NACTEINACTEI“The Beltway Blues”“The Beltway Blues”

1.1. Will Perkins Students Be Left Will Perkins Students Be Left BehindBehind

2.2. Are You Legal? Compliance Are You Legal? Compliance and Enforcement Issues and Enforcement Issues Under PerkinsUnder Perkins..

Michael BrusteinMichael Brustein

3105 South Street, N.W.3105 South Street, N.W.

Washington, DC 20007Washington, DC 20007

202.965.3652202.965.3652

Mbrustein@bruman.comMbrustein@bruman.com

Due to partisan Due to partisan rancor, election year rancor, election year politics, and a short politics, and a short legislative schedule:legislative schedule:

Perkins Reauthorization Perkins Reauthorization

Doubtful this year, but Doubtful this year, but Hill staff optimisticHill staff optimistic

Legislative staff Legislative staff predicts a predicts a

bipartisan package bipartisan package by the end of July.by the end of July.

““Right now I see no Right now I see no evidence that the evidence that the President’s proposal is President’s proposal is supported by members of supported by members of Congress.”Congress.”

Jane OatesJane Oates

April 21, 2004April 21, 2004

““No one has No one has vigorously endorsed vigorously endorsed Bush’s proposal”Bush’s proposal”

Kelly ScottKelly Scott

April 21, 2004April 21, 2004

There are no There are no “landmines” as in “landmines” as in the WIA.the WIA.

Jane OatesJane Oates

April 21, 2004April 21, 2004

Who will take the Who will take the lead on lead on

reauthorization?reauthorization?

Congress has Congress has defaulted on defaulted on

Article I Article I responsibilitiesresponsibilities

““The Perkins Vocational The Perkins Vocational Education Program has Education Program has

remained remained fundamentally fundamentally

unchanged since unchanged since 1917.”1917.”

President Bush President Bush

April 6, 2004April 6, 2004

The President proposes The President proposes to modernize this pre-to modernize this pre-World War I program to World War I program to better secure the better secure the needs of the 21needs of the 21stst Century Worker.Century Worker.

White HouseWhite House

April 6, 2004April 6, 2004

The President proposes to The President proposes to redirect Perkins into redirect Perkins into SecTech. Secondary SecTech. Secondary programs must offer 4 years programs must offer 4 years English, 3 years math and English, 3 years math and science, 3 years social science, 3 years social studies, as part of studies, as part of vocational curriculum.vocational curriculum.

The FY 2005 Budget The FY 2005 Budget Requests $1 billion to Requests $1 billion to promote the development promote the development of a new generation of of a new generation of academically and academically and technically rigorous career technically rigorous career pathway programs.pathway programs.

Susan Susan SclafaniSclafani

April 1, 2004April 1, 2004

““If they are going to do the If they are going to do the same things with the same things with the money, it’s a waste of money, it’s a waste of money.”money.”

Susan SclafaniSusan SclafaniOctober 26, October 26,

20032003

Perkins funds would only be Perkins funds would only be available for programs that available for programs that lead seamlessly into further lead seamlessly into further education.education.

Susan SclafaniSusan SclafaniApril 1, 2004April 1, 2004

No funding for most current No funding for most current voc ed programs, including voc ed programs, including Tech Prep, because they Tech Prep, because they duplicate activities duplicate activities proposed in SecTech.proposed in SecTech.

Susan SclafaniSusan SclafaniApril 1, 2004April 1, 2004

““Your rhetoric and Your rhetoric and your budget don’t your budget don’t match.”match.”

Rep. Sherwood, R-Rep. Sherwood, R-PAPA

April 1, April 1, 20042004

““In my opinion, In my opinion, Perkins should be Perkins should be doubled.”doubled.”

