Third Party Funding Agreements:

No Longer Appropriate for Serving the Handicapped Through the Vocational Rehabilitation Program

HRD-78-7: Published: Apr 4, 1978. Publicly Released: Apr 4, 1978.

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The vocational rehabilitation program operates as a federal-state program, the federal government supplying leadership and the states administering the program. State vocational rehabilitation agencies may enter into agreements with other state and local agencies to establish joint programs of service for the handicapped. These third party agreements have been used to financially expand the program by providing states with additional matching funds and have acted as a means of expanding services to the handicapped and establishing cooperation between agencies.

At present, agencies are not complying with federal regulations, and expenditures are being used to subsidize third party programs. As a result, many state agencies are not meeting the program's mandatory matching requirements. Services provided in cooperative programs often duplicate services provided by the cooperating agency. Many persons served under these agreements are only marginally handicapped, contrary to legislative requirements for priority to be given to the most severely handicapped. Costs and accomplishments of third party programs often are not accurately reported. State rehabilitation agencies are reporting only a portion of the expenditures on clients and claiming expenditures made by other agencies for costs they would normally incur for required services. The validity of successful rehabilitations attributed to the cooperative programs is questionable.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: State rehabilitation agencies should continue to cooperate with other agencies, but staffing, referral, and service delivery patterns established through the use of third party funding agreements should be modified. The Department of Health, Education, and Welfare (HEW) should: (1) review expenditures made under third party agreements and, if warranted, recover federal funds spent which did not comply with federal regulations from state rehabilitation agencies; (2) take the administrative steps necessary to see that third party funding agreements involving the improper use of federal funds are discontinued; (3) strengthen coordination at the federal level with other agencies providing services to the handicapped and provide policy guidance to states; (4) provide guidance to the state rehabilitation agencies in developing cooperative relationships; and (5) for state rehabilitation agencies formerly committed to third party funding programs, provide guidance in developing recommended modifications.

    Agency Affected:


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