Welfare-to-Work eligibility and grant spending guidance

U.S. Department of Labor, Employment and Training Administration Classification: WtW Correspondence symbol: OAS Date: September 7, 2000 Rescissions: None stated Expiration date: Continuing

TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 4-00

TO
: ALL STATE WELFARE-TO-WORK CONTACTS
ALL STATE WORKFORCE LIAISONS

FROM : LENITA JACOBS-SIMMONS Deputy Assistant Secretary

SUBJECT : Guidance on Welfare-to-Work Formula Grant Eligibility, Participant Reclassification, the Welfare-to-Work/Workforce Investment Act Interface, and the 70 Percent Minimum Expenditure Requirement and 15 Percent Administrative Cost Limitation under the Welfare-to-Work Program

1. Purpose. To provide clarifying information and guidance
   to Welfare-to-Work (WtW) grantees about 1) eligibility
   determination for formula grants for the period July 1 to
   September 30, 2000; 2) participant reclassification from the
   30 percent eligibility category to the 70 percent eligibility
   category; 3) the WtW and Workforce Investment Act (WIA)
   interface; and 4) the proper calculation of the 70 percent
   minimum expenditure requirement for WtW funds.

2. Authorities and References.
   - Title IV-A and Title IV-D of the Social Security Act
   (SSA)
   - Personal Responsibility and Work Opportunity
   Reconciliation Act of 1996 (Pub. L. 104-193)
   - Balanced Budget Act of 1997 (Pub. L. 105-33)
   amending Title IV-A of the SSA
   - 20 CFR Part 645, WtW Interim Final Rule (published
   at 62 Fed. Reg. 61588 (Nov. 18, 1997))
   - Omnibus Consolidated and Emergency Supplemental
   Appropriations Act, 1999 (Pub.L. 105-277)

• Title VIII of H.R. 3424, enacted as part of the
  Consolidated Appropriations Act for FY 2000 (Pub. L.
  106-113), which contains the Welfare to Work and
  Child Support Amendments of 1999 ("the 1999
  Amendments")
• Workforce Investment Act (WIA) of 1998 (Pub. L.
  105-220)
• 20 CFR Part 652 and Parts 660 through 671, WIA
  Interim Final Rule (published at 64 Fed. Reg. 18662
  (April 15, 1999)) also WIA Final Rule published
  August 11, 2000

3. Background. The eligibility, allowable activities, and
   reporting modifications contained in the 1999 Amendments
   have fundamentally impacted the operation of WtW formula and
   competitive grants. The staggered effective dates for the new
   allowable activities and the revised eligibility criteria for
   WtW participants under the 1999 Amendments resulted in a need
   for guidance on eligibility determination and enrollment
   issues for WtW formula grantees for the period July 1 to
   September 30, 2000. There is also a need for guidance on when
   a WtW grantee is permitted to reclassify individuals from the
   30 percent eligibility category to the 70 percent eligibility
   category. Questions and answers on these issues have been
   posted on the WtW online Questions and Answers system
   (http://wtw.doleta.gov/qsanda.htm. This TEGL conveys them as
   policy.

Similarly, the passage of WIA, and the nationwide
implementation of WIA as of July 1, 2000, have created a need
for guidance addressing the expected interface between the WtW
Program and other WIA program partners. The attached
questions and answers addressing these issues were first
posted on the WtW online Questions and Answers system; their
inclusion in this TEGL conveys them as official DOL policy.

Lastly, there has been some confusion about the WtW statutory
and regulatory requirement that at least 70 percent of the
total WtW funds allotted or awarded to an operating entity be
spent upon individuals enrolled under the 70 percent
eligibility provision. This TEGL reiterates that the 70
percent minimum expenditure requirement applies to a WtW
operating entity’s total allotment or award, not to a WtW
operating entity’s actual expenditures. This TEGL also
restates that the 15 percent administrative cost limitation is
similarly based on the operating entity’s total allotment or
award.

4. Eligibility Determination Guidance for Formula Grants for
   the Period July 1 to September 30, 2000. Section 801(e) of
   the 1999 Amendments contains effective dates for the new
   eligibility criteria and the new allowable activity,
   vocational educational training and job training, that are
   different for competitive grantees and formula grantees. For
   competitive grantees, the expanded eligibility criteria were
   effective on January 1, 2000.

The provision allowing pre-employment vocational educational
training and job training was effective for competitive
grantees on November 29, 1999, the enactment date for the 1999
Amendments. Provisions relating to the eligibility of
participants for WtW formula grants are effective on July 1,
2000, except that expenditures from allotments to the States
must not be made before October 1, 2000, for individuals who
would not have been eligible under the criteria in effect
before the changes made by the 1999 Amendments.

Provisions authorizing pre-placement vocational educational
training and job training for WtW formula grants are effective
on July 1, 2000, except that expenditures from allotments to
the States must not be made for this activity before October
1, 2000.

For formula grants, State and local areas may expend matching
funds beginning July 1, 2000 for the newly eligible
participants and the newly authorized services. Also, State
and local areas may incur unpaid obligations within the normal
course of business, beginning July 1, 2000, providing that the
timing of those transactions ensures that drawdown of federal
WtW formula funds to liquidate the obligations will not occur
until October 1.

Five Questions and Answers (No. E28 through No. E32) have been
posted online at http://wtw.doleta.gov/q&a/eligibility.htm
under “Eligibility Questions.” These Questions and Answers
provide guidance on which individuals are eligible as of July
1, 2000, and clarify the time frame when Federal formula funds
may be expended towards serving such individuals. Also, a new
Question & Answer No. AA43 has been posted under “Allowable
Activities” which describes the restriction on the expenditure
of formula-allotted funds for the limited vocational
educational training and job training activities. The
described Questions and Answers are included as Attachments 1
and 2 of this TEGL and they are incorporated by reference as
part of this policy guidance.

5. Participant Reclassification from the 30 Percent Portion
   of the WtW Program to the 70 Percent Portion. At least 70
   percent of the WtW funds allotted to or awarded to an
   operating entity must be spent to benefit individuals meeting
   certain eligibility criteria described in 20 CFR 645.212.
   Operating entities may spend up to 30 percent of the WtW funds
   allotted or awarded on individuals meeting certain other
   eligibility criteria described in 20 CFR 645.213.

True to the intent of the 1999 Amendments, overall eligibility
criteria for the WtW program has been simplified and new
categories of eligible individuals have been added. Most
notable is the elimination of the barriers individuals must
meet to be enrolled in the 70 percent portion of the program.

It is now sufficient that Temporary Assistance for Needy
Families (TANF) recipients simply either 1) have received
assistance under the State TANF program for at least 30 months
(whether or not consecutive); or 2) within twelve (12) months
will become ineligible for benefits due to a Federal or State-imposed time limit; or 3) no longer receive TANF benefits due to the imposition of Federal or State-imposed time limits.

The criteria for noncustodial parents have also changed. It
is expected that all new enrollments of noncustodial parents
will be in the 70 percent portion. Those who are currently
enrolled under the 30 percent portion may be re-classified and
enrolled under the 70 percent portion if they meet the new
eligibility criteria for noncustodial parents.

Before passage of the 1999 Amendments, we provided guidance to
operating entities on reclassifying individuals from the 30
percent eligibility portion to the 70 percent eligibility
portion. This earlier guidance concerned individuals whose
circumstances changed, such as attaining the 30 months on TANF
needed to meet the 70 percent criterion, and individuals who
may have been misclassified when enrolled. Question and
Answer No. E27 provided guidance on transferring such
participants from one portion to the other as well as the
relevant reporting instructions.

