In addition, wherever possible, this rule reflects the Corporation's determination to:

Existing and potential AmeriCorps grantees constitute a rich and diverse group of talented and innovative forces for change, with different needs, circumstances, and abilities. Therefore, the Corporation has endeavored, throughout these regulations, to:

As announced in the March 4, 2004, Federal Register notice, the Corporation is focusing these reforms on five main areas: (1) Sustainability of AmeriCorps programs, including decreasing grantee reliance on Federal funds and decreasing Federal costs per fulltime equivalent; (2) Selection criteria; (3) Performance measures and evaluation; (4) Tutor qualifications and requirements for tutoring programs; and (5) Streamlining continuation applications and grant cycles. The following discussion addresses the issues of sustainability and intermediaries generally, and then addresses the specifics of the proposed rule in more detail. Section V of this preamble addresses implementation of the proposed rule, and section VI addresses several policy issues we have considered in light of the public input we received.

Sustainability

The issues about which we received the most input were those relating to sustainability, Federal share, and cost per fulltime equivalent (FTE). Much of the input sought to define sustainability in broad terms, and included many elements, other than finances, as part of the definition. While the Corporation agrees that there are many measures and elements of sustainability, the most recent discussion has focused on the monetary aspects of sustainabilityFederal share and cost per FTE.

The Corporation understands that other forms of sustainability are important; they are reflected in the proposed changes to the selection criteria so that an organization achieving sustainability through any or all of those measures will be more competitive when applying for an AmeriCorps grant. But ultimately, we believe that the focus of Congress in this discussion of sustainability is at the organizational or program levelspecifically on the financial resources of the organization or program. In other words, how can organizations that the Corporation supports better leverage Federal dollars by expanding and diversifying their nonFederal funding? To the extent that this is a broader question, we would frame it as: how much more national service can AmeriCorps provide across the country with the Federal dollars available to it?

The Corporation's annual appropriations and its authorizing legislation, as well as E.O. 13331, support this approach. In our annual appropriations act each year dating back to fiscal year 1996, Congress directed the Corporation to ``increase significantly the level of matching funds and inkind contribution provided by the private sector,'' and ``reduce the total Federal costs per participant in all programs.'' Section 130(b)(3) of the Act, as amended, authorizes the Corporation to ask an organization ``recompeting'' for funding after a threeyear initial grant period to include a ``description of the success of the programs in reducing their reliance on Federal funds.'' In addition, E.O. 13331 directs that ``national and community service programs should leverage Federal resources to maximize support from the private sector and from State and local governments.''

While the Corporation is committed to meeting these goals, they do not require imposing limitations on the number of years an organization may receive funds, particularly given the many organizations providing valuable infrastructure and experience that enable national and community service to continue to thrive across the country. At the national level, we do not think it necessary to disqualify an organization from receiving Federal funding based on the number of years that organization has received funding. To do so would result, in future years, in a loss of some of the strongest organizations with the capacity, infrastructure, and experience to provide highquality service and deliver results that contribute to the strengthening and growth of national and community service. We do believe, however, that most, if not all, organizations that receive Corporation funds can and should contribute a higher share of program costs over time.

The Corporation's objectives in the proposed rule relating to sustainability are to make more resources available in order to increase national service activities and opportunities. In addition, we seek to strengthen existing national and community service programs by encouraging grantees to expand and diversify their nonFederal funding sources while strengthening the competitive framework. At the same time, we want to strengthen the independence, operating flexibility, and autonomy of grantees, and treat grantees fairly and equitably.

The Corporation's strategy to increase organizational sustainability and expand national and community service has six main elements:

1. Incorporates the broad spectrum of sustainability criteria throughout the Corporation's grant selection criteria.

2. Makes an applicant's budgeted Corporation cost per fulltime equivalent (FTE) a more meaningful factor in the selection process. All else being equal, the lower a program's cost per FTE, the better chance it will have to receive Corporation funding. At the
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same time, the Corporation will explicitly take into account the goals, performance outcomes, and the individual circumstances of programs and the communities in which they operate, thereby considering both costs and benefits.

3. Increases, based on a predictable and incremental schedule, the grantee share of program costs to a 50 percent aggregate level by the 10th year in which an organization receives an AmeriCorps grant for the same program.

4. Expects State commissions to develop and implement a sustainability approach as part of their oversight function.

5. Reserves a percentage of noncontinuation AmeriCorps State and national grant funds each year for applicants that have not received AmeriCorps competitive funding from the Corporation for at least five years.

6. Builds meaningful tools, including limited exceptions, for accommodating organizations that have demonstrated hardship in meeting the increasing match requirements.

With the exception of the fourth elementreserving a percentage of noncontinuation funds each year for applicants new to the
Corporationwe address each of the elements in more detail in the individual section discussions that follow. On the issue of reserving a percentage of funds for applicants new to the Corporation, we anticipate reserving annually a percentage of AmeriCorps funds for grants to new applicantsi.e., applicants who have not received an AmeriCorps State or national competitive grant for at least five years. The Corporation will determine this percentage annually based on the availability of appropriations and the projected number of recompeting applications, and publish this information, including posting it on the Web site at http://www.nationalservice.org, in advance of the selection process.

