(b) The department shall adopt standards for pilot project grants and, after adoption of the standards as regulations, in accordance with AS 44.62 (Administrative Procedure Act), shall apply the standards to determine eligibility of applicants for pilot project grants. In awarding pilot project grants, the department shall

1. (1) enter into agreements with the project sponsor to operate one or more of the selected pilot projects consistent with the standards adopted;

2. (2) monitor and evaluate, in a written report, each pilot project; the report must include

   1. (A) a description of the project and of the persons served by it;
   2. (B) the problems presented by the persons served by the project;
   3. (C) a description of the problems most effectively handled by the project; and
   4. (D) an estimate of projected cost of operation of the project for the next three succeeding years.