[Federal Register Volume 60, Number 95 (Wednesday, May 17, 1995)]
[Notices]
[Pages 26413-26414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12068]



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DEPARTMENT OF EDUCATION


Office of Special Education and Rehabilitative Services; Office 
of Administrative Law Judges; Intent To Compromise Claims, South 
Carolina Commission for the Blind

AGENCY: Department of Education.

ACTION: Notice of intent to compromise claims.

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SUMMARY: The Department intends to compromise claims against the South 
Carolina Commission for the Blind (Commission) now pending before the 
Office of Administrative Law Judges (OALJ), Docket Nos. 93-131-R and 
93-141-R (20 U.S.C. 1234a(j)).

DATES: Interested persons may comment on the proposed action by 
submitting written data, views, or arguments on or before July 3, 1995.

ADDRESSES: All comments concerning this notice should be addressed to 
Jeffrey B. Rosen, Office of the General Counsel, U.S. Department of 
Education, 600 Independence Avenue SW., Room 5411, FB-10B, Washington, 
D.C. 20202-2242.

FOR FURTHER INFORMATION CONTACT: Jeffrey B. Rosen. Telephone: (202) 
401-6009. 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: Pursuant to the Single Audit Act of 1984 
(P.L. 98-502) and the provisions of Office of Management and Budget 
(OMB) Circular A-128, the Office of the State Auditor, State of South 
Carolina, conducted an audit of the Commission for the period July 1, 
1987 through June 30, 1989. A final audit report was issued on February 
11, 1993 (ACN: 04-23147 SC) (hereinafter ``SC I'').
    Based upon this audit report, the Regional Commissioner, Region IV, 
Rehabilitation Services Commission, U.S. Department of Education (ED), 
issued a Preliminary Department Decision (PDD) on September 28, 1993 in 
which he requested that the Commission repay $294,232 of funds misspent 
under Title I of the Rehabilitation Act of 1973, as amended (the Act), 
29 U.S.C. 701 et seq. There were seven different monetary findings as 
follows:

a. Finding 1(b)--$8,528.23--Unallowable vehicle purchase.
b. Finding 2--$1,217.00--Purchases not properly allocated to particular 
cost objectives.
c. Finding 4--$51,294.74--Time distribution records not maintained for 
employees.
d. Finding 6(a)--$205,640.00--Documentation not maintained for Federal 
activities.
e. Finding 8--$8,109.41--Computer lease payments not properly 
allocated.
f. Finding 9--$17,614.62--Expenditures obligated after project end.
g. Finding 12--$1,828.00--Unallowable interest charges.

    On October 27, 1993 the Commission filed an application for review 
of the PDD with the Office of Administrative Law Judges (OALJ). On 
September 26, 1994, the Regional Commissioner filed a Notice of 
Reduction of Claim notifying the OALJ that, based upon new information 
submitted by the Commission, Finding 6(a) was reduced by $139,353.37. 
Thus, the total amount outstanding in the appeal was reduced to 
$154,878.63.
    The Office of the State Auditor conducted another audit covering 
the period July 1, 1990 through June 30, 1991. A final audit report was 
issued on February 23, 1993 (ACN: 04-23165G SC) (hereinafter ``SC 
II''). In SC II, the Regional Commissioner issued a PDD on September 
29, 1993 in which he requested that the Commission repay $129,369.26 of 
funds under the Act. There were three different monetary findings as 
follows:

a. Finding 1--$88,805.26--Time distribution records not maintained for 
employees.
b. Finding 2--$18,156.80--Using funds under the Act for unallowable 
expenditures.
c. Finding 3--$22,407.20--Purchases not properly allocated to 
particular cost objectives.

