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Corrective Action Plans Frequently Asked Questions

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Presentation on theme: "Corrective Action Plans Frequently Asked Questions"— Presentation transcript:

1 Corrective Action Plans Frequently Asked Questions
Leigh Manasevit, Esq. Bonnie Little Graham, Esq. Jenny Segal , Esq. Brustein & Manasevit, PLLC Spring Forum 2013 Brustein & Manasevit, PLLC

2 Intro [N]ewly purchased items of equipment were not consistently entered into the property tracking system or, if entered, some of the items of equipment remained in the warehouses undelivered, were delivered to an incorrect location, or were misplaced or stolen. As of 1998, VIDE began to implement the corrective actions necessary to revamp its property management system as well as to correct other deficiencies in its administration of Federal grant programs. Progress was slow. As a result, VIDE was designated as a “high-risk” grantee and special conditions were imposed. Later, ED and VIDE entered into a compliance agreement that permitted VIDE to continue to receive funding while it implemented a structured plan to correct the administrative and programmatic deficiencies. Application of U.S. Virgin Islands Dept. of ED, Docket No R (Jan. 24, 2011). Brustein & Manasevit, PLLC

3 Agenda When are corrective action plans necessary?
What needs to be in a corrective action plan? Can the state/grantee require a corrective action plan from locals/subgrantees? Can I use grant funds to pay for corrective actions? How are corrective actions enforced? Can I appeal required corrective actions? Brustein & Manasevit, PLLC

4 When are corrective action plans necessary?
Brustein & Manasevit, PLLC

5 Identifying Noncompliance
Monitoring by ED or grantee OIG audit A-133 single audit Performance data Financial data Internal review Brustein & Manasevit, PLLC

6 Corrective Action Needed
Program Determination Letters OIG Audit Report Single Audit Report Grant Award Notification – special conditions Monitoring report Brustein & Manasevit, PLLC

7 What needs to be in a corrective action plan?
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8 Corrective Action Plans
Objective/activity (measurable) Timeline Identify person responsible Budget Data Deliverables Brustein & Manasevit, PLLC

9 For example: Activity Responsible Party Deliverable Due Date
Ensure compliance with SEA’s application process for Federal education funds, including using SEA’s application tools, meeting all SEA deadlines and following SEA’s amendment procedures. LEA Director of Federal Programs [name, contact info] Documentation evidencing that LEA used SEA-provided application tools and submitted its application for funds and any amendments in accordance with SEA’s application process and deadlines, including budgets and signed assurances. Signature under penalty of perjury by the Superintendent or highest- ranking administrative position at LEA affirming that the submitted application(s) is true and correct. Consistent with SEA published deadlines Brustein & Manasevit, PLLC

10 Corrective Action Plan
Over-promise Under-promise Unrealistic timeframe Does not address the issue Correcting noncompliance can be a lengthy process, measured in years rather than months Brustein & Manasevit, PLLC

11 Can the state/grantee require a CAP from locals/subgrantees?
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12 Authority EDGAR 80.40(a) Grantees are responsible for managing the day-to-day operations of grant and subgrant supported activities. Grantees must monitor grant and subgrant supported activities to assure compliance with applicable Federal requirements and that performance goals are being achieved. Grantee monitoring must cover each program, function or activity. Brustein & Manasevit, PLLC

13 Authority EDGAR 80.12(a) A grantee or subgrantee may be considered “high risk” if: Has a history of unsatisfactory performance Is not financially stable Has management system that does not meet EDGAR standards Has not conformed to terms and conditions of previous awards Is otherwise not responsible Brustein & Manasevit, PLLC

14 Can I use grant funds to pay for corrective actions?
Brustein & Manasevit, PLLC

15 Paying for Corrective Actions
Allowable? Necessary and reasonable Legal expenses required in the administration of Federal programs are allowable. Costs related to cooperative audit resolution are allowable Allocable? Activity is allowable under multiple programs, agency has discretion in determining which programs may be charged C.F.R Agency can make “business decision” regarding what combination of funds would be applied to a function or activity that benefits two or more programs. Implementation Guide for OMB Circular A-87, Q&A 2-16 Example: Cross-cutting grants management policies and procedures manual Brustein & Manasevit, PLLC

16 How are corrective actions enforced?
Brustein & Manasevit, PLLC

17 Enforcement - ED Whenever the Secretary has reason to believe that any recipient of funds under any applicable program is failing to comply substantially with any requirement of law applicable to such funds, the Secretary may— withhold further payments under that program, issue a complaint to compel compliance through a cease and desist order of the Office,  enter into a compliance agreement with a recipient to bring it into compliance  take any other action authorized by law with respect to the recipient. Any action, or failure to take action, by the Secretary under this section shall not preclude the Secretary from seeking a recovery of funds  GEPA, 20 USC 1235c Brustein & Manasevit, PLLC

18 Enforcement - Grantees
Withholding approval of application Withholding of funds Reimbursement with special conditions High risk designation Brustein & Manasevit, PLLC

19 Compliance Agreement Pros Cons Continue to receive federal funding
Clear requirements and deadlines Heightened federal oversight Deadlines Inflexible Expensive Brustein & Manasevit, PLLC

