oig audits does program success trump program compliance? should we even be concerned with audits...

Presented by Michael Brustein, Esq.Brustein & Manasevit PLLCFall Forum 2011

“Michael’s presentation is designed to scare you.”

“Focus is on program success.”▪ Phil Maestri, RMS April 27, 2011 Brustein & Manasevit, PLLC Spring Forum

October 5, 2011 AEFFA Meeting in Charleston, SC

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Program Compliance

Program Success

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Risk Management

Innovation

•Inventory Management•Cash Management•Time & Effort Reporting•Procurement Control

•Silo Smashing•Transferability•Substitute Systems•Administrative Consolidation•Waivers

“Hyperfocus on compliance is an ineffective way to run an SEA.”

- Deborah Gist, Superintendent RIDE July 2011

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“We need to get out of the way.”

- Cindy Hill, Wyoming Superintendent

of Instruction July 2011

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“Special education began as a civil rights issue and there needed to be a focus on compliance back then, but that focus on compliance has remained constant, while the rest of the world has changed. I would rather be judged by OSEP on the real important issues.” - Ed Steinberg, Colorado Director of Special Ed August 2011

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So how many audits excused noncompliance because of program success?

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Section 441 of GEPA Each program must be administered in

accordance with all applicable statutes, regulations, program plans, and applications.

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“In enacting GEPA, Congress made clear its intention that States return misused funds.”

▪ U.S. Supreme CourtBell v. N.J.461 U.S. 773 (1983)

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“Legislation enacted pursuant to the spending power is much in the nature of a contract; in return for federal funds, the states agree to comply with federally imposed conditions.”

▪ U.S. Supreme CourtPennhurst State School v. Halderman451 U.S. 1 (1981)

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

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The Department must establish a “prima facie” case for recovery of funds so that the PDL can stand on its face unless contradicted by other evidence.

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The PDL must include an analysis of the harm to the federal interest.

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See page 139 of EDGAR

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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.Unresolved Audits of Subrecipients17.Lack of Subrecipient Monitoring18.Drawdowns 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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If you think program success trumps OIG Audit findings on match, listen to Susan Kelley.

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If you think OIG findings on time and effort can be defeated by evidence of program success, consider:▪ Houston: $238 million▪ Philadelphia: $123 million▪ Detroit: $49 million▪ Colorado: $23 million▪ Kiryas Joel: $191,124*

* one public school serving 123 students, 6,000 students in private school

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Why are time and effort findings so prevalent? Listen to Kristen Cowan’s presentation!

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Is OMB waking up to a new reality on time and effort?

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Does “program success” fare better with A-133 audits or federal/state monitoring?

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Program Determination Letters (PDL) can be based on any information

▪34 CFR 81.30 (b)

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Does the A-133 Single Audit process strike the right balance between success and compliance?

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Section 305 of A-133 – Auditor Selection

Compare State Auditor General/ Legislative Auditor (Florida, Georgia, Louisiana) to private firms

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Private audit firms develop and protect long-term client relationships, sometimes to detriment of public

Rosslyn, NY

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Is there a fundamental conflict when the auditee pays the auditor?

Does this create incentives for the auditor to render a favorable opinion?

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GAO mandatory audit rotation may not be the most efficient way of strengthening auditor independence and audit quality

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Auditees cannot charge to federal grants audit costs if audit is not conducted in accordance with A-133

- Section 230

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Compare OIG Audits to A-133 Audits on T/E and Supplanting

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Until Congress repeals Section 441 of GEPA, OMB rewrites A-87 and A-21, and USDE disregards the current “Compliance Supplement,” Compliance trumps Program Success.

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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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