[Federal Register Volume 59, Number 215 (Tuesday, November 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-27665]
[[Page Unknown]]
[Federal Register: November 8, 1994]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF EDUCATION
Office of Administrative Law Judges; Intent To Compromise
Consolidated Claims; Washington State Library
AGENCY: Department of Education.
ACTION: Notice of Intent to Compromise Consolidated Claims.
-----------------------------------------------------------------------
SUMMARY: The U.S. Department of Education (the Department) intends to
compromise consolidated claims against the Washington State Library
(WSL) in a consolidated appeal which is now pending before the
Department's Office of Administrative Law Judges (the OALJ), Docket
Nos. 90-92-R (ACN: 10-83457) and 91-43-R (ACN:10-83572 ), under
authority of section 452(j)(1) of the General Education Provisions Act
(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 December 23,
1994.
ADDRESSES: Comments should be addressed to Ronald Petracca, Esq.,
Office of the General Counsel, U.S. Department of Education, 600
Independence Avenue, S.W., Room 5421, Washington, D.C. 20202. Telephone
(202) 401-8316.
FOR FURTHER INFORMATION CONTACT: Ronald Petracca, Esq., at (202) 401-
8316. 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
initially arose from an organization-wide audit of the WSL conducted by
the Washington State Auditor (State Auditor) for the periods July 1,
1985 to June 30, 1986 (ACN:10-83457) and July 1, 1986 to June 30, 1987
(ACN:10-83572). 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 Title I
of the Federal Library Services and Construction Act (LSCA) (assistance
to States for public library services), the State Auditor found that
the WSL had failed to use an accurate method for allocating certain
costs as among Title I LSCA programs and other programs, and had failed
to keep accurate records sufficient to enable auditors to determine how
those costs had in fact been allocated. The auditors determined that
this failure to allocate costs properly was a violation of applicable
Federal regulations (OMB Circular A-87, 34 CFR Part 74 Appendix C, Part
I Section J (1986), now incorporated by reference in 34 CFR 80.22(b)).
In an audit report dated August 29, 1988, the auditors questioned costs
in the amount of $450,613, representing the amounts of the salaries of
employees dividing their time between Title I LSCA and other programs.
On October 16, 1990, the U.S. Department of Education's Assistant
Secretary for Educational Research and Improvement (Assistant
Secretary) issued a program determination letter (PDL) sustaining the
State Auditor's finding, and demanding recovery of $450,613. The WSL
timely appealed that determination to the OALJ pursuant to 20 U.S.C.
1234(f)(1).
In 1988, the State Auditor conducted a similar audit for the State
fiscal year 1987; a final audit report was issued by the State Auditor
on August 29, 1988. The State Auditor found that certain funds had not
been expended by the WSL within the time period prescribed by 20 U.S.C.
1225(b) (the ``Tydings Amendment'') and the implementing regulations in
34 CFR 76.705. The questioned costs were $15,103. The State Auditor
further found that the legal violations of Federal regulations
governing cost allocation, which were discussed in connection with
Docket No.90-92-R, above, had continued in fiscal year 1987, resulting
in questioned costs of $675,961. The State Auditor also determined that
an amount of $15,103 had been obligated in violation of 20 U.S.C. 1225
(prescribing the time limit for obligation of funds by the grantee). In
a PDL dated April 25, 1991, the Assistant Secretary sustained these
audit findings and demanded repayment of $691,064. The WSL timely
appealed these determinations to the OALJ.
Because the issues in the two audit appeals were similar, the OALJ
consolidated the two appeals. Subsequently the litigation was stayed at
the joint request of the parties so that the facts could be clarified.
At the Department's request, the State Auditor conducted special
(supplemental) audits for both of the fiscal years in question,
reviewing the same records which had been reviewed in the previous
audits. The State Auditor issued a report of the special audit of
fiscal year 1986 on July 28, 1992. In this report the State Auditor
found that the recovery amount of $450,613 should be reduced to
$164,540. The reasons for the revised finding were that the original
recovery amount was found to have included $243,707 which were
allowable costs for goods and services, and that the original recovery
amount was found to have included $42,366 in allowable personnel costs.
With respect to fiscal year 1987, the State Auditor issued special
audits on July 28, 1992. The State Auditor found that the originally
determined questioned cost amount totalling $691,064 should be reduced.
The $15,103 finding was reduced to $2,230. The other questioned costs
pertaining to improper recordkeeping were determined to be $384,398.
With respect to the latter finding, the original questioned cost amount
was determined to have erroneously included $247,602 in allowable
direct costs for goods and services. In addition, the original recovery
amount was found to have included $43,961 in allowable personnel costs.
The Office of the Inspector General, U.S. Department of Education,
verified the findings in the special audits after conducting a site
visit and reviewing the State Auditor's workpapers. Based on the
supplemental audit findings, the parties stipulated to the OALJ on
February 1, 1993, that the questioned costs in issue for fiscal year
1986 should be reduced from $450,613 to $164,540; and that the
questioned costs in issue for fiscal year 1987 should be reduced to
$386,628.
In the course of ensuing settlement discussions, the WSL submitted
documentary evidence that it had corrected the practices which had
generated the State Auditor's findings of improper record-keeping. As a
result of settlement discussions, the parties have tentatively agreed
to a settlement under which the WSL has promised to repay a total of
$49,362 for the findings pertaining to fiscal year 1986, and $186,740
for the findings related to fiscal year 1987--a total of $236,102 to
the Department for both years, in full resolution of all issues.
In addition to the repayment of funds, the State has certified in
the tentative settlement agreement that it is currently in compliance
with all legal requirements 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),
the Department has determined that it would not be practical or in the
public interest to continue litigation of this case. Rather, the
Department has determined that a compromise of these two claims for a
total amount of $236,102 would be appropriate. This decision takes into
account the documented fact that the WSL has fully corrected the
practices which were the basis of the claims of faulty record-keeping,
and the estimated litigation risks and costs of proceeding through the
appeal process. The public is invited to comment on the Department's
intent to compromise this claim. Additional information may be obtained
by writing to Ronald Petracca, Esq., at the address given at the
beginning of this notice.
Program Authority: 20 U.S.C. 1234a(j)(2).
Dated: November 2, 1994.
Donald R. Wurtz,
Chief Financial Officer.
[FR Doc. 94-27665 Filed 11-7-94; 8:45 am]
BILLING CODE 4000-01-P