We revised Question and Answer No. E27 to add new scenarios
posed by the 1999 Amendments as discussed above. Basically,
in certain circumstances, enrolled individuals may be
transferred from the 30 percent portion to the 70 percent
portion. The operating entity does not have to re-determine
an individual’s eligibility after the effective date of the
1999 Amendments, but does need to document in the
participant’s eligibility file the reason for the transfer and
the information needed to support the reclassification. The

revised Question and Answer No. E27 contains the accompanying
reporting instructions for each scenario and is included in
this TEGL as Attachment 3, which is incorporated by reference
as part of this policy guidance.

6. WtW and WIA Interface.

a) WtW/WIA Questions and Answers. We posted a series of
Questions and Answers about the changes necessitated by the
implementation of WIA on the WtW website at
http://wtw.doleta.gov/q&a/wiaquestions.htm as a separate part
of the WtW Questions and Answers. These Questions and Answers
are found in Attachment 4. This same Question and Answer
series is included as a subpart on WIA implementation found at
http://www.usworkforce.org/asp/qanda.asp. They are
transmitted as policy guidance for the WtW competitive and
formula grant programs via this TEGL.

The major thrust of this series of questions concerns the
transition from local service delivery areas to WIA local
areas

and the transition from Private Industry Councils (PICs) to
local workforce investment boards (local boards) in those
local areas. For purposes of WtW, this change was foreseen
and earlier amendments to the Social Security Act (contained
in the Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999 (Pub.L. 105-277)) provide that the
operating entities may be either PICs or the successor local
boards. The WIA legislation calls for the WtW Program to be a
partner in the One-Stop system
under WIA. Memoranda of Understanding (MOUs) are required
between the WtW operating entity and the local board to cover
coordination, referrals and resource allocation pertaining to
the operation of the One-Stop system in the local area.

We recognize that there may be a change in geographic
configuration during the transition from service delivery
areas under the Job Training Partnership Act (JTPA) to local
areas under WIA. Question and Answer No. 5 and No. 6 in
Attachment 4 discuss such a situation, and provides that
States are required to redistribute WtW funds as a result of
such changes. This redistribution should occur within 30 days
of the implementation of WIA or as soon as possible. Further,
States should submit a modification of the State WtW formula
plan to reflect the redistribution of the original
allocation(s). Such modifications should be submitted to
appropriate Regional Office as soon as the redistribution has
been made.

b) Novation Agreements. If the geographical areas are the
same under JTPA and WIA, the PIC operating a formula WtW
program should enter into a “novation agreement” with the
local board which is the new administrative entity. State
formula grantees should ensure that such agreements are
entered into promptly in the local areas in accordance with
the State’s overall administrative responsibility for the WtW
Program.

A copy of the instructions regarding Novation and Change-of-Name Agreements, published in the Federal Acquisition Regulation (48 CFR Ch. 1 Subpart 42.12, October 1, 1999 edition), is included as Attachment 5. These instructions should be used in accordance with guidance provided in WtW/WIA Question and Answer No. 4 and No. 5 on the transfer of responsibility for WtW grants from a PIC to a local board. For purposes of WtW, references to the Administrative Contracting Officer means the State administering entity.

c) Liability. The Balanced Budget Act of 1997 established the
WtW Program. The statute named JTPA service delivery areas as
grant recipients. PICs were identified as presumptive
administering entities under the Formula Grant portion of the
WtW Program. PICs were also allowed to compete under the
competitive grant portion.

On July 1, 2000, JTPA expired. As discussed above,
amendments to the WtW statute identified local boards
established under WIA section 117 (including alternative
entities meeting the requirements of section 117(i)) as
eligible WtW operating entities. With the expiration of
JTPA, PICs ceased to have legal authority to continue as the
statutorily named board to oversee employment and training
programs in a particular community.

With the implementation of WIA, the Chief Elected Official
(CEO) determines who can now oversee the WtW formula or
competitive grant programs previously overseen by the PIC:

In most cases, the CEO will choose the successor entity local
board to oversee the WtW Program(s). This is accomplished
through a novation agreement by which a PIC transfers WtW
funds, assets and responsibilities to the new local board.

In some cases, the CEO may select the PIC (although no longer
statutorily authorized as an employment and training
oversight body with the expiration of JTPA) to continue to
exist as an independent service provider, incorporated to
operate programs and carry out other tasks. A CEO may wish
to have such an incorporated, independent PIC serve as the
WtW grant recipient.

In other cases, the CEO may wish to have some other
organization as grant recipient to oversee the WtW Program(s)
in his/her community. In such as case, the CEO will have to
coordinate with the Governor to request a waiver under 20 CFR
645.400, to designate the other organization as an alternate
local administering agency.

Any of these choices rest with the CEO. No matter which
choice is made, the CEO is responsible and liable for WtW
funds at the local level.

Because local boards are considered the successor entities to
PICs, the CEO must consult with or otherwise notify the State
level formula grantee of any local formula grant recipient
designations other than local boards established under WIA
section 117. The State level formula grantee has the
responsibility of notifying the Department of Labor and
requesting a State WtW formula grant modification when:

1. A local board chosen to oversee the WtW formula grant program at the local level has replaced the PIC, but now has a changed geographical jurisdiction from the service delivery area that PIC originally covered. In such instances, funds should be redistributed to the new local areas as soon as possible using the existing formula; or

2. A designation to oversee the WtW formula grant program at the local level is made to any organization other than the local board established under WIA Section 117.

In cases where the PIC is also a competitive grant recipient,
the CEO has responsibility for notifying the Department of
Labor when he/she chooses any entity other than the local
board established under section 117 of WIA to oversee a
competitive grant previously overseen by a PIC. (Note: it is
possible the CEO may designate a different entity to oversee
the competitive grant from the entity in the area that will
oversee the formula grant).

7. Application of the 70 Percent Minimum Expenditure
   Requirement and the 15 Percent Administrative Cost
   Limitation. Direction provided in Question and Answer No.
   AF7 on the WtW
   online questions and answers system, and in the WtW Financial
   Management Technical Assistance Guide (TAG), created some
   ambiguity about the base against which 70 percent minimum
   expenditure requirement, discussed above, is to be
   calculated. If the grantee is unable to attain the 70
   percent minimum expenditure requirement, there may be an

administrative finding. The Department of Labor has
discretion about how such administrative findings may be
resolved.

As stated in 20 CFR 645.211, the calculation of the 70
percent minimum expenditure requirement, as well as the
related 30 percent maximum expenditure limitation, is applied
against a base of the total amount of funds allotted or
awarded to the WtW operating entity. The minimum expenditure
requirement is not calculated against a base of the total
amount of funds expended by the operating entity.

The WtW regulations, at 20 CFR 645.235(a), limit the
expenditure of WtW funds for administrative purposes to no
more than 15 percent of the grant award. Similar to the
measurement of the 70 percent expenditure requirement, the
base against which the 15 percent administrative cost
limitation is applied is also the total amount of funds
allotted or awarded to the WtW operating entity.
Expenditures for administrative costs will not be measured
against total expenditures.

