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Corrective Action Plans Frequently Asked Questions

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Corrective Action Plans Frequently Asked Questions Brustein & Manasevit, PLLC Leigh Manasevit, Esq. lmanasevit_at_bruman.com Bonnie Little Graham, Esq. – PowerPoint PPT presentation

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Title: Corrective Action Plans Frequently Asked Questions


1
Corrective Action Plans Frequently Asked Questions
  • Leigh Manasevit, Esq.
  • lmanasevit_at_bruman.com
  • Bonnie Little Graham, Esq.
  • bgraham_at_bruman.com
  • Jenny Segal , Esq.
  • jsegal_at_bruman.com
  • Brustein Manasevit, PLLC
  • www.bruman.com
  • Spring Forum 2013

2
Intro
  • 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).

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?

4
When are corrective action plans necessary?
5
Identifying Noncompliance
  • Monitoring by ED or grantee
  • OIG audit
  • A-133 single audit
  • Performance data
  • Financial data
  • Internal review

6
Corrective Action Needed
  • Program Determination Letters
  • OIG Audit Report
  • Single Audit Report
  • Grant Award Notification special conditions
  • Monitoring report

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

9
For example
Activity Responsible Party Deliverable Due Date
Ensure compliance with SEAs application process for Federal education funds, including using SEAs application tools, meeting all SEA deadlines and following SEAs 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 SEAs 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
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

11
Can the state/grantee require a CAP from
locals/subgrantees?
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.

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

14
Can I use grant funds to pay for corrective
actions?
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. 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

16
How are corrective actions enforced?
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

18
Enforcement - Grantees
  • Withholding approval of application
  • Withholding of funds
  • Reimbursement with special conditions
  • High risk designation

19
Compliance Agreement
  • Pros
  • Cons
  • Continue to receive federal funding
  • Clear requirements and deadlines
  • Heightened federal oversight
  • Deadlines
  • Inflexible
  • Expensive

20
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. 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.

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?

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)

23
Can I appeal required corrective actions?
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.

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. 81.36(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.

26
The Super Circular on corrective actions
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

28
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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 76.730(e) of EDGAR to keep
    records to facilitate an effective audit and
  • 2. Working with ED (not being adversarial).

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.

31
For example . . . Colorado
  • OIG We commend CDE for initiating timely
    corrective action in response to the audits
    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!

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.
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