EDGAR Part 81 Subpart B (Hearings for Recovery of Funds), Appendix
Subpart B_Hearings for Recovery of Funds
Sec. 81.30 Basis for recovery of funds.
(a) Subject to the provisions of Sec. 81.31, an authorized
Departmental official requires a recipient to return funds to the
Department if--
(1) The recipient made an unallowable expenditure of funds under a
grant or cooperative agreement; or
(2) The recipient otherwise failed to discharge its obligation to
account properly for funds under a grant or cooperative agreement.
(b) An authorized Departmental offcial may base a decision to
require a recipient to return funds upon an audit report, an
investigative report, a monitoring report, or any other evidence.
(Authority: 20 U.S.C. 1234a(a) (1) and (2))
[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug.
16, 1993]
Sec. 81.31 Measure of recovery.
A recipient that made an unallowable expenditure or otherwise failed
to discharge its obligation to account properly for funds shall return
an amount that--
(a) Meets the standards for proportionality in Sec. 81.32;
(b) In the case of a State or local educational agency, excludes any
amount attributable to mitigating circumstances under the standards in
Sec. 81.23; and
(c) Excludes any amount expended in a manner not authorized by law
more than five years before the recipient received the notice of a
disallowance decision under Sec. 81.34.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(k), 1234b (a) and (b),
and 3474(a))
[54 FR 19512, May 5, 1989; 54 FR 21622, May 19, 1989. Redesignated and
amended at 58 FR 43473, Aug. 16, 1993]
Sec. 81.32 Proportionality.
(a)(1) A recipient that made an unallowable expenditure or otherwise
failed to account properly for funds shall return an amount that is
proportional to the extent of the harm its violation caused to an
identifiable Federal interest associated with the program under which it
received the grant or cooperative agreement.
(2) An identifiable Federal interest under paragraph (a)(1) of this
section includes, but is not limited to, the following:
(i) Serving only eligible beneficiaries.
(ii) Providing only authorized services or benefits.
(iii) Complying with expenditure requirements and conditions, such
as set-aside, excess cost, maintenance of effort, comparability,
supplement-not-supplant, and matching requirements.
(iv) Preserving the integrity of planning, application,
recordkeeping, and reporting requirements.
(v) Maintaining accountability for the use of funds.
(b) The appendix to this part contains examples that illustrate how
the standards for proportionality apply. The examples present
hypothetical cases and do not represent interpretations of any actual
program statute or regulation.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234b(a), and 3474(a))
[54 FR 19512, May 5, 1989. Redesignated at 58 FR 43473, Aug. 16, 1993]
Sec. 81.33 Mitigating circumstances.
(a) A recipient that is a State or local educational agency and that
has made an unallowable expenditure or otherwise failed to account
properly for funds is not required to return any amount that is
attributable to the mitigating circumstances described in paragraph (b),
(c), or (d) of this section.
(b) Mitigating circumstances exist if it would be unjust to compel
the recovery of funds because the recipient's violation was caused by
erroneous written guidance from the department. To prove mitigating
circumstances under this paragraph, the recipient shall prove that--
(1) The guidance was provided in response to a specific written
request from the recipient that was submitted to the Department at the
address provided by notice published in the Federal Register under this
section;
(2) The guidance was provided by a Departmental official authorized
to provide the guidance, as described by that notice;
(3) The recipient actually relied on the guidance as the basis for
the conduct that constituted the violation; and
(4) The recipient's reliance on the guidance was reasonable.