Rep. Peterson, R-PARep. Peterson, R-PAApril 1, April 1,

20042004

Bush Budget for FY 2005Bush Budget for FY 2005

““Career and technical training in our Career and technical training in our nation’s high schools has largely nation’s high schools has largely been an outdated relic, suitable for been an outdated relic, suitable for the classroom realities of the the classroom realities of the 1950’s…”1950’s…”

Bush Budget for FY 2005Bush Budget for FY 2005

““Students participating in vocational Students participating in vocational education programs in our nation’s education programs in our nation’s high schools are often limited to high schools are often limited to courses that offer a narrow set of courses that offer a narrow set of job skills and poor academic job skills and poor academic preparation for college and the preparation for college and the modern workforce.”modern workforce.”

Bush Budget for FY 2005Bush Budget for FY 2005

““There has been scant evidence that There has been scant evidence that the Department’s Vocational the Department’s Vocational Education State Grants Program Education State Grants Program leads to positive student outcomes leads to positive student outcomes despite decades of increasing despite decades of increasing federal investment.”federal investment.”

Congress approved Congress approved $1.195 billion for $1.195 billion for Perkins for the Perkins for the

period July 1, 2004 period July 1, 2004 to June 30, 2005.to June 30, 2005.

Perkins has been flat Perkins has been flat funded for funded for

approximately 20 approximately 20 years.years.

Funding for Funding for July 1, 2005 to July 1, 2005 to June 30, 2006June 30, 2006

-Continuing ResolutionContinuing Resolution-Omnibus / MinibusOmnibus / Minibus

States and Locals will States and Locals will operate under current operate under current

plan (with new plan (with new benchmarks) benchmarks)

for 7-1-04 to 6-30-05 for 7-1-04 to 6-30-05 and probablyand probably

7-1-05 to 6-30-067-1-05 to 6-30-06

NCLB Issues Impacting NCLB Issues Impacting PerkinsPerkins

A.A. Increased Academic RigorIncreased Academic Rigor

B.B. Unfunded MandateUnfunded Mandate

C.C. Highly Qualified TeachersHighly Qualified Teachers

D.D. Scientifically Based ResearchScientifically Based Research

E.E. Adequate Yearly Progress - Adequate Yearly Progress - SanctionsSanctions

Unfunded Mandates:Unfunded Mandates:

Key election issueKey election issue Intrusion on local prerogativesIntrusion on local prerogatives Read what you vote forRead what you vote for

Highly Qualified Highly Qualified TeachersTeachers

Teachers must be highly Teachers must be highly qualified (Bachelor’s qualified (Bachelor’s degree) if teaching core degree) if teaching core academic subjects.academic subjects.

Perkins needs to rectify Perkins needs to rectify this concern – business this concern – business and industry want and industry want experienced workers as experienced workers as career tech instructors.career tech instructors.

Jane OatesJane Oates

April 2004April 2004

Scientifically Based Scientifically Based Research (SBR)Research (SBR)

Curricula, professional Curricula, professional development,development,

instructional methodologies must instructional methodologies must be validated by rigorous evidence be validated by rigorous evidence of effectivenessof effectiveness

(national clearinghouse for SBR)(national clearinghouse for SBR)

Adequate Yearly Progress Adequate Yearly Progress (AYP)(AYP)

Must score higher on Must score higher on standardized English and standardized English and math tests to make math tests to make adequate yearly progressadequate yearly progress

AYPAYP

All subgroups (racial, ethnic, low All subgroups (racial, ethnic, low income, disabled, LEP) must make income, disabled, LEP) must make AYPAYP

Any subgroup fails, the school failsAny subgroup fails, the school fails All schools must be 100% All schools must be 100%

proficient by 2013-2014proficient by 2013-2014

AYPAYP

At least 95% of all students At least 95% of all students enrolled and 95% of each enrolled and 95% of each subgroup must take assessmentsubgroup must take assessment

Several states fail on participation Several states fail on participation ratesrates

Failing AYP for 2 consecutive years Failing AYP for 2 consecutive years = school improvement= school improvement

Contrast AYP to Perkins Contrast AYP to Perkins ImprovementImprovement

Transfers – 1Transfers – 1stst year in school year in school improvementimprovement

Supplemental Services – 2Supplemental Services – 2ndnd year of year of school improvementschool improvement

Corrective Action – 4Corrective Action – 4thth year year Restructuring – 5Restructuring – 5thth year year

House is using House is using Perkins III as the Perkins III as the framework, not framework, not

SECTECHSECTECH

The Two Key Questions:The Two Key Questions:

Will Perkins serve only career Will Perkins serve only career tech students?tech students?

