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1. OIG Audit2. A-133 Audit3. Federal Monitoring4. State (Pass Through) Monitoring

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What types of audit violations are deemed “significant” by the U.S. Education Department?

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1. Time Distribution2. MOE3. Supplement, not supplant4. Over-Allocating5. Unallowable Expenses

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6. Illegal Procurement Practices7. Serving Ineligible Students8. Lack of Accountability for

Equipment/Materials9. Obligations Beyond Period of

Availability10.Matching Violations

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11.Excess Cost12.Lack of Appropriate Record Keeping 13.Record Retention Problems14.Late or no Submission of Required

Reports15.Allocations Improperly Approved

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16.Audits of Subrecipient Unresolved17.Lack of Subrecipient Monitoring18.Drawdown before they are needed or

more than 90 days after the end of funding period

19.Large Carryover Balances20.Discrepancies in Reports Filed

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21.Errors in Student Per Pupil Expenditures

22.Title I Comparability23.Lack of valid, reliable or complete

performance data

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1) Matching - “The Valencia Story”2) MOE – Oklahoma3) Supplanting/Time and Effort – New York

State

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• A 12 year nightmare

• Be careful what guidance you rely on

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• Beginning in 1999 Valencia received 7

Gear-up Awards

• Gear-up statute required a 50% match

• The official OPE application package listed “facilities” as an example of “match”

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“The value assigned to in-kind contribution in non federal match may not exceed the fair market

value of the property”

OPE Gear Up Packet

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February 2001-

OPE site visit facilities could not be used for match if “depreciation” or “use allowance” included in college’s indirect cost pool.

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VCC College did not include depreciation or use allowance in its indirect cost pool

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• OIG conducted audit to review VCC in-kind match documentation.

• Issue: Did VCC include depreciation or use allowance in indirect cost pool no

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2nd OIG visit October 2001› OIG – use of facilities violated non-supplant

provision, because existing facilities could never be used as a match

November 2001 – OIG informs VCC of no intent to pursue supplanting violation, but will return to VCC for 3rd visit.

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• Meeting in D.C. with VCC, OIG (Rich Rasa), OCFO (Ted Mueller)

• Discussion Points1. Professionalism of auditors 2. Site selection3. Calculation of match for 3rd visit

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• Methodology on match calculation – flawed

• Must be depreciation or use allowance, not fair market value

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• Refund $1,822,864 for match violation

• Final audit report May 2003

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1st PDL› Did not sustain audit findings› Does VCC have additional matching

contributions

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Between 2003-2010, VCC submitted data on additional match scholarships.

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Final PDL› VCC must refund $289,966

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VCC did not appeal What about statute of limitations? Five

years!

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Mitigating circumstances› 34 CFR 81.33 (page 135)

“unjust to compel recovery of funds because the recipient’s violation was caused by erroneous written guidance from the department.”

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ED’s Authority to Compromise Claims Against Grantees

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Assistant Secretary (OSERs) issued PDL to recover $583,943 of IDEA-Part B from Oklahoma based on Single Audit

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PDL identified 76 LEAs that violated maintenance of effort

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Oklahoma and ED jointly stayed the briefing before OALJ to pursue settlement

Based on additional documentation, amount reduced to $289,501

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Then ED compromised claim to $217,126 or 75%

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Oklahoma had taken: Corrective action Not practical or in public interest for ED

to continue the litigation See 76 F.R. 5363, 1/31/11

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Supplanting / Time and EffortNew York / Kiryas Joel

ACN 02K00032/2/11

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One public school, serving 123 students, all special needs

6,000 students in KJ attend private school

Receives $5,044,791 in Title I $772,842 in IDEA

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$276,443 in Title I funds used to pay part of the lease on the one public school building. KJ did not incur any additional lease costs as a result of providing Title I services.

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KJ could not provide adequate supporting documentation for $191,124 in salary expenditures for Title I.

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For Time and Effort violations resort to reconstruction (e.g. affidavits).

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1. Settlement – resolve questioned costs by mutual agreement 81.14 (page 132)

2. Voluntary Mediation – 81.13 (page 132)3. CAROI – relies on alternative and

creative approaches in resolving findings, but non-adversarial

4. Appeal before OALJ – Burden of proof on Auditee

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