Question and Answer No. AF8 correctly conveys what base the
administrative costs limitation applies to. However, this
Question and Answer was responding to whether the planned or
the actual expenditures at the end of three years would be
the basis for determining compliance. The answer notes: “The
15 percent administrative cost limitation applies to actual
expenditures, as compared with the total grant award amount,
as determined at the end of the three year period.”
(Emphasis added). This language did not imply that the
limitation would be adjusted based upon the level of
expenditures; it meant only that actual expenditures on
administration would be the measuring rod instead of planned
expenditures. To resolve any misunderstanding based on the
highlighted language in the Question and Answer, this TEGL
makes clear that the administrative cost limitation will be
measured against the total amount of funds allotted or
awarded. The regulations at 20 CFR 645.235 (a) and (b)
affirm the statutory intent that administrative expenditures
are limited to 15 percent maximum “of the grant award” for
both formula and competitive grants.

Should the total amount of the grant award be reduced because
of difficulty in meeting the match requirements, or due to
voluntary or involuntary return of grant funds to the
Department of Labor, the administrative cost expenditures and
the 70% minimum expenditure requirement will be measured
against the total amount of funds awarded or allotted,

adjusted by the reduced allotment, at the end of the program
for compliance purposes.

The two Questions and Answers referred to in this section
(AF7 and AF8) will be revised for clarity and will refer to
this TEGL for further guidance.

8. Action Required. States should provide this guidance to
   appropriate staff.

9. Inquiries. Inquiries on this TEGL should be addressed to
   the appropriate Regional Office contact, which can be found
   at http://wtw.doleta.gov/resources/regcon.htm.

10. Attachments.

1 - Eligibility Questions & Answers E28 to E32;
2 - Allowable Activity Question and Answer A43;
3 - Reclassification Question & Answer E27;
4 - WIA Questions & Answers;
5 - Novation and Change-of-Name Agreements (FAR, 48 CFR Ch.
1 Subpart 42.12).

Attachment 1: Eligibility questions and answers E28–E32

Official attachment: https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2000/TEGL4-00Attach1.pdf

Attachment 1

E28: During the period of July 1, 2000 through September 30, 2000, may WtW operating entities continue to spend Federal formula funds on individuals that were already enrolled in the WtW program as of June 30, 2000?

Yes, such individuals should experience no interruption of service or expenditure activity during this period. (June 30, 2000)

E29: May WtW operating entities enroll an individual in the program between July 1, 2000 and September 30, 2000, if (s)he ONLY meets the old eligibility criteria for the WtW program?

No, the new eligibility criteria take effect on July 1, 2000, and supercede the old eligibility criteria in effect up to that date. Therefore, an individual meeting ONLY the old criteria would not be eligible and could not be enrolled in the WtW program. However, because the new eligibility criteria are much broader than the old criteria, we expect that most individuals who could have met the old criteria will also meet the new criteria. Some individuals might not, however, such as a noncustodial parent who has barriers, etc., but who does not meet the new criteria for noncustodial parents (unemployed, underemployed, or having difficulty paying child support obligations, etc.). (June 30, 2000)

E30: May WtW operating entities enroll an individual in the WtW program between July 1, 2000 and September 30, 2000 if (s)he ONLY meets the new criteria? May WtW operating entities spend Federal formula funds on these individuals?

WtW operating entities may only enroll individuals meeting the new eligibility criteria in the WtW program beginning July 1, 2000. However, until October 1, 2000, WtW operating entities cannot spend Federal formula funds on individuals who meet the new eligibility criteria but who would not have met the old eligibility criteria. The intent of this restriction is to prevent the outlay of Federal WtW formula funds until the first day of fiscal year 2001. It is not intended to prevent the normal incurrence of unpaid obligations until that date, provided that Federal WtW formula funds are not drawn down to liquidate the obligations until October 1, 2000. Therefore, operating entities may not draw down WtW formula funds from the Federal Treasury until that date. During the period of July 1, 2000 to September 30, 2000, operating entities may expend matching funds and/or may incur unpaid obligations within the normal course of business, provided that the timing of those transactions ensures that the draw-down of Federal WtW formula funds to liquidate the obligations will not occur until October 1, 2000. (June 30, 2000)

E31: May WtW operating entities enroll an individual in the WtW program between July 1, 2000 and September 30, 2000 if (s)he meets BOTH the old and new eligibility for the program AND spend Federal formula funds on him or her during this three-month period?

Yes, during this three-month period, WtW operating entities may enroll and spend Federal formula funds on an individual who BOTH meets the new eligibility criteria and would have met the old eligibility criteria. The 1999 Amendments only restrict expenditures from allotments for individuals who “would not have been eligible before July 1, 2000.” (June 30, 2000)

E32: Can WtW operating entities enroll an individual who meets the old criteria under the 30 percent provision AND meets the new criteria under the 70 percent (general eligibility and noncustodial parents provision) under the new 70 percent provision after July 1, 2000? Can WtW operating entities spend Federal formula funds on this individual?

Yes, WtW operating entities may enroll an individual who meets the new general eligibility or noncustodial parents criteria under the 70 percent provision as long as the individual would have met either the “old” 30 percent or “old” 70 percent criteria. WtW operating entities may spend Federal formula funds on this individual between July 1, 2000 and September 30, 2000. The 1999 Amendments only restrict expenditures from allotments for individuals who “would not have been eligible before July 1, 2000.” (June 30, 2000)

Attachment 2: Allowable activity question and answer AA43

Official attachment: https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2000/TEGL4-00Attach2.pdf

Attachment 2

AA 43: Can a formula grantee provide “pre-employment” vocational educational training or job training (not to exceed 6 months) as allowed by Section 802 of the 1999 Amendments during the period July 1, 2000 through September 30, 2000? Can Federal formula funds be spent on this activity during this period?

WtW formula funded operating entities may provide “pre-employment” vocational educational training or job training activities to eligible participants during the July 1, 2000 to September 30, 2000 period. However, these entities may not spend Federal formula funds for these activities until October 1, 2000. The intent of this restriction is to prevent the outlay of Federal WtW formula funds until the first day of fiscal year 2001. It is not intended to prevent the normal incurrence of unpaid obligations until that date, provided that Federal WtW formula funds are not drawn down to liquidate the obligations until October 1, 2000. Therefore operating entities may not draw down WtW formula funds from the Federal Treasury until that date. During the period of July 1, 2000 to September 30, 2000, operating entities may expend matching funds and/or may incur unpaid obligations within the normal course of business, provided that the timing of those transactions ensures that the draw-down of Federal WtW formula funds to liquidate the obligations will not occur until October 1, 2000. (June 30, 2000)

Attachment 3: Participant reclassification question and answer E27

Official attachment: https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2000/TEGL4-00Attach3.pdf

Attachment 3

REVISED

E27: An individual is determined eligible for, and enrolled in, the 30% portion of the WtW program. At a later time, the individual is determined to be eligible to be served under the 70% portion. Can that individual be transferred from the 30% portion of the program and enrolled into the 70% portion?

Yes. An individual enrolled currently in the 30% portion may later become eligible for the 70% portion due to the individual’s change in classification. Below we have provided four scenarios which illustrate the ways an individual’s classification can change and what can be done or not done regarding 70%/30% classification. Each is followed by a section which describes how to report the changes that such a scenario may cause.

     NOTE: Formula Grantees are reminded that on July 1, 2000 they may implement the
    changes in eligibility caused by the WtW Amendments of 1999, but they may not use any
    federal WtW funds to do so. Beginning October 1, 2000 Formula Grantees may
    implement the eligibility changes using federal WtW dollars.

Please note that in all four scenarios, it is never necessary to terminate the individual from the program and re-determine eligibility. This is because the individual has already been determined eligible for the WtW program. Nevertheless, if the operating entity chooses to transfer an individual from the 30% to the 70% portion, the following guidance is applicable. In all scenarios, operating entities must document and explain the transfer of participants in the “Remarks” section of their QFSR, and participants’ files should be documented to explain the reason for the transfer. Also, financial records should be adjusted accordingly so there is a clear audit trail to substantiate the action.