The Corporation believes that its sustainability approach represents a fair, equitable, and authoritative resolution of the issue of organizational financial sustainability. The proposed rules are authorized by, and consistent with, our enabling legislation, and strike a reasonable balance between our objectives of supporting and strengthening highquality programs while leveraging Federal resources to achieve the greatest benefit possible for our nation's communities. Predictability and consistency are crucial elements of this rulemaking. Thus, we seek to provide clear guidance to our grantees on our long term expectations for sustainability, which we believe decisively resolves the ongoing discussion on the issue.

Intermediaries

The Corporation received a substantial amount of input regarding intermediaries and, in particular, the potential effect of efforts to promote sustainability on those entities. We believe that there is and should continue to be a prominent place for intermediaries in the national and community service portfolio, particularly given their important role in reaching faithbased and small communitybased organizations. The Corporation understands that many intermediary models include a regular infusion of new sites, which, as with any startup, may have higher costs initially. In designing the selection criteria, we have explicitly included that feature of intermediaries as a possible factor in considering several of the costeffectiveness competitive factors.

We note, however, that we have set matching requirements at the grantee level, rather than at the placement or operating site level, and we have not adjusted the matching requirements based on the proportion of new sites in any given year. We believe that establishing the matching requirements at the grantee level gives greater flexibility to intermediaries to manage and achieve a mix of new and older sites.

Specifics of the Proposed Rule

As discussed in more detail below, the proposed rule:

1. Defines the term ``target community'' as the geographic community for which an AmeriCorps grant applicant identifies an unmet need to be addressed.

2. Clarifies the types of service activities in which AmeriCorps members may engage and explains the parameters for grantees and members to engage in capacitybuilding service activities, including volunteer recruitment and support.

3. Increases, in an incremental and predictable fashion, the grantee's share of program costs to a 50 percent aggregate plateau over 10 years.

4. Codifies that the amount of childcare payments the Corporation makes on behalf of an AmeriCorps member may not exceed the amount provided under the Child Care and Development Block Grant Act of 1990 (P.L. 101508).

5. Codifies the grant selection process and criteria, and aligns the criteria with indicators of highquality and sustainable programs.

6. Clarifies how grantees will calculate their budgeted Corporation cost per FTE.

7. Codifies the Corporation's requirements for grantees to establish performance measures and to evaluate program outcomes, and establishes grant size threshold for evaluations.

8. Establishes qualifications for members serving as tutors and requirements for tutoring programs.

9. Prohibits displacement of volunteers.

10. Removes obsolete references to ``transitional entities'' serving as State commissions on national and community service.

11. Broadens State commission flexibility to directly operate national service programs, except to the extent prohibited by statute.

12. Modifies State commission State plan requirements to include a description of their program sustainability approach.
Member Service Activities on Behalf of the Organization (Sec. Sec. 2520.20 Through 2520.65)

Except for those member activities specifically prohibited in sections 132 and 174 of the Act, as amended, the Corporation has broad authority to determine appropriate service activities for AmeriCorps members. The proposed regulation largely codifies and clarifies the Corporation's current guidelines and grant provisions on this issue. Specifically, this regulation clarifies that AmeriCorps members may: (1) Perform direct service activities, and (2) engage in other activities that build the organizational and financial capacity of nonprofit organizations and communities, including volunteer recruitment and certain fundraising activities.

Volunteer Recruitment

One focus of Executive Order 13331 is leveraging of Federal resources ``to enable the recruitment and effective management of a larger number of volunteers than is currently possible.'' The proposed regulations more clearly direct that some component of an AmeriCorps grant must help build the longterm capacity of nonprofit organizations and the community by recruiting and supporting volunteers. While this has implicitly been a requirement over the past two years, clarifying and reinforcing this requirement is expected to encourage more Americans to engage in service and volunteer activities, and advance President Bush's call to service.

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The Corporation does not, however, intend for this requirement to distract from an organization's mission, nor is our goal to replace direct service with volunteer generation and other capacitybuilding activities. In most cases, direct service and volunteer leveraging can complement each other to strengthen programs and communities. When considering how an AmeriCorps program can promote the effective involvement of volunteers, applicants have the flexibility to determine the best way to enhance or build upon the direct service goals of the program in which the AmeriCorps members are serving and to propose capacitybuilding activities accordingly.

The Corporation recognizes, however, that some program models, such as certain professional corps, youth corps, and programs in some rural locations with a limited volunteer pool, may not be able to include volunteer recruitment and support in their program model, and the Corporation will take these factors into account in considering requests to waive the volunteer leveraging requirement.

Fundraising

The proposed regulation also clarifies that AmeriCorps members may help organizations raise funds directly in support of service activities that meet local environmental, educational, public safety, homeland security, or other human needs. Members may participate in a wide range of fundraising activities if these activities make up only a relatively small amount of any individual member's overall service hours. Members may write grant applications excepting those for AmeriCorps or any other Federal funding.