(c) Mitigating circumstances exist if it would be unjust to compel
the recovery of funds because the recipient's violation was caused by
the Department's failure to provide timely guidance. To prove mitigating
circumstances under this paragraph, the recipient shall prove that--
(1) The recipient in good faith submitted a written request for
guidance with respect to the legality of a proposed expenditure or
practice;
(2) The request was submitted to the Department at the address
provided by notice published in the Federal Register under this section;
(3) The request--
(i) Accurately described the proposed expenditure or practice; and
(ii) Included the facts necessary for the Department's determination
of its legality;
(4) The request contained the certification of the chief legal
officer of the appropriate State educational agency that the officer--
(i) Examined the proposed expenditure or practice; and
(ii) Believed it was permissible under State and Federal law
applicable at the time of the certification;
(5) The recipient reasonably believed the proposed expenditure or
practice was permissible under State and Federal law applicable at the
time it submitted the request to the Department;
(6) No Departmental official authorized to provide the requested
guidance responded to the request within 90 days of its receipt by the
Department; and
(7) The recipient made the proposed expenditure or engaged in the
proposed practice after the expiration of the 90-day period.
(d) Mitigating circumstances exist if it would be unjust to compel
the recovery of funds because the recipient's violation was caused by
the recipient's compliance with a judicial decree from a court of
competent jurisdiction. To prove mitigating circumstances under this
paragraph, the recipient shall prove that--
(1) The recipient was legally bound by the decree;
(2) The recipient actually relied on the decree when it engaged in
the conduct that constituted the violation; and
(3) The recipient's reliance on the decree was reasonable.
(e) If a Departmental official authorized to provide the requested
guidance responds to a request described in paragraph (c) of this
section more than 90 days after its receipt, the recipient that made the
request shall comply with the guidance at the earliest practicable time.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234b(b), and 3474(a))
[54 FR 19512, May 5, 1989. Redesignated at 58 FR 43473, Aug. 16, 1993]
Sec. 81.34 Notice of a disallowance decision.
(a) If an authorized Departmental official decides that a recipient
must return funds under Sec. 81.30, the official gives the recipient
written notice of a disallowance decision. The official sends the notice
by certified mail, return receipt requested, or other means that ensure
proof of receipt.
(b)(1) The notice must establish a prima facie case for the recovery
of funds, including an analysis reflecting the value of the program
services actually obtained in a determination of harm to the Federal
interest.
(2) For the purpose of this section, a prima facie case is a
statement of the law and the facts that, unless rebutted, is sufficient
to sustain the conclusion drawn in the notice. The facts may be set out
in the notice or in a document that is identified in the notice and
available to the recipient.
(3) A statement that the recipient failed to maintain records
required by law or failed to allow an authorized representative of the
Secretary access to those records constitutes a prima facie case for the
recovery of the funds affected.
(i) If the recipient failed to maintain records, the statement must
briefly describe the types of records that were not maintained and
identify the recordkeeping requirement that was violated.
(ii) If the recipient failed to allow access to records, the
statement must briefly describe the recipient's actions that constituted
the failure and identify the access requirement that was violated.
(c) The notice must inform the recipient that it may--
(1) Obtain a review of the disallowance decision by the OALJ; and
(2) Request mediation under Sec. 81.13.
(d) The notice must describe--
(1) The time available to apply for a review of the disallowance
decision; and
(2) The procedure for filing an application for review.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(a), and 3474(a))
[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug.
16, 1993; 60 FR 46494, Sept. 6, 1995; 61 FR 14484, Apr. 2, 1996]
Sec. 81.35 Reduction of claims.
The Secretary or an authorized Departmental official as appropriate
may, after the issuance of a disallowance decision, reduce the amount of
a claim established under this subpart by--
(a) Redetermining the claim on the basis of the proper application
of the law, including the standards for the measure of recovery under
Sec. 81.31, to the facts;
(b) Compromising the claim under the Federal Claims Collection
Standards in 4 CFR part 103; or
(c) Compromising the claim under Sec. 81.36, if applicable.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(j), and 3474(a); 31
U.S.C. 3711)
[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug.
16, 1993]
Sec. 81.36 Compromise of claims under General Education Provisions
Act.