                          SCENARIO #1
 TANF RECIPIENT/EXHAUSTEE WAS ORIGINALLY ENROLLED AS 30%. AFTER
            AMENDMENTS QUALIFIES FOR COUNTING AS 70%

    The first scenario includes situations where a TANF recipient or TANF exhaustee who was
    originally enrolled in the 30% portion prior to the effective date of the Welfare-to-Work and
    Child Support Amendments of 1999 (the 1999 Amendments) would be eligible under the new
    criteria for the 70% portion due to the eligibility changes enacted by the 1999 Amendments.

For example, before the effective date of the 1999 Amendments, a TANF recipient or TANF
exhaustee may have been enrolled under the 30% portion, because while (s)he possessed the
requisite 30 months of TANF receipt under 20 CFR § 645.212(a)(3)(i), (s)he did not have the
required two of three barriers to employment outlined at 20 CFR § 645.212(a)(2). The 1999
Amendments eliminated the requirement that TANF recipients and TANF exhaustees enrolled
under the 70% portion must meet the criteria for barriers to employment; now, under the 1999
Amendments, individuals served as long-term TANF recipients in the 70% portion must only
meet the TANF receipt criteria outlined at 20 CFR § 645.212(a)(3)(i) or (ii). Due to this
individual’s length of time on TANF, (s)he is now eligible to be served under the 70% portion
and may be transferred from the 30% portion.

HOW TO REPORT

Where a WtW operating entity has transferred an individual to the 70% portion because (s)he
meets the new eligibility requirements enacted by the 1999 Amendments, the entity should
report him or her on the Quarterly Financial Status Report (QFSR) as a participant under the
70% portion for the quarter in which (s)he became eligible for the 70% portion (i.e., the first
quarter in which the eligibility changes under the 1999 Amendments are in effect for the
operating entity). The entity must remove him or her from the participant count under the 30%
portion in the same quarter, in order to avoid having a “double-count” for that participant.
Reported expenditures made on behalf of the individual prior to his/her transfer into the 70%
portion, for the period for time when (s)he was reported as an individual in the 30% portion,
must remain in the 30% portion expenditure category. After his or her transfer to the 70%
portion, the operating entity should report all expenditures attributable to the participant in the
70% portion.

Operating entities should transfer eligible participants in the first quarter after the eligibility
changes under the 1999 Amendments are in effect for them. For competitive grantees, the
1999 Amendments were effective January 1, 2000, so the transfer of eligible individuals should
have happened and should have been reported in the quarter ending March 31, 2000. For
formula grantees, 1999 Amendments take effect July 1, 2000, so the transfer of individuals
should take place and should be reported in the quarter ending September 30, 2000. If
operating entities did not transfer eligible individuals in the first quarter after the 1999
Amendments took effect for them, they may transfer these individuals in a later quarter,
retroactive to the first quarter after the 1999 Amendments took effect for them.
Nonetheless, operating entities should transfer eligible participants as quickly as possible after
the eligibility changes under the 1999 Amendments are in effect for them.

Please note that in this scenario, the operating entity need not re-determine an individual’s
eligibility after the effective date of the 1999 Amendments in order to transfer the individual
from the 30% portion to the 70% portion. That is, operating entities in this scenario will rely

   upon the information collected at the time of the individual’s initial enrollment into WtW, to
   make the determination that the individual is now classified under the 70% portion due to the
   eligibility changes under the 1999 Amendments.

                          SCENARIO #2
    NONCUSTODIAL PARENT ORIGINALLY ENROLLED UNDER 30%, AFTER
           AMENDMENTS QUALIFIES TO BE COUNTED AS 70%

   The second scenario includes situations where a noncustodial parent who was originally
   enrolled in the 30% portion prior to the effective date of the 1999 Amendments would be
   eligible under the new criteria for the 70% portion due to the eligibility changes enacted by the
   1999 Amendments. The 1999 Amendments eliminated the noncustodial category in the 30%
   portion for enrollments which take place after the effective dates of the 1999 Amendments
   (January 1, 2000 for competitive grantees, and July 1, 2000 for formula grantees). As a result,
   operating entities now have the option to transfer noncustodial parents who were enrolled under
   the 30% portion prior to the effective dates of the 1999 Amendments into the 70% portion
   after the effective date of the 1999 Amendments, if those noncustodial parents meet the new
   noncustodial parent criteria and requirements at section 403(a)(5)(C) of the SSA.

HOW TO REPORT
Operating entities should report a noncustodial parent who was originally enrolled in the 30%
portion prior to the effective date of the 1999 Amendments and who is thereafter eligible under
the new criteria for the 70% portion as a participant under the 70% portion for the quarter in
which the noncustodial parent meets all of the eligibility requirements outlined at section
403(a)(5)(C) of the SSA.

   When the noncustodial parent is transferred into the participant count under the 70% portion,
   (s)he must be removed from the participant count under the 30% portion in the same quarter, in
   order to avoid having a “double-count” for that participant. Reported expenditures made on
   behalf of the noncustodial parent prior to his/her transfer into the 70% portion, for the period
   for time when (s)he was reported as an individual in the 30% portion, must remain in the 30%
   portion expenditure category. All expenditures attributable to this noncustodial parent since
   his/her transfer to the 70% portion should be reported under the 70% portion expenditure
   category beginning in the quarter in which (s)he becomes eligible for transfer into the 70%
   portion.

   Please note that in this scenario, aside from meeting the requirements of the personal
   responsibility contract, the operating entity need not re-determine a noncustodial parent’s
   eligibility after the effective date of the 1999 Amendments in order to transfer the individual
   from the 30% portion to the 70% portion. That is, under this scenario, operating entities will

    rely upon the information collected at the time of the noncustodial parent’s initial enrollment
    into WtW, rather than eligibility information available at the time of the individual’s transfer from
    the 30% portion to the 70% portion.

    Please also note that the transfer of eligible noncustodial parents from the 30% portion to the
    70% portion is optional. Operating entities may continue to serve noncustodial parents who
    were originally enrolled into the 30% portion prior to the effective date of the 1999
    Amendments in the 30% portion, without transferring them to the 70% portion after the
    effective date of the 1999 Amendments. However, because the 1999 Amendments eliminated
    the noncustodial parent category in the 30% portion, the revised WtW reporting instructions
    will not contain a line item for the reporting of participants being served in the 30% noncustodial
    parent category. Therefore, if operating entities choose not to transfer noncustodial parents
    originally enrolled in the 30% portion into the 70% portion, they will have to report these
    individuals on a line item with other categories in the 30% eligibility portion. For instance, an
    operating entity could report noncustodial parents being served in the 30% portion as “TANF
    Recipients with Significant Barriers to Self-Sufficiency,” with a note in the “Remarks” section of
    the report documenting the number of noncustodial parents being grouped on that line.
    Detailed instructions for reporting in these situations will be contained in the revised WtW
    reporting instructions.

                          SCENARIO #3
  INDIVIDUAL ORIGINALLY ENROLLED AS 30% HAS CHANGE IN PERSONAL
        CIRCUMSTANCES NOW QUALIFIES TO BE COUNTED AS 70%.

