[Federal Register Volume 64, Number 231 (Thursday, December 2, 1999)]
[Rules and Regulations]
[Pages 67501-67511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30896]
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LEGAL SERVICES CORPORATION
45 CFR Part 1641
Debarment, Suspension and Removal of Recipient Auditors
AGENCY: Legal Services Corporation.
ACTION: Final rule.
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SUMMARY: This rule implements a provision in the Legal Services
Corporation's (``Corporation'' or ``LSC'') fiscal year 1996 and
subsequent fiscal year appropriations acts which authorized the Office
of Inspector General (``OIG'') to remove, suspend, or bar an
independent public accountant, upon a showing of good cause, from
performing audit services . . . after notice to the auditor and an
opportunity for hearing. This rule sets out the debarment, suspension
and removal authority of the OIG and informs independent public
accountants performing audit services for LSC recipients of their
rights, and the standards that will apply, in connection with
debarment, suspension and removal actions.
DATES: This final rule is effective January 3, 2000.
FOR FURTHER INFORMATION CONTACT: Laurie Tarantowicz, Counsel, Office of
Inspector General, (202) 336-8830, LTarantowicz@oig.lsc.gov.
SUPPLEMENTARY INFORMATION: The Corporation's fiscal year 1996
appropriations act authorized the LSC Inspector General (``IG'') to
``remove, suspend, or bar an independent public accountant, upon a
showing of good cause, from performing audit services . . . after
notice to the auditor and an opportunity for hearing.'' Pub. L. No.
104-134, 110 Stat. 1321, Sec. 509(d) (1996). This provision has
continuing effect in fiscal years 1997, Pub. L. No. 104-208, 110 Stat.
3009, Sec. 503(a) (1996) and 1998, Pub. L. No. 105-119, 111 Stat. 2440
(1997), and 1999, Pub. L. No. 105-277 (1998). In accordance with the
statutory direction to ``develop and issue rules of practice,'' 110
Stat. 1321, Sec. 509(d), the OIG issues this rule. On September 11,
1998, the LSC Board of Directors' Operations and Regulations Committee
held public hearings on proposed 45 CFR Part 1641. The proposed rule
was published in the Federal Register on
[[Page 67502]]
February 5, 1999, was published on the OIG's website, and notification
was sent to recipient auditors. No comments were received. The
Committee again held public hearings on the proposed rule on April 16
and June 11, 1999. After making additional revisions to the rule, the
Committee recommended that the Board adopt the rule as final, which the
Board did on June 12, 1998.
Pursuant to Executive Order, the Federal government has a
government wide system of suspension and debarment. The Executive
Office of the President, Office of Management and Budget, has issued
guidance setting forth procedures for agencies to follow in
establishing procedures for making suspension and debarment decisions.
Policy Letter 82-1. Based on this guidance, agencies have promulgated
regulations, all substantially similar, implementing suspension and
debarment. These regulations have been developed after extensive public
comment and have withstood considerable judicial scrutiny. This rule is
based on the government wide system, but includes some modifications
based on the OIG's specific statutory authorization to debar, suspend
and remove, and on the particular circumstances of independent public
accountants and their relationship to LSC recipients.
Section-by-Section Analysis
Subpart A--General
Section 1641.1 Purpose/Applicability
Recipients are required by statute to have an annual audit
conducted by an independent public accountant (IPA). In order to assist
in ensuring that recipients receive acceptable audits, the OIG is
authorized to debar, suspend and remove IPAs from performing audit
services for recipients. This rule sets out that authority and informs
IPAs of their rights, and the standards that will apply, in connection
with debarment, suspension and removal actions.
This rule applies to IPAs performing audit services for all
entities that receive LSC funds, including subrecipients. This is
consistent with LSC's general policy extending the requirements and
restrictions applicable to recipients to entities that receive
transfers of LSC funds from recipients, see 45 CFR 1610.7, and with
LSC's regulation governing subgrants, 45 CFR Part 1627, which requires
subrecipients to obtain an audit in accordance with LSC's audit policy,
45 CFR 1627.3(c).
Section 1641.2 Definitions
This section defines the key terms used in the rule. Many of the
terms are defined in the rule as they are defined in the government
wide system.
Paragraph (a) defines ``adequate evidence,'' which is the standard
of proof for imposing a suspension, as information sufficient to
support the reasonable belief that a particular act or omission has
occurred. This is a less stringent standard than ``preponderance of the
evidence,'' the standard applicable to debarment and removal actions.
The courts have likened the adequate evidence standard to the probable
cause standard for obtaining a search warrant. See Electro-Methods,
Inc. v. United States, 728 F.2d 1471, 1473 (Fed. Cir. 1984); Horne
Brothers, Inc. v. Laird, 463 F.2d 1268, 1271 (D.C. Cir. 1972). Under
the Federal Acquisition Regulations (FAR), ``[i]n assessing the
adequacy of evidence, agencies should consider how much information is
available, how credible it is given the circumstances, whether or not
important allegations are corroborated, and what inferences can
reasonably be drawn as a result.'' 29 CFR 9.407-1(b)(1).
Paragraph (b) defines ``audit services.'' This section has been
modified from the proposed rule to expressly set out the elements of an
annual financial statement audit. This is the audit required by section
509(a) of LSC's fiscal year 1996 appropriations act. Section 509 of the
fiscal year 1996 appropriations act has been incorporated by reference
in subsequent fiscal year appropriations acts and continues to be
effective, see, e.g., Pub. L. No. 105-277 (1998). For ease of
reference, this provision of law is hereinafter referred to as
``section 509.'' Debarment, suspension and removal affects only the
ability of recipients to hire an IPA to perform ``audit services'' as
defined. Leaving aside the question of the wisdom of doing so, even if
the IPA is debarred, suspended or removed, a recipient may hire the IPA
to perform other services, such as, preparation of a tax return or
setting up the recipient's accounting system. Of course, recipients
should consider the fact of debarment, etc., when deciding whether to
hire an IPA to perform such other services.
Paragraph (c) defines ``contract'' as an agreement between a
recipient and an IPA for an IPA to provide audit services to the
recipient. Debarment and suspension affects future contracts between a
recipient and an IPA; removal affects existing contracts.
Paragraph (d) defines ``conviction'' as a judgment or conviction of
a criminal offense by any court, whether entered upon a verdict or
plea, including but not limited to pleas of nolo contendere. After some
consideration, the Committee decided that, in order to debar or remove
an IPA, a conviction must be final, see sections 1641.7 and 1641.18.
The conviction need not be final in order to suspend an IPA, see
section 1641.13.
An IPA may be debarred suspended or removed if convicted of any
offense indicating a breach of trust, dishonesty or lack of integrity,
or conspiracy to do the same, by any court, whether federal, state,
county or municipal. For examples of such offenses, see the discussion
under section 1641.7(d) of this section-by-section analysis.
Paragraph (e) defines ``debarment.'' Debarment is a decision by the
debarring official to prohibit an IPA from soliciting or entering into
new contracts to perform audit services for recipient(s). Debarment
does not affect existing contracts between a recipient and an IPA. A
debarment must be based on a finding, by a preponderance of the
evidence, that any of the causes for debarment exist. Debarment may
cover an IPA's contracts with all recipients or with one or more
specific recipients.