(a) The Secretary or an authorized Departmental official as
appropriate may compromise a claim established under this subpart
without following the procedures in 4 CFR part 103 if--
(1)(i) The amount of the claim does not exceed $200,000; or
(ii) The difference between the amount of the claim and the amount
agreed to be returned does not exceed $200,000; and
(2) The Secretary or the official determines that--
(i) The collection of the amount by which the claim is reduced under
the compromise would not be practical or in the public interest; and
(ii) The practice that resulted in the disallowance decision has
been corrected and will not recur.
(b) Not less than 45 days before compromising a claim under this
section, the Department publishes a notice in the Federal Register
stating--
(1) The intention to compromise the claim; and
(2) That interested persons may comment on the proposed compromise.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a (j), and 3474(a))
[54 FR 19512, May 5, 1989. Redesignated at 58 FR 43473, Aug. 16, 1993]
Sec. 81.37 Application for review of a disallowance decision.
(a) If a recipient wishes to obtain review of a disallowance
decision, the recipient shall file a written application for review with
the Office of Administrative Law Judges, c/o Docket Clerk, Office of
Hearings and Appeals, and, as required by Sec. 81.12(b), shall serve a
copy on the applicable Departmental official who made the disallowance
decision.
(b) A recipient shall file an application for review not later than
60 days after the date it receives the notice of a disallowance
decision.
(c) Within 10 days after receipt of a copy of the application for
review, the authorized Departmental official who made the disallowance
decision shall provide the ALJ with a copy of any document identified in
the notice pursuant to Sec. 81.34(b)(2).
(d) An application for review must contain--
(1) A copy of the disallowance decision of which review is sought;
(2) A statement certifying the date the recipient received the
notice of that decision;
(3) A short and plain statement of the disputed issues of law and
fact, the recipient's position with respect to these issues, and the
disallowed funds the recipient contends need not be returned; and
(4) A statement of the facts and the reasons that support the
recipient's position.
(e) The ALJ who considers a timely application for review that
substantially complies with the requirements of paragraph (c) of this
section may permit the recipient to supplement or amend the application
with respect to issues that were timely raised. Any requirement to
return funds that is not timely appealed becomes the final decision of
the Department.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(b)(1), and 3474(a))
[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473,
43474, Aug. 16, 1993; 58 FR 51013, Sept. 30, 1993; 60 FR 46494, Sept. 6,
1995]
Sec. 81.38 Consideration of an application for review.
(a) The ALJ assigned to the case under Sec. 81.4 considers an
application for review of a disallowance decision.
(b) The ALJ decides whether the notice of a disallowance decision
meets the requirements of Sec. 81.34, as provided by section 451(e) of
GEPA.
(1) If the notice does not meet those requirements, the ALJ--
(i) Returns the notice, as expeditiously as possible, to the
authorized Departmental official who made the disallowance decision;
(ii) Gives the official the reasons why the notice does not meet the
requirements of Sec. 81.34; and
(iii) Informs the recipient of the ALJ's decision by certified mail,
return receipt requested.
(2) An authorized Departmental official may modify and reissue a
notice that an ALJ returns.
(c) If the notice of a disallowance decision meets the requirements
of Sec. 81.34, the ALJ decides whether the application for review meets
the requirements of Sec. 81.37.
(1) If the application, including any supplements or amendments
under Sec. 81.37(d), does not meet those requirements, the disallowance
decision becomes the final decision of the Department.
(2) If the application meets those requirements, the ALJ--
(i) Informs the recipient and the authorized Departmental official
that the OALJ has accepted jurisdiction of the case; and
(ii) Schedules a hearing on the record.
(3) The ALJ informs the recipient of the disposition of its
application for review by certified mail, return receipt requested. If
the ALJ decides that the application does not meet the requirements of
Sec. 81.37, the ALJ informs the recipient of the reasons for the
decision.
(Authority: 20 U.S.C. 1221e-3, 1234 (e) and (f)(1), 1234a(b), and
3474(a))
[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug.