The rule's provisions governing fundraising are more flexible for AmeriCorps members than those for grantee staff, which are subject to Federal cost principles described in the Office of Management and Budget Circulars that generally disallow costs incurred in organized fundraising. The Corporation believes that these activities will enhance the use of AmeriCorps members to build the capacity of nonprofit organizations, as well as advance the professional development of the members themselves.

Finally, the rule codifies the Corporation's existing socalled ``80/20'' rule, which limits a program's aggregate number of hours for education and training activities to not more than 20 percent of its members' total service hours. The rule also clarifies that capacity building activities count towards the 80 percent and not the 20 percent education and training hours.
Increase in Grantee Share of Program Costs (Sec. Sec. 2521.40 Through 2521.60)

Sections 121 and 140 of the Act, as amended, establish a ceiling on the Corporation share for program operating costs and the Federal share for member support costs of 75 percent and 85 percent, respectively. In other words, at a minimum, the statute requires an AmeriCorps grantee to provide not less than 25 percent of operating costs, and 15 percent of member support costs. While the Act does not allow the Corporation to decrease the grantee share requirements below the statutory minimum, the Corporation has the discretion under the statute to increase the grantee share of costs, and did so in 1996, when we increased the grantee share of operating costs from 25 percent to 33 percent.

As discussed earlier, the Corporation believes that the essence of the current public discussions of sustainability relates to the financial resources of our grantee organizations. Section 130 of the Act, as amended, explicitly authorizes the Corporation to ask an organization applying for renewal of assistance (``recompete'' funding) after an initial threeyear grant period to describe how it has decreased its reliance on Federal funding. In addition, in our annual appropriations act each year dating back to fiscal year 1996, Congress has directed the Corporation to ``increase significantly the level of matching funds and inkind contribution provided by the private sector,'' and to ``reduce the total Federal costs per participant in all programs.'' Finally, E.O. 13331 directs that ``national and community service programs should leverage Federal resources to maximize support from the private sector and from State and local governments.''

Consequently, this proposed rulemaking would increase, in a predictable and incremental fashion, the grantee share of program costs to a 50 percent aggregate level in the 10th year that an organization receives an AmeriCorps grant. Each grantee will be required to meet the current minimum requirements of 33 percent match (cash or inkind) for operating costs and 15 percent match (nonFederal cash only) for member support costs. After meeting those minimum requirements, the grantee may meet the balance of its aggregate share of costs through any combination of operating or member support matching funds. The grantee aggregate share will apply beginning in the fourth year and increase in each year thereafter in which an organization receives a program grant as follows:
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Minimum Aggregate Share................... N/A N/A N/A 26% 30% 34% 38% 42% 46% 50%

The proposed rule establishes that a current grantee who has received an AmeriCorps grant for 4 years or more, must begin meeting the match requirements at the year threelevel. For the first two years, that organization will be required to meet current, or marginally higher, match requirements, before its required share begins to increase more systematically.

The Corporation intends to provide training and technical assistance to grantees to assist them in achieving their matching goals. For example, we may provide training on documenting inkind match to enable grantees to maximize their ability to use inkind towards their overall matching requirements. We will consult with grantees to determine the most useful and appropriate training and technical assistance.

We believe, based on our research into current grantee match levels, that it is reasonable to expect all grantees, even those operating in remote or impoverished communities, to achieve this level of matching, and we expect State commissions to continue managing their portfolios to achieve even higher match levels. However, to the extent that an organization is unable to achieve or increase its share of costs, we intend to consider targeting the following assistance to organizations that are demonstrably at risk of not meeting the matching requirements:

1. Providing additional training and technical assistance: The Corporation plans to provide training and technical assistance to help grantees identify new strategies to raise matching funds and community support.

2. Redirecting Corporation assets: The Corporation will consider using, on a
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shortterm basis, other program assets to help an organization struggling to meet its match requirements. For example, we might temporarily allocate a VISTA member to help build the capacity and broaden the community support of a VISTAeligible organization.

3. Conducting Corporation outreach to the regional and national philanthropic community: The Corporation will seek to broaden its outreach to the philanthropic community to promote those national and community service programs that are potentially at risk and explain the impact of the changes we are implementing.

4. Allowing State commission portfolio flexibility: If a subgrantee of a State commission is not meeting its minimum matching requirements, we are providing the State commissions the ability to make up for the shortfall in a lowmatching grantee's matching funds by pairing that grantee up with one or more grantees that are meeting more than the required level of matching funds. This will provide some flexibility to State commissions to manage their formula and, to some extent, competitive portfolios, while effectively reducing Federal share.

5. Allowing a waiver: On a limited basis, the Corporation will use its current statutory waiver authority for those satisfactorily performing and otherwise compliant programs that demonstrate an inability, in spite of reasonable efforts, to achieve sufficient financial support to meet the increased matching requirements. This waiver would be granted on an annual basis and subject to revision or revocation based on grantee performance and resources.

The Corporation believes the increased match requirements, together with the measures described above that are designed to assist grantees in meeting the new requirements, represent a fair, equitable, and authoritative resolution of the issue of organizational financial sustainability, such that additional measures in annual appropriations bills, or through rulemaking, are not necessary. We intend to make public information on an annual basis reporting the progress that grantees are making in leveraging Federal resources.