Paragraph (f) defines ``debarring official.'' This is the official
responsible for debarment, suspension or removal actions. In the normal
course, the OIG legal counsel will be the debarring official. The final
rule eliminates the authority of the OIG legal counsel to designate
another to act as the debarring official. Instead, the final rule
provides the Inspector General with the discretion to appoint another
OIG staff member or an individual outside the OIG as the debarring
official. The Inspector General would designate someone other than
legal counsel as the debarring official when there is no OIG legal
counsel or when the OIG legal counsel, in the judgment of the Inspector
General, should not serve as the debarring official because, for
example, there exists a conflict of interest.
An issue was raised concerning whether the debarring official
should in some cases be required to be an individual having no prior
involvement in the matter, e.g., a neutral independent hearing
examiner. Due process does not require this. See Note, Moving Toward a
Better-Defined Standard of Public Interest in Administrative Decisions
to Suspend Government Contractors, 36 Am. U. L. Rev. 693, n. 43 (citing
Schweiker v. McClure, 456 U.S. 188, 195 (1982) (presuming hearing
officers unbiased unless showing of specific reason for
disqualification); Withrow v. Larkin, 421 U.S. 35, 47 (1975) (stating
that combination of investigative and adjudicative function does not,
without
[[Page 67503]]
more, create unconstitutional risk of bias); Transco Sec., Inc. of Ohio
v. Freeman, 639 F.2d 318, 325 (6th Cir.) (holding high level
administrative review satisfies due process, neutral judicial officer
unnecessary), cert. denied, 454 U.S. 820 (1981)).
Paragraph (g) defines ``indictment'' for a criminal offense. This
definition was modified to make clear that an information, presentment,
or other filing by competent authority charging a criminal offense
shall be given the same effect as an indictment. An IPA may be
suspended if indicted for any offense indicating a breach of trust,
dishonesty or lack of integrity, or conspiracy to do the same.
Paragraph (h) defines ``IPA.'' This definition was modified to
clarify that IPA means either an individual independent public
accountant or a firm of accountants.
Paragraph (i) defines ``knowingly'' to mean that an act was done
voluntarily and intentionally and not because of mistake or accident.
This term is used in the rule in the context of prohibiting recipients
from knowingly awarding contracts to, extending or modifying existing
contracts with, or soliciting proposals from IPAs that have been
debarred or suspended.
Paragraph (j) defines ``material fact'' as one which is necessary
to determine the outcome of an issue or case and without which the case
could not be supported. In certain respects, whether material facts are
in dispute determines the extent of the procedures afforded the IPA
under the rule. For example, if the debarring official determines that
the IPA's response to the notice of proposed debarment does not raise a
genuine issue of material fact, the debarment proceeding will be
conducted entirely by written submissions.
Paragraph (k) defines ``person.'' The definition of this term was
added to the final rule to clarify that the term, particularly in its
use in the definition of ``indictment,'' means an individual or a firm,
partnership, corporation, association, or other legal entity.
Paragraph (l) defines ``preponderance of the evidence,'' which is
the standard of proof for imposing a debarment or removal, as proof by
information that, compared with that opposing it, leads to the
conclusion that the fact at issue is more probably true than not. This
is a more stringent standard than ``adequate evidence,'' the standard
applicable to suspension actions.
Paragraph (m) defines ``removal.'' Removal is a decision by the
debarring official to prohibit an IPA from performing audit services in
subsequent years of an existing contract. Suppose, for example, that a
recipient has entered into a contract with an IPA under which the IPA
will perform an audit of the recipient for years 1, 2 and 3. If the IPA
is conducting the year-1 audit of the recipient when the IPA is removed
by the OIG, removal of the IPA will not prohibit the IPA from
completing the year-1 audit. Removal will prohibit the IPA from
conducting the year-2 and year-3 audits. Removal must be based on a
finding, by a preponderance of the evidence that any of the causes for
removal exist. Removal may cover an IPA's contracts with one or more
recipients.
Paragraph (n) defines ``suspension.'' This paragraph was modified
in the final rule to clarify that suspension is a decision by the
debarring official prohibiting an IPA from soliciting or entering into
new contracts to perform audit services for recipient(s). Suspension
does not affect existing contracts between recipients and IPAs. A
suspension must be supported by adequate evidence. Suspension may
preclude an IPA from soliciting or entering into new contracts with all
recipients or with one or more specific recipients.
Section 1641.3 Scope of Debarment, Suspension and Removal
This section sets out the scope of debarment, suspension or
removal; that is, the effect of such action on the IPA and, for
example, the IPA's divisions and affiliates.
Debarment, suspension or removal of an individual IPA prohibits
that IPA from performing audit services as an individual or as an
employee, independent contractor, agent or other representative of an
IPA firm.
This section has been reworded to clarify that a debarment,
suspension, or removal shall have an impact on only those
organizational elements of an IPA firm which were materially involved
in the relevant engagement. Extending the debarment to other
organizational elements would go beyond what is necessary to achieve
the purposes of debarment, suspension or removal.
If there is a cause to debar, suspend, or remove, the OIG may
include in its debarment, suspension or removal of an IPA firm any firm
that is an affiliate, subcontractor, joint venturer, agent or
representative of the IPA firm. An affiliate, etc., may be included in
the decision only if such firm was materially involved in the relevant
engagement and only if such affiliate, etc., was specifically named and
given notice of the proposed action and an opportunity to respond.
Similarly, the OIG may include in its debarment, suspension or
removal of an IPA firm the individual officer, director or partner
responsible for the engagement, or an individual employee, independent
contract or, agent, representative or other individual associated with
the IPA firm. Such individuals may be included in the decision only if
specifically named and given notice of the proposed action and an
opportunity to respond. If not named in the decision, such individuals
would be prohibited from performing audit services only as a
representative of the debarred firm. Otherwise, such individuals are
not prohibited from performing audit services.
Section 1641.4 Duration of Debarment, Suspension and Removal
This section provides that a debarment, suspension or removal only
becomes effective after the IPA has been provided the opportunity to
avail itself of the procedures outlined in this rule (notice and an
opportunity to be heard) and a decision is issued by the debarring
official.
Subsection (a) sets out the length of time that a debarment will be
effective. Generally, a debarment should not exceed three years.
Debarment may be effective for less than three years if appropriate
after consideration of the evidence presented by the IPA. Debarment may
exceed three years in extraordinary circumstances. A longer period may
be appropriate, for example, if an IPA has been debarred by a Federal
agency for a longer period, see section 1641.7(b), or if an IPA has
been convicted of an offense referred to in section 1641.7(d) and will
be incarcerated for a period exceeding three years. If a suspension
precedes a debarment, the suspension period will be considered in
determining the debarment period and the debarment may be effective for
less than three years.
After debarment for a specified period has been instituted, the
debarring official may extend the debarment for an additional period if
necessary to protect LSC funds. The debarment period may not be
extended based solely on the facts and circumstances upon which the
initial debarment was based, but must be based on new facts, not
previously in the record, and will be effective only after the
procedures outlined in the rule have been followed.