16, 1993]
Sec. 81.39 Submission of evidence.
(a) The ALJ schedules the submission of the evidence, whether oral
or documentary, to occur within 90 days of the OALJ's receipt of an
acceptable application for review under Sec. 81.37.
(b) The ALJ may waive the 90-day requirement for good cause.
(Authority: 5 U.S.C. 556(d); 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(c),
and 3474(a))
[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug.
16, 1993]
Sec. 81.40 Burden of proof.
If the OALJ accepts jurisdiction of a case under Sec. 81.38, the
recipient shall present its case first and shall have the burden of
proving that the recipient is not required to return the amount of funds
that the disallowance decision requires to be returned because--
(a) An expenditure identified in the disallowance decision as
unallowable was allowable;
(b) The recipient discharged its obligation to account properly for
the funds;
(c) The amount required to be returned does not meet the standards
for proportionality in Sec. 81.32;
(d) The amount required to be returned includes an amount
attributable to mitigating circumstances under the standards in Sec.
81.33; or
(e) The amount required to be returned includes an amount expended
in a manner not authorized by law more than five years before the
recipient received the notice of the disallowance decision.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(b)(3), 1234b(b)(1), and
3474(a))
[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug.
16, 1993]
Sec. 81.41 Initial decision.
(a) The ALJ makes an initial decision based on the record.
(b) The initial decision includes the ALJ's findings of fact,
conclusions of law, and reasoning on all material issues.
(c) The initial decision is transmitted to the Secretary by hand-
delivery or Department mail, and to the parties by certified mail,
return receipt requested, by the Office of Administrative Law Judges.
(d) For the purpose of this part, ``initial decision'' includes an
ALJ's modified decision after the Secretary's remand of a case.
(Authority: 5 U.S.C. 557(c); 20 U.S.C 1221e-3, 1234(f)(1), and 3474(a))
[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473,
43474, Aug. 16, 1993]
Sec. 81.42 Petition for review of initial decision.
(a) If a party seeks to obtain the Secretary's review of the initial
decision of an ALJ, the party shall file a petition for review with the
Office of Hearings and Appeals, which immediately forwards the petition
to the Office of the Secretary.
(b) A party shall file a petition for review not later than 30 days
after the date it receives the initial decision.
(c) If a party files a petition for review, the party shall serve a
copy of the petition on the other party on the filing date by hand
delivery or by ``overnight or express'' mail. If agreed upon by the
parties, service of a copy of the petition may be made upon the other
party by facsimile transmission.
(d) Any written submission to the Secretary under this section must
be accompanied by a statement certifying the date that the filed
material was served on the other party.
(e) A petition for review of an initial decision must contain--
(1) The identity of the initial decision for which review is sought;
and
(2) A statement of the reasons asserted by the party for affirming,
modifying, setting aside, or remanding the initial decision in whole or
in part.
(f)(1) A party may respond to a petition for review of an initial
decision by filing a statement of its views on the issues raised in the
petition with the Secretary, as provided for in this section, not later
than 15 days after the date it receives the petition.
(2) A party shall serve a copy of its statement of views on the
other party by hand delivery or mail, and shall certify that it has done
so pursuant to the provisions of paragraph (d) of this section. If
agreed upon by the parties, service of a copy of the statement of views
may be made upon the other party by facsimile transmission.
(g)(1) The filing date for written submissions under this section is
the date the document is--
(i) Hand delivered;
(ii) Mailed; or
(iii) Sent by facsimile transmission.
(2) If a scheduled filing date falls on a Saturday, Sunday or a
Federal holiday, the filing deadline is the next business day.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(e), and 3474(a))
[58 FR 43474, Aug. 16, 1993]
Sec. 81.43 Review by the Secretary.
(a)(1) The Secretary's review of an initial decision is based on the
record of the case, the initial decision, and any proper submissions of
the parties or other participants in the case.
