Office of Administrative Law Judges; Intent to Compromise Consolidated Claims; Maine Department of Education

DEPARTMENT OF EDUCATION

Office of Administrative Law Judges; Intent to Compromise

Consolidated Claims; Maine Department of Education

AGENCY: Department of Education.

ACTION: Notice of Intent to Compromise Consolidated Claims.

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SUMMARY: The U.S. Department of Education (the Department) intends to

compromise consolidated claims against the Maine Department of

Education (the State), in a consolidated appeal which is now pending

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

Docket Nos. 92-88-R (ACN: 01-93245) and 92-105-R (ACN: 01-13035-G),

under authority of Sec. 452(j)(1) of the General Education Provisions

Act (GEPA) (20 U.S.C. 1234a(j)(1) (1988)).

DATES: Interested persons may comment on the proposed action by

submitting written data, views, or arguments on or before November 4,

1994.

ADDRESSES: Comments should be addressed to Adina Kole, Esq. or Daphna

Crotty, Esq., Office of the General Counsel, U.S. Department of

Education, 600 Independence Avenue, SW, Washington, DC 20202.

FOR FURTHER INFORMATION CONTACT: Adina Kole, Esq. at (202) 401-8316 or

Daphna Crotty, Esq. at (202) 401-8292. 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: The consolidated claims in question arose

from two organization-wide audits of the Maine Department of Education,

conducted by the Maine Department of Audit for the periods between July

1, 1987 and June 30, 1988 (ACN: 01-93245) and July 1, 1988 and June 30,

1989 (ACN: 01-13035-G). The audits were conducted pursuant to the

Single Audit Act of 1984 and Office of Management and Budget Circular

No. A-128.

In reviewing the State's administration of programs under the

Individuals with Disabilities Education Act (Part B) (formerly the

Education of the Handicapped Act) for the period between July 1, 1987

and June 30, 1988, the auditors found that the State's administrative

costs under the Part B program exceeded the allowable maximum by

$354,211.63. The auditors determined that, due to the differences

between State and Federal fiscal years, $65,325 of this amount had

previously been questioned in the June 30, 1987 audit report.

Consequently, for the period between July 1, 1987 and June 30, 1988,

the auditors questioned administrative costs in the amount of $288,886

(the difference between $354,211 and $65,325). Additionally, during

this same State fiscal year, the auditors found that the State had

charged personnel costs to various Federal programs for employees who

had not worked exclusively on those programs, questioning $77,700 in

Part B personnel costs.

On October 14, 1991, the Assistant Secretary for the Office of

Special Education and Rehabilitative Services (OSERS), issued a program

determination letter (PDL) stating that the administrative cost finding

had been addressed in a previous PDL (dated March 27, 1991) and that

the personnel finding was not being sustained due to insufficient

information in the audit report. However, upon further review and

follow-up by the Department's Regional Inspector General for Audit with

staff of the State Auditor's office and upon review of their

workpapers, it was determined that there was no support for the

charging of 100 percent of two employees' time to several different

Part B programs. On June 29, 1992, the Assistant Secretary for OSERS

issued a Program Redetermination Letter (PRDL) seeking recovery of

$311,840 in fiscal year (FY) 1987 funds.

In reviewing the State's administration of programs under Part B

and under the Carl D. Perkins Vocational and Applied Technology

Education Act (the Perkins Act), for the period between July 1, 1988

and June 30, 1989, the auditors found that under the Part B program the

State incurred $50,580 in administrative costs in excess of the

allowable maximum. Additionally, the auditors determined that personnel

costs for a number of employees who did not work exclusively for the

Handicapped-State Grant Program funded under Part B, and the Vocational

Education Basic Grants Program funded under the Perkins Act, were

charged entirely to those Federal programs. In total, the auditors

questioned $133,140 in personnel costs incurred in the period between

July 1, 1988 and June 30, 1989.

On August 25, 1992 the Assistant Secretary for OSERS and the

Assistant Secretary for the Office of Vocational and Adult Education

(OVAE) issued a joint PDL seeking recovery of $140,852 in FY 1989

funds. Of that total, $90,272 was disallowed in a joint finding between

the Assistant Secretaries for OSERS and OVAE, related to salary charges

under Part B and the Perkins Act. Specifically, the Assistant

Secretaries determined that in FY 1989, $44,832 awarded under Part B

and $45,440 awarded under the Perkins Act had been used by the State to

pay administrative salaries without the required supporting

documentation.

