[Federal Register Volume 59, Number 81 (Thursday, April 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10135]


[Federal Register: April 28, 1994]


-----------------------------------------------------------------------


DEPARTMENT OF EDUCATION

Intent To Repay to the Arizona State Department of Education 
Funds Recovered as a Result of a Final Audit Determination

AGENCY: Department of Education.

ACTION: Notice of intent to award grantback funds.

-----------------------------------------------------------------------

SUMMARY: Under section 459 of the General Education Provisions Act 
(GEPA), 20 U.S.C. 1234h (1988), the U.S. Secretary of Education 
(Secretary) intends to repay to the Arizona State Department of 
Education, the State educational agency (SEA), the sum of $438,750, an 
amount that is 75 percent of the funds recovered by the U.S. Department 
of Education (Department) under Chapter 2 of the Education 
Consolidation and Improvement Act of 1981 (ECIA) as a result of a final 
audit determination and settlement agreement. This notice describes the 
SEA's plans for the use of the repaid funds and the terms and 
conditions under which the Secretary intends to make those funds 
available. The notice invites comments on the proposed grantback.

DATES: All comments must be received on or before May 31, 1994.

ADDRESSES: Comments concerning the grantback should be addressed to 
Alicia Coro, Director, School Improvement Programs, Office of 
Elementary and Secondary Education, U.S. Department of Education, 400 
Maryland Avenue SW., Portals Room 4520, Washington, DC 20202-6140.

FOR FURTHER INFORMATION CONTACT: Alicia Coro, Telephone: (202) 260-
2431. Individuals who use a telecommunication 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:

A. Background

    The Department recovered $585,000 from the SEA in response to 
claims arising from a special investigative audit conducted by the 
Office of the Arizona Auditor General of the SEA's discretionary 
funding programs for the period January 1979 through June 1989.
    The claims primarily involved the SEA's administration and 
supervision of funds under Chapter 2 of the ECIA. Specifically, the 
final audit determination of the Assistant Secretary for Elementary and 
Secondary Education (Assistant Secretary) found that official records, 
such as sole source procurement authorizations, vendor invoices, and 
receiving reports, were falsified to circumvent internal control 
procedures. As a result of collusion between a former Deputy 
Superintendent of the SEA and two vendors, Chapter 2 funds paid for 
consulting services that were never performed, educational materials 
that did not exist, and other fraudulent schemes. Therefore, the 
Assistant Secretary demanded repayment of $777,745.46 to the Department 
for misspent funds. The SEA appealed the determination of the Assistant 
Secretary to the Office of Administrative Law Judges (OALJ) on February 
20, 1991. Subsequently, on July 23, 1993, while the case was pending, 
the Department and the SEA executed a settlement agreement, wherein the 
SEA would repay $585,000 to the Department in full settlement of the 
appeal. On October 22, 1993, the SEA repaid the full amount of $585,000 
to the Department for misspent funds under Chapter 2 of the ECIA.

B. Authority for Awarding a Grantback

    Section 459(a) of GEPA, 20 U.S.C. 1234h(a), provides that, whenever 
the Secretary has recovered funds following a final audit determination 
with respect to an applicable program, the Secretary may consider those 
funds to be additional funds available for the program and may arrange 
to repay to the SEA or local educational agency (LEA) affected by that 
determination an amount not to exceed 75 percent of the recovered 
funds. The Secretary may enter into this ``grantback'' arrangement if 
the Secretary determines that--
    (1) The practices and procedures of the SEA or LEA that resulted in 
the audit determination have been corrected, and the SEA or LEA is, in 
all other respects, in compliance with the requirements of the 
applicable program;
    (2) The SEA has submitted to the Secretary a plan for the use of 
the funds to be awarded under the grantback arrangement that meets the 
requirements of the program and, to the extent possible, benefits the 
population that was affected by the failure to comply or by the 
misexpenditures that resulted in the audit exception; and
    (3) Use of funds to be awarded under the grantback arrangement in 
accordance with the SEA's plan would serve to achieve the purposes of 
the program under which the funds were originally granted.