Subsection (b) defines the duration of suspension. A suspension is
a temporary measure, which may be instituted while debarment
proceedings are being conducted. This subsection has been modified in
the final rule to
[[Page 67504]]
clarify that, if a cause for suspension exists, but an investigation or
other legal or debarment proceedings should be completed prior to the
initiation of a debarment, an IPA may be suspended pending the
completion of such investigation or proceedings. This could occur, for
example: pending completion of an investigation conducted by either the
OIG or other authority, pending completion of a debarment proceeding
conducted by a Federal agency, pending the outcome of a criminal
prosecution, or pending the outcome of proceedings conducted by a
sanctioning or licensing body with authority over IPAs, such as the
American Institute of Certified Public Accountants (AICPA) or a State
Board of Accountancy. If debarment proceedings are not initiated within
12 months after the date of the suspension notice, the suspension shall
be terminated. However, if a law enforcement official, including the
police or a prosecuting authority, an official from another OIG, a
state licensing body or other organization with authority over IPAs, or
a government agency requests an extension of the suspension in writing,
the suspension may be extended. This subsection also has been modified
to clarify that the OIG shall notify such officials or organizations of
the suspension and of its pending termination. Unless a debarment has
been initiated, a suspension may not be imposed for more than 18
months.
Subsection (c) defines the duration of removal. A removal is
effective for the years remaining on the existing contract between the
IPA and the recipient. Because removal affects existing contracts,
there is an obvious concern that removal might cause financial harm to
the recipient. Although current contracts between recipients and their
IPAs may vary, the sample contract included as an appendix to the Audit
Guide for Recipients and Auditors (Audit Guide) contains a provision
which may be interpreted to allow the recipient to end its relationship
with the IPA in the event of removal, see Audit Guide, Appendix B. To
clearly address removal (and recognize debarment and suspension), the
OIG intends to notify recipients that contracts with IPAs should
specifically address this potentiality. In the meantime, if a removal
action is considered against an IPA with a current contract that does
not include such a term, the OIG will consider this when contemplating
removal of the IPA.
Subpart B--Debarment
Section 1641.5 Debarment
The OIG may debar an IPA from performing audit services to all
recipients or may debar an IPA from performing audit services for one
or more specific recipients. This section informs the IPA and
recipients of the effect of both types of debarment. Recipients are
prohibited from knowingly awarding contracts to, extending or modifying
existing contracts with, or soliciting proposals from debarred IPAs.
Although IPAs debarred from providing audit services to selected
recipients may contract with other recipients, the IPA must give prior
written notice to the debarring official before providing such services
to other recipients. In addition, the debarred IPA is required to
provide prior written notice of the debarment to any recipient seeking
its services. Minor clarifying changes were made to this section.
Section 1641.6 Procedures for Debarment
This section sets out the general procedures for debarment. The
specific procedures are set out more fully in subsequent sections. The
OIG shall provide an IPA with an opportunity to be heard prior to
debarring the IPA. Such hearing will consist entirely of written
submissions unless the debarring official finds that there is a genuine
dispute of material fact. In addition, an informal meeting may be held
between the debarring official and the IPA.
Section 1641.7 Causes for Debarment
The subsections in this section set out the causes for debarment.
The causes are based on those set out in the government wide system,
but have been modified to recognize the particular circumstances of
IPAs performing audits of LSC recipients. The existence of a cause for
debarment does not necessarily require that the IPA be debarred; the
seriousness of the IPA's acts or omissions and any mitigating
circumstances shall be considered in making any debarment decisions.
Subsection (a) allows the OIG to debar an IPA that has failed
significantly to comply with government auditing standards established
by the Comptroller General of the United States, generally accepted
auditing standards and/or OIG audit guidance. Under section 509, LSC
recipients are required to have audits conducted in accordance with
guidance established by the OIG. Such guidance appears in the OIG Audit
Guide, including the Compliance Supplement for Audits of LSC
Recipients, and audit bulletins issued by the OIG. The OIG audit
guidance incorporates government auditing standards. Under the IG Act,
the OIG is required to ensure that audits are conducted in accordance
with government auditing standards (established by the Comptroller
General). In determining whether there is a failure to comply with
standards or OIG audit guidance, the OIG primarily will be concerned
about the effect of the failure on the reliability of the audit report.
Minor clarifying edits were made to this subsection.
Subsection (b) allows debarment when an IPA is currently debarred
from contracting with any Federal agency or entity receiving Federal
funds. This would include, for example, when the IPA has been debarred
consistent with the government wide system for debarment. The proposed
rule included suspension as well as debarment from government
contracting as a cause for debarment. The Committee determined that a
suspension was not a sufficient cause for debarment and deleted
reference to suspension.
Subsection (c) allows debarment if the IPA's license to practice
accounting has been revoked, terminated or suspended by a state
licensing body or other organization with authority over IPAs.
Subsection (d) allows debarment if the IPA has been convicted of
any offense indicating a breach of trust, dishonesty or lack of
integrity, or conspiracy to do the same. Offenses indicating a breach
of trust, dishonesty or lack of integrity include, for example, fraud,
embezzlement, theft, forgery, bribery, falsification or destruction of
records, making false statements, making false claims, or receiving
stolen property. This section has been modified: a conviction is a
cause for debarment only if the conviction is final. A conviction is
final when all appeals have been exhausted or the time for appeal has
expired.
Subsection (e) allows debarment if the IPA has been found subject
to a civil judgment for any action indicating a breach of trust,
dishonesty or lack of integrity, or conspiracy to do the same. This
section has been modified: a civil judgment is cause for debarment only
when the judgment is final. A civil judgment is final when all appeals
have been exhausted or the time for appeal has expired.
Section 1641.8 Notice of Proposed Debarment
This section sets out the information which must be included in the
notice of proposed debarment sent to the IPA. Because the IPA will have
a specified
[[Page 67505]]
time from receipt of the notice to respond, see section 1641.9, notice
will be sent in a way that ensures that the OIG receives evidence of
the IPA's receipt of the notice. Thus, for example, the OIG may send
the notice via certified mail, return receipt requested, or via Federal
Express, requiring that the recipient sign to evidence receipt, or by
any other means that will provide evidence that the specific addressee
has received the notice. Although the notice may be sent via electronic
mail, that shall not be the only means by which notice is sent. Under
this section, a copy of the notice is sent to any affected recipient
and the recipient may comment on the proposed action within the time
that the IPA has to respond under section 1641.9.
Section 1641.9 Response to Notice of Proposed Debarment
This section gives the IPA 30 days from receipt of the notice
within which to respond. Such response must be in writing and should
include information and argument in opposition to the proposed
debarment. The response may request a meeting with the debarring
official to permit the IPA to discuss issues of fact or law relating to
the proposed debarment or to otherwise resolve the matter. Although the
meeting shall take such form as the debarring official deems
appropriate, the IPA may request an in person meeting. Any in person
meeting shall be held at LSC headquarters. The meeting must be held
within 20 days of the response. Under subsection (d), if the IPA fails
to respond to the notice, this shall be deemed an admission of the
existence of the cause(s) for debarment set out in the notice and an
acceptance of the period of debarment, and the debarring official may
enter a final decision without further proceedings. Minor clarifying
edits were made to this section.