    The third scenario includes situations where an individual enrolled in the 30% portion becomes
    eligible for the 70% portion after a change in circumstances. For example, at the time of
    enrollment into WtW under the 30% portion, the individual might have received TANF for only
    25 months. Yet, if this individual continues on TANF for another 5 months and is still enrolled in
    WtW, (s)he may be reclassified and enrolled under the 70% portion, having met the
    requirement under 20 CFR § 645.212(a)(3)(i) at that time. Likewise, an individual enrolled
    under the 30% portion may, after time, come within 12 months of becoming ineligible for
    assistance as specified in 20 CFR § 645.212(a)(3)(ii). This individual may also be transferred
    into the 70% portion at that time. Such transfers are optional and not required.

HOW TO REPORT

Where the transfer to the 70% portion is because of a change in the participant’s circumstances, the operating entity should report the participant on the QFSR as a participant under the 70% portion in the quarter that the operating entity determines that the individual meets the 70% criteria. Under this circumstance, in order to avoid having a “double-count” for that participant, the individual must be

removed from the 30% portion participant count that same quarter. Reported expenditures made on behalf of the individual prior to his/her transfer into the 70% portion, for the period for time when (s)he was reported as an individual in the 30% portion, must remain in the 30% portion expenditure category. Expenditures attributable to this participant after the operating entity determined it was appropriate to transfer him or her to the 70% portion should be reported under the 70% portion expenditure category.

                                   SCENARIO #4
                       INDIVIDUAL ORIGINALLY MISCLASSIFIED

    The fourth type of scenario is where some individuals may have been misclassified at initial
    enrollment because one or more of the eligibility criteria were not known at the time of initial
    processing. For example, individuals enrolled in the 30% portion may not have been enrolled
    under the 70% portion because of a miscalculation of their total time receiving TANF. In this
    instance, an individual actually may have met the criteria for long-term TANF receipt under 20
    CFR § 645.212(a)(2) at the time of enrollment, but the WtW operating entity may have
    classified the individual as a participant in the 30% portion because of the miscalculation. If the
    operating entity later determines that the individual did in fact meet the criteria for long-term
    TANF receipt at the time of initial eligibility determination, the operating entity may retroactively
    consider that individual as a participant under the 70% portion of the program as of the date of
    the individual’s initial enrollment.

HOW TO REPORT

    Individuals enrolled in the 30% portion who are later identified as having been eligible for
    enrollment into the 70% portion from the time of their initial enrollment in WtW, may be
    transferred to the 70% portion. In this case, the operating entity should retroactively adjust the
    QFSR(s) to move the participant and the associated participant costs from the 30% to the 70%
    portion as of the date of initial enrollment in WtW.

(Revised 8/30/00)

Attachment 4: Welfare-to-Work and WIA questions and answers

Official attachment: https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2000/TEGL4-00Attach4.pdf

Attachment 4

Welfare to Work and WIA

The Workforce Investment Act of 1998, (WIA), which became fully effective July 1, 2000, mandates the formation of Local “Workforce Investment Boards” (Local Boards) to administer programs within a specific local area and to oversee a One-Stop service delivery system designed to provide quality information and services for customers. The following key questions have been posed regarding the impact of WIA legislation on WtW program operations.

1. Q. Is the Local Workforce Investment Board (Local Board) the successor entity to the
   Private Industry Council (PIC)?

A. Yes. The Local Board will assume the role previously held by the PIC as the administrative entity for Welfare-to-Work (WtW). (Section 403(5)(D)(ii)of the Social Security Act was amended in October 1998 to expand the definition of “private industry council” to read as follows: “private industry council” means, with respect to a service delivery area, the private industry council or local workforce investment board established for the service delivery area pursuant to the Job Training Partnership Act, (JTPA), or title I of the Workforce Investment Act of 1998, as appropriate.” (Pub. L. 105-277)). This change in the WtW authorizing legislation makes it clear that local workforce investment boards (local boards) are intended as successor entities to PICs for purposes of the WtW program. WIA authorized the creation of Local Boards in Section 117. JTPA which authorized the establishment of PICs is no longer in effect after July 1, 2000.

2. Q. How will WtW fit into the local workforce investment system?

A. 20 CFR 662.200-662.220 of the WIA Final Regulations lists the entities which serve as partners in the One-Stop system. Under WIA, all WtW formula and competitive grantees, including Local Boards, are required partners in the One-Stop service delivery system. Title I of WIA and its regulations require a Memorandum of Understanding (MOU) between each partner and the Local Board. MOUs must include information about what services each partner will provide, including coordination of referrals and use of resources. Information on the responsibilities of One-Stop partners, including specific information on MOUs, may be found in 20 CFR part 662. Technical assistance and samples of MOUs may be found at http://www.usworkforce.org.

While the relationship between the WtW competitive grantees and the Local Boards may not be as formal as that of the WtW formula grantee, which in most cases will also be administratively responsible for WIA funding, all WtW grantees are considered to be covered by the provisions of 20 CFR part 662

of the WIA regulations. Under 20 CFR 661.315 and 661.317, the chief elected official must appoint to the Local Board at least one member who represents the WtW program, and may solicit nominations for that member from grantees in the local area. A partnership with the local One Stop system can enhance participant services, so competitive grantees should craft cooperative arrangements with the Local Board to maximize support for all participants.

3. Q. If PICs were providing WtW services directly to participants, can the Local Boards
   (former PICs) do so under WIA and under WtW?

A. Under WIA, one of the key reform principles is focusing local, business-led workforce investment boards on strategic planning and oversight. As a result, Local Boards may only provide core and intensive services under title I of WIA with the agreement of the chief elected official and the Governor. Local Boards may only provide training services funded by title I of WIA if they obtain a waiver from the Governor. Details on these restrictions are outlined in section 117(f) of WIA and 20 CFR 661.310. The Question and Answers page at http://usworkforce.org/asp/qanda.asp provides general information on PICs and their transition to Local Boards under WIA.

Under WtW, Local Boards are required to provide job readiness, job placement and post-employment services through contracts and vouchers. While the WtW 1999 Amendments, signed by the President on November 29, 1999, permit grantees that are not Local Boards to provide these services directly, the prohibition on providing these specific services directly still exists for Local Boards. The WtW law and regulations permit Local Boards to provide other WtW services directly (such as outreach, recruitment, assessment, employment activities and job retention/support services), although the Department encourages Local Boards to focus on their strategic planning and oversight responsibilities as described under WIA.

In some cases, PICs were providing prohibited services directly under WtW due to a misinterpretation of a policy clarification issued by the Department. We expect to clarify this policy in new interim final regulations implementing the WtW 1999 Amendments. We do not intend to sanction PICs or Local Boards which relied on a prior misinterpretation of this policy, provided that they have come into compliance with the law and regulation on this issue as we specify in the final regulations, when published.

4. Q. Does the agreement with the WtW State administrative entity have to be modified as a
   result of a former PIC’s transition into a Local Board?

A. Yes. Some form of a transaction will have to occur to transfer fiscal authority and liability for WtW grant funds. This will ensure that the State formula grant remains in compliance with the “Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments,” codified in the DOL regulations at 29 CFR part 97. These requirements to ensure the sound management of Federal funds are incorporated by reference in both WtW and WIA regulations.

However, it is up to each State to determine the nature and extent of the required modifications to local agreements. In some cases this modification may only consist of changing the name of the local entity. In other cases, where substantial changes are taking place in the mode of service delivery, a more extensive modification is likely to be required by the State.

If there is no change in geography, the State should arrange for or facilitate “novation agreements” (See Federal Acquisition Regulation at 48 CFR Subpart 42.12) between the outgoing PIC and the Local Board taking its place. This agreement establishes that all parties are in agreement with the terms and will allow the new entity (the Local Board) to administer the WtW funds as the successor entity.