(2) During the Secretary's review of the initial decision there
shall not be any ex parte contact between the Secretary and individuals
representing the Department or the recipient.
(b) The ALJ's findings of fact, if supported by substantial
evidence, are conclusive.
(c) The Secretary may affirm, modify, set aside, or remand the ALJ's
initial decision.
(1) If the Secretary modifies, sets aside, or remands an initial
decision, in whole or in part, the Secretary's decision includes a
statement of reasons that supports the Secretary's decision.
(2)(i) The Secretary may remand the case to the ALJ with
instructions to make additional findings of fact or conclusions of law,
or both, based on the evidence of record. The Secretary may also remand
the case to the ALJ for further briefing or for clarification or
revision of the initial decision.
(ii) If a case is remanded, the ALJ shall make new or modified
findings of fact or conclusions of law or otherwise modify the initial
decision in accordance with the Secretary's remand order.
(iii) A party may appeal a modified decision of the ALJ under the
provisions of Sec. Sec. 81.42 through 81.45. However, upon that review,
the ALJ's new or modified findings, if supported by substantial
evidence, are conclusive.
(3) The Secretary, for good cause shown, may remand the case to the
ALJ to take further evidence, and the ALJ may make new or modified
findings of fact and may modify the initial decision based on that new
evidence. These new or modified findings of fact are likewise conclusive
if supported by substantial evidence.
(Authority: 5 U.S.C. 557(b); 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(d),
and 3474(a))
[58 FR 43474, Aug. 16, 1993, as amended at 60 FR 46494, Sept. 6, 1995]
Sec. 81.44 Final decision of the Department.
(a) The ALJ's initial decision becomes the final decision of the
Department 60 days after the recipient receives the ALJ's decision
unless the Secretary modifies, sets aside, or remands the decision
during the 60-day period.
(b) If the Secretary modifies or sets aside the ALJ's initial
decision, a copy of the Secretary's decision is sent by the Office of
Hearings and Appeals to the parties by certified mail, return receipt
requested. The Secretary's decision becomes the final decision of the
Department on the date the recipient receives the Secretary's decision.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234a(g), and 3474(a))
[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473,
43474, Aug. 16, 1993]
Sec. 81.45 Collection of claims.
(a) An authorized Departmental official collects a claim established
under this subpart by using the standards and procedures in 34 CFR part
30.
(b) A claim established under this subpart may be collected--
(1) 30 days after a recipient receives notice of a disallowance
decision if the recipient fails to file an acceptable application for
review under Sec. 81.37; or
(2) On the date of the final decision of the Department under Sec.
81.44 if the recipient obtains review of a disallowance decision.
(c) The Department takes no collection action pending judicial
review of a final decision of the Department under section 458 of GEPA.
(d) If a recipient obtains review of a disallowance decision under
Sec. 81.38, the Department does not collect interest on the claim for
the period between the date of the disallowance decision and the date of
the final decision of the Department under Sec. 81.44.
(Authority: 20 U.S.C. 1234(f)(1); 1234a(f)(1) and (2), (i), and (1))
[54 FR 19512, May 5, 1989. Redesignated and amended at 58 FR 43473, Aug.
16, 1993]
Appendix to Part 81--Illustrations of Proportionality
(1) Ineligible beneficiaries. A State uses 15 percent of its grant
to meet the special educational needs of children who were migratory,
but who have not migrated for more than five years as a Federal program
statute requires for eligibility to participate in the program. Result:
Recovery of 15 percent of the grant--all program funds spent for the
benefit of those children. Although the services were authorized, the
children were not eligible to receive them.
(2) Ineligible beneficiaries. A Federal program designed to meet the
special educational needs of gifted and talented children requires that
at least 80 percent of the children served in any project must be
identified as gifted or talented. A local educational agency (LEA)
conducts a project in which 76 students are identified as gifted or
talented and 24 are not. The project was designed and implemented to
meet the special educational needs of gifted and talented students.