Section 1641.10 Additional Proceedings as to Disputed Material Facts
If the debarring official finds that the IPA's submission raises a
genuine dispute of material fact and the action is not based on a
conviction or civil judgment under section 1641.7(d) or (e), the IPA
will be afforded an opportunity to appear (with counsel), submit
documentary evidence, present witnesses, and confront any witnesses the
OIG presents. When there is no genuine dispute of material fact, an
evidentiary hearing is not warranted. In the case of a conviction or
civil judgment, the facts underlying the conviction or civil judgment
would have been fully adjudicated in another forum and a hearing on
those facts would be inappropriate. In addition, there should be no
dispute about the existence of the conviction or civil judgment.
If, on the other hand, the debarring official finds that the IPA's
submission does not raise a genuine issue of material fact, no such
additional proceedings will be provided and the hearing shall be held
entirely by written submissions (except to the extent a meeting is held
under section 1641.9(c)).
If additional proceedings are to be held, the IPA shall be
notified, and such notice shall identify the procedures under which the
proceeding will be conducted. A transcribed record of such proceedings
shall be prepared, with a copy provided to the IPA without cost. At the
debarring official's discretion, disputed material facts may be
referred to a fact finder for fact finding, analysis and
recommendation. Such fact finder need not be a member of the OIG staff.
Minor clarifying edits were made to this section.
Subpart C--Suspension
The sections in this subpart set out the causes, procedures and
effect of a suspension. Suspension procedures are similar to those for
debarment. However, the procedures have been streamlined by shortening
the time periods and providing for a strictly show cause procedure,
entirely by written submissions, except that an informal meeting may be
held. Because suspension procedures are similar to debarment
procedures, the proposed rule used incorporation by reference to the
debarment procedures. After consideration, the Committee determined
that in most cases, this either did not work or was not clear.
Therefore, the final rule sets out the procedures more fully than did
the proposed rule.
Section 1641.11 Suspension
The OIG may suspend an IPA from performing audit services to all
recipients or may suspend an IPA from performing audit services for one
or more specific recipients. This section informs the IPA and
recipients of the effect of both types of suspension.
Section 1641.12 Procedures for Suspension
Before suspending an IPA, the OIG will provide a show cause hearing
held entirely by written submissions (except that a meeting between the
IPA and the debarring official may be held). The specific procedures
are set out more fully in subsequent sections.
Section 1641.13 Causes for Suspension
The causes for suspension are similar to those for debarment. In a
suspension, however, there must be adequate evidence that the cause(s)
may exist, rather than a preponderance of the evidence that the
cause(s) do exist as in debarment. In addition, an indictment for or
conviction of the listed types of offenses, rather than a final
conviction, is sufficient cause for suspension, as is the described
type of civil judgment, whether or not the judgment is final. Finally,
a suspension, rather than a debarment, from contracting with a Federal
agency or entity receiving Federal funds is sufficient cause for
suspension.
Section 1641.14 Notice of Proposed Suspension
The notice for suspension is similar to that for debarment. A
suspension notice, however, includes a directive, returnable in 10
days, to show cause why a suspension should not be instituted.
Section 1641.15 Response to Notice of Proposed Suspension
The IPA's response to the notice of proposed suspension must be
received within 10 days of receipt of the notice. The response should
contain information similar to that discussed under section 1641.9
relating to debarment. Similar provisions allow for a meeting between
the IPA and the debarring official and describe the effect of not
responding. This section contains one modification. The Committee felt
that, in order for a law enforcement or other official to prevent a
meeting between the IPA and the OIG, a proceeding (including an
investigation or other legal or debarment proceeding) involving the IPA
should be pending, rather than merely contemplated.
Subpart D--Removal
Because removal procedures are similar to debarment procedures, the
proposed rule used incorporation by reference to the debarment
procedures. After consideration, the Committee determined that in most
cases, this either did not work or was not clear. Therefore, the final
rule sets out the procedures more fully than did the proposed rule.
Section 1641.16 Removal
The OIG may remove an IPA from performing audit services for one or
more recipients. This section informs the IPA and recipients of the
effect of a removal. Removed IPAs are prohibited from performing audit
services for subsequent years under an existing
[[Page 67506]]
contract. Recipients, moreover, are prohibited from extending existing
contracts with removed IPAs. It is likely that the OIG would
simultaneously debar (or prohibit the IPA from entering into future
contracts with recipients) and remove the IPA, see section 1641.17(b).
Absent complete debarment, IPAs removed from providing audit services
to selected recipients may contract with other recipients. The IPA,
however, must give prior written notice to the debarring official
before providing such services to other recipients. In addition, the
removed IPA is required to provide prior written notice of the removal
to any recipient seeking its services.
Section 1641.17 Procedures for Removal
This section sets out the general procedures for removal. The
specific procedures are set out more fully in subsequent sections. The
OIG shall provide an IPA with an opportunity to be heard prior to
removing the IPA. Such hearing will be held entirely by written
submissions unless the debarring official finds that there is a genuine
dispute of material fact. In addition, an informal meeting may be held
between the debarring official and the IPA. This section also puts IPAs
on notice that a Notice of Proposed Removal normally will be
accompanied by a Notice of Proposed Debarment, and that the proceedings
may be consolidated.
Section 1641.18 Causes for Removal
This section sets out the causes for removal. The causes for
removal are the same as the causes for debarment (section 1641.7).
Section 1641.19 Notice of Proposed Removal
Notice required for removal is similar to that required for
debarment (section 1641.8).
Section 1641.20 Response to Notice of Proposed Removal
The response to the notice of proposed removal should contain
information similar to that which would be submitted in response to a
notice of debarment. Unlike debarment, which may be effective for
varying periods of time, a removal, by definition, is for the years
remaining on an existing contract. The response to a notice of removal,
therefore, will not include argument in mitigation of the period of
removal, as it would in the case of debarment.
Section 1641.21 Additional Proceedings as to Disputed Material Facts
If the debarring official finds that the IPA's submission raises a
genuine dispute of material fact and the action is not based on a
conviction or civil judgment under section 1641.18(d) or (e), the IPA
will be afforded an opportunity to appear (with counsel), submit
documentary evidence, present witnesses, and confront any witnesses the
OIG presents. When there is no genuine dispute of material fact, an
evidentiary hearing is not warranted.
Subpart E--Decisions
Section 1641.22 Decisions of Debarring Official
This section provides information relevant to the debarring
official's decision on debarment, suspension or removal.
Subsection (a) sets out the standard of proof for debarment and
removal (preponderance of the evidence) and for suspension (adequate
evidence).
Subsection (b) sets out the information that will be included in
the administrative record, which will form the basis for the decision.
This subsection has been modified in the final rule to remove
redundancies and to make clear what the administrative record will
consist of in cases in which additional proceedings under section
1641.10 or section 1641.21 are conducted.
Subsection (c) notifies IPAs that the failure of the OIG to meet a
time requirement does not preclude the OIG from taking the debarment,
suspension or removal action. This subsection has been modified to
allow the OIG limited discretion to waive a time requirement placed on
the IPA by this rule.
