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Corrective Action Plans Drafting 101


Corrective Action Plans Drafting 101 Bonnie Little Graham, Esq. Jenny Segal, Esq. Brustein & Manasevit, PLLC Fall Forum 2013 – PowerPoint PPT presentation

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Title: Corrective Action Plans Drafting 101

Corrective Action PlansDrafting 101
  • Bonnie Little Graham, Esq.
  • Jenny Segal, Esq.
  • Brustein Manasevit, PLLC
  • Fall Forum 2013

  • Newly 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. 05-04-R (Jan. 24, 2011).

  • 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
  • How are corrective actions enforced?
  • Can I appeal required corrective actions?

When are corrective action plans necessary?
Identifying Noncompliance
  • Monitoring by ED or grantee
  • OIG audit
  • A-133 single audit
  • Performance data
  • Financial data
  • Internal review

Corrective Action Needed
  • Program Determination Letters
  • OIG Audit Report
  • Single Audit Report
  • Grant Award Notification special conditions
  • Monitoring report
  • Self Assessment

What needs to be in a corrective action plan?
Corrective Action Plan, Example
  • Audit Finding
  • LEA did not maintain adequate time and effort
    documentation, questioned related costs
  • Auditors selected 261 payroll expenditures at
    four LEAs
  • 61 (23 percent) were inadequately documented
  • Audit Recommendation
  • Provide documentation in support of questioned
    costs, or return the funds to ED
  • Ensure training to all staff regarding federal

Corrective Action Plan, Example
  • SEA Response
  • Concurred with finding and recommendations
  • Asked to initiate audit resolution procedures
    regarding the questioned payroll expenditures
  • Provided plan for technical assistance and
    training to all LEAs regarding how to properly
    document time and effort (not only those reviewed
    by OIG)

Corrective Action Plan, Example
  • Timeline
  • February 18, 2011 Draft OIG Audit Report
  • March 4, 2011 SEA Response to Audit Report
  • April 11, 2011 Final OIG Audit Report
  • May 9, 2011 SEA provides ED with plan for
    corrective action
  • September 12, 2012 SEA provides evidence of
    corrective actions
  • September 28, 2012 - Final Determination by ED
  • No further corrective actions are required.

Corrective Action Plans
  • Objective/activity (measurable)
  • Timeline
  • Identify person responsible
  • Budget
  • Data
  • Deliverables

Corrective Action PlansExample
  • Monitoring Review by ED
  • Finding SEAs current monitoring instrument and
    monitoring reports do not address adequately
    Title III use of funds and supplement not
    supplant issues. SEA does not distinguish that
    Title III funds should supplement the level of
    Federal, State and local public funds.
    Consequently, LEAs were supplanting Title III
    funds and using Title III funds for unallowable

Activity / Implementation Steps Responsible Staff Deliverables Due Date
SEA must ensure that its Title III monitoring activities focus on compliance with Title III fiscal and programmatic requirements, particularly in the area of ensuring LEAs are not supplanting Title III funds. Include position title, English Learner Office will make revisions to instrument Position title, Federal Program Office will implement revised instrument and provide necessary training Revised monitoring plan Revised monitoring instrument Evidence of training and implementation. 11/30/13- updated draft monitoring instrument provided for review 1/31/14-legal reviews 3/31/14-federal program office includes revised doc 8/31/14- train SEA program reviewers and LEAs
Corrective Action PlansExample
  • Significant issues general grants management and
  • Financial Management
  • Procurement
  • Inventory Management
  • Time and Effort

Activity / Implementation Steps Responsible Staff Deliverables Due Date
1. Hire outside consultant to conduct Risk Assessment, create compliant grants policies and procedures and training materials. 2. Staff Grants Compliance Office. 3. New processes for position coding. 4. Implement time and effort forms and protocols. 5. Deploy new Enterprise Resource Planning system. Position title, task assigned Core group of staff identified and tasked with implementing corrective actions. 1. RFP Selected Contractor 2. Draft Risk Assessment, Input 3. Final Risk Assessment 4. List of policies 5. Policies (draft, final) 6. Detailed procedures (draft, final) 7. Related forms 8. Training materials 9. Evidence of training 10. Adjustments to policies, procedures May 2010- RFP Oct 2010- Vendor selected Nov 2010-Contract July 2010- Draft Risk Assessment Sept 2010- Final Risk Assessment July 2011- Draft policies
Audit or Monitoring Review Scheduled?
  • Critical CAP in place at time of visit, even
    if implementation will be in the FUTURE

