Intent To Repay to the New Jersey Department of Labor, Division of Vocational Rehabilitation Services (DOL/DVRS), Funds Recovered as a Result of a Final Audit Determination

SUMMARY: Under Section 459 of the General Education Provisions Act

(GEPA), 20 U.S.C 1234h (1990), the U.S. Secretary of Education

(Secretary) intends to repay to the New Jersey Department of Labor,

Division of Vocational Rehabilitation Services (State agency), under a

grantback arrangement, an amount equal to 75 percent of the funds

recovered by the Department of Education (Department) as a result of a

final action taken by the Department on February 11, 1993, on an audit

determination. This notice describes the State agency's plans for the

use of the repaid funds and the terms and conditions under which the

Secretary intends to make these funds available to the State agency.

This notice invites comments on the proposed grantback.

DATES: All comments must be received on or before June 27, 1994.

ADDRESSES: Comments concerning the grantback should be addressed to Peg

Covello, U.S. Department of Education, 400 Maryland Avenue SW., room

3222, Switzer Building, Washington, DC 20202-2735.

FOR FURTHER INFORMATION CONTACT: Peg Covello. Telephone: (202) 205-

5539. Individuals who use a telecommunications device for the deaf

(TDD) may call the Federal Information Relay Service (FIRS) at 1-800-

877-8339 between 8 a.m. and 8 p.m., Eastern time, Monday through

Friday.

SUPPLEMENTARY INFORMATION

A. Background

The Department has recovered $627,778 from the New Jersey

Department of Labor, Division of Vocational Rehabilitation Services, in

response to a claim arising from an audit conducted by the Department's

Office of Inspector General (OIG). The audit covered Federal fiscal

years (FYs) 1989, 1990, and 1991.

The claim involved the State agency's administration of The State

Vocational Rehabilitation Services Program under Title I of the

Rehabilitation Act of 1973, as amended. The final audit determination

of the Regional Commissioner, which was issued on August 19, 1992,

found that during FYs 1989, 1990, and 1991 the State agency had

violated the regulatory requirements in 34 CFR 361.44, including its

assurance in section 8.9 of the approved State Plan, concerning the

procedures for authorizing client services. The OIG found instances in

which the agency charged to one Federal fiscal year the costs of client

services that had been initiated or completed in the prior Federal

fiscal year by deferring the issuance of the agency's authorization

form. As a result of these violations, the State agency had charged

expenditures to the wrong Federal fiscal years, thereby failing to

preserve the integrity of Federal accountability requirements. The

final determination sought the recovery of $2,176,802 from the State

agency.

The State agency appealed the Regional Commissioner's determination

to the Department's Office of Administrative Law Judges (OALJ)

(Application of the State of New Jersey Department of Labor: Docket No.

92-103-R) on September 21, 1992. In a Joint Notice of Reduction of

Claim and Motion to Dismiss, filed with the OALJ on February 11, 1993,

both parties agreed that, based upon an analysis of all the evidence in

the case, the amount of the disallowance should be reduced to $627,778.

The notice also certified that the State agency had returned the

$627,778 to the Department on January 22, 1993. On February 18, 1993,

the OALJ dismissed the case.

New Jersey DOL/DVRS has submitted a request for a grantback of

$470,833 (75 percent) of the $627,778 recovered by the Department of

Education. In its request, DOL/DVRS provided documentation of the

actions taken to correct the practices of the State agency that

resulted in the final audit determination.

Following the audit, the State agency issued a new policy directive

to field staff on the procedures for authorizing and approving client

services. The purpose of the new directive was to prevent charging case

service expenditures to the wrong Federal fiscal years. A subsequent

site review of the State agency by the Department resulted in the

agency strengthening further its policies governing the procedures for

case service authorizations.

B. Authority for Awarding a Grantback

Section 459(a) of GEPA, 20 U.S.C. 1234h(a), provides that, whenever

the Secretary has recovered funds following a final audit determination

with respect to an applicable program, the Secretary may consider those

funds to be additional funds available for that program and may arrange

to repay to the State agency affected by that determination an amount

not to exceed 75 percent of the recovered funds. The Secretary may

enter into this so-called ``grantback'' arrangement if the Secretary

determines that--

(a) The practices and procedures of the State agency that resulted

in the final audit determination have been corrected and the State

agency is, in all other respects, in compliance with requirements of

the applicable program;

(b) The State agency has submitted to the Secretary a plan for the

use of the funds to be awarded under the grantback arrangement that

meets the requirements of the program and, to the extent possible,

benefits the population that was affected by the failure to comply or

by the misexpenditures that resulted in the audit exception; and

(c) The use of funds to be awarded under the grantback arrangement

in accordance with the State agency's plan would serve to achieve the

purposes of the program under which funds were originally granted.