20 Withholding of Funds Withholding: Suspending:
Reasonable notice of intent to withhold and opportunity for a hearing with an impartial hearing officer U.S.C. 1232c(b)(2); 20 U.S.C. 1234d(b). Withhold until satisfied there is no longer a failure to comply. Suspending: SEA must provide notice to the subgrantee and allow it 15 days to show cause why the suspension should not take effect. 20 U.S.C. 1232c(b)(2). If the subgrantee does not show cause, SEA may suspend funds for 60 days. Brustein & Manasevit, PLLC

21 Reimbursement with Special Conditions
ED and Grantees have discretion to impose special conditions Grantees are responsible for ensuring all expenditures are lawful (including subgrantees’ expenditures) and for ensuring all findings of noncompliance are resolved. 34 CFR 80.40(a). For example: SEA could reimburse 80% of each Federal draw upon receipt of the summary reports and detailed lists, and then reimburse the remaining 20% after sampling certain expenditures and verifying detailed supporting documentation (such as time and effort documentation supporting payroll charges and requisition requests, purchase orders, contracts, receiving documents, invoices and canceled checks for non-payroll charges). Is this reimbursement scheme “withholding”? Brustein & Manasevit, PLLC

22 High Risk Designation After placing the grantee/subgrantee on high risk, special conditions or restrictions that correspond to the high risk condition must be imposed. Such special conditions or restrictions may include: Payment on a reimbursement basis; Withholding authority to proceed to the next phase until receipt of evidence of acceptable performance within a given funding period; Requiring additional, more detailed financial reports; Additional project monitoring; Requiring the grantee or subgrantee to obtain technical or management assistance; or Establishing additional prior approvals. 34 CFR 80.12(b) Brustein & Manasevit, PLLC

23 Can I appeal required corrective actions?
Brustein & Manasevit, PLLC

24 Appeal Disallowance vs. Corrective action
GEPA permits an appeal of a disallowance decision No appeal of corrective actions A-133, _.315(c) “If the auditee does not agree with the audit findings or believes corrective action is not required, then the corrective action plan shall include an explanation and specific reasons.” Brustein & Manasevit, PLLC

25 Appeal – Disallowance Impact of Corrective Action on Recovery Amount
Compromise authority: In certain circumstances, ED may compromise the amount claimed under GEPA if the grantee/subgrantee demonstrates “the practice that resulted in the disallowance decision has been corrected and will not recur.” 34 C.F.R (a). Grantback: In certain circumstances, ED may offer a grantback of up to 75% of the recovered funds if the “practices or procedures of the recipient that resulted in the violation have been corrected.” 20 U.S.C. 1234h(a). Equitable offset: Remedy available to grantees and subgrantees to prevent the recovery of sustained audit liabilities. Case law establishes that evidence of appropriate corrective actions is an equitable factor in support of the application of equitable offset. Brustein & Manasevit, PLLC

26 The “Super” Circular on corrective actions
Brustein & Manasevit, PLLC

27 Cooperative Audit Resolution
“Federal agencies offering appropriate amnesty for past noncompliance when audits show prompt corrective action has occurred.” Corrective Action means action taken by the auditee that: Corrects identified deficiencies; Produces recommended improvements; or Demonstrates that audit findings are either invalid or do not warrant auditee action Brustein & Manasevit, PLLC

28 Brustein & Manasevit, PLLC

29 For example… In one jurisdiction, ED issued a 70 Page PDL which determined all findings were either: 1. Resolved and closed because ED had received sufficient documentation that corrective action was already in place; or 2. Required further corrective action: Please note that corrective action is required for some of these audit findings, as well as audit findings not specifically addressed in this PDL. [ED] will continue to work with [you] to implement corrective actions required by this PDL. Emphasized the importance of: 1. Producing records at the time they are requested by the auditors and complying with the requirements in (e) of EDGAR to keep records “to facilitate an effective audit”’; and 2. Working with ED (not being adversarial). Brustein & Manasevit, PLLC

30 For example… A second jurisdiction received a 76 page PDL regarding two single-audits. PDL did not demand recovery of any funds, but mandated several corrective actions, such as: MOE: Review MOE calculation methodologies and update; use audited data; complete MOE calculations in a timely manner and communicate data to LEAs to ensure timely completion of A-133 audits. Is audited data required? Subrecipient Monitoring: Process for identifying “high risk” grantees under 80.12; conduct fiscal monitoring (cannot rely solely on A-133 audits). Comparability: Develop and implement an indicator for monitoring comparability and integrate this indicator into protocols for subrecipient monitoring. Brustein & Manasevit, PLLC

31 For example Colorado OIG: “We commend CDE for initiating timely corrective action in response to the audit’s finding and recommendations. The actions that CDE describes in its comments, in response to our recommendations, would appear to address our finding, but the Department will ultimately make this determination.” PDL: “We find that the policies and procedures provided generally appear sufficient to establish an effective system to account for the distribution of effort for employees who work on multiple programs, however we have questions regarding implementation “ Single audit findings! Brustein & Manasevit, PLLC

32 Disclaimer This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the presentation or later review of these printed materials does not create an attorney-client relationship with Brustein & Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances. Brustein & Manasevit, PLLC

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