34 C.F.R. § 303.705 – Withholding funds.

(a) Opportunity for hearing. Prior to withholding any funds under part C of the Act, the Secretary provides reasonable notice and an opportunity for a hearing to the lead agency involved, pursuant to the procedures in §§ 303.231 through 303.236.
(b) Suspension. Pending the outcome of any hearing to withhold payments under paragraph (a) of this section, the Secretary may suspend payments to a recipient, suspend the authority of the recipient to obligate funds under part C of the Act, or both, after the recipient has been given reasonable notice and an opportunity to show cause why future payments or authority to obligate funds under part C of the Act should not be suspended.
(c) Nature of withholding.
1. (1) Limitation. If the Secretary determines that it is appropriate to withhold further payments under section 616(e)(2) or (e)(3) of the Act, the Secretary may determine—
  1. (i) That such withholding will be limited to programs or projects, or portions of programs or projects, that affected the Secretary's determination under § 303.703(b)(1); or
  2. (ii) That the lead agency must not make further payments of funds under part C of the Act to specified State agencies, EIS programs or, if the lead agency does not provide part C funds to the EIS program, EIS providers that caused or were involved in the Secretary's determination under § 303.703(b)(1).
2. (2) Withholding until rectified. Until the Secretary is satisfied that the condition that caused the initial withholding has been substantially rectified—
  1. (i) Payments to the State under part C of the Act must be withheld in whole or in part; and
  2. (ii) Payments by the lead agency under part C of the Act must be limited to State agencies and EIS providers whose actions did not cause or were not involved in the Secretary's determination under § 303.703(b)(1).
    (Authority: 20 U.S.C. 1416(e)(4), 1416(e)(6), 1442)