Subsection (d) sets forth the information that will be contained in
the debarring official's decision. Among other things, this includes
notifying the IPA that the decision will become a matter of public
record. In the government wide system for suspension and debarment, the
General Services Administration (GSA) is required to maintain and
distribute a current list of all entities debarred or suspended by
Federal agencies or by the General Accounting Office (GAO). Although we
cannot include IPAs debarred by the OIG debars on this GSA list, the
OIG plans to maintain a list of debarred, suspended and removed IPAs,
to distribute the list to recipients, and to maintain the list on the
OIG website.
Subsection (e) sets out the debarring official's authority to
withdraw the notice of debarment, suspension or removal, where
appropriate, or to terminate the proceedings, and subsection (f) sets
out the debarring official's authority to settle the action and to
place appropriate conditions on the IPA.
Section 1641.23 Exceptions to Debarment, Suspension and Removal
In unique circumstances, when there are compelling reasons to use a
particular IPA for a specific task, the recipient requiring such
services may submit to the OIG a request to except the IPA from the
effects of the debarment, suspension or removal. The Inspector General
may provide an exception for a particular contract upon a written
determination that a compelling reason exists for using the IPA in a
particular instance. Under certain circumstances, a compelling reason
may be that the recipient is in a rural area and there are no other
IPAs within a reasonable distance from the recipient.
Section 1641.24 Appeal and Reconsideration of Debarring Official
Decisions
This section allows for appeal or reconsideration of the debarring
official's decision to debar, suspend or remove an IPA. The section has
been modified in the final rule to make clear that if any relief is
granted upon appeal or reconsideration, the relief shall be limited to
that granted in the decision on appeal or reconsideration. The section
also has been modified to make it consistent with the Committee's
determination that an IPA may be debarred or removed based on a
conviction or civil judgment only when the conviction or judgment is
final. Thus, those subsections dealing with reconsideration based on
the reversal of a conviction or civil judgment have been modified to
make clear that this ground for reconsideration applies only to
suspensions.
Appeals are decided by the Inspector General, who may uphold,
reverse or modify the debarring official's decision. A written appeal
may be filed by a debarred or removed IPA within 30 days of receipt of
the decision and by a suspended IPA within 15 days of receipt. At his
discretion, the Inspector General may stay the effect of the debarring
official's decision pending the conclusion of review, after determining
that a compelling reason to do so exists.
Requests for reconsideration are decided by the debarring official.
Such requests must be in writing and supported by documentation
justifying the action on reconsideration. Modification of the decision
on
[[Page 67507]]
reconsideration is appropriate only in the circumstances set out in the
rule.
List of Subjects in 45 CFR Part 1641
Accounting, Grant programs, Hearing and appeal procedures, Legal
services.
For reasons set forth in the preamble, LSC amends Chapter XVI of
Title 45 by adding part 1641 as follows:
PART 1641--DEBARMENT, SUSPENSION AND REMOVAL OF RECIPIENT AUDITORS
Subpart A--General
Sec.
1641.1 Purpose/Applicability.
1641.2 Definitions.
1641.3 Scope of debarment, suspension and removal.
1641.4 Duration of debarment, suspension and removal.
Subpart B--Debarment
1641.5 Debarment.
1641.6 Procedures for debarment.
1641.7 Causes for debarment.
1641.8 Notice of proposed debarment.
1641.9 Response to notice of proposed debarment.
1641.10 Additional proceedings as to disputed material facts.
Subpart C--Suspension
1641.11 Suspension.
1641.12 Procedures for suspension.
1641.13 Causes for suspension.
1641.14 Notice of proposed suspension.
1641.15 Response to notice of proposed suspension.
Subpart D--Removal
1641.16 Removal.
1641.17 Procedures for removal.
1641.18 Causes for removal.
1641.19 Notice of proposed removal.
1641.20 Response to notice of proposed removal.
1641.21 Additional proceedings as to disputed material facts.
Subpart E--Decisions
1641.22 Decisions of debarring official.
1641.23 Exceptions to debarment, suspension and removal.
1641.24 Appeal and reconsideration of debarring official decisions.
Authority: 42 U.S.C. 2996e(g); Pub. L. 105-277.
Subpart A--General
Sec. 1641.1 Purpose/Applicability.
In order to assist in ensuring that recipients receive acceptable
audits, this part sets out the authority of the Legal Services
Corporation (``LSC'') Office of Inspector General (``OIG'') to debar,
suspend or remove independent public accountants (``IPAs'') from
performing audit services for recipients. This rule informs IPAs of
their rights to notice and an opportunity to be heard on actions
involving debarment, suspension or removal, and the standards upon
which such actions will be taken. This part applies to IPAs performing
audit services for recipients, subrecipients or other entities which
receive LSC funds and are required to have an audit performed in
accordance with guidance promulgated by the OIG.
Sec. 1641.2 Definitions.
Adequate evidence means information sufficient to support the
reasonable belief that a particular act or omission has occurred.
Audit services means the annual financial statement audit of a
recipient, including an audit of the recipient's financial statements,
systems of internal control, and compliance with laws and regulations.
Contract means an agreement between a recipient and an IPA for an
IPA to provide audit services to the recipient.
Conviction means a judgment or conviction of a criminal offense by
any court, whether entered upon a verdict or plea, including but not
limited to, pleas of nolo contendere.
Debarment means a decision by the debarring official to prohibit an
IPA from soliciting or entering into new contracts to perform audit
services for recipient(s) based upon a finding by a preponderance of
the evidence that any of the causes for debarment set out in
Sec. 1641.7 exist. Debarment may cover an IPA's contracts with all
recipients or with one or more specific recipients.
Debarring official is the official responsible for debarment,
suspension or removal actions under this part. The OIG legal counsel is
the debarring official. In the absence of an OIG legal counsel or in
the discretion of the Inspector General, the debarring official shall
be the OIG staff person or other individual designated by the Inspector
General.
Indictment means a charge by a grand jury that the person named
therein has committed a criminal offense. An information, presentment,
or other filing by competent authority charging a criminal offense
shall be given the same effect as an indictment.
IPA means an independent public accountant or firm of accountants.
Knowingly means that an act was done voluntarily and intentionally
and not because of mistake or accident.
Material fact means one which is necessary to determine the outcome
of an issue or case and without which the case could not be supported.
Person means an individual or a firm, partnership, corporation,
association, or other legal entity.
Preponderance of the evidence means proof by information that,
compared with that opposing it, leads to the conclusion that the fact
at issue is more probably true than not.
Removal means a decision by the debarring official to prohibit an
IPA from performing audit services in subsequent years of an existing
contract with one or more specific recipients based upon a finding by a
preponderance of the evidence that any of the causes set out in
Sec. 1641.18 exist.
Suspension means a decision by the debarring official, in
anticipation of a debarment, to prohibit an IPA from soliciting or
entering into new contracts to perform audit services for recipient(s)
based upon a finding of adequate evidence that any of the causes
referred to in Sec. 1641.13 exist. Suspension may preclude an IPA from
soliciting or entering into new contracts with all recipients or with
one or more specific recipients.
Sec. 1641.3 Scope of debarment, suspension and removal.
An IPA may be debarred, suspended or removed under this part only
if the IPA is specifically named and given notice of the proposed
action and an opportunity to respond in accordance with this part.
(a) Actions against individual IPAs. Debarment, suspension or
removal of an individual IPA, debars, suspends or removes that
individual from performing audit services as an individual or as an
employee, independent contractor, agent or other representative of an
IPA firm.