Codifying the Cap on ChildCare Payments (Sec. 2522.250)

Section 140(e) of the Act, as amended, authorizes the Corporation to establish guidelines on the availability and value of childcare assistance. By current regulation, childcare payments for AmeriCorps State and National members are ``based on'' amounts authorized under the Child Care and Development Block Grant of 1990. The Corporation is proposing to eliminate any ambiguity in the current language by explicitly capping the amount of childcare benefits for any individual AmeriCorps member at the level established by each State under the Child Care and Development Block Grant.
AmeriCorps Grants Selection Process and Criteria (Sec. Sec. 2522.400 Through 2522.470)

In addition to establishing specific AmeriCorps grant application requirements, section 130 of the Act, as amended, gives the Corporation broad authority to set additional application requirements and to establish the selection process. We are proposing adjustments to our grant selection criteria to meet three objectives: (1) To better align the selection criteria with elements that predict program success; (2) To incorporate into the selection criteria greater emphasis on sustainability; and (3) To provide transparency, predictability, and consistency for organizations applying for AmeriCorps funds.

The proposed rule describes the Corporation's processes and criteria for selecting grantees. In selecting AmeriCorps programs, the Corporation generally needs to know four things: (1) An organization's plan and its expected outcomes; (2) Whether the organization has the capability to manage Federal funds, and operate and support the proposed program; (3) The cost implications of the proposed program; and (4) For an existing program, whether the organization has implemented a sound program, including achieving strong outputs and outcomes, organizational capability, and costeffectiveness.

To address these issues, the proposed rule modifies the current structure of three overall categories of criteriaProgram Design, Organizational Capability (formerly Organization Capacity), and Cost Effectiveness (formerly Budget/CostEffectiveness). We have adjusted the weights of the three categories to better balance program design against organizational strength, which is reflected through organizational capability, and costeffectiveness. Consequently,

The Corporation's focus within Program Design is now on the relationship between an applicant's rationale and approach, and the outputs and outcomes to be achieved for members and the community. Most of the criteria from the Corporation's current AmeriCorps 2004 guidelines remain part of the revised selection criteria, although they may now appear under a different category. (Please visit our Web site at http://www.nationalservice.org to view the AmeriCorps 2004 guidelines). We have also added criteria across all three categories to better reflect our focus on outcomes and sustainability. With respect to financial sustainability, we have included a specific criterion on Corporation cost per FTE, so that, all things being equal, an applicant proposing a lower cost per FTE will be more advantaged in the selection process, in the context of fully weighing the benefits, contributions and circumstances of each program.

In applying the selection criteria, the Corporation intends to ensure, to the maximum extent possible, that similar program models are evaluated together. This will help to ensure equity and fairness. The proposed rule would allow the Corporation to also consider relevant information it has received or that is otherwise available during the grant review processthe proposed rule sets out in detail the type of information that the Corporation may choose to consider.

After the Corporation applies the basic selection criteria, we may then apply one or more of the Corporation's selection priorities, as described in this proposed rule. The Corporation may also announce additional priorities in the Notice of Funding Availability, or other notice to the public. Our intent, however, in codifying the selection priorities in these regulations is to provide transparency and baseline consistency for current and prospective grantees. This list of selection priorities reflects several longstanding Board priorities as well as new priorities that we believe are appropriate as a matter of policyand for the Programs Supporting Distressed Communities, as a matter of law.

The proposed rule reaffirms that the Corporation will seek to ensure innovation and diversity across its portfolio of AmeriCorps programs. In addition, we are requiring State commissions to prioritize their State competitive proposals in rank order to help inform our selection process. While the Corporation will not be bound by the commissions' rankings, we may consider them when making
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funding decisions. We may, in the future, choose to limit the number of proposals any one State may submit for State competitive funding to streamline the selection process and make optimal use of outside peer review panels. If so, we will announce the limitation in the appropriate Notice of Funding Availability.

The input we received raised some questions over State commission peer review requirements and why the Corporation conducts peer reviews of proposals that State commissions may have already peer reviewed. While the regulatory language does not specify this, we wish to clarify that the Corporation does not require State commissions to peer review AmeriCorps State competitive proposals. The Corporation conducts peer reviews of those proposals at the national level to ensure equitable consideration of all applications. However, a State commission may be required, under State law, to peer review proposals, or it may choose to do so on its own.

Cost Per FullTimeEquivalent (FTE) (Sec. 2522.485)

As discussed earlier, the proposed rule strengthens the Corporation's basic selection criteria, and explicitly includes a program's proposed Corporation cost per FTE as an indicator of cost effectiveness at Sec. 2522.435. The proposed regulations also quantify an individual program's Corporation cost per FTE. For individual programs, the Corporation cost per FTE is the budgeted grant costs divided by the number of member FTEs awarded in the grant. The budgeted grant costs exclude: (1) Childcare for individual members, for which the Corporation pays directly; and (2) The education award a member may receive from the National Service Trust after fulfilling a term of service.