Result: The LEA must return five percent of the project costs. The LEA
provided authorized services for a project in which the 76 target
students had to constitute at least 80 percent of the total. Thus, the
maximum number of non-target students permitted was 19. Project costs
relating to the remaining five students must be returned.
(3) Ineligible beneficiaries. Same as the example in paragraph (2),
except that only 15 percent of the children were identified as gifted or
talented. On the basis of the low percentage of these children and other
evidence, the authorized Departmental official finds that the project as
a whole did not address their special educational needs and was outside
the purpose of the statute. Result: The LEA must return its entire
award. The difference between the required percentage of gifted and
talented children and the percentage actually enrolled is so substantial
that, if consistent with other evidence, the official may reasonably
conclude the entire grant was misused.
(4) Ineligible beneficiaries. Same as the example in paragraph (2),
except that 60 percent of the children were identified as gifted or
talented, and it is not clear whether the project was designed or
implemented to meet the special educational needs of these children.
Result: If it is determined that the project was designed and
implemented to serve their special educational needs, the LEA must
return 25 percent of the project costs. A project that included 60
target children would meet the requirement that 80 percent of the
children served be gifted and talented if it included no more than 15
other children. Thus, while the LEA provided authorized services, only
75 percent of the beneficiaries were authorized to participate in the
project (60 target children and 15 others). If the authorized
Departmental official, after examining all the relevant facts,
determines that the project was not designed and implemented to serve
the special educational needs of gifted or talented students, the LEA
must return its entire award because it did not provide services
authorized by the statute.
(5) Unauthorized activities. An LEA uses ten percent of its grant
under a Federal program that authorizes activities only to meet the
special educational needs of educationally deprived children to pay
for health services that are available to all children in
the LEA. All the children who use the Federally funded health
services happen to be educationally deprived, and thus eligible
to receive program services. Result: Recovery of ten percent of the
grant--all program funds spent for the health services. Although the
children were eligible to receive program services, the health services
were unrelated to a special educational need and, therefore, not
authorized by law.
(6) Set-aside requirement. A State uses 22 percent of its grant for
one fiscal year under a Federal adult education program to provide
programs of equivalency to a certificate of graduation from a secondary
school. The adult education program statute restricts those programs to
no more than 20 percent of the State's grant. Result: Two percent of the
State's grant must be returned. Although all 22 percent of the funds
supported adult education, the State had no authority to spend more than
20 percent on secondary school equivalency programs.
(7) Set-aside requirement. A State uses eight percent of its basic
State grant under a Federal vocational education program to pay for the
excess cost of vocational education services and activities for
handicapped individuals. The program statute requires a State to use ten
percent of its basic State grant for this purpose. Result: The State
must return two percent of its basic State grant, regardless of how it
was used. Because the State was required to spend that two percent on
services and activities for handicapped individuals and did not do so,
it diverted those funds from their intended purposes, and the Federal
interest was harmed to that extent.
(8) Excess cost requirement. An LEA uses funds reserved for the
disadvantaged under a Federal vocational education program to pay for
the cost of the same vocational education services it provides to non-
disadvantaged individuals. The program statute requires that funds
reserved for the disadvantaged must be used to pay only for the
supplemental or additional costs of vocational education services that
are not provided to other individuals and that are required for
disadvantaged individuals to participate in vocational education.
Result: All the funds spent on the disadvantaged must be returned.
Although the funds were spent to serve the disadvantaged, the funds were
available to pay for only the supplemental or additional costs of
providing services to the disadvantaged.
