply with the provisions of this section no later than July 1, 1967. Prior to that date, a State plan which meets the requirements of the Vocational Rehabilitation Act as in effect prior to the Vocational Rehabilitation Act Amendments of 1965 will be accepted.

§ 401.7 State administrator.

The State plan shall provide that there shall be a State administrator or other named official with primary responsibility for the direction of the administration of the vocational rehabilitation program of the State agency, or the vocational and other rehabilitation of disabled individuals, and that such State administrator shall be required to devote his full time and efforts to the vocational rehabilitation program, or the vocational and other rehabilitation of disabled individuals, with the following exception: Upon the request of a State agency, the Commissioner may approve arrangements whereby the State administrator is also responsible for the direction of other programs primarily concerned with handicapped persons, if he finds in view of all the circumstances in the particular case that such arrangements will not impair the effective administration of the State plan. This requirement applies to the chief officer of a State agency of the type specified in § 401.5 (b) (1) and to the administrator of the organizational unit for rehabilitation in a State agency of the type specified in § 401.5 (b) (2), (b) (3) or (c).

§ 401.8 Local administration.

The State plan may provide for administration of the program through a sole local rehabilitation agency of a political subdivision of the State, under the supervision of the State agency and in compliance with Statewide standards established by the State agency (except to the extent that there is a waiver of Statewideness, § 401.9). If the plan provides for local administration, the local rehabilitation agency shall be responsible for the administration of all aspects of the program within the political subdivi

sion which it serves: Provided, however, That a separate local rehabilitation agency serving the blind may administer that part of the plan relating to the rehabilitation of the blind, under the supervision of the State agency for the blind. If the State plan provides for the administration of the program by local rehabilitation agencies, the State plan shall set forth the standards governing their organization and methods of administration, and shall describe the nature and extent of the supervision exercised by the State agency in order to assure observance in the application of State standards and the effective achievement of the objectives of the State plan throughout the State except to the extent that the requirement for Statewideness is waived in accordance with § 401.9.

§ 401.9

Waiver of Statewideness.

If the State agency desires to carry out activities in one or more political subdivisions through local financing to promote the vocational rehabilitation of substantially larger numbers of handicapped individuals or the vocational rehabilitation of individuals with particular types of disabilities, the State plan shall (a) describe the types of activities which will be carried out for these purposes; (b) provide that the State agency will obtain a full written description of any such activity to be carried out in a particular political subdivision and will obtain written assurance from the political subdivision that the non-Federal share of funds is available to the State agency; (c) provide that the State agency will require that its approval be given to each individual proposal before the proposal is put into effect in a political subdivision; (d) provide that the State agency will furnish such information and reports as the Commissioner may from time to time require to ascertain whether the activities are within the purposes of this section; (e) provide that the State agency will have sole responsibility for administration (or supervision if the vocational rehabilitation program is administered by local rehabilitation agencies) of the program in the particular local political subdivision in accordance with § 401.5; and (f) provide that all requirements of the State plan shall apply to such activities, except the requirement that the program shall be in effect in all political subdivisions of the State, and except that the provisions of § 401.70