5. Q. What procedure should be followed if a local workforce investment area’s geographic
   configuration under WIA is different from the service delivery area (SDA) configuration under JTPA?

A. If the local geographic configurations change as WIA is implemented, the State entity that administers the WtW grant must ensure that funds are appropriately redistributed among local workforce investment areas. Based on the elements in the State’s distribution formula outlined in the WtW State Formula Plan, the State will determine what, if any, adjustments to local area allocations are necessary. States should reapply their original WtW formula to the new areas, based on the data used at the time of the initial allocation, if possible. Adjustments, to the extent needed, should be made only out of funds that are unexpended or unobligated at the local level.

6. Q. Does the approved WtW State formula plan require modification in order to reflect this
   geographical change?

A. Yes. If the geographic configurations and WtW formula allocations are different than those provided by the State in the approved FY 98 and/or FY 99 WtW formula plan, then the State must submit a modification to the Department of Labor. The modification must identify the newly designated local workforce investment areas and the adjusted amount of WtW funds allocated to those areas. The State must submit this modification to the WtW State Plan as soon as possible after either the new local workforce investment area is designated or upon ETA's approval of the WIA State plan.

7. Q. If the State does not have a WtW formula grant, can competitive grantees represent the
   WtW program on the State Board?

A. Yes. WIA requires the representation of each One-Stop partner program on the State Workforce Investment Board by the lead State agency official with responsibility for the partner program . Where no lead State agency is responsible for a partner program, the partner program is represented by a person with expertise relating to the partner program. For WtW, an official from a competitive grantee may be designated as the representative with expertise relating to WtW, although the Governor may choose to designate some other representative.

8. Q. Are WtW competitive grantees required partners in the local One-Stop delivery system
   and are they be required to enter into a MOU?

A. Yes. The WtW program, including all WtW formula and competitive grantees, is a partner program in the local One-Stop delivery system. Under 20 CFR 661.315 and 661.317, the chief elected official must appoint to the Local Board at least one member who represents the WtW program. The WIA regulations, at 20 CFR 662.230 and 622.300, require a MOU between each partner and the Local Board outlining what services each will provide, including coordination of referrals and use of resources for services and operating costs of the system.

9. Q. If there is more than one WtW competitive grantees in a local area, do there have to be
   separate Local Board members appointed to represent each grantee?

A. No. The CEO must appoint a representative for each One-Stop partner program in the local area, but one representative may represent multiple grantees of a partner program. The CEO may also select more than one representative. For example, the CEO may appoint a representative from multiple grantees of the same program to facilitate more effective representation of the program on the Local Board.

10. Q. Since competitive grantees which are Local Boards (formerly PICs) must contract out
    most WtW services, will the transition to WIA require a modification to the competitive grant document?

A The WtW requirement that a Local Board must contract out certain WtW services does not necessarily change a competitive grantee’s scope of work, as originally funded. If it was not clearly specified in the original grant document how services were going to be provided (directly or through subrecipients), then a change in the mode of service delivery may not require a modification to the grant document. If a change in the mode of service delivery significantly affects the grant’s scope of work, however, then a modification would be necessary. Lack of clarity in the grant document does not relieve a competitive grantee which is a Local Board from the requirements of the WtW statute - providing job readiness, job placement and post-employment services through contracts or vouchers.

If a Local Board has a WtW competitive grant and is providing services in compliance with WtW, but WIA requires them to make other changes in their mode of service delivery, the same standard would apply. A modification would be necessary if the changes in service delivery are different than those expressly stated in the WtW competitive grant document.

Fiscal WtW/WIA Questions and Answers:

1. Q. When a PIC phases out, how are funds transferred to the Local Board? Does the
   change take place when the geographic configurations for the local workforce investment areas change?

A. If the geographic areas are the same for the WIA local area and the JTPA service delivery area, the parties may enter into a “novation agreement” which, in essence, establishes that all parties are in agreement and transfers funds and the responsibility and liability for those funds over to the new administrative entity (See Federal Acquisition Regulation at 48 CFR Subpart 42.12). If the geographic areas change when the Local Board is established, the State is responsible for redistributing funds on an equitable basis, using the elements in the State’s distribution formula outlined in the WtW State Formula Plan, to ensure that the appropriate funding amounts are available to each local area after transformation to WIA.

Attachment 5: FAR novation and change-of-name agreements

Official attachment: https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2000/TEGL4-00Attach5.pdf

Attachment 5

[Code of Federal Regulations]
[Title 48, Volume 1, Chapter 1 (Parts 1 to 51)]
[Revised as of October 1, 1999]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR42]
[Page 794-800]

    TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

      CHAPTER 1--FEDERAL ACQUISITION REGULATION

PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES--Table of Contents

Subpart 42.12--Novation and Change-of-Name Agreements

42.1200 Scope of subpart.

This subpart prescribes policies and procedures for--
(a) Recognition of a successor in interest to Government contracts when contractor assets are transferred; (b) Recognition of a change in a contractor's name; and (c) Execution of novation agreements and change-of-name agreements by the responsible contracting officer.

42.1201 Definitions.

Change-of-name agreement means a legal instrument executed by the contractor and the Government that recognizes the legal change of name of the contractor without disturbing the original contractual rights and obligations of the parties. Novation agreement means a legal instrument executed by (a) the contractor (transferor), (b) the successor in interest (transferee), and (c) the Government by which, among other things, the transferor guarantees performance of the contract, the transferee assumes all obligations under the contract, and the Government recognizes the transfer of the contract and related assets.

42.1202 Responsibility for executing agreements.

The contracting officer responsible for processing and executing novation and change-of-name agreements shall be determined as follows: (a) If any of the affected contracts held by the transferor have been assigned to an administrative contracting officer (ACO) (see 2.1 and 42.202), the responsible contracting officer shall be--

(1) This ACO; or
(2) The ACO responsible for the corporate office, if affected contracts are in more than one plant or division of the transferor. (b) If none of the affected contracts held by the transferor have been assigned to an ACO, the contracting officer responsible for the largest unsettled (unbilled plus billed but unpaid) dollar balance of contracts shall be the responsible contracting officer. (c) If several transferors are involved, the responsible contracting officer shall be-- (1) The ACO administering the largest unsettled dollar balance; or (2) The contracting officer (or ACO) designated by the agency having the largest unsettled dollar balance, if none of the affected contracts have been assigned to an ACO.

42.1203 Processing agreements.

(a) If a contractor wishes the Government to recognize a successor in interest to its contracts or a name change, the contractor must submit a written request to the responsible contracting officer (see 42.1202). If the contractor received its contract under Subpart 8.7 under the Javits-Wagner-O'Day Act, use the procedures at 8.716 instead. (b) The responsible contracting officer shall-- (1) Identify and request that the contractor submit the information necessary to evaluate the proposed agreement for recognizing a successor in interest or a name change. This information should include the items identified in 42.1204 (e) and (f) or 42.1205(a), as applicable; (2) Notify each contract administration office and contracting office affected by a proposed agreement for recognizing a successor in interest, and provide those offices with a list of all affected contracts; and (3) Request submission of any comments or objections to the proposed transfer within 30 days after notification. Any submission should be accompanied by supporting documentation. (c) Upon receipt of the necessary information, the responsible contracting officer shall determine whether or not it is in the Government's interest to recognize the proposed successor in interest on the basis of-- (1) The comments received from the affected contract administration offices and contracting offices; (2) The proposed successor's responsibility under subpart 9.1, Responsible Prospective Contractors; and (3) Any factor relating to the proposed successor's performance of contracts with the Government that the Government determines would impair the proposed successor's ability to perform the contract satisfactorily. (d) The execution of a novation agreement does not preclude the use of any other method available to the contracting officer to resolve any other issues related to a transfer of contractor assets, including the treatment of costs. (e) Any separate agreement between the transferor and transferee regarding the assumption of liabilities (e.g., long-term incentive compensation plans, cost accounting standards noncompliances, environmental cleanup costs,