Will Perkins become a Will Perkins become a competitive program? Can competitive program? Can the State ensure quality the State ensure quality through formula grants?through formula grants?

In the past, career tech In the past, career tech made the effort at made the effort at collaboration. In the future, collaboration. In the future, academic teachers must academic teachers must work collaboratively in order work collaboratively in order to serve all students.to serve all students.

Susan ScalafaniSusan Scalafani

April 21, 2004April 21, 2004

The New Legal The New Legal FrameworkFramework1.1. Focus on career techFocus on career tech2.2. Sweeping emphasis on accountability with new Sweeping emphasis on accountability with new

assessmentassessment3.3. Aligned with NCLB – boost academic rigor of Aligned with NCLB – boost academic rigor of

coursescourses4.4. Emphasis on integration, articulationEmphasis on integration, articulation5.5. P/S dollars linked to WIA – partnerships with P/S dollars linked to WIA – partnerships with

businessbusiness6.6. Not prescriptive as to where CTE takes place as Not prescriptive as to where CTE takes place as

long as students are academically prepared to long as students are academically prepared to enter collegeenter college

7.7. SanctionsSanctions

““The Most The Most Significant Significant

Compliance and Compliance and Enforcement Issues Enforcement Issues

Under Perkins”Under Perkins”

IssuesIssues1.1. The Compliance and Enforcement The Compliance and Enforcement

ProcessProcess

2.2. Matching / Hold Harmless – State Matching / Hold Harmless – State AdminAdmin

3.3. Maintenance of EffortMaintenance of Effort

4.4. SupplantingSupplanting

5.5. A-87 AllocabilityA-87 Allocability

6.6. Lapsing of Federal DollarsLapsing of Federal Dollars

The Compliance and The Compliance and Enforcement ProcessEnforcement Process

A.A. Meaning of State-Administered Meaning of State-Administered ProgramProgram

B.B. Single Audit Act of 1980, OMB Single Audit Act of 1980, OMB Circular A-133Circular A-133

C.C. The Office of Inspector General The Office of Inspector General (e.g. Florida, Indiana)(e.g. Florida, Indiana)

D.D. The Compliance SupplementThe Compliance Supplement

Legal AuthoritiesLegal Authorities

A.A. Perkins ActPerkins Act

B.B. A-87A-87

C.C. A-102A-102

D.D. EDGAREDGAR

E.E. No Program RegulationsNo Program Regulations

MonitoringMonitoring

Grantees are responsible for Grantees are responsible for managing the day-to-day managing the day-to-day operations for grant and subgrant operations for grant and subgrant supported activities to assure supported activities to assure compliance.compliance.

34 CFR 34 CFR 80.4080.40

Grantee Monitoring Must Grantee Monitoring Must Include:Include:

Performance goals are being achievedPerformance goals are being achieved Each program, function, or activityEach program, function, or activity

34 CFR 80.4034 CFR 80.40

GEPA Single State GEPA Single State ApplicationApplication20 U.S.C. §1232d20 U.S.C. §1232d

General Requirements for General Requirements for State–Administered State–Administered ProgramsPrograms

Monitoring subrecipientsMonitoring subrecipients Enforcement of obligationsEnforcement of obligations Providing t/aProviding t/a Corrections of deficienciesCorrections of deficiencies Assure proper accounting of all fundsAssure proper accounting of all funds

State-Administered State-Administered ProgramsPrograms

SEA responsible for lawful SEA responsible for lawful expenditures expenditures

SEA must effectuate audit SEA must effectuate audit resolutionresolution

1996 Amendments to the 1996 Amendments to the Single Audit ActSingle Audit Act31 U.S.C. §7502(f)(2)(B)31 U.S.C. §7502(f)(2)(B)

Pass through entities must Pass through entities must monitor a subrecipient’s use of monitor a subrecipient’s use of federal funds through site federal funds through site visits, limited scope audits, or visits, limited scope audits, or other meansother means

Reliance on Reliance on Desk Review Desk Review is insufficient.is insufficient.

