[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