and final overhead costs) should be referenced specifically in the novation agreement. (f) Before novation and change-of-name agreements are executed, the responsible contracting officer shall ensure that Government counsel has reviewed them for legal sufficiency. (g) The responsible contracting officer shall (1) forward a signed copy of the executed novation or change-of-name agreement to the transferor and to the transferee and (2) retain a signed copy in the case file. (h) Following distribution of the agreement, the responsible contracting officer shall-- (1) Prepare a Standard Form 30, Amendment of Solicitation/Modification of Contract, incorporating a summary of the agreement and attaching a complete list of contracts affected; (2) Retain the original Standard Form 30 with the attached list in the case file; (3) Send a signed copy of the Standard Form 30, with attached list to the transferor and to the transferee; and (4) Send a copy of this Standard Form 30 with attached list to each contract administration office or contracting office involved, which shall be responsible for further appropriate distribution.

[48 FR 42370, Sept. 19, 1983, as amended at 62 FR 64934, Dec. 9, 1997; 63 FR 1533, Jan. 9, 1998; 64 FR 51834, Sept. 24, 1999]

Effective Date Note: At 64 FR 51834, Sept. 24, 1999, section 42.1203 was amended by revising paragraph (a), effective Nov. 23, 1999. For the convenience of the user, the supersed text is set forth as follows:

42.1203 Processing agreements.

(a) When a firm performing Government contracts wishes the Government to recognize (1) a successor in interest to these contracts or (2) a name change, the contractor shall submit a written request to the responsible contracting officer (see 42.1202).

                 *****

42.1204 Applicability of novation agreements.

(a) 41 U.S.C. 15 prohibits transfer of Government contracts from the contractor to a third party. The Government may, when in its interest, recognize a third party as the successor in interest to a Government contract when the third party's interest in the contract arises out of the transfer of-- (1) All the contractor's assets; or (2) The entire portion of the assets involved in performing the contract. (See 14.404-2(l) for the effect of novation agreements after bid opening but before award.) Examples of such transactions include, but are not limited to-- (i) Sale of these assets with a provision for assuming liabilities; (ii) Transfer of these assets incident to a merger or corporate consolidation; and (iii) Incorporation of a proprietorship or partnership, or formation of a partnership. (b) A novation agreement is unnecessary when there is a change in the ownership of a contractor as

a result of a stock purchase, with no legal change in the contracting party, and when that contracting party remains in control of the assets and is the party performing the contract. However, whether there is a purchase of assets or a stock purchase, there may be issues related to the change in ownership that appropriately should be addressed in a formal agreement between the contractor and the Government (see 42.1203(e)). (c) When it is in the Government's interest not to concur in the transfer of a contract from one company to another company, the original contractor remains under contractual obligation to the Government, and the contract may be terminated for reasons of default, should the original contractor not perform. (d) When considering whether to recognize a third party as a successor in interest to Government contracts, the responsible contracting officer shall identify and evaluate any significant organizational conflicts of interest in accordance with subpart 9.5. If the responsible contracting officer determines that a conflict of interest cannot be resolved, but that it is in the best interest of the Government to approve the novation request, a request for a waiver may be submitted in accordance with the procedures at 9.503. (e) When a contractor asks the Government to recognize a successor in interest, the contractor shall submit to

the responsible contracting officer three signed copies of the proposed novation agreement and one copy each, as applicable, of the following: (1) The document describing the proposed transaction, e.g., purchase/sale agreement or memorandum of understanding. (2) A list of all affected contracts between the transferor and the Government, as of the date of sale or transfer of assets, showing for each, as of that date, the-- (i) Contract number and type; (ii) Name and address of the contracting office; (iii) Total dollar value, as amended; and (iv) Approximate remaining unpaid balance. (3) Evidence of the transferee's capability to perform. (4) Any other relevant information requested by the responsible contracting officer. (f) Except as provided in paragraph (g) of this section, the contractor shall submit to the responsible contracting officer one copy of each of the following documents, as applicable, as the documents become available: (1) An authenticated copy of the instrument effecting the transfer of assets; e.g., bill of sale, certificate of merger, contract, deed, agreement, or court decree. (2) A certified copy of each resolution of the corporate parties' boards of directors authorizing the transfer of assets. (3) A certified copy of the minutes of each corporate party's stockholder meeting necessary to approve the transfer of assets. (4) An authenticated copy of the transferee's certificate and articles of incorporation, if a corporation was formed for the purpose of receiving the assets involved in performing the Government contracts.

(5) The opinion of legal counsel for the transferor and transferee stating that the transfer was properly effected under applicable law and the effective date of transfer. (6) Balance sheets of the transferor and transferee as of the dates immediately before and after the transfer of assets, audited by independent accountants. (7) Evidence that any security clearance requirements have been met. (8) The consent of sureties on all contracts listed under paragraph (e)(2) of this section if bonds are required, or a statement from the transferor that none are required. (g) If the Government has acquired the documents during its participation in the pre-merger or pre-acquisition review process, or the Government's interests are adequately protected with an alternative formulation of the information, the responsible contracting officer may modify the list of documents to be submitted by the contractor. (h) When recognizing a successor in interest to a Government contract is consistent with the Government's interest, the responsible contracting officer shall execute a novation agreement with the transferor and the transferee. It shall ordinarily provide in part that-- (1) The transferee assumes all the transferor's obligations under the contract; (2) The transferor waives all rights under the contract against the Government; (3) The transferor guarantees performance of the contract by the transferee (a satisfactory performance bond may be accepted instead of the guarantee); and (4) Nothing in the agreement shall relieve the transferor or transferee from compliance with any Federal law. (i) The responsible contracting officer shall use the following format for agreements when the transferor and transferee are corporations and all the transferor's assets are transferred. This format may be adapted to fit specific cases and may be used as a guide in preparing similar agreements for other situations.

              NOVATION AGREEMENT

The ABC CORPORATION (Transferor), a corporation duly organized and existing under the laws of -------- [insert State] with its principal office in -------- [insert city]; the XYZ CORPORATION (Transferee), [if appropriate add ``formerly known as the EFG Corporation''] a corporation duly organized and existing under the laws of -------- [insert

