vocational rehabilitation services furnished to disability beneficiaries. Within the limits authorized under section 222, as amended, trust funds will be available for payment by the Commissioner of Vocational Rehabilitation to the States to provide for vocational rehabilitation services (and related costs of administration) for disability beneficiaries under State plans approved under section 5 of the Vocational Rehabilitation Act.

(b) To receive trust funds for vocational rehabilitation, each State agency is required to submit, through the Vocational Rehabilitation Administration regional office, and to have approved by the Commissioner an amendment to its State plan or plans which sets forth its policy and procedures for providing vocational rehabilitation services to disability beneficiaries in keeping with the purposes and objectives as stated below and which meets the requirements and conditions prescribed herein.

§ 401.81 Purposes and objectives.

With the objective of making it possible for more disability beneficiaries to receive vocational rehabilitation services, money is made available from the trust funds to finance the vocational rehabilitation of selected beneficiaries. It is the intent of Congress that this money will be used in such a way that the saving from the amount of benefits that would otherwise have to be paid and the increased contributions to the trust funds paid by virtue of the earnings of beneficiaries who return to work will exceed, or at least equal, the money paid from the trust funds for rehabilitation costs. In addition to the offsetting gains that the trust funds are expected to realize, there will be gains to the individual concerned and to society when the disabled individuals are returned to productive activity. In order to maximize the values to be obtained from the program, States will act promptly to provide the appropriate

vocational rehabilitation services utilizing such regular and special rehabilitation techniques and facilities as will help the maximum number of disability beneficiaries to engage in productive activity. The term “productive activity" in the context of this subpart is closely related to "ability to engage in substantial gainful activity" as that phrase is used in 20 CFR 404.1532ff., i.e., either actual performance of such activity (as distinquished from

For purposes of this subpart:

(a) "Disability beneficiary" means a disabled individual who is entitled to benefits under section 223 of the Social Security Act (including disabled individuals serving a waiting period prior to such entitlement), or a disabled individual over age 18 who is entitled to child's insurance benefits under section 202(d) of the Social Security Act.

(b) "Productive activity" means fulltime or substantial part-time employment or self-employment wherein the nature of the work activity performed, the earnings received, or both, or the capacity to engage in such employment or self-employment, can reasonably be expected to result in termination of social security disability benefits.

(c) "Trust funds" means funds derived from the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund for purposes of vocational rehabilitation pursuant to section 222(d) of the Social Security Act.

§ 401.84 State plan requirements.

For a State to receive trust funds the State plan or plans must contain the following provisions regarding vocational rehabilitation services to disability beneficiaries:

(a) Conformance to selection criteria. The State plan shall provide that, to the extent funds provided from the trust funds are adequate for that purpose, vocational rehabilitation services will be furnished to disability beneficiaries in the State who the State determines on the basis of medical, vocational, social, personal or other factors are otherwise

eligible for services and who meet the following requirements:

(1) There is present a disabling physical or mental impairment which is not so rapidly progressive as to outrun the effect of vocational rehabilitation services, or to preclude restoration of the beneficiary to #productive activity;

(2) The disabling effect of the impairment, without the services planned, is expected to remain at a level of severity which would result in the continuing payment of disability benefits;

(3) There is a reasonable expectation that the provision of such services will result in the restoration of the individual to productive activity; and

(4) The reasonably predictable period of productive work activity is of sufficient duration that the benefits to be saved and the contributions which would be paid to the trust funds on future earnings would offset the cost of the services planned.

(b) Order of selection. The State plan shall provide that the order of selection for services shall be in accordance with the beneficiary's readiness and po#tential for rehabilitation to productive activity and without regard to any order of selection which would otherwise be followed under the State plan pursuant to the Vocational Rehabilitation Act.

(c) Citizenship, residence, and economic need. The State plan shall provide that any disability beneficiary who meets the other requirements for selection for vocational rehabilitation services shall be provided with authorized services without regard to (1) his citizenship or (2) his place of residence or (3) his need for financial assistance.

The

(d) Promptness of services. State plan shall provide that services will be furnished with reasonable promptness to disability beneficiaries selected under paragraphs (a), (b), and (c) of this section.

(e) Services available. The State plan shall provide that vocational rehabilitation services available to disability beneficiaries selected for such services shall include the full range of services authorized in the Vocational Rehabilitation Act, subject to the conditions and limitations with respect to the use of trust funds prescribed in § 401.85.

§ 401.85 Costs of services-conditions and limitations.

Costs of vocational rehabilitation services (and administration) paid from trust funds shall be subject to the following conditions and limitations:

(a) Except as otherwise provided in this subpart, costs shall be subject to all requirements for Federal financial participation set forth in the regulations governing the State vocational rehabilitation programs. (See Subpart C of this part.)

(b) Trust funds will not be used to pay costs of establishment of a workshop or rehabilitation facility.

(c) Trust funds will not be used to pay the costs of maintenance while an individual is receiving vocational rehabilitation services unless it is necessary for the individual to be away from home to receive such services. The costs of such maintenance shall not exceed the amount of increased expenses that the rehabilitation program causes for the individual or his family.

