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E.D. Proposes Regulations For Chapter 2

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Washington--The Education Department has proposed regulations for the Chapter 2 block-grant program that reflect changes made by last year's reauthorization law and apply new financial accounting rules to state agencies administering the program.

Under the proposed rules, in fiscal year 1989:

School districts must use Chapter 2 funds for one or more of six broad purposes contained in the Hawkins-Stafford School Improvement Amendments, and must state in their applications what they will do with their grants.

Aid can be used for programs for at-risk students, the acquisition and use of instructional materials, "innovative" school-improvement efforts, personnel training, and special programs in 11 specified areas, ranging from instruction in ethics to early-childhood education.

The proposed regulations, published in the March 1 Federal Register, interpret the law as prohibiting expenditures on equipment, except computer hardware, "as a program in and of itself." While the law allows "programs for the acquisition and use of instructional and educational materials," the regulations state that Chapter 2-funded equipment must be used as part of a Chapter 2-eligible program.

State agencies must use their share of Chapter 2 funds for three purposes only: administering local grants, for which they may spend no more than 25 percent of their allocation; providing assistance to school districts in carrying out their Chapter 2 programs; and "effective schools" programs, which can include state activities and local assistance and must receive at least 20 percent of a state's grant.

"No longer are 'state strengthening' activities allowable merely because they were previously authorized" under earlier laws, according to the regulations.

Districts are now specifically required to consult with private-school officials annually on the need of their students for Chapter 2 services.

Districts receiving extra aid because they enroll "high-cost" pupils from low-income families or sparsely populated areas must spend the ''extra" money in one of two ways.

They may either distribute the money among all schools in the same way as other Chapter 2 funds or allocate it only to schools enrolling the students that generated the extra funds. They may not discriminate against private-school students under either method.

Districts must report annually to state agencies, and the agencies must report to the U.S. Education Department, on their use of Chapter 2 money. State agencies must also report in fiscal 1992 on the effectiveness of state and local Chapter 2 programs.

One section of the rules that was not spurred by the Hawkins-Stafford law would apply certain provisions of the Education Department's general administrative regulations, known as edgar, to Chapter 2.

The department is not proposing to apply all of edgar's financial-accounting requirements to Chapter 2. But it will require the states to adopt written accounting systems for all state and local funds received through the program.--jm

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