C. Plan for Use of Funds Awarded Under a Grantback Arrangement

In its December 13, 1993, request for a grantback, the State agency

submitted a plan, in accordance with section 459(a)(2) of GEPA, for the

proposed use of the requested funds. In its plan, the State proposes to

use the grantback of $470,833 plus the required State matching funds in

the amount of $127,430 to supplement current program services to

eligible individuals with disabilities under The State Vocational

Rehabilitation Services Program. The grantback and State matching funds

would be used to provide time-limited employment site job coaching and

support services through traditional community rehabilitation programs

to increase the number of competitive placements in integrated settings

made by these traditional programs.

There are currently 32 traditional programs that are CARF (Council

on Accreditation of Rehabilitation Facilities) accredited and approved

to provide work adjustment training and extended employment to DOL/

DVRS. These traditional programs, also known as sheltered workshops,

most frequently serve individuals with the most severe disabilities. In

the majority of the cases, these individuals are rehabilitated as

extended employees of the programs. According to the agency, 402

individuals were placed in competitive work in integrated settings

during or at the conclusion of work adjustment training in FY 1993. By

initiating time-limited employment site job coaching and support

services through these programs, DOL/DVRS expects placements in

competitive work in integrated settings to increase by at least 10

percent in both FY 1995 and FY 1996 compared to the number placed in FY

1993.

Initiatives facilitating placements of individuals with

disabilities in competitive work in integrated work settings were

identified as needs during public hearings concerning the

reauthorization of the Rehabilitation Act and DOL/DVRS' State and

Strategic Plans.

D. The Secretary's Determinations

The Secretary has reviewed the State agency's request for the

repayment of funds, the State agency's plan (as outlined in section C

of this notice), and other information submitted by the State agency.

Based upon that review, the Secretary has determined that the

conditions contained in section 459 of GEPA have been met. This

determination is based upon the best information available to the

Secretary at the present time. If this information is, at a later date,

discovered to have been inaccurate or incomplete, the Secretary will

not be precluded from taking appropriate administrative action at that

time. On finding that the conditions of section 459 of GEPA have been

met, the Secretary makes no determination concerning any pending audit

recommendation or final audit determination.

E. Notice of the Secretary's Intent To Enter Into a Grantback

Arrangement

Section 459(d) of GEPA requires that, at least 30 days prior to

entering into an arrangement to award funds under a grantback, the

Secretary publish in the Federal Register a notice of intent to do so,

and the terms and conditions under which the payment will be made.

In accordance with section 459(d) of GEPA, notice is hereby given

that the Secretary intends to make funds available to the New Jersey

Department of Labor, Division of Vocational Rehabilitation Services,

under a grantback arrangement, as authorized by section 459. The

grantback award will be in the amount of $470,833. This amount is 75

percent--the maximum percentage authorized by section 459--of the

amount of funds recovered by the Department. The Secretary's intent to

award the maximum amount of grantback funds possible under section 459

is based upon the determination outlined in section D of this notice.

F. Terms and Conditions Under Which Payments Under a Grantback

Arrangement Will Be Made

The State agency agrees to comply with the following terms and

conditions under which payments under a grantback arrangement will be

made:

(a) The funds awarded under the grantback and the required State

matching funds must be expended in accordance with--

(1) All applicable statutory and regulatory requirements of the

Title I, State Vocational Rehabilitation Services Program including

those provisions relating to an order of selection if such an order is

in effect during the grantback period;

(2) The plan and the request for the grantback that were submitted

on December 13, 1993, and any other amendments to that plan that are

approved in advance of the grantback award by the Secretary; and

(3) The budget that was submitted with the plan and any amendments

to the budget that are approved in advance by the Secretary.

(b) Pursuant to section 459(c) of GEPA, all funds received under

this grantback arrangement must be obligated not later than September

30, 1996.

(c) The State agency must, not later than January 1, 1995, January

1, 1996, and January 1, 1997, submit reports to the Secretary that--

(1) Indicate how the funds awarded under the grantback and the

State matching funds have been expended in accordance with the proposed

plan; and

(2) Describe the results and effectiveness of the project for which

the funds were expended.

(d) The State matching funds expended under the grantback

arrangement will be counted for maintenance of effort purposes under

the Title I State Vocational Rehabilitation Services Program.

(e) Separate accounting records must be maintained documenting the

expenditure of all funds under the grantback arrangement.

(f) Before funds will be repaid pursuant to this notice, the State

agency must repay to the Department any debts that become overdue or

enter into a repayment agreement for those debts.

(Catalog of Federal Domestic Assistance Number 84.126,

Rehabilitation Services--Basic Support)

Dated: May 23, 1994.

Andrew J. Pepin,

Acting Assistant Secretary, for Special Education and Rehabilitative

Services.

[FR Doc. 94-12905 Filed 5-25-94; 8:45 am]

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