C. Plan for Use of Funds Awarded Under a Grantback Arrangement

    Pursuant to section 459(a)(2) of GEPA, the SEA has submitted a plan 
for use of the $438,750 in grantback funds under Chapter 2 of Title I 
of the Elementary and Secondary Education Act of 1965 (ESEA).
    The SEA proposes to use the grantback funds to supplement a portion 
of its Chapter 2 effective schools program, specifically the Arizona 
Student Assessment Program (ASAP), by developing performance-based 
assessments tailored to the State's Spanish-speaking pupils--many of 
whom are at risk and whose education entails higher costs. The 
grantback plan also includes teacher and parent training related to the 
new assessments.
    One of ASAP's components prescribes a comprehensive performance-
based assessment system with broad capabilities for reporting test 
results. The SEA has designed performance assessments that effectively 
test student mastery of the Arizona Essential Skills, Statewide 
academic standards, at grades 3, 8, and 12 in the areas of reading, 
writing, and mathematics. These tests, known as ``Form A,'' are 
administered in both English and Spanish. However, the Riverside 
Publishing Company has developed a ``Form B'' for testing one to two 
grade levels preceding ``Form A,'' and a ``Form C'' that will test two 
to three grade levels preceding ``Form A.'' Presently, there are no 
Spanish versions of ``Form B'' or ``Form C.'' Spanish versions are 
greatly needed because approximately one quarter of Arizona's student 
population is from native Spanish-speaking backgrounds and nearly 9 
percent are enrolled in bilingual education classes. Currently, no 
legislative or State board mandate exists to obtain Spanish versions 
nor has a funding source to develop them been identified. Under the 
grantback plan, Arizona would use the grantback funds to pay the 
Riverside Publishing Company to produce Spanish editions of the tests 
called ``Forms B and C'' that would reflect appropriate cultural 
content. Teachers would receive training in the use of ``Forms B and 
C'' and parent and community workshops would be held to inform the 
public at large about ASAP initiatives and to invite participation.

D. The Secretary's Determination

    The Secretary has carefully reviewed the plan submitted by the SEA. 
Based upon that review, the Secretary has determined that the 
conditions under section 459 of GEPA have been met. In particular, with 
respect to correcting the practices that led to the audit 
determination, the SEA has demonstrated that its system of internal 
controls has been greatly strengthened and that recently adopted 
policies and procedures governing the distribution of grant funds 
should prevent recurrence of the fraudulent activities that 
precipitated this case. Arizona has also criminally prosecuted the 
former Deputy Superintendent as well as the principal vendor involved 
in the scheme to misappropriate Chapter 2 funds.
    This determination is based upon the best information available to 
the Secretary at the present time. If this information is not accurate 
or complete, the Secretary is not precluded from taking appropriate 
administrative action. In finding that the conditions of section 459 of 
GEPA have been met, the Secretary makes no determination concerning any 
pending audit recommendations or final audit determinations.

E. Notice of the Secretary's Intent To Enter Into a Grantback 
Arrangement

    Section 459(d) of GEPA requires that, at least 30 days before 
entering into an arrangement to award funds under a grantback, the 
Secretary must publish in the Federal Register a notice of intent to do 
so, and the terms and conditions under which the payment will be made.
    In accordance with section 459(d) of GEPA, notice is hereby given 
that the Secretary intends to make funds available to the Arizona SEA 
under a grantback arrangement. The grantback award would be in the 
amount of $438,750, which is 75 percent of the Chapter 2 funds 
recovered by the Department as a result of the audit.

F. Terms and Conditions Under Which Payments Under a Grantback 
Arrangement Would Be Made

    The SEA agrees to comply with the following terms and conditions 
under which payment under a grantback arrangement would be made:
    (1) The funds awarded under the grantback must be spent in 
accordance with--
    (a) All applicable statutory and regulatory requirements;
    (b) The plan that the SEA submitted and any amendments to the plan 
that are approved in advance by the Secretary; and
    (c) The budget that was submitted with the plan and any amendments 
to the budget that are approved in advance by the Secretary.
    (2) All funds received under the grantback arrangement must be 
obligated by September 30, 1996 in accordance with section 459 (c) of 
GEPA.
    (3) The SEA will, not later than January 1, 1998, submit a report 
to the Secretary that--
    (a) Indicates that the funds awarded under the grantback have been 
spent in accordance with the proposed plan and approved budget; and
    (b) Describes the results and effectiveness of the project for 
which the funds were spent.
    (4) Separate accounting records must be maintained documenting the 
expenditures of funds awarded under the grantback arrangement.
    (5) Before funds will be repaid pursuant to this notice, the SEA 
must repay to the Department any debts that become overdue or enter 
into a repayment agreement for those debts.

(Catalog of Federal Domestic Assistance Number 84.151, Chapter 2 of 
Title I of the Elementary and Secondary Education Act of 1965)

    Dated: April 21, 1994.
Thomas W. Payzant,
Assistant Secretary, Elementary and Secondary Education.
[FR Doc. 94-10135 Filed 4-26-94; 8:45 am]
BILLING CODE 4000-01-P