The Corporation will announce annually any changes in a program's Corporation cost per FTE. We anticipate that making cost per FTE a competitive factor and gradually decreasing the Federal share of grantee costs will cause the cost per FTE for most programs to decrease over time. Generally, however, the Corporation will consider granting continuation and recompete program requests to increase their Corporation cost per FTE up to the statutorilyrequired percentage increase in their previous year's AmeriCorps member living allowance. (42 U.S.C. Sec. 12594(a)).

The Corporation will continue to hold State commissions and national direct grantees to a maximum average Corporation cost per FTE. State commissions and national direct grantees will calculate their portfolio's average Corporation cost per FTE by dividing the budgeted grant costs for all their AmeriCorps programs by the number of member FTEs awarded across their portfolio of AmeriCorps programs, including Education Award programs. The budgeted grant costs do not include childcare for individual members, the education award a member may receive from the National Service Trust for fulfilling a term of service, or nonprogram grant funds such as a State commission's administrative grant or Program Development and Training (PDAT) funds. We encourage State commissions and national direct grantees to use the Education Award Program as a way to lower their average Corporation cost per FTE, to the extent feasible while maintaining high quality programs.

Currently, the average cost per FTE for each commission includes the formula funds they use for planning grants. Some of the input suggested that the Corporation give States more leeway to use planning grants to foster new AmeriCorps programs by taking the cost of planning grants out of the average cost per FTE calculation for each commission. The Corporation is considering allowing commissions, in calculating their average Corporation cost per FTE, to exclude some amount of planning grants from their budgeted grant costs, in an amount to be determined by the Corporation each year. The Corporation plans to study the budgetary and National Service Trust implications of this approach in the coming months. However, we invite the public to suggest other ideas for expanding the use of planning grants.

The Corporation will announce in the Federal Register and on its Web site at http://www.nationalservice.org the annual maximum average Corporation cost per FTE for State commissions and national direct portfolios. For the 2004 and 2005 program years, the maximum average Corporation cost per FTE for both State commissions and national directs will remain at the current level of $12,400. The Corporation recognizes that the member living allowance may increase and we will review the maximum average cost per FTE annually with this and other changes to program costs in mind.

While we acknowledge that cost per FTE may be defined in several different ways, our proposed calculations of Corporation cost per FTE are primarily to enable grantees and subgrantees to manage Corporation costs at the program and State commission level, and to estimate costs for the grant selection process.
Performance Measures and Evaluation (Sec. 2522.500 Through 2522.740)

To ensure that the Corporation continues to demonstrate the true impact of national service, and that programs continue to improve, as well as to fulfill the expectations laid out in the Government Performance Results Act of 1993 and OMB's Program Assessment Rating Tool (or PART), we are continuing to build on the progress we have made in demonstrating results. The proposed rule codifies the Corporation's current requirements for performance measurement, focuses independent evaluation requirements on large grantees, and generally reflects current Corporation practice. In addition, the proposed rule clearly describes the relationship between performance measures, evaluations, and funding decisions. The Corporation believes that a stronger emphasis on performance measurement and evaluation will strengthen AmeriCorps programs and foster continuous improvement. In line with E.O. 13331, emphasizing performance measures and evaluation will also help us identify both best practices and models that merit replication, and programmatic weaknesses that can be corrected most effectively when identified early.

The proposed rule distinguishes performance measurement from program evaluation, while making explicit that grant funds used to pay for either activity are not considered ``administrative costs'' or subject to the 5 percent statutory cap. A grantee would be allowed to use grant funds to pay for performance measurement and evaluation up to the approved amounts for such activities in its grant.

While the proposed rule allows an applicant organization to propose and negotiate performance measures unique to the applicant's program, the rule provides that the Corporation will establish one or more national performance measures on which all grantees would have to report. The Corporation will establish a national performance measure on volunteer leveraging, and may establish performance indicators of member satisfaction. The Corporation will develop national standardized performance measures in consultation with AmeriCorps grantees.

Section 131(d)(1) of the Act specifies that an applicant must arrange for an independent evaluation of an AmeriCorps national service program receiving assistance under Subtitle C of Title I of the Act, unless the applicant obtains Corporation approval to conduct an internal evaluation. The statute also
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authorizes the Corporation to make alternative evaluation requirements ``based upon the amount of assistance'' a grantee receives.

In light of these provisions, the Corporation is revising its current requirement that all grantees arrange for evaluations every 4 years. The proposed rule requires that only grantees receiving an average annual program grant of $500,000 or more conduct an evaluation that covers a period of at least 5 years, and submit the evaluation results with their application for recompete funding. The Corporation intends to strictly enforce this requirement. Our rationale for this approach is that it is burdensome to require evaluation for smaller grants, and, for larger grants, we want to give a grantee enough time to complete a rigorous evaluation, and ensure that the Corporation receives it in time to consider with a grantee's second recompete application for funding. The Corporation will not consider for funding any recompete application that does not include the required evaluation summary, or results, as applicable.

For grantees that do not meet the dollar threshold, the Corporation encourages (but does not require) them to perform evaluations and may consider the results of these evaluations when making decisions on an organization's application for funds. See our Web site (http://www.nationalservice.org ), under the AmeriCorps application guidelines
and AmeriCorps application instructions for the relevant program year for information on how to submit evaluation materials.