OMBOMB

OMB expects pass-OMB expects pass-through entities to through entities to consider various risk consider various risk factors in developing factors in developing subrecipient monitoring subrecipient monitoring procedureprocedure(relative size and (relative size and complexity of award, complexity of award, prior experience)prior experience)

Unallowable Audit Unallowable Audit CostsCosts

1.1. Single Audit not conducted Single Audit not conducted in accord with A-133in accord with A-133

2.2. Audits of entities Audits of entities expending under $500,000 expending under $500,000 per yearper year

Pass-through entity Pass-through entity may charge to may charge to federal grant the federal grant the cost of “Limited cost of “Limited Scope Audit.”Scope Audit.”

Limited Scope AuditLimited Scope AuditAddress one or more of the Address one or more of the

following types of compliance following types of compliance requirementsrequirements::

Allowable costs / cost principlesAllowable costs / cost principles EligibilityEligibility Matching / MOEMatching / MOE EarmarkingEarmarking ReportingReporting

Pass-through Entity (SEA) Pass-through Entity (SEA) Responsibilities Under A-Responsibilities Under A-133133

1.1. Identify all awards for subrecipientsIdentify all awards for subrecipients2.2. Advise subs of all requirementsAdvise subs of all requirements3.3. Monitor all subs for complianceMonitor all subs for compliance4.4. Ensure that subs expending over Ensure that subs expending over

$500,000 have audits$500,000 have audits5.5. Issue management decisions and ensure Issue management decisions and ensure

subs take corrective actionsubs take corrective action6.6. Adjust own records necessitated by auditsAdjust own records necessitated by audits7.7. Require sub to permit SEA access to Require sub to permit SEA access to

recordsrecords

Time RequirementsTime Requirements

1.1. SEA must make management SEA must make management decision within 6 months of decision within 6 months of receipt of auditreceipt of audit

2.2. CAP must be initiated within 6 CAP must be initiated within 6 months after receipt of auditmonths after receipt of audit

Monitoring of CBOs, FBOs, Monitoring of CBOs, FBOs, and Nonprofitsand Nonprofits

1.1. Advance payment v. Advance payment v. ReimbursementReimbursement

2.2. Fiscal agent with track recordFiscal agent with track record

3.3. Surety BondsSurety Bonds

4.4. Training (Florida example)Training (Florida example)

Many states are Many states are developing developing instruments:instruments:

See Louisiana modelSee Louisiana model

Matching / Hold Harmless Matching / Hold Harmless – State Administration– State Administration

Perkins RequirementsPerkins Requirements

A.A. Cap of 5%Cap of 5%

B.B. Direct and indirect chargesDirect and indirect charges

C.C. Dollar for dollar matchDollar for dollar match

D.D. Hold harmless dates to 1984 (7%)Hold harmless dates to 1984 (7%)

Many states reserve Many states reserve less than 5% due to less than 5% due to

insufficient state insufficient state contributionscontributions

Look to other sources Look to other sources of state administration of state administration

supportsupport

Maintenance of EffortMaintenance of Effort

A.A. Perkins is most prescriptive (no Perkins is most prescriptive (no proportionate reduction)proportionate reduction)

B.B. Pennsylvania case – Vocational Pennsylvania case – Vocational education is what the Feds say, education is what the Feds say, not the State. U.S. 3not the State. U.S. 3rdrd Circuit Circuit Court of AppealsCourt of Appeals

SupplantingSupplanting

Presumption of Supplanting if:Presumption of Supplanting if:

A.A. Activity required by State lawActivity required by State law

B.B. Activity previously paid for with Activity previously paid for with State fundsState funds

SupplantingSupplanting

Presumption is Rebutted if:Presumption is Rebutted if:

A.A. Activity discontinued in the Activity discontinued in the absence of federal fundsabsence of federal funds