(d) The amount of the expenditure made under the State plan for services in behalf of a disability beneficiary and for which a State may receive payment of the costs from trust funds shall not exceed such maximum amount for any one beneficiary as may be federally prescribed.

(e) Where trust funds are used to provide equipment, including vending stands, or initial stock to a disability beneficiary, or where such funds are used to equip and stock a small business enterprise for the rehabilitation of a disability beneficiary, the State agency shall establish appropriate conditions to assure the use of such equipment and stock by another disability beneficiary if such stock and equipment are no longer required for the previous beneficiary. § 401.86 Payments of trust funds.

(a) Effective dates of payments. Payment to any State from trust funds in accordance with this subpart may commence with the effective date of the approved amended State plan.

(b) Payments for services and administration. (1) Trust funds will be available, subject to statutory limitations, to any limitations set forth in this subpart, and to the approval of the Commissioner, to pay for expenditures made under the approved amended State plan

for authorized vocational rehabilitation services provided to disability beneficiaries, including the administration thereof.

(2) Payment from the trust funds may be made for determining the eligibility for and the character of vocational rehabilitation services needed by a disability beneficiary, or by a claimant for disability benefits if it appears there is a strong likelihood that such claimant will be found entitled to such disability benefits (even though later he is not so found), to the extent that such services were furnished to such claimant prior to the receipt by the State agency of notice of a determination of nonentitlement.

(3) Other authorized services provided prior to determination to persons meeting the selection criteria may be paid for from trust funds if and when the State agency receives notice that the individual has been determined to be entitled to disability benefits.

(4) In no case, however, may services be paid for from the trust funds which are provided before (i) the effective date of the approved amended State plan, (ii) the beginning of the period of disability, or (iii) the filing of application for disability benefits, whichever is latest.

(c) Reversal of determination of noneligibility for disability benefits. Payment from the trust funds for services which have been rendered to a claimant otherwise eligible therefor who has been found not entitled to disability benefits may, if such finding is later reversed on reconsideration, appeal, or judicial review, be made retroactively for the fiscal year in which notice of the reversal is received by the State agency, provided at that time services are being currently rendered to the claimant.

(d) Termination of disability benefits. Payment for services after receipt by the State agency of notice that entitlement to disability benefits has terminated shall not be made from trust funds, except when the services have been started and the individual case plan reflects that commitments of monies have been made for these services prior to receipt of notice of such termination, i.e., written contracts, purchase orders or equivalent authorizations have been issued, or lump sum payment may have been required to have been made in advance such as in the case of tuition or training expenses. In no case may payment be made for costs of services extending

more than 4 months after the month in which entitlement to disability benefits terminates or in which notice that entitlement to disability benefits has terminated is received by the State agency, whichever is later.

of

(e) Distribution and payment funds. (1) Payment from available trust funds may be made in advance or by way of reimbursement, as determined by the Commissioner, for agency costs of providing services to disability beneficiaries under this subpart.

(2) In distributing funds to the States, the Commissioner will consider agency estimates, the number of disability beneficiaries in the State, and such other factors as the Commissioner may determine.

(3) The Commissioner will make necessary adjustments or redistribution on account of overpayments, underpayments, and unused funds.

The State shall submit reports of expenditures and case service activities in behalf of beneficiaries, in such form and in such detail and frequency as required by the Commissioner. All records, procedures, and operational activities of the State agency, the costs of which are paid from trust funds, shall be subject to inspection, review, and audit.

Subpart E-Grants to States for Innovation of Vocational Rehabilitation Services

§ 401.90 General requirements.

(a) Under the authority of section 3 of the act, States providing vocational rehabilitation services under an approved State plan may receive grants to assist them in undertaking projects which: (1) Provide for the development of new methods or techniques for providing vocational rehabilitation services for handicapped individuals; or (2) are especially designed for the development of, or provision for, new or expanded vocational rehabilitation services for groups

of handicapped individuals having disabilities which are catastrophic or particularly severe. Whether the methods, or techniques are new, or the services are new or expanded, shall be determined in relation to the program existing in the State.

(b) Each such project for which a State desires assistance must be approved by the Vocational Rehabilitation Administration. The necessary conditions for such approval are: (1) The innovation project undertaken by the State agency must be an organized plan of identifiable activities directed to the purposes described in paragraph (a) of this section; and (2) the project activity or activities must already be included within the scope of the State's approved plan, or such plan must be amended to include them.

(c) Types of projects for which innovation grants may be made include, but are not limited to, projects which: (1) Provide vocational rehabilitation services to paraplegics, quadriplegics, stroke and cancer victims, the totally deaf, the deaf blind, the retarded blind and others who have been inadequately served because of the severity of their disabilities or the costs involved; (2) introduce new patterns of vocational rehabilitation services; (3) establish workshops or rehabilitation facilities unique in that State and in conformity with the State workshops and rehabilitation facilities plan; and (4) develop service programs in cooperation with other public agencies which provide new methods and techniques for serving the handicapped, especially those individuals having disabilities which are catastrophic or particularly severe. Projects may be Statewide in scope or limited to a geographical area of the State.

