81ct199a.htm

DATE:  January 28, 1992
CASE NO.  81-CTA-199


IN THE MATTER OF 

AMERICAN INDIAN COMMUNITY HOUSE.


BEFORE:   THE SECRETARY OF LABOR


                         FINAL DECISION AND ORDER

     This case arises under the Comprehensive Employment and
Training Act (CETA or the Act)), 29 U.S.C. §§ 801-999
(Supp. V 1981), [1]  and involves an audit of CETA grant
expenditures by American Indian Community House (AICH) during the
period from October 1, 1976, to September 30, 1977.  The
Administrative Law Judge (ALJ) issued a Decision and Order (D.
and O.) on April 2, 1984, ordering AICH to repay $13,967 to the
United States Department of Labor (DOL) from non-CETA funds. 
Upon consideration of AICH's request, the Secretary asserted
jurisdiction pursuant to 20 C.F.R. § 676.91(f) (1984). [2]  

                             BACKGROUND
     AICH was awarded a grant under CETA Titles II, III and VI 
to combat unemployment problems among the Native American
community in the New York City metropolitan area.  Based on the
Final Auditors' Report of a 1978 audit covering AICH's grant
operations for the year ending September 30, 1977, the Grant
Officer issued an Initial Determination, dated December 23, 1980,
and a Final Determination, dated July 9, 1981.  The Grant
Officer's Final Determination disallowed costs totaling $116,096. 
See AX-2a; AX-2b.  AICH timely appealed this determination
to the Office of Administrative Law Judges; a hearing was held on

March 15, 1982,  see AX-1; the parties filed further
evidentiary material; the record was closed on June 22, 1982; and
post-hearing briefs were filed by the parties in July 1982. 
Through this process the amount of disallowed costs was reduced,
and 
[PAGE 2]
based on AICH's post-hearing evidence, the Grant Officer further
revised the Final Determination in a letter dated March 7, 1983. 
The ALJ addressed only the $23,337.12 still in dispute after the
Grant Officer's March 7 determinations.  
     After reviewing the remaining disallowed costs seriatim, the
ALJ upheld disallowances totaling $13,967.07 and ordered AICH to
repay this sum from non-CETA funds. [3]   The ALJ considered and
rejected the legal arguments raised by AICH:  (1) that the Grant
Officer failed to present a prima facie case
because the administrative file was not entered into the record;
(2) that 
the Act does not provide the Secretary with authority to order
repayment of misspent CETA funds; (3) that the Grant Officer's
final determination was invalid because it was not issued within
120 days of receipt of the final audit report, as provided for in
Section 106(b) of the Act; (4) that the final determination is
flawed because the Grant Officer incorrectly cited the applicable
regulations; and (5) that the ALJ's order allow repayment through
services.                
     Before me, the parties have agreed to disposition based on
the record as reconstituted. [4]   
                             DISCUSSION    
     AICH's appeal letter of April 26, 1984, asserted several
reasons for seeking review of the D. and O.  First, AICH
reiterated arguments rejected by the ALJ: (1) that Section 602(b)
of the Act provides DOL's sole remedy and provides no authority
for collecting misspent funds, and that the United States Court
of Appeals for the Second Circuit has not ruled on this issue;
(2) that the Grant Officer's failure to issue a final
determination within 120 days divested the Secretary of
jurisdiction; and (3) that the Grant Officer failed to cite
particular applicable regulations for each specific finding in
his final determination.  Next, AICH argued that in light of the
decision in Quechan Indian Tribe v. DOL, 723 F.2d 733 (9th
Cir. 1984), the Secretary must consider the equitable arguments
for waiver of repayment.  Additionally, AICH stated that,
"finally, with regard to the specific cost disallowances, the
Secretary needs presented in brief the specific equitable,
factual or legal argument to determine if the repayment sanction
is proper.  This can only be done by accepting this appeal and
scheduling briefs." See April 26 letter at p. 2.  Lastly,
AICH noted that the final determination failed to impose a
specific sanction as required by statute and regulation, and
consequently, argued there is not an enforceable order.  
     As the party requesting the hearing before the ALJ, AICH 
had the burden of establishing the facts and entitlement to the
relief requested.  20 C.F.R. § 676.90(b) (1990). [5]   Thus,
AICH has the burden herein, of establishing that, contrary to the