To continuously improve the results of programs for both participants and the people they serve, we encourage all grantees to provide for evaluations as part of their programs.
Qualifications for Members Serving as Reading Tutors and Requirements for Tutoring Programs (Sec. Sec. 2522.900 Through 2522.950)

E.O. 13331 directs that schoolbased national and community service programs ``should employ tutors who meet required paraprofessional qualifications, and use such practices and methodologies as are required for supplemental educational services.'' The Corporation believes strongly that it is important to maintain consistency with the No Child Left Behind Act (NCLBA) and ensure that children who need tutoring are receiving the best possible support.

At the same time, we recognize that thousands of AmeriCorps members are providing invaluable support to children through a wide range of activities. In setting qualifications, we have narrowly defined ``tutor'' in these regulations to include only individuals whose primary goal is to increase academic achievement in reading or other core subjects through planned, consistent, onetoone or smallgroup reading, or other smallgroup sessions, that build on students' academic strengths and target students' academic needs. We do not intend to establish qualifications for national service participants who engage in other schoolrelated support activities, such as homework help provided as part of a safeplaceafterschool program.

The proposed rule also confirms that the qualification requirements for tutors and other paraprofessionals under the NCLBA apply to tutors who are employees of the Local Education Agency (LEA) or school, but do not apply to AmeriCorps members serving as tutors under the sponsorship of an organization other than the school district.

Under the NCLBA, paraprofessionals who provide instructional support in Title I schools must have a secondary school diploma or its equivalent and must have: (a) Completed two years of study at an institution of higher education; or (b) Obtained an associate's or higher degree; or (c) Met a rigorous standard of quality and be able to demonstrate the appropriate and relevant job skills through a formal State or local academic assessment. As stated above, these requirements apply only to tutors who are employees of the LEA or school, but do not apply to AmeriCorps members serving as tutors under the sponsorship of an organization other than the school.

For a member serving as a tutor, other than one employed by the LEA or school, the proposed rule requires either that the member has a high school diploma (or its equivalent), or that the member passes a proficiency test that the grantee has determined effective in ensuring that the member has the necessary skills to serve as a tutor. A member serving as a tutor would also have to successfully complete any pre and inservice specialized training required by the program.

In addition, tutoring programs are required to show competency to provide tutoring service through their recruitment, specialized training, performance measures, and supervision. We believe that these requirements will help improve the overall quality of tutoring and literacy programs in which AmeriCorps members serve.

NonDisplacement of Volunteers (Sec. 2540.100)

The Corporation's focus has always been, pursuant to the Act, to fund programs meeting unmet needs in their communities. The non displacement rules are one way to ensure that programs are meeting unmet needs, rather than needs that employees or volunteers are meeting already. Consequently, we are proposing to clarify, in the regulation, that the service of an AmeriCorps member must complement, and may not displace, the service of other volunteers in the community. This clarification is consistent with the directive in E.O. 13331 that national and community service programs avoid or eliminate any practice that displaces volunteers.

Transitional Entities (Sec. Sec. 2550.10 Through 2550.80)

The National Service Trust Act of 1993 and the Corporation's regulations, originally issued in 1994, contemplated the existence of transitional entities, in addition to State commissions and alternative administrative entities, as State bodies that could be eligible to receive Corporation funding and administer national service programs on an interim basis. The provisions relating to transitional entities, however, sunsetted 27 months after the passage of the Act, or December 1995. The proposed rule amends the regulations to remove any obsolete references to transitional entities.
State Commission Sustainability Approaches (Sec. 2550.80(a)(3))

Part of the Corporation's sustainability strategy is to build upon what some States are already doing in the sustainability arena. Through the public input process and followup discussions, we learned that roughly onequarter of the State commissions have written
sustainability policies or approaches through which they promote sustainability and encourage new programs in their States. Some States, for example, gradually and predictably reduce their programs' Corporation cost per FTE over 12 years, to allow the commission to invest funds in new programs and encourage ongoing programs to develop efficiencies and enhance community support. Other State commissions require, among other things, that their subgrantees develop their own sustainability plans, and increase the subgrantee share of program operating costs over a sevenyear period to 75 percent. Some States, in addition to requiring a small increase in program share of member support
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costs over a threeyear period, actively solicit private donations to use, in part, to help AmeriCorps programs meet corporate donors and improve private support.