(9) Maintenance-of-effort requirement. An LEA participates in a
Federal program in fiscal year 1988 that requires it to maintain its
expenditures from non-Federal sources for program purposes to receive
its full allotment. The program statute requires that non-Federal funds
expended in the first preceding fiscal year must be at least 90 percent
of non-Federal funds expended in the second preceding fiscal year and
provides for a reduction in grant amount proportional to the shortfall
in expenditures. No waiver of the requirement is authorized. In fiscal
year 1986 the LEA spent $100,000 from non-Federal sources for program
purposes; in fiscal year 1987, only $87,000. Result: The LEA must return
1/30 of its fiscal year 1988 grant--the amount of its grant that equals
the proportion of its shortfall ($3,000) to the required level of
expenditures ($90,000). If, instead, the statute made maintenance of
expenditures a clear condition of the LEA's eligibility to receive funds
and did not provide for a proportional reduction in the grant award, the
LEA would be required to return its entire grant.
(10) Supplanting prohibition. An LEA uses funds under a Federal drug
education program to provide drug abuse prevention counseling to
students in the eighth grade. The LEA is required to provide that same
counseling under State law. Funds under the Federal program statute are
subject to a supplement-not-supplant requirement. Result: All the funds
used to provide the required counseling to the eighth-grade students
must be returned. The Federal funds did not increase the total amount of
spending for program purposes because the counseling would have been
provided with non-Federal funds if the Federal funds were not available.
(11) Matching requirement. A State receives an allotment of $90,000
for fiscal year 1988 under a Federal adult education program. It expends
its full allotment and $8,000 from its own resources for adult
education. Under the Federal statute, the Federal share of expenditures
for the State's program is 90 percent. Result: The State must return the
unmatched Federal funds, or $18,000. Expenditure of a $90,000 Federal
allotment required $10,000 in matching State expenditures, $2,000 more
than the State's actual expenditures. At a ratio of one State dollar for
every nine Federal dollars, $18,000 in Federal funds were unmatched.
(12) Application requirements. In order to receive funds under a
Federal program that supports a wide range of activities designed to
improve the quality of elementary and secondary education, an LEA
submits an application to its State educational agency (SEA) for a
subgrant to carry out school-level basic skills development programs.
The LEA submits its application after conducting an assessment of the
needs of its students in consultation with parents, teachers, community
leaders, and interested members of the general public. The Federal
program statute requires the application and consultation processes. The
SEA reviews the LEA's application, determines that the proposed programs
are sound and the application is in compliance with Federal law, and
approves the application. After the LEA receives the subgrant, it
unilaterally decides to use 20 percent of the funds for gifted and
talented elementary school students--an authorized activity under the
Federal statute. However, the LEA does not consult with interested
parties and does not amend its application. Result: 20 percent of the
LEA's subgrant must be returned. The LEA had no legal authority to use
Federal funds for programs or activities other than those described in
its approved application, and its actions with respect to 20 percent of
the subgrant not only impaired the integrity of the application process,
but caused significant harm to other Federal interests associated with
the program as follows: the required planning process was circumvented
because the LEA did not consult with the specified local interests;
program accountability was impaired because neither the SEA nor the
various local interests that were to be consulted had an opportunity to
review and comment on the merits of the gifted and talented program
activities, and the LEA never had to justify those activities to them;
and fiscal accountability was impaired because the SEA and those various
local interests were, in effect, misled by the LEA's unamended
application regarding the expenditure of Federal funds.
(13) Harmless violation. Under a Federal program, a grantee is
required to establish a 15-member advisory council of affected teachers,
school administrators, parents, and students to assist in program
design, monitoring, and evaluation. Although the law requires at least
three student members of the council, a grantee's council contains only
two. The project is carried out, and no damage to the project
attributable to the lack of a third student member can be identified.
Result: No financial recovery is required, although the grantee must
take other appropriate steps to come into compliance with the law. The
grantee's violation has not measurably harmed a Federal interest
associated with the program.
(Authority: 20 U.S.C. 1221e-3, 1234(f)(1), 1234b(a), and 3474(a))
[54 FR 19512, May 5, 1989; 54 FR 21622, May 19, 1989]
EDGAR version June 23, 2005
