FISCAL CONTROLS; SANCTIONS.

SEC. 142. FISCAL CONTROLS; SANCTIONS. (a) Fiscal Controls.— Section 164(a) of the Act (29 U.S.C. 1579(a)) is amended to read as follows: “(a) (1) Each State shall establish such fiscal control and fund accounting procedures as may be necessary to assure the proper disbursal of, and accounting for, Federal funds paid to the recipient under titles II and III. Such procedures shall ensure that all financial transactions are conducted and records maintained in accordance with generally accepted accounting principles applicable in each State. “(2) The Secretary shall prescribe regulations establishing uniform cost principles substantially equivalent to such principles generally applicable to recipients of Federal grants funds. At a106 STAT. 1047 minimum, such standards shall provide that, to be allowable, costs must— “(A) be necessary and reasonable for proper and efficient administration of the program under this Act; “(B) be allocable to the program under this Act; and “(C) not be a general expense required to carry out the overall responsibilities of State, local, or federally recognized Indian tribal governments except as specifically provided by this Act. “(3) The Governor, in accordance with minimum requirements established by the Secretary in regulations, shall prescribe and implement procurement standards to ensure fiscal accountability and prevent fraud and abuse in programs administered under this Act. The Secretary, in establishing such minimum requirements, shall consult with the Inspector General of the Department of Labor and take into consideration relevant aspects of the circulars issued by the Director of the Office of Management and Budget. Such minimum requirements shall include provisions to ensure that for States, substate areas, and service delivery areas— “(A) procurements shall be conducted in a manner providing full and open competition; “(B) the use of sole source procurements shall be minimized to the extent practicable, but in every case shall be justified; “(C) procurements shall include an appropriate analysis of the reasonableness of costs and prices; “(D) procurements shall not provide excess program income (for nonprofit and governmental entities) or excess profit (for private for-profit entities), and that appropriate factors shall be utilized in determining whether such income or profit is excessive, such as— “(i) the complexity of the work to be performed; “(ii) the risk borne by the contractor; and “(iii) market conditions in the surrounding geographical area; “(E) procurements shall clearly specify deliverables and the basis for payment; “(F) written procedures shall be established for procurement transactions; “(G) no grantee, contractor, subgrantee, or subcontractor shall engage in any conflict of interest, actual or apparent, in the selection, award, or administration of a contract or grant under this Act; “(H) all grantees and subgrantees shall conduct oversight to ensure compliance with procurement standards; and “(I) procurement transactions between units of State or local governments, and any other entities organized principally as the administrative entity for service delivery areas, shall be conducted on a cost reimbursable basis. “(4) The Governor shall annually conduct on-site monitoring of each service delivery area and substate area within the State to ensure compliance with the procurement standards established pursuant to paragraph (3). “(5) If the Governor determines that a service delivery area or substate area is not in compliance with the procurement standards established pursuant to paragraph (3), the Governor shall— “(A) require corrective action to secure prompt compliance; and 106 STAT. 1048 “(B) impose the sanctions provided under subsection (b) in the event of failure to take the required corrective action. “(6) The Governor shall biennially certify to the Secretary that— “(A) the State has implemented the procurement standards established under paragraph (3); “(B) the State has monitored substate areas and service delivery areas to ensure compliance with the procurement standards as required under paragraph (4); and “(C) the State has taken appropriate action to secure compliance pursuant to paragraph (5). “(7) If the Secretary determines that the Governor has not fulfilled the requirements of this subsection, the Secretary shall— “(A) require corrective action to secure prompt compliance; and “(B) impose the sanctions provided under subsection (f) in the event of failure of the Governor to take the required corrective action. “(8) The Secretary, in consultation with the Inspector General, shall review the implementation of this subsection and submit a report to the appropriate committees of the Congress, not later than October 1, 1995, evaluating the effectiveness of this subsection in ensuring fiscal accountability and containing such recommendations as the Secretary determines to be appropriate.”. (b) Consequences of Failures.— Section 164(b) of the Act (29 U.S.C. 1574(b)) is amended to read as follows: “(b) (1) If, as a result of financial and compliance audits or otherwise, the Governor determines that there is a substantial violation of a specific provision of this Act or the regulations under this Act, and corrective action has not been taken, the Governor shall— “(A) issue a notice of intent to revoke approval of all or part of the plan affected; or “(B) impose a reorganization plan, which may include— “(i) restructuring the private industry council involved; “(ii) prohibiting the use of designated service providers; “(iii) selecting an alternative entity to administer the program for the service delivery area involved; “(iv) merging the service delivery area into 1 or more other existing service delivery areas; or “(v) other such changes as the Secretary or Governor determines necessary to secure compliance. “(2) (A) The actions taken by the Governor pursuant to paragraph (1)(A) may be appealed to the Secretary under the same terms and conditions as the disapproval of the plan and shall not become effective until— “(i) the time for appeal has expired; or “(ii) the Secretary has issued a decision. “(B) The actions taken by the Governor pursuant to paragraph (1)(B) may be appealed to the Secretary, who shall make a final decision not later than 60 days of the receipt of the appeal. “(3) If the Governor fails to promptly take the actions required under paragraph (1), the Secretary shall take such actions.”.