1. “The Georgia and Maine Stories” Impact on Recent Judicial Precedent on Federal Grants Management
Michael Brustein, Esq.
Bonnie Graham, Esq.

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Moral of the Story!
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Focus Effort on Front End, not Back End
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4. Opportunities to Impact Findings:
Audit
Exit
Conference
Draft
Audit
Report
Final
Audit
Report
Mgmt
Letter
(PDL)
OGC
Input
OALJ
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Georgia Department of Education v. United States Department of Education U.S. Court of Appeals for 11th Circuit
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The Eclipse of Equitable Offset
???
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What is Equitable Offset?
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8. The Genesis of Equitable Offset
The Tangipahoa Parish case
New York State Education Department – Time and Effort
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Equitable Offset
Doctrine of Fairness/Equity
Integral part of administrative law
ED issued NPRM
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What is the impact on MOE/Match/Supplanting if Equitable Offset triggered?
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11. Prelude: The Philadelphia Story – Part 2
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12. Overlapping Timelines
Philadelphia
Audit Issued Jan. 2010
PDL March 2011
ALJ decision Feb. 2014
Secretary decision Dec
Established new test
Limits holding to parties
Third Circuit March 2016
Georgia
Audit Issued Jan. 2008
PDL May 2012
ALJ decision (stayed for PA appeal) Jan. 2016
Secretary decision Nov. 2016
Eleventh Circuit Feb. 2018
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13. The Philadelphia Story Part 2
New Test (Secretary Decision):
Severity of the violation (honest or clerical error v. more serious violation)
Whether grantee acted in “good faith” in response to the issue
Whether the Department opposes the request for offset
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14. Factual Underpinnings to Georgia
“[State auditors] uncovered evidence indicating a complex fraud scheme was in place, involving several GDOE employees, certain members of the independent external peer review panel, and a number of community- based organizations, to manipulate the outcome of the 21st Century grant competition in favor of these community-based organizations.” -PDL May 2012
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15. Factual Underpinnings to Georgia
award year
54 grant applications; 29 awarded
$29k paid to peer reviewers
$10.7 million in total awards
17 awardees that were not qualified
Totaling $5.66 million
$3.6 million barred by statute of limitations
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16. How to Measure Harm to Federal Interest
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GEPA Section 1234b
“A recipient … shall be required to return funds in an amount that is proportionate to the extent of the harm its violation caused[.]”
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Do non-federal expenditures made by a grantee that could have been charged to the federal grant, but weren’t, “reduce the harm” to the federal interest?
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OALJ Decision: Equitable offset is inconsistent with GEPA.
Secretary Decision: Equitable offset is permitted under GEPA, but only if ED believes it is warranted given the circumstances.
“In this case, I find that the nature and scope of GDE’s violation is too serious to warrant an equitable offset.”
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11th Circuit Court Decision: Noting that its review is “exceedingly deferential”, the Court determined that “the Secretary properly considered the circumstances of the underlying fraud … in denying the equitable offset remedy.”
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The Eclipse of Equitable Offset
???
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Coastal Counties Workforce, Inc. v. Paul LePage U.S. District Court District of Maine
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Just the Facts!
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Significant impact on authority of pass-through to impose conditions on federal funds
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“OMB regulations do contemplate additional conditions imposed by a state at the subaward stage, but these are limited to financial and accounting measures.” 2 CFR (a)(3)
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“There is no indication in these regulations that state governments, as pass-through entities, may impose new substantive conditions on the receipt of funds absent noncompliance with the regulations by the recipient.”
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Disclaimer
This presentation is intended solely to provide general information and does not constitute legal advice or a legal service.  This presentation does not create a client-lawyer relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of Professional Conduct.  Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this presentation with any attorney at Brustein & Manasevit, PLLC 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.
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