(d) Innovation grants will not be made for projects designed primarily to: (1) Train staff; (2) improve administrative procedures unless it can be shown clearly that such improvements will bring new methods or techniques to the State for providing services or will bring services to new groups of clients; or (3) establish workshops and rehabilitation facilities of a type already found in the State.

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ing the costs of approved innovation projects, each State shall be entitled to an allotment of an amount bearing the same ratio to such sums as the population of the State bears to the population of all the States. Population, as applied to any State, means the population of that State as determined by the most recent official estimates of the Bureau of the Census available to the Commissioner preceding the fiscal year for which Federal grant funds are appropriated. The act further provides that the allotment to any State for any fiscal year which is less than $5,000 (or such other amount as may be specified as a minimum allotment in the act appropriating such sums for such year) shall be increased to that amount, the total of the increases thereby required being derived by proportionately reducing the allotments to each of the remaining States, but with such adjustments as may be necessary to prevent the allotment of any of such remaining States from being thereby reduced to less than that amount. Where the State plan designates separate agencies to administer (or supervise the administration of) the part of the plan under which vocational rehabilitation services are provided for the blind, and the rest of the plan, respectively, the division of the State's allotment between such agencies is a matter for State determination.

§ 401.92

Payments from allotments.

(a) Payments with respect to any innovation project may be made for a period not exceeding 5 years, beginning with the commencement of the first fiscal year for which any payment is made for such project under paragraph (b) of this section. If any innovation project extends beyond such 5-year period, payments may continue to be made with respect to such projects in accordance with the provisions of section 2 of the act and § 401.72.

(b) From the sums allotted pursuant to § 401.91, the Commissioner shall pay to each State, with respect to any approved innovation project, an amount equal to 90 percent of the cost of such project (including its administration) for the first 3 years of such project and 75 percent of the cost of such project (including its administration) for the fourth and fifth years, except that, at the request of the State, such payment may be less than such percentage of the cost of such project.

(c) For purposes of determining the commencement of Federal participation in any innovation project under section 3 of the act, the effective date for the commencement of such project shall be the date of its submission for approval (or a later date, at the request of the State).

(d) No payment shall be made from an allotment under section 3 of the act with respect to any cost of an innovation project for which payment has been made under any other section of the act. § 401.93 Application submittal.

An application for an innovation project may be submitted to the regional representative of the Vocational Rehabilitation Administration at any time. The application shall be submitted by a duly authorized officer of the State agency in such form and detail as the Commissioner may prescribe. The regional representative will review each application and determine, after consultation with the State regarding any suggested revision, whether such application meets the requirements for an innovation grant, and he will notify the State in writing of his finding.

§ 401.94 Application content.

Each application submitted shall (a) describe the specific activities to be undertaken, showing how they: (1) Provide for the development of new methods or techniques for providing vocational rehabilitation services, or (2) offer new or expanded services for groups of handicapped individuals whose disabilities are particularly severe or catastrophic; (b) specify the duration of the project; (c) set forth the budget for the project and the method for meeting costs; (d) provide that qualified and adequate staff and supervision are available to accomplish the purpose of the project; and (e) supply such other information as the Commissioner may find necessary to insure that the project meets the requirements for approval hereinbefore set forth. § 401.95 Project amendments.

An amendment to an approved innovation project shall be submitted whenever necessary to reflect any material change in the scope, operation or administration of the project. Such amendments shall be submitted in writing to the regional representative for approval. If for any reason an approved project is discontinued, the State agency shall notify the

regional representative, giving the reasons for termination, an accounting of funds granted for the project, and other pertinent information.

§ 401.96

Continuation grants for innovation projects; reports.

A progress report will be submitted annually in the form and containing the information prescribed by the Commissioner with the State's request for a continuation grant for the project. Such request for continuation will include a budget for the next year. The regional representative will review each application for a continuation grant and determine whether the project continues to meet the requirements for an innovation grant, and he will notify the State in writing of his finding. The final project report will be submitted not later than 90 days following termination of the project.

§ 401.97

Transition of extension and improvement projects to innovation projects.

(a) An extension and improvement project approved on or after July 1, 1965, may be financed under the provisions which apply to innovation projects, if it is determined that such extension and improvement project meets the criteria required of innovation projects.

(b) Notwithstanding any other provision of this subpart, payment for an extension and improvement project approved under section 3 of the Vocational Rehabilitation Act prior to November 8, 1965, may continue to be made out of the State's allotment for innovation grants for the length of time for which the project was originally approved and at the same rate of Federal financial participation as was in effect at the time of the project's approval, provided the project continues to meet the criteria for extension and improvement grants. § 401.98 Methods of computing and making payments.

The method of computing and paying amounts pursuant to § 401.92 shall be in accordance with provisions of § 401.73. The provisions of §§ 401.74 through 401.76 are also applicable to this subpart. Subpart F-Grants for Expansion of Vocational Rehabilitation Services § 401.100

Purpose.

Under section 4(a) (2) (A) of the act, grants may be made to States, and pub