[PAGE 3]
Grant Officer's determinations and the ALJ's findings, the
disallowed expenditures of CETA funds were made in compliance
with the Act and the regulations in effect at the time.  AICH 
was directed to indicate specifically each item of exception
remaining in this appeal and was afforded numerous opportunities
to submit a brief in support of these exceptions.  AICH has not
responded.  Based on review of the reconstituted record, the
statute and regulations and the applicable case law, I affirm 
the ALJ's findings upholding the grant officer's disallowances of
$13,967.07 in misspent CETA funds.  See D. and O. at 3-8;
15-17.    The assertion that the Secretary lacks the authority to
recover misspent CETA funds is without merit.  See
generally  Chicano Education and Manpower
Services v. Department of Labor, 909 F.2d 1320, 1327 (9th
Cir. 1990); Colorado Department of Labor & Employment v. U.S.
Department of Labor, 875 F.2d 791, 799 (10th Cir. 1989);
City of St. Louis, Missouri v. Department of Labor, 787
F.2d 342, 349 (8th Cir. 1986); Onslow County v. U.S.
Department of Labor, 774 F.2d 607, 614 (4th Cir. 1985).
Commonwealth of Kentucky Department of Human Resources
v. Donovan, 704 F.2d 288, 294-97 (6th Cir. 1983);
Blackfeet Tribe
v. U.S. Department of Labor, Case No. 85-CPA-45, Sec. Final 
Dec. and Order, Dec. 2, 1991, slip op. at 6-7.   
     Any claim that the failure to issue a final determination
within 120 days was dispositive of the case was settled in
Brock v. Pierce County, 476 U.S. 253 (1986).  The Court
held that the Secretary does not lose the authority to recover
misspent funds after the expiration of the 120-day period
specified in CETA Section 106(b), 29 U.S.C. § 816(b) (Supp.
V 1981).  476 U.S. at 258-266.  Moreover, I agree with the ALJ,
D. and O. at 14, that contrary to AICH's assertions, the Grant
Officer's Final Determination findings conform to the applicable
regulations.  
     The ALJ did not consider the equitable waiver of recoupment
issue because it was not raised before him.  AICH, citing
the decision in Quechan Indian Tribe v. DOL, 723 F.2d 733
(9th Cir. 1984), has raised the issue before me and I will
consider it. 
     Subsequent to the ALJ's decision in this case, the U.S.
Court of Appeals for the Ninth Circuit had an opportunity to
reconsider Quechan. [6]   See Chicano
Education and Manpower Services v. United States Department of
Labor, 909 F.2d 1320 
(9th Cir. 1990).  In Chicano Education, which like
Quechan construed CETA Section 106(d)(2), the court said
that the Department had promulgated 20 C.F.R. § 676.88(c) to
implement 
the "special circumstances" exception of Section 106(d)(2), and
concluded that the Department is "of course, required to follow
its own regulations."  Id. at 1327.  Section 676.88(c),
specifies that misspent funds "shall" be disallowed "except that
costs associated with ineligible participants and public service 
[PAGE 4]
employment programs" may be allowed when the Grant Officer finds
five specific factors present.  See U.S. Department of
Labor v. Rockingham/Strafford Employment and Training
Consortium, Case 
No. 81-CTA-363, Sec. Dec. and Order of Remand, March 11, 1991,
slip op. at 4-5; Central Tribes of the Shawnee Area,
Inc. v. U.S. Department of Labor, Case No. 85-CPA-17,
Sec. Final Dec. and Order, Dec. 14, 1989, slip op. at 3-5;
California Indian Manpower Consortium, Case No. 85-CTA-
124, Sec. Final Dec. and Order, October 25, 1988, slip op. at 6. 
As Blackfeet Tribe made clear, slip op. at 4, the
Secretary's discretionary authority to waive DOL's right to
recoupment pursuant to Section 106(d) has been exercised through
the promulgation of Section 676.88(c).
     A review of the record establishes that none of the $13,967
of disallowed costs at issue in this case involved "public
service employment programs" as specified in the Act, 29 U.S.C. 
§ 816(d)(2), and the regulation, 29 C.F.R. § 676.88(c). 
See Blackfeet Tribe, Case No. 85-CPA-45, slip op.
at 3-7; Rockingham/Strafford, slip op. at 4-5; Central
Tribes, slip 
op. at 4-5.  Since Section 676.88(c) limits waiver to disallowed
costs involved in public service employment programs, I find that
waiver of repayment is not appropriate in this case.
                               ORDER
     Accordingly, American Indian Community House is ordered to
repay to the United States Department of Labor, from non-CETA
funds, $13,967.  If it has not done so, AICH is ordered to submit
the information specified by the ALJ regarding the participants
entitled to reimbursement pursuant to Findings 8 and
9.  D. and O. at 16.
     SO ORDERED.



                              ___________________________
                              Secretary of Labor

Washington, D.C.


OAA:EGONZALEZ:kg:1/13/92
Room S-4309:FPB:523-9728


[ENDNOTES]
           
[1]   CETA was repealed effective October 13, 1982, and replaced
by the Job Training Partnership Act, 29 U.S.C. §§ 1501-
1781 (1988).  CETA continues to govern administrative or judicial
proceedings pending on October 13, 1982, or begun between October
13, 1982, and September 30, 1984.  29 U.S.C. § 1591(e).

[2]   Review was stayed pending appellate and Supreme Court
review of the applicability of the "120-day" provision in section
106(b) of the Act, 29 U.S.C. § 816(b), an issue raised by
AICH in its appeal to the Secretary.

[3]   With respect to $3,953 in disallowed costs associated with
improperly withheld Federal Insurance Contributions Act (FICA)
contributions, the ALJ ordered AICH to furnish DOL  with the
names, addresses and amounts due to each participant involved. 
The ALJ instructed that DOL should pay the amount owed to each 
of these participants from the disallowed costs repaid by AICH.

[4]   On March 17, 1988, the Secretary issued an order directing
the parties to reconstitute the case record and providing a
briefing schedule.  On November 19, 1990, the Secretary issued 
a Supplemental Order to Reconstitute the Record, and a further
briefing schedule.  At the request of AICH's counsel, the parties
were allowed additional time to pursue settlement.  In response
to my Order to Show Cause of April 16, 1991, the parties
agreed that review should proceed based on the existing record. 
AICH further requested until June 1, 1991, to file a brief in
support of its exceptions.  This request was granted by Order
issued on May 7, 1991, but the briefing period allowed has
expired, and AICH has not filed a brief. 

[5]   The same regulatory provision governing the burden of proof
in a CETA hearing was in effect at the time of AICH's hearing in
1982.

[6]   I note again that although AICH urged the Secretary to
provide an opportunity for briefing its several arguments, it
failed to submit a brief in support of its position and
addressing intervening case law and decisions of the Secretary on
the issue of waiver of repayment post Quechan.