(b) Actions against IPA firms. (1) Debarment, suspension or removal
shall affect only those divisions or other organizational elements
materially involved in the relevant engagement and as to which there is
cause to debar, suspend or remove.
(2) The debarment, suspension or removal action contemplated in
paragraph (b)(1) of this section may include any firm that is an
affiliate, subcontractor, joint venturer, agent or representative of
the IPA firm only if such firm was materially involved in the relevant
engagement and is specifically named and given notice of the proposed
action and an opportunity to respond in accordance with this part.
(3) The debarment, suspension or removal action contemplated in
paragraph (b)(1) of this section may include an individual officer,
director, or partner responsible for the engagement, or an individual
employee, independent contractor, agent, representative or other
individual associated with an IPA firm only if such individual is
specifically named and given notice of the proposed action and
[[Page 67508]]
an opportunity to respond in accordance with this part.
Sec. 1641.4 Duration of debarment, suspension and removal.
A debarment, suspension or removal is effective as set out in the
debarring official's decision to debar, suspend or remove, issued
pursuant to Sec. 1641.22.
(a) Debarment. (1) Debarment generally should not exceed three
years, but may be for a shorter period based on a consideration of the
evidence presented by the IPA. Debarment may exceed three years in
extraordinary circumstances.
(2) If a suspension precedes a debarment, the suspension period
shall be considered in determining the debarment period.
(3) The debarring official may extend an existing debarment for an
additional period if the debarring official determines, based on
additional facts not previously in the record, that an extension is
necessary to protect LSC funds. The standards and procedures in this
part shall be applied in any proceeding to extend a debarment.
(b) Suspension. (1) The debarring official may determine that a
cause for suspension exists, but that an investigation or other legal
or debarment proceeding should be completed before proceeding to a
debarment. Suspension shall be for a temporary period pending the
completion of an investigation or other legal or debarment proceedings,
including a proceeding conducted by the OIG, a law enforcement or other
government agency, an investigative or audit official from another OIG,
a court, or a state licensing body or other organization with authority
over IPAs.
(2) If debarment proceedings are not initiated within 12 months
after the date of the suspension notice, the suspension shall be
terminated unless an official or organization conducting a proceeding
referred to in paragraph (b)(1) of this section requests its extension
in writing. In such cases, the suspension may be extended up to an
additional six months. In no event may a suspension be imposed for more
than 18 months, unless debarment proceedings have been initiated within
that period.
(3) The OIG shall notify the appropriate official or organization
conducting a proceeding referred to in paragraph (b)(1) of this
section, if any, of the suspension within 10 days of its
implementation, and shall notify such official or organization of an
impending termination of a suspension at least 30 days before the 12-
month period expires to allow an opportunity to request an extension.
(4) The limit on the duration of a suspension in paragraph (b)(2)
of this section may be waived by the affected IPA.
(c) Removal. Removal shall be effective for the years remaining on
the existing contract(s) between the IPA and the recipient(s).
Subpart B--Debarment
Sec. 1641.5 Debarment.
(a) IPAs debarred from providing audit services for all recipients
are prohibited from soliciting or entering into any new contracts for
audit services with recipients for the duration of the specified period
of debarment. Recipients shall not knowingly award contracts to, extend
or modify existing contracts with, or solicit proposals from, such
IPAs. Debarred IPAs also are prohibited from providing audit services
to recipients as agents or representatives of other IPAs.
(b) IPAs debarred from providing audit services for one or more
specific recipient(s) are prohibited from soliciting or entering into
any new contracts for audit services with such recipient(s) for the
duration of the period of debarment as determined pursuant to this
part. The affected recipient(s) shall not knowingly award contracts to,
extend or modify existing contracts with, or solicit proposals from,
such IPAs. Debarred IPAs also are prohibited from providing audit
services to the affected recipient(s) as agents or representatives of
other IPAs, and are required to provide prior written notice to the
debarring official before providing such services to other recipients.
Debarred IPAs also must provide prior written notice of the debarment
to any recipient for which the IPA provides audit services.
Sec. 1641.6 Procedures for debarment.
Before debarring an IPA, the OIG shall provide the IPA with a
hearing in accordance with the procedures set out in Secs. 1641.7
through 1641.9. Such hearing shall be held entirely by written
submissions, except:
(a) Additional proceedings shall be held under Sec. 1641.10 if the
debarring official finds there is a genuine dispute of material fact;
and/or
(b) A meeting may be held under Sec. 1641.9(c).
Sec. 1641.7 Causes for debarment.
The debarring official may debar an IPA from performing audit
services in accordance with the procedures set forth in this part upon
a finding by a preponderance of the evidence that:
(a) The IPA has failed significantly to comply with government
auditing standards established by the Comptroller General of the United
States, generally accepted auditing standards and/or OIG audit guidance
as stated in the OIG Audit Guide for Recipients and Auditors, including
the Compliance Supplement for Audits of LSC Recipients, and in OIG
Audit Bulletins;
(b) The IPA is currently debarred from contracting with any Federal
agency or entity receiving Federal funds, including when the IPA has
stipulated to such debarment;
(c) The IPA's license to practice accounting has been revoked,
terminated or suspended by a state licensing body or other organization
with authority over IPAs;
(d) The IPA has been convicted of any offense indicating a breach
of trust, dishonesty or lack of integrity, or conspiracy to commit such
an offense, and the conviction is final; or
(e) The IPA has been found subject to a civil judgment for any
action indicating a breach of trust, dishonesty or lack of integrity,
or conspiracy to take such action, and the judgment is final.
Sec. 1641.8 Notice of proposed debarment.
(a) Before debarring an IPA, the OIG shall send the IPA written
notice of the proposed debarment. The notice shall be sent in a manner
that provides evidence of its receipt and shall:
(1) State that debarment is being considered;
(2) Identify the reasons for the proposed debarment sufficient to
put the IPA on notice of the conduct or transaction(s) upon which a
debarment proceeding is based;
(3) Identify the regulatory provisions governing the debarment
proceeding; and
(4) State that debarment may be for a period of up to three years
or longer under extraordinary circumstances. If the OIG has determined
that extraordinary circumstances warranting debarment in excess of
three years may exist, the notice shall so state.
(b) A copy of the notice also shall be sent to the affected
recipient(s), if any, which may comment on the proposed action in the
time frame set out in Sec. 1641.9.
Sec. 1641.9 Response to notice of proposed debarment.
(a) The IPA shall have 30 days from receipt of the notice within
which to respond.
(b) The response shall be in writing and may include information
and argument in opposition to the proposed debarment, including any
additional specific information pertaining to the
[[Page 67509]]
possible causes for debarment, and information and argument in
mitigation of the proposed period of debarment.
(c) The response may request a meeting with the debarring official
to permit the IPA to discuss issues of fact or law relating to the
proposed debarment, or to otherwise resolve the pending matters. Any
such meeting shall take the form that the debarring official deems
appropriate and shall be held within 20 days of the response. If the
IPA requests an in person meeting, it shall be held at LSC
headquarters.
(d) Failure to respond to the notice shall be deemed an admission
of the existence of the cause(s) for debarment set forth in the notice
and an acceptance of the period of debarment. In such circumstances,
without further proceedings, the debarring official may enter a final
decision stating the period of debarment.