1.1. Compliance SupplementCompliance Supplement

2.2. Hickok letterHickok letter

B.B. Documentation to support ADocumentation to support A

A-87 AllocabilityA-87 Allocability

All Perkins expenditures must All Perkins expenditures must benefit students who elect to enroll benefit students who elect to enroll in career techin career tech

- equipment exception- equipment exception

Significant Issues in Significant Issues in the Audit Resolution the Audit Resolution ProcessProcess

The General Education The General Education Provisions Act (GEPA)Provisions Act (GEPA)

Requires that when USDE Requires that when USDE determines a recipient must determines a recipient must return funds inappropriately return funds inappropriately expended, USDE must issue expended, USDE must issue a program determination a program determination letter (PDL)letter (PDL)

34 CFR 84.3434 CFR 84.34

PDL may be issued based PDL may be issued based on:on:

1.1. Audit – (OIG or A-133 Single Audits)Audit – (OIG or A-133 Single Audits)

2.2. Investigative Report (OIG)Investigative Report (OIG)

3.3. Monitoring ReportMonitoring Report

4.4. Any Other EvidenceAny Other Evidence

Based on Tangipahoa CaseBased on Tangipahoa Case

34 CFR 81.3034 CFR 81.30

OIG 2004 WorkplanOIG 2004 Workplan“Potential Barriers to Audit “Potential Barriers to Audit

Resolution”Resolution”

1.1. Prima facie casePrima facie case

2.2. Harm to the federal interestHarm to the federal interest

3.3. Statute of limitationsStatute of limitations

The PDL must establish The PDL must establish a “prima facie case” for a “prima facie case” for the recovery of funds the recovery of funds and a determination of and a determination of harm to the federal harm to the federal interest.interest.

34 CFR 81.3434 CFR 81.34

““Prima facie case” = Prima facie case” = statement of the law statement of the law and facts, unless and facts, unless rebutted, is rebutted, is sufficient to sustain sufficient to sustain the conclusion the conclusion drawn in notice.drawn in notice.

34 CFR 81.3434 CFR 81.34

““Burden of Proof”Burden of Proof”

If OALJ accepts PDL as meeting prima If OALJ accepts PDL as meeting prima facie standard, burden of proof facie standard, burden of proof shifts to the recipient.shifts to the recipient.

Burden on recipient to demonstrate Burden on recipient to demonstrate through documentary evidence through documentary evidence compliance. compliance.

34 CFR 81.4034 CFR 81.40

Should prima facie Should prima facie standard be standard be incorporated into the incorporated into the A-133 compliance A-133 compliance supplement?supplement?

ProportionalityProportionality

A recipient shall A recipient shall return an amount that return an amount that is proportional to the is proportional to the extent of the harmextent of the harm

34 CFR 34 CFR 81.3281.32

OIG – Program OIG – Program offices lack the offices lack the expertise to make expertise to make prima facie prima facie assessmentassessment

January 4, 2004 – January 4, 2004 – OIG Audit: Funds not OIG Audit: Funds not recovered due to 5 recovered due to 5 year S/Lyear S/L

What is the What is the statute of statute of limitations?limitations?

OIG – Federal fund OIG – Federal fund recovery was lost due to 3 recovery was lost due to 3 factors:factors:

1.1. Audits were not received timelyAudits were not received timely

2.2. Audits were not resolved timelyAudits were not resolved timely

3.3. Prima facie evidence could not be Prima facie evidence could not be establishedestablished

OIG – seeking OIG – seeking sanctions for late sanctions for late single auditssingle audits

OIG – Congress OIG – Congress should consider should consider changes to S/L and changes to S/L and prima facie standardprima facie standard

Most PDLs based on:Most PDLs based on:

1.1. Tydings violation (obligation Tydings violation (obligation period)period)

2.2. A-87 Time and Effort (A-21)A-87 Time and Effort (A-21)

3.3. Supplanting, matching, Supplanting, matching, maintenance of effortmaintenance of effort

4.4. Allocability and AllowabilityAllocability and Allowability

5.5. Lack of documentationLack of documentation

TydingsTydings

Funds not obligated in the current Funds not obligated in the current year shall remain available for year shall remain available for obligation during succeeding yearobligation during succeeding year

20 U.S.C 1225(b)20 U.S.C 1225(b)

What constitutes What constitutes an obligation?an obligation?

