84ct131a.htm

DATE: July 13, 1993
CASE NO. 84-CTA-131


IN THE MATTER OF

U. S. DEPARTMENT OF LABOR,

          COMPLAINANT,

     v.

KENTUCKY CABINET FOR HUMAN RESOURCES, 

          RESPONDENT.


BEFORE: THE SECRETARY OF LABOR


                         FINAL DECISION AND ORDER

    This case arises under the Comprehensive Employment and
Training Act (CETA), 29 U.S.C. §§ 801-999 (Supp. V
1981). [1]   At issue is the application of the exclusion clause
of the Debt Collection Act of 1982 (DCA), Pub. L. No. 97-365, 11,
96 Stat. 1749, 1756 (1982), codified at 31 U.S.C. §§
3701, 3717 (1988), which addresses whether debts owed by the
states to the Federal Government may be exempt from interest
assessments.
                             BACKGROUND
     The presiding ALJ issued a decision on February 20, 1987,
affirming the Grant Officer's disallowance of $196,673 of CETA 
costs claimed by Kentucky Cabinet.  The ALJ found that the record
did not sustain Kentucky Cabinet's contention that any of the
disallowed funds had been repaid to the Department of Labor (DOL)
or there had been a subsequent adjustment of the succeeding year
budget satisfying the debt.  The ALJ then concluded that the
exclusion provision of the DCA, at §§ 3701(c), 3717,
specifically excluded debts owed by the states from any interest
levies by the Federal Government, and determined that DOL was
"not empowered to charge interest on the disallowed costs." 
In the Matter of U.S. Dep't of Labor v. Kentucky
Cabinet for Human Resources, Case 

[PAGE 2]
No. 84-CTA-131, ALJ Dec., slip op. at 17.
     The Grant Officer excepted to the ALJ's decision solely on 
the issue of the Department's authority to charge interest on a
debt owed to it.  Kentucky Cabinet excepted to the ALJ's decision
that it was strictly liable for the questioned costs of its
subgrantees barring any findings of fraud, and to the ALJ's
findings of fact with regard to certain alleged repayments.  It
requested the Secretary to waive recoupment of the disallowed 
costs absent any finding of fraud.
                             DISCUSSION
     The DCA requires the head of a government agency to charge a
debtor of the United States an annual rate of interest on its
outstanding debt, [2]  but also provides at 31 U.S.C. §
3717(g) that "[t]his section does not apply . . . (2) to a claim
under a contract executed before October 25, 1982, that is in
effect on October 25, 1982."  The grants in this case were
executed before October 25, 1982, and their operational phases
were completed prior to that date, although the audit was not
completed until after that date and the Grant Officer's Final
Determination was not issued until May 3, 1984.
     In Florida Dep't of Labor and Employment
Security v. U.S. Dep't of Labor, 893 F.2d 1319 (11th
Cir. 1990), the court was confronted with a chronological
situation similar to this case, and determined that on-going
administrative activities kept the grants "in effect" through the
specified date.  893 F.2d at 1323-24.  (CETA grant operations
which concluded prior to 
October 25, 1982, but CETA prime sponsor's responsibilities
continued beyond grant termination date kept the grants "in
effect").  See also West
Virginia v. United States, 479 U.S. 
305, 312 n.6 (1987) (DCA not applicable to claims arising under
contracts entered into before October 25, 1982).  The courts 
in each case determined that the provisions of the DCA were
inapplicable, as I do in the present case.
     With regard to the Department's authority to assess interest
on debts owed to it, I am guided by the Supreme Court's 
affirmation of the Federal Government's common law right to
assess interest on its debts for more than a century. [3]  
Further, the language of the 1978 CETA Amendments provided the
Secretary with the authority "to order such sanctions or
corrective actions as are appropriate."  29 U.S.C. §
816(d)(1).  See also, 29 U.S.C. § 816(d)(2). 
Such authority has been broadly construed by the courts.  City
of Oakland v. Donovan 703 F.2d 1104, 1107 (9th Cir. 1983). 
See also City of St. Louis v. U.S. Dep't of
Labor, 787 F.2d 342, 349 (8th Cir. 1986).  Illinois
Migrant Council v. U.S. Dep't of Labor, 773 F.2d 180, 183
(7th Cir. 1985).  I find that the power to assess interest on
debts owed to the Department is appropriate under that
authority.

[PAGE 3]
     My review of the record
is in agreement with the ALJ's determination, and I find that the
record does not substantiate Kentucky Cabinet's allegation that
the disallowed funds pertaining to the Grant Officer's Final
Determination's Finding 4 had been recouped through a following
year allocation adjustment; nor is there support that the funds
disallowed in Finding 11 m had been previously recouped by the
Department of Labor.
     I also deny Kentucky Cabinet's request to waive repayment of
the disallowed costs due to the absence of substantiating records
absent a finding of fraud.  The only way that the Department of
Labor can verify that appropriated funds were spent for the
purposes intended by Congress is by requiring documentation to
support expenditures.  Montgomery County Maryland v.
Department of Labor, 757 F.2d 1510, 1513 (4th Cir. 1985).
                               ORDER
     The ALJ's finding that the Grant Officer's disallowance of
$196,673 was appropriate IS AFFIRMED.  The ALJ's determination
that the Department of Labor is not entitled to charge interest
on disallowed costs IS REVERSED.  The Kentucky Cabinet for Human
Resources is directed to repay to the U.S. Department of Labor
the sum of $196,673 with interest in accordance with Employment
and Training Order No. 2-86, issued June 5, 1986.
     SO ORDERED.



                              ____________________________
                              Secretary of Labor 


Washington, D.C. 



[ENDNOTES]
           
[1] 
  CETA was replaced by the Job Training Partnership Act, 
29 U.S.C. §§ 1501-1791 (1988).  However, 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] 
  31 U.S.C. § 3717 entitled [i]nterest and penalty on
claims provides:

     (a)(l) The head of an executive or legislative agency
     shall charge a minimum annual rate of interest on an
     outstanding debt on a United States Government claim
     owed by a person that is equal to the
     average investment rate for the Treasury tax and loan
     accounts for the 12 month period ending on September 30
     of each year, rounded to the nearest whole percentage
     point. 

[3] 
  West Virginia v. United States, 479 U.S. 305 (1987);
Rodgers v. United States, 332 U.S. 371 (1947); Board of
Commissioners of the County of Jackson, Kansas v. United
States, 308 U.S. 343 (1939); Billings v. United
States, 232 U.S. 261 (1914); Young v. Godbe, 82
U.S.(Wall) 562 (1872).