45 CFR §1156.20

1. (a)When the endowment withholds funds from a recipient under the regulations in this part, the Chairperson may disburse the withheld funds directly to an alternate recipient otherwise eligible for Endowment support: any public or nonprofit private organization or agency, or State or political subdivision of the State.
2. (b)The Chairperson will require any alternate recipient to demonstrate:
   1. (1)The ability to comply with the regulations in this part; and
   2. (2)The ability to achieve the goals of the Federal statute authorizing the Federal financial assistance.