Sec. 1641.10 Additional proceedings as to disputed material facts.
(a) In actions not based upon a conviction or civil judgment under
Sec. 1641.7 (d) or (e), if the debarring official finds that the IPA's
submission raises a genuine dispute of material fact, the IPA shall be
afforded an opportunity to appear (with counsel, if desired), submit
documentary evidence, present witnesses, and confront any witnesses the
OIG presents. If the debarring official finds that the IPA's submission
does not raise a genuine issue of material fact, additional proceedings
will not be provided. In such case, the hearing shall be held entirely
by written submissions, except that a meeting may be held under
Sec. 1641.9(c).
(b) If the debarring official determines additional proceedings to
be warranted, OIG shall notify the IPA. Such notice shall include
notice of the procedures under which such proceedings shall be
conducted.
(c) A transcribed record of any additional proceedings shall be
prepared and a copy shall be made available to the IPA without cost.
(d) The debarring official may refer disputed material facts to a
fact finder, who need not be a member of the OIG staff, for fact
finding, analysis and recommendation.
Subpart C--Suspension
Sec. 1641.11 Suspension.
(a) IPAs suspended from providing audit services for all recipients
are prohibited from soliciting or entering into any new contracts for
audit services with recipients for the duration of the suspension.
Recipients shall not knowingly award contracts to, extend or modify
existing contracts with, or solicit proposals from, such IPAs.
Suspended IPAs also are prohibited from providing audit services to
recipients as agents or representatives of other IPAs.
(b) IPAs suspended from providing audit services for one or more
specific recipient(s) are prohibited from soliciting or entering into
any new contracts for audit services with such recipient(s) for the
duration of the period of suspension as determined pursuant to this
part. The affected recipient(s) shall not knowingly award contracts to,
extend or modify existing contracts with, or solicit proposals from,
such IPAs. Suspended IPAs also are prohibited from providing audit
services to the affected recipient(s) as agents or representatives of
other IPAs, and are required to provide prior written notice to the
debarring official before providing such services to other recipients.
Suspended IPAs also must provide prior written notice of the suspension
to any recipient for which the IPA provides audit services.
Sec. 1641.12 Procedures for suspension.
Before suspending an IPA, the OIG shall provide the IPA with a show
cause hearing in accordance with the procedures set out in
Secs. 1641.13 through 1641.15. Such hearing shall be held entirely by
written submissions, except that a meeting may be held under
Sec. 1641.15(c).
Sec. 1641.13 Causes for suspension.
The debarring official may suspend an IPA in accordance with the
procedures set forth in this part upon adequate evidence that:
(a) A cause for debarment under Sec. 1641.7 may exist;
(b) The IPA has been indicted for or convicted of any offense
described in Sec. 1641.7;
(c) The IPA has been found subject to a civil judgment described in
Sec. 1641.7(e), whether the judgment is final or not.
(d) The IPA has been suspended from contracting with a Federal
agency or entity receiving Federal funds including when the IPA has
stipulated to the suspension.
Sec. 1641.14 Notice of proposed suspension.
(a) Before suspending an IPA, OIG shall send it written notice of
cause to suspend. Such notice shall:
(1) Include a directive to show cause, signed by the debarring
official, which shall inform the IPA that unless the IPA responds
within 10 days as provided in Sec. 1641.15, a suspension will be
imposed;
(2) Identify the reasons for the proposed suspension sufficient to
put the IPA on notice of the conduct or transaction(s) upon which a
suspension proceeding is based;
(3) Identify the regulatory provisions governing the suspension
proceeding; and
(4) State that, if imposed, the suspension shall be for a temporary
period pending the completion of a investigation or other legal or
debarment proceeding.
(b) A copy of the notice also shall be sent to the affected
recipient(s), if any, who may comment on the proposed action in the
time frame set out in Sec. 1641.15.
Sec. 1641.15 Response to notice of proposed suspension.
(a) The IPA shall have 10 days from receipt of the notice within
which to respond.
(b) The response shall be in writing and may include information
and argument in opposition to the proposed suspension, including any
additional specific information pertaining to the possible causes for
suspension, and information and argument in mitigation of the proposed
period of suspension.
(c) The response may request a meeting with the OIG official
identified in the notice to permit the IPA to discuss issues of fact or
law relating to the proposed suspension, or to otherwise resolve the
pending matters.
(1) Any such meeting shall take such form as the debarring official
deems appropriate and shall be held within 10 days of the response.
(2) No meeting will be held if a law enforcement official, an
investigative or audit official from another OIG, a state licensing
body or other organization with authority over IPAs, or a governmental
agency has advised in writing that the substantial interest of a
governmental unit would be prejudiced by such a meeting and the
debarring official determines that the suspension is based on the same
facts as the pending legal proceedings referenced by the law
enforcement official.
(d) Failure to respond to the notice shall be deemed an admission
of the existence of the cause(s) for suspension set forth in the notice
and an acceptance of the period of suspension. In such circumstances,
the OIG may proceed to a final decision without further proceedings.
Subpart D--Removal
Sec. 1641.16 Removal.
Removed IPAs are prohibited from performing audit services in
subsequent years under an existing contract(s) with one or more
specific recipients. The
[[Page 67510]]
affected recipient(s) shall not extend existing contracts with such
IPAs. Removed IPAs also are prohibited from providing audit services to
the affected recipient(s) as agents or representatives of other IPAs,
and are required to provide prior written notice to the debarring
official before providing such services to other recipients. Removed
IPAs also must provide prior written notice of the removal to any such
recipient.
Sec. 1641.17 Procedures for removal.
(a) Before removing an IPA, the OIG shall provide the IPA with a
hearing in accordance with the procedures set out in Secs. 1641.18
through 1641.21. Such hearing shall be held entirely by written
submissions, except:
(1) Additional proceedings shall be held under Sec. 1641.21 if the
debarring official finds there is a genuine dispute of material fact;
and/or
(2) A meeting may be held under Sec. 1641.20(c).
(b) A Notice of Proposed Removal normally will be accompanied by a
Notice of Proposed Debarment, and the proceedings may be consolidated.
Sec. 1641.18 Causes for removal.
The debarring official may remove an IPA from performing audit
services in accordance with the procedures set forth in this part upon
a finding by a preponderance of the evidence that:
(a) The IPA has failed significantly to comply with government
auditing standards established by the Comptroller General of the United
States, generally accepted auditing standards and/or OIG audit guidance
as stated in the OIG Audit Guide for Recipients and Auditors, including
the Compliance Supplement for Audits of LSC Recipients, and in OIG
Audit Bulletins;
(b) The IPA is currently debarred from contracting with any Federal
agency or entity receiving Federal funds, including when the IPA has
stipulated to such debarment;
(c) The IPA's license to practice accounting has been revoked,
terminated or suspended by a state licensing body or other organization
with authority over IPAs;
(d) The IPA has been convicted of any offense indicating a breach
of trust, dishonesty or lack of integrity, or conspiracy to commit such
an offense, and the conviction is final; or
(e) The IPA has been found subject to a civil judgment for any
action indicating a breach of trust, dishonesty or lack of integrity,
or conspiracy to take such action, and the judgment is final.
