Program Instructions ADD PI-86-3
ADD-PI-86-3
Issued 10/31/86
TO: |
Directors, |
SUBJECT: |
Court Judgments awarded to Protection and Advocacy Systems |
LEGAL AND RELATED REFERENCES:
Developmental Disabilities Assistance and Bill of Rights Act of 1984, Public Law
98-527
45 CFR Part 1386, Developmental Disabilities Program
Final Rule; 45 CFR Part 74, Administration of Grants
ADD-IM-85-4 dated March 8, 1985, subject: Program Income.
BACKGROUND:
In several recent instances, we have been informed of court judgments awarded
to Protection and Advocacy Systems after litigation has been initiated by such
systems. The use and reporting of funds awarded to Protection and Advocacy Systems
have been inconsistent. The purpose of this Program Instruction is to provide
guidance concerning the proper treatment of funds awarded from court judgments.
INFORMATION:
We have studied the general nature of typical court judgments and the circumstances
concerning Protection and Advocacy suits on behalf of developmentally disabled
persons. In our opinion, funds awarded to Protection and Advocacy Systems, as
distinguished from their clients, as the result of legal proceedings constitute
general program income if the criteria for determining program income under 45
CFR 74.41(a) and 74.42(a) are met. The relationship between the amounts of the
court judgments and the amounts expended by the Protection and Advocacy Systems
on the court proceedings is unimportant in classifying the proceeds as program
income. All of the proceeds realized by Protection and Advocacy Systems through
court action that meet the criteria of 45 CFR 71.41(a) and 74.42(a) must be classified
and treated as program income. This Program Instruction applies to all funds awarded
through court judgments, including awards specifically identified as attorney
fees. General program income received through court judgments should be reported
on the financial status reports (SF-269's) and used in accordance with either
the deduction alternative or the additional costs alternative as described in
ADD-IM-85-4, 45 CFR Part 74.42 and in the State Plan. The matching alternative
may not be used, since there is no matching requirement. Under the additional
costs alternative, the funds may be used for costs which would otherwise be unallowable
under the Protection and Advocacy Program. However, such funds must be used to
further the broad objectives of the Protection and Advocacy statute. Funds expended
on litigation and program income recovered from court judgments should be reported
as provided in ADD's separate instructions for completing the SF-269's. We recognize
that many different situations exist throughout the nation as to how grantees
secure legal representation for court cases. Where Protection and Advocacy Systems
contract for legal services, their own procedures and the applicable procurement
standards (either OMB Circular A-102, Attachment O or OMB Circular A-110, Attachment
O) must be followed. Both of the OMB Circulars prohibit using the cost plus a
percentage of cost method of contracting. The only situations where attorneys
may receive funds awarded as attorney fees through court judgments are those in
which the attorneys (who are not employees or contractors of Protection and Advocacy
Systems) have represented clients on behalf of Protection and Advocacy Systems
on no-fee bases. Vigilance must be exercised to assure that funds awarded through
court judgments are used by the Protection and Advocacy Systems to further the
objectives of the program. It was never intended nor is there a legal basis for
such funds to be used to augment grantee payments to legal contractors or grantee
staff as additional fees and personal bonuses.
/signature/
Casimer R. Wichlacz
Acting Commissioner
Administration on Developmental Disabilities
EFFECTIVE DATE: Upon Issuance
INQUIRIES TO: HDS Regional Administrators
ADD-PI-86-3