Example Time and Effort
  • LEA Self assessment
  • Numerous employees paid from program they
    previously (no longer) work on

Example Time and Effort (cont.)
  • Remedy and Corrective Action
  • Change payment sources to reflect current
  • or
  • Reassign employees back to prior program
  • AND
  • Reimburse improperly charged program

Example Time and Effort (cont.)
  • Corrective Action Plan - FUTURE
  • Review all employees (federally paid) to assure
  • Correct the misalignments
  • Assign specific individual/office responsibility
    for future reviews
  • In-service training

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

Can the state/grantee require a CAP from
  • EDGAR 80.40 74.51
  • 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.

  • EDGAR 80.12 74.14
  • A grantee or subgrantee may be considered high
    risk if
  • History of unsatisfactory performance
  • Is not financially stable
  • Has management system that does not meet EDGAR
  • Has not conformed to terms and conditions of
    previous awards
  • Is otherwise not responsible

Can I use grant funds to pay for corrective
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
  • Allocable?
  • Activity is allowable under multiple programs,
    agency has discretion in determining which
    programs may be charged. 34 C.F.R. 76.760
  • 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, QA 2-16
  • Example Cross-cutting grants management policies
    and procedures manual

How are corrective actions enforced?
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 1234c

Enforcement - Grantees
  • Withholding approval of application
  • Withholding of funds
  • Reimbursement with special conditions
  • High risk designation

Compliance Agreement
  • Pros
  • Cons
  • Continue to receive federal funding
  • Clear requirements and deadlines
  • Heightened federal oversight
  • Deadlines
  • Inflexible
  • Expensive

Withholding of funds
  • Withholding
  • Reasonable notice of intent to withhold and
    opportunity for a hearing with an impartial
    hearing officer. 20 U.S.C. 1232c(b)(2) 20 U.S.C.
  • 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

Reimbursement with Special Conditions
  • ED and Grantees have discretion to impose special
  • 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
  • Is this reimbursement scheme withholding?
  • See Maryland OIG Audit Report

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
  • Additional project monitoring
  • Requiring the grantee or subgrantee to obtain
    technical or management assistance or
  • Establishing additional prior approvals.
  • 34 CFR 80.12
  • 34 CFR 74.14

Can I appeal required corrective actions?
  • Disallowance v. 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.

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. 81.36
  • 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.

The Super Circular on corrective actions
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

(No Transcript)
For example
  • After significant audit findings in 2008 (for the
    audit period 2004-2006), the SEA and LEA began
    working with ED to address systemic internal
    control issues highlighted in the audit report.
  • The final Program Determination Letter was issued
    in March 2013. All questioned costs were barred
    by statute of limitations.
  • Many findings were fully resolved, although some
    corrective actions were still required to address
    specific audit concerns
  • Proof that LEA properly codes employee activities
    as supplemental or regular work activities and
    only charged Title I for insurance benefits of
    regular work duties
  • Evidence of trained employees responsible for
    allocating salaries between programs

For example
  • ED issued a Program Determination Letter
    regarding three single audits with monetary
    determinations of 2.6 million and required
    corrective actions
  • Improved policies and procedures and strengthened
    internal controls to (1) maintain adequate
    documentation to support disbursement of federal
    funds (2) procedures for obtaining quotes for
    procurements (3) documentation supporting
    procurements. Training on procedures.
  • Lack of procurement documentation an issue for
    several years
  • Procedures and internal controls to prevent
    unallowable expenditures, including improper
    payments and overpayments and to promptly collect
    amounts due.
  • Problem escalating in the three audit reports
  • Policies and procedures and internal controls
    regarding subrecipient monitoring for the 21st
    Century Community Learning Centers Program.
  • Grantee argued formal monitoring procedures are
    best practice only

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.
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