Sec. 1641.19 Notice of proposed removal.
(a) Before removing an IPA, the OIG shall send the IPA written
notice of the proposed removal. The notice shall be sent in a manner
that provides evidence of its receipt and shall:
(1) State that removal is being considered;
(2) Identify the reasons for the proposed removal sufficient to put
the IPA on notice of the conduct or transaction(s) upon which a removal
proceeding is based;
(3) Identify the regulatory provisions governing the removal
proceeding; and
(4) State that removal shall be for the years remaining on the
existing contract(s) between the IPA and the recipient(s).
(b) A copy of the notice also shall be sent to the affected
recipient(s), if any, which may comment on the proposed action in the
time frame set out in Sec. 1641.20.
Sec. 1641.20 Response to notice of proposed removal.
(a) The IPA shall have 30 days from receipt of the notice within
which to respond.
(b) The response shall be in writing and may include information
and argument in opposition to the proposed removal, including any
additional specific information pertaining to the possible causes for
removal.
(c) The response may request a meeting with the debarring official
to permit the IPA to discuss issues of fact or law relating to the
proposed removal, or to otherwise resolve the pending matters. Any such
meeting shall take the form that the debarring official deems
appropriate and shall be held within 20 days of the response. If the
IPA requests an in person meeting, it shall be held at LSC
headquarters.
(d) Failure to respond to the notice shall be deemed an admission
of the existence of the cause(s) for removal set forth in the notice
and an acceptance of the removal. In such circumstances, without
further proceedings, the debarring official may enter a final decision
removing the IPA.
Sec. 1641.21 Additional proceedings as to disputed material facts.
(a) In actions not based upon a conviction or civil judgment under
Sec. 1641.18(d) or (e), if the debarring official finds that the IPA's
submission raises a genuine dispute of material fact, the IPA shall be
afforded an opportunity to appear (with counsel, if desired), submit
documentary evidence, present witnesses, and confront any witnesses the
OIG presents. If the debarring official finds that the IPA's submission
does not raise a genuine issue of material fact, additional proceedings
will not be provided. In such case, the hearing shall be held entirely
by written submissions, except that a meeting may be held under
Sec. 1641.20(c).
(b) If the debarring official determines additional proceedings to
be warranted, OIG shall notify the IPA. Such notice shall include
notice of the procedures under which such proceedings shall be
conducted.
(c) A transcribed record of any additional proceedings shall be
prepared and a copy shall be made available to the IPA without cost.
(d) The debarring official may refer disputed material facts to a
fact finder, who need not be a member of the OIG staff, for fact
finding, analysis and recommendation.
Subpart E--Decisions
Sec. 1641.22 Decisions of debarring official.
(a) Standard of proof. (1) A debarment or removal must be based on
a finding that the cause or causes for debarment or removal are
established by a preponderance of the evidence in the administrative
record of the case.
(2) A suspension must be based on a finding that the cause or
causes are established by adequate evidence in the administrative
record of the case.
(b) The administrative record consists of any information, reports,
documents or other evidence identified and relied upon in the Notice of
Proposed Debarment, the Notice of Proposed Suspension, or the Notice of
Proposed Removal, together with any relevant material contained in the
IPA's response or submitted by an affected recipient. In the case of
debarment or removal, when additional proceedings are necessary to
determine disputed material facts, the administrative record also shall
consist of any relevant material submitted or presented at such
proceedings.
(c) Failure of the OIG to meet a time requirement of this part does
not preclude the OIG from debarring, suspending or removing an IPA. In
extraordinary circumstances, the OIG may grant an IPA an extension of
the time requirements set out in this part.
(d) Notice of decisions. IPAs shall be given prompt notice of the
debarring official's decision. A copy of the decision also will be sent
to the affected recipient. If the debarring official debars, suspends
or removes an IPA, the decision shall:
(1) Set forth the finding(s) upon which the decision is based;
(2) Set forth the effect of the debarment, suspension or removal
[[Page 67511]]
action and the effective dates of the action;
(3) Refer the IPA to its procedural rights of appeal and
reconsideration under Sec. 1641.24; and
(4) Inform the IPA that a copy of the debarring official's decision
will be a public document and the fact of debarment, suspension or
removal will be a matter of public record.
(e) If the debarring official decides that a debarment, suspension,
or removal is not warranted, the Notice may be withdrawn or the
proceeding may be otherwise terminated.
(f) If the debarring official deems it appropriate, the debarring
official may, at any time, settle by agreement with the IPA a
debarment, suspension, or removal action. Such a negotiated settlement
may include the imposition of appropriate conditions on the IPA.
Sec. 1641.23 Exceptions to debarment, suspension and removal.
Exceptions to the effects of debarment, suspension or removal may
be available in unique circumstances, when there are compelling reasons
to use a particular IPA for a specific task. Requests for such
exceptions may be submitted only by the recipient requiring audit
services. The Inspector General may except a contract from the effects
of debarment, suspension or removal upon a written determination that a
compelling reason exists for using the IPA in the particular instance.
Sec. 1641.24 Appeal and reconsideration of debarring official
decisions.
(a) Appeal and reconsideration generally. A debarred, suspended or
removed IPA may submit the debarring official's decision for appeal or
reconsideration in accordance with this section. Within 60 days, IPAs
shall be given notice of decisions on appeal and reconsideration. The
relief, if any, granted upon appeal or reconsideration shall be limited
to the relief stated in the decision on the appeal or reconsideration.
(b) Appeal. (1) A debarred, suspended or removed IPA may appeal the
decision to the Inspector General, who may uphold, reverse or modify
the debarring official's decision.
(2) The appeal shall be filed in writing:
(i) By a debarred or removed IPA, within 30 days of receipt of the
decision;
(ii) By a suspended IPA, within 15 days of receipt of the decision.
(3) The Inspector General, at his or her discretion and after
determining that a compelling reason exists, may stay the effect of the
debarment, suspension or removal pending conclusion of his or her
review of the matter.
(c) Reconsideration. (1) A debarred, suspended or removed IPA may
submit a request to the debarring official to reconsider the debarment,
suspension or removal decision, reduce the period of debarment or
removal, or terminate the suspension.
(2) Such requests shall be in writing and supported by
documentation that the requested action is justified by:
(i) In the case of suspension, reversal of the conviction or civil
judgment upon which the suspension was based;
(ii) Newly discovered material evidence;
(iii) Bona fide change in ownership or management;
(iv) Elimination of other causes for which the debarment,
suspension or removal was imposed; or
(v) Other reasons the debarring official deems appropriate.
(3) A request for reconsideration of a suspension which was based a
conviction, civil judgment, or sanction that has been reversed may be
filed at any time.
(4) Requests for reconsideration based on other grounds may only be
filed during the period commencing 60 days after the debarring
official's decision imposing the debarment or suspension. Only one such
request may be filed in any twelve month period.
(5) The debarring official's decision on a request for
reconsideration is subject to the appeal procedure set forth in
paragraph (b) of this section.
Dated: November 22, 1999.
Victor M. Fortuno,
Vice President for Legal Affairs, General Counsel, Corporate Secretary.
[FR Doc. 99-30896 Filed 12-1-99; 8:45 am]
BILLING CODE 7050-01-P