    The Commission filed an appeal of the PDD with the OALJ on November 
3, 1993.
    The Commission and ED have agreed to settle all of the issues in 
these cases. The outstanding amounts in the two cases are covered by 
the Settlement Agreements.
    Under the terms of the proposed agreement in SC I, the Commission 
owes ED a total of $68,955. This repayment amount, including four 
percent interest accruing from July 15, 1995, is to be paid in three 
equal annual payments of $23,904 beginning July 15, 1995 and continuing 
through July 15, 1997. The Commission would be assessed interest at a 
rate of four percent per year if any of the foregoing payments are not 
made in a timely fashion. Failure to make timely payment within 20 days 
would result in a late payment fee of 10 percent of the payment due. 
Finally, under the agreement, the parties would jointly move for 
dismissal of the appeal.
    For the following reasons, ED recommends approval of the proposed 
Settlement Agreement in SC I. The Commission has agreed to repay in 
full the cost disallowances in Findings 1, 2, 8, and 12. In Finding 9, 
ED determined that there was insufficient evidence of harm to the 
Federal interest and, as a result, agreed not to seek any recovery on 
this issue in the agreement.
    With respect to Finding 4, which pertains to a time distribution 
issue for employees, the parties agreed that the Commission should 
repay $15,826, which represents a repayment of greater than 30 percent 
of the original disallowed amount of $51,294.74. The evidence presented 
by the Commission demonstrated that the employees in question worked a 
substantial portion of time on grant activities. Although the 
Commission clearly had an obligation to keep time distribution records, 
it presented other less reliable and circumstantial evidence that could 
persuade an administrative law judge or a Federal court to rule in 
substantial part or in full for its position.
    With respect to the final issue, Finding 6(a), ED originally 
recommended a cost disallowance of $205,640 for the failure of the 
Commission to maintain proper documentation for Federal activities. 
Following an on-site review of the documentation in question in this 
issue, ED agreed to reduce the cost disallowance to $66,286.63, which 
consisted of obligations the liquidation of which the Commission had 
been unable to verify. Notwithstanding the Commission's failure to 
satisfy its burden of providing this information, ED did not have 
evidence demonstrating that all of these outstanding obligations were, 
in fact, unliquidated or detailing the extent to which the Federal 
interest was harmed. In order to reach a settlement of all the issues 
in this case, ED agreed to a 50 percent payback of $33,143 on this 
issue.
    Based upon the foregoing, ED believes that it is prudent to accept 
the settlement offer in SC I, which represents almost 45 percent of the 
disallowed costs outstanding in this case. [[Page 26414]] 
    Under the terms of the proposed agreement in SC II, the Commission 
owes ED a total of $71,044. This repayment amount, including four 
percent interest accruing from July 15, 1995, is to be paid in three 
equal annual payments of $24,628 beginning July 15, 1995 and continuing 
through July 15, 1997. The Commission would be assessed interest at a 
rate of four percent per year if any of the foregoing payments are not 
made in a timely fashion. Failure to make timely payment within 20 days 
would result in a late payment fee of 10 percent of the payment due. 
Finally, under the agreement, the parties would jointly move for 
dismissal of the appeal.
    For the following reasons, ED recommends approval of the proposed 
Settlement Agreement in SC II. The Commission has agreed to repay in 
full the cost disallowances in Findings 2 and 3. With respect to 
Finding 1, which pertains to a time distribution issue for employees, 
the parties agreed that the Commission should repay $30,480, which 
represents a repayment of over 30 percent of the original disallowed 
amount of $88,805.26. The evidence presented by the Commission 
demonstrated that the employees in question worked a substantial 
portion of time on grant activities. Although the Commission clearly 
had an obligation to keep time distribution records, it presented other 
less reliable and circumstantial evidence that could persuade an 
administrative law judge or a Federal court to rule in substantial part 
or in full for its position.
    Based upon the foregoing, ED believes that it is prudent to accept 
the settlement offer in SC II, which represents almost 55 percent of 
the original costs disallowed in the PDD for this finding.
    If these issues are not settled, ED will incur further litigation 
costs. Additional discovery efforts would be necessary before these 
cases can be litigated. Furthermore, it is unlikely that ED would be 
able to recover 100 percent of the cost disallowance for the time 
distribution issues in SC I and SC II and the failure to maintain 
documentation issue in SC I. The recovery amounts for these issues not 
only reflect the demonstrated harm to the Federal interest, but were 
essential to the overall settlements that were agreed to by the 
parties.
    There are even litigation risks with respect to the issues the 
Commission has conceded in the Settlement Agreements. If these issues 
are litigated, ED would run the risk of not recovering 100 percent. 
Moreover, the Commission would have the right to appeal any decision to 
the U.S. Court of Appeals. See 20 U.S.C. 1234g. There is no certainty 
that ED would recover 100 percent on these issues as is contemplated in 
the Settlement Agreements.
    After weighing the risks in litigating the issues that are the 
subject of the settlements, it is ED's assessment that the proposed 
Settlement Agreements are the most advantageous resolution of the 
outstanding issues in these cases.
    The public is invited to comment on the Department's intent to 
compromise these claims. Additional information may be obtained by 
writing to Jeffrey B. Rosen at the address given at the beginning of 
this notice.

    Program Authority: 20 U.S.C. 1234a(j) (1990)

    Dated: May 11, 1995.
Donald R. Wurtz,
Chief Financial Officer.
[FR Doc. 95-12068 Filed 5-16-95; 8:45 am]
BILLING CODE 4000-01-P