34 CFR 76.70734 CFR 76.707

34 CFR 75.70734 CFR 75.707

ObligationsObligations

Acquisition of Acquisition of PropertyProperty

Date of binding Date of binding

written commitmentwritten commitment

Personal ServicesPersonal Services

by Employeeby EmployeeWhen services When services

are performedare performed

Personal Services Personal Services

by Contractorby ContractorDate of binding Date of binding

written commitmentwritten commitment

TravelTravel When travel is takenWhen travel is taken

On July 1, 2003, SEAs had On July 1, 2003, SEAs had funds from:funds from:7-1-01 7-1-01 9-30-03 9-30-037-1-02 7-1-02 9-30-04 9-30-047-1-03 7-1-03 9-30-05 9-30-05

SEAs account generally on FIFOSEAs account generally on FIFO

What is the standard What is the standard for determining for determining obligations under obligations under Tydings?Tydings?

See California decision See California decision (Tab A)(Tab A)

When did obligation When did obligation arise, not in what arise, not in what account it was account it was initially recorded.initially recorded.

Why do Federal funds Why do Federal funds lapse?lapse?

1.1. Misunderstanding of Tydings, Misunderstanding of Tydings, FIFO, CMIA, California decisionFIFO, CMIA, California decision

2.2. States needlessly identify funds States needlessly identify funds at local level, and do not roll at local level, and do not roll funds backfunds back

3.3. Failure to monitor GAPS (Grants Failure to monitor GAPS (Grants Administration and Payment Administration and Payment System)System)

““Lapsing” resulted in Lapsing” resulted in the $6 billion White the $6 billion White House offensive last fall House offensive last fall to NCLB unfunded to NCLB unfunded

mandate--mandate-- -States in denialStates in denial-CCSSO exacerbated CCSSO exacerbated issueissue

Reality CheckReality Check

All 50 states lost FY 97 All 50 states lost FY 97 funds on 9-30-03funds on 9-30-03

Texas was the biggest state Texas was the biggest state loserloser

See Attachment BSee Attachment B

Reality CheckReality Check

Under CMIA, ED must revert Under CMIA, ED must revert all unexpended balances to all unexpended balances to the Treasury five years from the Treasury five years from the the endend date of date of ED’sED’s funding authority.funding authority.

Example:Example:

FY 1997 funds available as of 7-1-FY 1997 funds available as of 7-1-97, remained available for ED to 97, remained available for ED to allocate until 9-30-98 although allocate until 9-30-98 although SEAs had until 9-30-99SEAs had until 9-30-99

ED reverted $154 million of FY 97 ED reverted $154 million of FY 97 funds on 9-30-03funds on 9-30-03

Reality CheckReality Check

ED program offices now ED program offices now apprising states of FY 98 apprising states of FY 98 close-out, allowing the close-out, allowing the reopening of grant awards reopening of grant awards to liquidate outstanding to liquidate outstanding balances.balances.

Reality CheckReality Check

Look to California Tydings Look to California Tydings decision as basis to roll decision as basis to roll funds under FIFO, but funds under FIFO, but caution on supplanting.caution on supplanting.

Reality CheckReality Check

March 23, 2004 CCSSO March 23, 2004 CCSSO meeting with Bush: White meeting with Bush: White House would “cease and House would “cease and desist” on lapsing funds desist” on lapsing funds exposure.exposure.

Questions??Questions??

This presentation is intended solely to This presentation is intended solely to provide general information and does not provide general information and does not constitute legal advice. Attendance at the constitute legal advice. Attendance at the presentation or later review of these presentation or later review of these printed materials does not create an printed materials does not create an attorney-client relationship with Brustein attorney-client relationship with Brustein & Manasevit. You should not take any & Manasevit. You should not take any action based upon any information in this action based upon any information in this presentation without first consulting legal presentation without first consulting legal counsel familiar with your particular counsel familiar with your particular circumstances.circumstances.