State] with its principal office in -------- [insert city]; and the UNITED STATES OF AMERICA (Government) enter into this Agreement as of -------- [insert the date transfer of assets became effective under applicable State law]. (a) THE PARTIES AGREE TO THE FOLLOWING FACTS: (1) The Government, represented by various Contracting Officers of the -------- [insert name(s) of agency(ies)], has entered into certain contracts with the Transferor, namely: -------- [insert contract or purchase order identifications]; [or delete namely'' and insertas shown in the attached list marked
`Exhibit A' and incorporated in this Agreement by reference.'']. The term the contracts, as used in this Agreement, means the above contracts and purchase orders and all other contracts and purchase orders, including all modifications, made between the Government and the Transferor before the

effective date of this Agreement (whether or not performance and payment have been completed and releases executed if the Government or the Transferor has any remaining rights, duties, or obligations under these contracts and purchase orders). Included in the term the contracts are also all modifications made under the terms and conditions of these contracts and purchase orders between the Government and the Transferee, on or after the effective date of this Agreement. (2) As of --------, 19--, the Transferor has transferred to the Transferee all the assets of the Transferor by virtue of a -------- [insert term descriptive of the legal transaction involved] between the Transferor and the Transferee. (3) The Transferee has acquired all the assets of the Transferor by virtue of the above transfer. (4) The Transferee has assumed all obligations and liabilities of the Transferor under the contracts by virtue of the above transfer. (5) The Transferee is in a position to fully perform all obligations that may exist under the contracts. (6) It is consistent with the Government's interest to recognize the Transferee as the successor party to the contracts. (7) Evidence of the above transfer has been filed with the Government.
[When a change of name is also involved; e.g., a prior or concurrent change of the Transferee's name, an appropriate statement shall be inserted (see example in paragraph (8) below)]. (8) A certificate dated --------, 19--, signed by the Secretary of State of -------- [insert State], to the effect that the corporate name of EFG CORPORATION was changed to XYZ CORPORATION on --------, 19--, has been filed with the Government. (b) IN CONSIDERATION OF THESE FACTS, THE PARTIES AGREE THAT BY THIS AGREEMENT-- (1) The Transferor confirms the transfer to the Transferee, and waives any claims and rights against the Government that it now has or may have in the future in connection with the contracts. (2) The Transferee agrees to be bound by and to perform each contract in accordance with the conditions contained in the contracts. The Transferee also assumes all obligations and liabilities of, and all claims against, the Transferor under the contracts as if the Transferee were the original party to the contracts. (3) The Transferee ratifies all previous actions taken by the Transferor with respect to the contracts, with the same force and effect as if the action had been taken by the Transferee. (4) The Government recognizes the Transferee as the Transferor's successor in interest in and to the contracts. The Transferee by this Agreement becomes entitled to all rights, titles, and interests of the Transferor in and to the contracts as if the Transferee were the original party to the contracts. Following the effective date of this Agreement, the term Contractor, as used in the contracts, shall refer to the Transferee. (5) Except as expressly provided in this Agreement, nothing in it shall be construed as a waiver of any rights of the Government against the Transferor. (6) All payments and reimbursements previously made by the Government to the Transferor, and all other previous actions taken by the Government under the contracts, shall be considered to have discharged those parts of the Government's obligations under the contracts. All payments and reimbursements made by the Government after the date of this Agreement in the name of or to the Transferor shall have the same force and effect as if made to the Transferee, and shall constitute a complete discharge of the Government's obligations under the contracts, to the extent of the amounts

paid or reimbursed.
(7) The Transferor and the Transferee agree that the Government is not obligated to pay or reimburse either of them for, or otherwise give effect to, any costs, taxes, or other expenses, or any related increases, directly or indirectly arising out of or resulting from the transfer or this Agreement, other than those that the Government in the absence of this transfer or Agreement would have been obligated to pay or reimburse under the terms of the contracts. (8) The Transferor guarantees payment of all liabilities and the performance of all obligations that the Transferee (i) assumes under this Agreement or (ii) may undertake in the future should these contracts be modified under their terms and conditions. The Transferor waives notice of, and consents to, any such future modifications.

(9) The contracts shall remain in full force and effect, except as modified by this Agreement. Each party has executed this Agreement as of the day and year first above written.

UNITED STATES OF AMERICA,

By__________ Title_____________

ABC CORPORATION,

By__________ Title_____________

[CORPORATE SEAL]

XYZ CORPORATION,

By__________ Title_____________

[CORPORATE SEAL]

                 CERTIFICATE

I, ----------, certify that I am the Secretary of ABC CORPORATION; that ----------, who signed this Agreement for this corporation, was then -------- of this corporation; and that this Agreement was duly signed for and on behalf of this corporation by authority of its governing body and within the scope of its corporate powers. Witness my hand and the seal of this corporation this -------- day of -------- 19--.

By__________

[CORPORATE SEAL]

                CERTIFICATE

I, ----------, certify that I am the Secretary of XYZ CORPORATION; that ----------, who signed this Agreement for this corporation, was then ---------- of this corporation; and that this Agreement was duly signed for and on behalf of this corporation by authority of its governing body and within the scope of its corporate powers. Witness my hand and the seal of this corporation this -------- day of -------- 19--.

By__________

[CORPORATE SEAL]

[48 FR 42370, Sept. 19, 1983, as amended at 62 FR 64935, Dec. 9, 1997]

42.1205 Agreement to recognize contractor's change of name.

(a) If only a change of the contractor's name is involved and the Government's and contractor's rights and obligations remain unaffected, the parties shall execute an agreement to reflect the name change. The contractor shall forward to the responsible contracting officer three signed copies of the Change-of-Name Agreement, and one copy each of the following: (1) The document effecting the name change, authenticated by a proper official of the State having jurisdiction. (2) The opinion of the contractor's legal counsel stating that the change of name was properly effected under applicable law and showing the effective date. (3) A list of all affected contracts and purchase orders remaining unsettled between the contractor and the Government, showing for each the contract number and type, and name and address of the contracting office. The contracting officer may request the total dollar value as amended and the remaining unpaid balance for each contract. (b) The following suggested format for an agreement may be adapted for specific cases:

            CHANGE-OF-NAME AGREEMENT

The ABC CORPORATION (Contractor), a corporation duly organized and existing under the laws of ------ [insert State], and the UNITED STATES OF AMERICA (Government), enter into this Agreement as of -------- [insert date when the change of name became effective under applicable State law]. (a) THE PARTIES AGREE TO THE FOLLOWING FACTS:

(1) The Government, represented by various Contracting Officers of the -------- [insert name(s) of agency(ies)], has entered into certain contracts and purchase orders with the XYZ CORPORATION, namely: -------- [insert contract or purchase order identifications]; [or delete namely'' and insertas shown in the attached list marked `Exhibit A' and incorporated in this Agreement by reference.'']. The term the contracts, as used in this Agreement, means the above contracts and purchase orders and all other contracts and purchase orders, including all modifications, made by the Government and the Contractor before the effective date of this Agreement (whether or not performance and payment have been completed and releases executed if the Government or the Contractor has any remaining rights, duties, or obligations under these contracts and purchase orders). (2) The XYZ CORPORATION, by an amendment to its certificate of incorporation, dated --------, 19--, has changed its corporate name to ABC CORPORATION.

(3) This amendment accomplishes a change of corporate name only and all rights and obligations of the Government and of the Contractor under the contracts are unaffected by this change. (4) Documentary evidence of this change of corporate name has been filed with the Government. (b) IN CONSIDERATION OF THESE FACTS, THE PARTIES AGREE THAT-- (1) The contracts covered by this Agreement are amended by substituting the name ABC CORPORATION'' for the nameXYZ CORPORATION'' wherever it appears in the contracts; and (2) Each party has executed this Agreement as of the day and year first above written.

UNITED STATES OF AMERICA,

By__________ Title_____________

ABC CORPORATION,

By__________ Title_____________

[CORPORATE SEAL]

                 CERTIFICATE

I, ----------, certify that I am the Secretary of ABC CORPORATION; that ----------, who signed this Agreement for this corporation, was then -------- of this corporation; and that this Agreement was duly signed for and on behalf of this corporation by authority of its governing body and within the scope of its corporate powers. Witness my hand and the seal of this corporation this ---- day of -------- 19--.

By__________

[CORPORATE SEAL]

[48 FR 42370, Sept. 19, 1983, as amended at 56 FR 67134, Dec. 27, 1991]