We expect these States to continue their sustainability efforts, and other States to begin planning how they can help make national and community service sustainable at the state level. For this reason, the proposed rule requires each State to describe its sustainability approach in its State plan. To address this requirement, States will need to consider how best to use the Corporation's sustainability approaches in conjunction with State needs to achieve sustainable national and community service programs, and the Corporation will have the opportunity to learn from what the States are doing and to share best practices.
State Commissions Directly Operating Programs (Sec. 2550.80(j))

The Corporation proposes to ease the restriction on State commissions directly carrying out national and community service programs. Under the Act, a State commission or alternative administrative entity may not directly carry out any national service program that receives assistance under subtitle C. 42 U.S.C. 12638(f). Currently, however, 45 CFR 2550.80 goes further than the statute by prohibiting State commissions from directly operating any national service program receiving assistance, in any form, from the Corporation. This means that, currently, a State commission is prohibited from operating not only a subtitle C AmeriCorps program, but also any subtitle H, Learn and Serve, or Senior Corps program. The Corporation is relaxing the restriction by amending the regulations to conform to the Act and to give commissions more flexibility to directly operate programs other than subtitle C AmeriCorps programs. V. Effective Dates

The Corporation intends to make any final rule based on this proposal effective no sooner than 30 days after the final rule is published in the Federal Register. We will include an implementation schedule in the final rule, based on the final rule's date of publication.

VI. Significant NonRegulatory Issues

The Corporation announced in its March 4, 2004 Federal Register notice that we would not respond to the input we received during the preliminary input process, but that we would use it to inform our drafting process. That said, we received sufficient input on certain issues that we feel we should address here, even in the absence of regulatory language.
A. Streamlining Grantee Requirements and Aligning Them With Grantee Needs

Much of the public input we received focused on suggestions for streamlining our grant application and grantmaking processes, and streamlining and aligning with grantee needs our reporting and other requirements. The following are some of the issues we considered and our response.

Revising the Timing of the Grant Cycle

During the preliminary public input process, we heard that our current grant calendar is not optimal for many organizations with start dates in the fall. To the extent that appropriations are made available, we intend to move application deadlines and grant awards to earlier in the fiscal year. Our goal is to execute grant awards to allow grantees as much time as possible from the time they receive the grant to the date that they start their programs. Part of this process will also include revisiting our current application requirements to tailor them more closely to the information we reasonably need to make decisions.

The Corporation received several requests to authorize grantees to allow members to begin serving before we actually execute the grant award. By law, the Corporation cannot meet this request. The Strengthen AmeriCorps Act reemphasizes the statutory requirement that the obligational event for an education award is the execution of the grant award. Thus, we cannot allow programs to enroll members before we have awarded both the grant and the member FTEs associated with the grant. Streamlining Continuation Grants and Reporting Requirements

Section 130 of the National and Community Service Act of 1990, as amended, authorizes the Corporation to determine the timing and content of applications for AmeriCorps funding. The public input we received overwhelmingly indicated that we should streamline our current process for applying for continuation funding in years two and three of a threeyear grant period. We agree and intend to change our continuation application requirements to minimize the burden on grantees, while ensuring that the Corporation receives the information it needs to make fiscally responsible continuation awards. Our intent is to streamline the application, reporting requirements, and the review process for continuations, as well as to give grantees more predictability over the threeyear grant cycle.

We propose:

Accordingly, the Corporation will be revising and streamlining many of the information collection requirements related to grant applications. The Corporation intends, to the maximum extent possible, to award continuation grants within one month of a grantee's request, or within one month of the Corporation's receipt of its annual appropriation, whichever is later. This means that, as a general rule, the Corporation intends to award continuation requests on a rolling basis, rather than requiring all applications to be submitted on a specific day and considering them at the same time. We intend to work with State commissions on a schedule that accommodates the different start dates of programs within a State's portfolio. Because of the uncertainties of annual appropriations, however, we are reviewing how this process would affect continuation requests that include an expansion request (including both requests for more program funds and requests for more member FTEs), and may establish an alternate timetable for considering those requests.

The Corporation intends to approve continuation requests based on:

1. The Grantee's satisfactory performance, as demonstrated in the progress report and other information the Corporation may have obtained;

2. Whether the grantee is in compliance with its grant provisions;

3. Any proposed changes to the grantee's program or budget; and [[Page 50130]]

4. The availability of appropriations.

To make this new process work, the Corporation intends to tie reporting requirements, such as the progress report, to the start date of individual grants, rather than setting an arbitrary deadline for all grantees. We anticipate issuing a threeyear schedule of reporting due dates with each initial grant award so that the grantee will know what is expected at the outset. This will also ensure that the Corporation receives the reports at the optimal point in time for making funding decisions. In addition, we are committed to focusing and streamlining our current reporting requirements to reduce grantee burden.

In sum, these anticipated changes are expected to decrease the burden on grantees, increase the efficiency of the grantmaking process, and increase the utility of what grantees report. We will inform our grantees once we have finalized our continuation request processes.

Providing ThreeYear Funding for ThreeYear Grants

The input we received indicated a strong preference for providing three years of funding up front to a grantee. However, funding three year grants up front would necessarily decrease the size of the national service field, at least initially, as we would only be able to award about a third of the annual grants we award now. We, therefore, decline to accept this suggestion and do not anticipate providing three years of funding up front for a threeyear grant.

Clarifying and Streamlining Guidance

As mentioned earlier, the Corporation is initiating a second rulemaking process this year to rewrite and reorganize our current regulations, and streamline and incorporate the grant provisions and guidelines into regulation. We believe that this will result in much clearer, more focused, and transparent guidance for applicants and grantees and a decrease in grantee burden.
B. Maximizing a Grantee's Ability To Meet Objectives and Achieve Strong Outcomes

ReFill Rule

Since last year, the Corporation has prohibited programs from re filling a slot when a member left without completing a term of service. We received a significant amount of input asking that we revisit this policy. We are still examining this possibility for the 2004 program year and will issue more specific guidance on this issue in the near future. We will address this issue outside of rulemaking.