On July 29, 1992, the State filed a timely request for review of

the Assistant Secretary for OSERS' determination in the PDL for ACN:

01-93245, with the Office of Administrative Law Judges (OALJ). Upon

joint motion by the parties, on March 16, 1992, the Administrative Law

Judge (ALJ) assigned to this matter stayed the proceeding for purposes

of mediation. On September 25, 1992, the State filed a timely request

for review of the Assistant Secretaries for OSERS' and OVAE's

determinations in the PDL for ACN: 01-13035-G. Upon joint motion by the

parties, on October 22, 1992, the ALJ stayed the proceeding for

purposes of mediation, and consolidated the two cases. On March 12,

1993, the ALJ granted a Joint Motion to Stay the Proceedings for

Settlement Discussions, filed by the parties.

In the course of ensuing settlement discussions, the State

submitted documentary evidence not previously seen by the auditors

relevant to both the Part B excess administrative cost and the

personnel salaries issues raised under the Part B and Perkins Act

programs. As a result of settlement discussions, the parties

tentatively agreed to a settlement under which the State would repay a

total of $125,635 to the Department in full resolution of all issues.

With regard to the Part B excess administrative costs

determinations contained in both PDLs, during mediation and settlement

discussions the State was able to demonstrate that it had expended

$12,863.27 of excess administrative costs in FY 1987, and $55,817.84 of

excess administrative costs in FY 1988, for a total of $68,681.11 in

excess administrative costs. Under the tentative Settlement Agreement,

the State will submit revised SF-269s to the Department reflecting its

reconciliation of certain administrative costs expenditures for FYs

1987 and 1988.

With regard to both Assistant Secretaries' determinations of

unsupported charging of personnel salaries, in the course of mediation

and settlement discussions the State submitted documentation not seen

by the auditors demonstrating to the Assistant Secretary for OSERS that

the majority of two salaries questioned in the PDL for ACN: 01-93245

were properly expended under Part B. Additionally, the State agreed

that its charging of a $44,832 salary to the FY 1989 Part B grant was

erroneous. The State proposed to offset the improper salary charges

with what it believed to be allowable administrative expenditures that

had not previously been charged to the Part B grant but that had been

incurred during the fiscal years at issue in these audits.

On June 14, 1994, the Assistant Secretary for OSERS filed a Notice

of Withdrawal of Claims and Reduction of Amount in Dispute covering

disallowances in the June 29, 1992 PRDL for ACN: 01-93245 and in the

August 25, 1992 PDL in ACN: 01-13015-G, in which the Assistant

Secretary reduced the Part B claims in this consolidated appeal to

$45,272 for the June 29, 1992 PRDL and to $115,046 for the August 25,

1992 PDL. The latter total included disallowances under the Perkins Act

for which no reduction of claim was included in the June 14, 1994

Notice. As a result of the June 14, 1994 withdrawal notice, the

disallowances for both cases totalled $160,318.

Under the tentative Settlement Agreement negotiated between the

parties, the State has agreed to repay $125,635 to the Department in

full resolution of the issues raised in both the PRDL and the PDL. Of

this amount, $45,272 would be in full settlement of the claims under

Part B contained in the June 29, 1992 PRDL. And, $80,363 would be in

full settlement of the claims under Part B and under the Perkins Act

contained in the August 25, 1992 PDL. Of this amount, $63,664 settles

the Part B disallowance and $16,699 settles the Perkins Act

disallowance.

In addition to the repayment of funds, the State has agreed to

submit to the Department revised Financial Status Reports for fiscal

years 1987 through 1993 reflecting proper coding of excess

administrative costs to the grants during each of the years within that

period. The State has also provided an assurance in the tentative

Settlement Agreement that it will not shift excess administrative

expenditures forward, to fiscal years after FY 1992, that are related

to disallowances either in the June 29, 1992 PRDL or in the August 25,

1992 PDL. Finally, the State has certified in the tentative Settlement

Agreement that it is currently in compliance with all requirements of

the statutes and regulations pertaining to the practices and procedures

that gave rise to the disallowances in question in this consolidated

appeal.

In accordance with the authority provided in 20 U.S.C. 1234a(j)(1),

given the documentation submitted by the State, the certification and

assurances provided by the State, and the estimated litigation risks

and costs of proceeding through the appeal process, the Department has

determined that it would not be practical or in the public interest to

continue litigation of this case. Rather, under the authority provided

in 20 U.S.C. 1234a(j)(1), the Department has determined that a

compromise of this claim for $125,635 would be appropriate. The public

is invited to comment on the Department's intent to compromise this

claim. Additional information may be obtained by writing to Adina Kole,

Esq. or Daphna Crotty, Esq., at the address given at the beginning of

this notice.

Program Authority: 20 U.S.C. 1234a(j)(2).

Dated: September 15, 1994.

Donald R. Wurtz,

Chief Financial Officer.

[FR Doc. 94-23245 Filed 9-19-94; 8:45 am]

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