Challenge Grants

Many individuals who provided input saw challenge grants as a way to increase the capacity of the national and community service field. The Corporation supports making challenge grants under certain circumstances. Under the VA/HUD appropriation, however, challenge grants are currently authorized and funded under subtitle H of the Act, as amended, and are not available for the purpose of supporting AmeriCorps programs. To date, we have not had authority in our appropriations statute to fund challenge grants with AmeriCorps State and National funds and are, therefore, unable to accept this suggestion.

Professional Corps

The Corporation received a substantial amount of input on behalf of professional corps grantees requesting separate application guidelines and requirements for professional corps programs. We have concluded that we do not need to establish separate guidelines in regulation. The Corporation believes, however, that professional corps programs, particularly those for which the cost is largely borne by sponsoring organizations, will continue to compete well in our AmeriCorps grant competitions. By using an ``apples to apples'' approach during our selection process, we will ensure, to the maximum extent possible, that we evaluate professional corps programs together. In addition, for a program able to demonstrate the requirement to leverage volunteers is a fundamental program structure alteration, we will consider a request to waive such leveraging requirement.

Finally, we recently issued a Notice of Funding Availability directed only at professional corps, and would consider doing so again in the future.

C. Improving the AmeriCorps Member Experience

We received input from current and former AmeriCorps members asking us to focus on their experience and the resources available to them. The Corporation has a strong interest in the AmeriCorps member experience and intends to further explore ways to improve it.

In particular, we intend to explore creating a member satisfaction survey through which AmeriCorps members would be able to evaluate their programs and their AmeriCorps experience.
D. Issues That the Corporation Cannot Address Under Current Law

The Corporation received many suggestions for reforms that it is unable to address without legislation. The following table lists examples of these proposed reforms and the associated statutory constraints.
Public input proposal Statutory constraint Statutory citation Increase amount of education award.... Amount for a fulltime term of 42 U.S.C. 12603(a). service is fixed at $4,725. Education award should be exempt from Internal Revenue Code......... 26 U.S.C. 1 et seq. taxation.
Permit transfer of education award.... Recipient must be AmeriCorps 42 U.S.C. 12602. member.
Permit education award to be used for Limited to costs of attending 42 U.S.C. 12604. additional purposes. Title IV institutions of higher education and repayment of qualified student loans.
Permit AmeriCorps members to receive Limit is two education awards 42 U.S.C. 12602(c). more than two education awards as for the first and second long as the total amount does not terms of service, regardless exceed the value of two fulltime of length.
education awards.
Make payment of education award Disbursement must be to 42 U.S.C. 12604. directly to AmeriCorps member. institution of higher education or loan holder. Permit AmeriCorps members to enroll as Approval of position does not 42 U.S.C. 12581; soon as the grant selections are occur until grant award is 42 U.S.C. 12605. announced. executed.
Increase percentage of grant costs Limit is five percent of grant 42 U.S.C. 12571(d). that may be spent on administrative amount.
functions.
Grant period should be up to 5 years.. Grant period may not exceed 42 U.S.C. 12574. three years.
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Executive Order 12866

The Corporation has determined that this rule, while a significant regulatory action, is not an ``economically significant'' rule within the meaning of E.O. 12866 because it is not likely to result in: (1) An annual effect on the economy of $100 million or more, or an adverse and material effect on a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal government or communities; (2) the creation of a serious inconsistency or interference with an action taken or planned by another agency; (3) a material alteration in the budgetary impacts of entitlement, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) the raising of novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in E.O. 12866.

The proposed rule requires all grantees and subgrantees of the Corporation to increase, based on a predictable and incremental schedule, the grantee share of program costs. After the initial three year grant period, a Corporation program in its fourth year of operation must provide at least 26 percent of their overall program budget in matching money. During years five through ten of Corporation sponsorship, the program's required matching percentage increases gradually to 50 percent.

The initial impact of this change will be small. During the 2000 2002 grant periodthe most recent threeyear period where we have complete data on program budgetsabout 20.6 percent of all AmeriCorps grantees and subgrantees had match percentages less than 26 percent. On average, about 146 programs per grant year would be affected. Among these programs, the average amount of matching money needed to reach the 26 percent level is about $20,250 per program, or about $2,950,000 per year across all AmeriCorps programs. However, the median program would require about $14,200 in additional matching money to reach the 26 percent level. All told, this analysis indicates that the programs that would be affected would require very little additional money to achieve a 26 percent match, and that the overall impact of the rule on Corporation programs falls well short of $100 million annually.

FOR FURTHER INFORMATION CONTACT Kim Mansaray, Docket Manager, Corporation for National and Community Service, (202) 6065000, ext. 236. TDD (202) 5652799. Persons with visual impairments may request this proposed rule in an alternative format.