The Impact of Deregulation on Compliance The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 The Impact of Deregulation on Compliance Michael L. Brustein, Esq. mbrustein@bruman.com www.bruman.com

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Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Five Questions Has the Administration’s move towards deregulation impacted grant compliance requirements? Has compliance taken a backseat to performance? Must single auditors look at compliance? Must the pass-through look at compliance? What types of noncompliance lead to recovery of funds? Brustein & Manasevit, PLLC © 2017. All rights reserved.

Efforts at Deregulation The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Efforts at Deregulation For every new reg, two must be revoked Costs must be offset Supplement not Supplant – withdrawn 1/17 ESSA Accountability – nullified 3/17 HEA Teacher Prep – nullified 3/17 Transgender/Title IX guidance - rescinded Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Executive Order 13771 Reducing Regulation Brustein & Manasevit, PLLC © 2017. All rights reserved.

OMB Directive M-17-26 June 15, 2017 “Reducing Burden” The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 OMB Directive M-17-26 June 15, 2017 “Reducing Burden” Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 OMB Directives Federal Agencies no longer required to report “metrics” measuring the impact of the UGG COFAR is disbanded Brustein & Manasevit, PLLC © 2017. All rights reserved.

Is Compliance Still Important? The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Is Compliance Still Important? YES! Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Bruman Wall of Shame Recovery Actions Front Page of Newspaper Jail Time/OIG Investigations Brustein & Manasevit, PLLC © 2017. All rights reserved.

False Claims Act Recoveries The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 False Claims Act Recoveries As of August 1, 2016, civil penalties increased to between $10,781 and $21,562 per claim plus three times the amount of damages that the federal government sustains. - 31 U.S. Code 3729 Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Required Certification – 2 CFR 200.415 (UGG) “I am aware that any false, fictitious or fraudulent information, or the omission of any material fact, may subject me to criminal, civil or administrative penalties for fraud, false statements, false claims” Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 What is the legal basis for imposing consequences for non-compliance of grant conditions? Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 A federal grant “is much in the nature of a contract,” in return for the federal funds the grantee agrees to comply with the federally imposed conditions. Pennhurst vs. Halderman, 451 U.S. 1 (1981) Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 After establishment of ED, New Jersey and Pennsylvania argued to the Supreme Court that USDE cannot recover misspent grant funds Bell v. New Jersey and Pennsylvania, 461 U.S. 773 (1983) Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 OIG determined both states misspent Title I funds. Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Supreme Court grantees misusing federal funds incur a debt to the Federal Government (citing Section 415 of GEPA) grants must be adjusted on account of overpayments. Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Citing Pennhurst grantee chose to participate in the program, and as a condition of receiving the grant, gave an assurance that it would abide by the conditions of the grant. Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Many of the conditions of the grant are included in GEPA, and EDGAR, and UGG. Brustein & Manasevit, PLLC © 2017. All rights reserved.

Has Compliance Taken a Backseat to Performance? The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Has Compliance Taken a Backseat to Performance? Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 UGG  Preamble December 26, 2013 78 FR 78592 “The final guidance includes provisions that focus on performance OVER compliance to provide accountability for federal funds.” Brustein & Manasevit, PLLC © 2017. All rights reserved.

“Over” means “above in authority” The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 “Over” means “above in authority” Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 While non-compliance results in consequences – think corrective action!!! Brustein & Manasevit, PLLC © 2017. All rights reserved.

What has changed? New Emphasis on Timely Corrective Action The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 What has changed? New Emphasis on Timely Corrective Action Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 UGG Definition of “Cooperative Audit Resolution” “Federal Agencies offering appropriate relief for past noncompliance when audits show prompt corrective action has occurred” 2 CFR 200.25 (d) Brustein & Manasevit, PLLC © 2017. All rights reserved.

What does “appropriate” mean? The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 What does “appropriate” mean? Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 The UGG proposed regulation on cooperative audit resolution used the term “amnesty.” Brustein & Manasevit, PLLC © 2017. All rights reserved.

Does Appropriate Relief mean Amnesty? The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Does Appropriate Relief mean Amnesty? Brustein & Manasevit, PLLC © 2017. All rights reserved.

Must Single Auditors look at Compliance? The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Must Single Auditors look at Compliance? Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Yes!!! Auditors must determine whether the auditee has complied with federal statutes, regulations and the terms and conditions of federal awards - 2 CFR 200.514(d) Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 The principal compliance requirements are included in the compliance supplement - 2 CFR 200.514(d)(2) Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 The UGG threshold for auditors to report questionable costs is $25,000 but ED does not adopt that policy -p. 229 of EDGAR Brustein & Manasevit, PLLC © 2017. All rights reserved.

YES!! Must the Pass-Through look at compliance? The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Must the Pass-Through look at compliance? YES!! Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 The P/T must “monitor” the activities of the sub to ensure “compliance with federal statutes, regulations, and the terms and conditions of the subaward.” - 2 CFR 200.331(d) Brustein & Manasevit, PLLC © 2017. All rights reserved.

GEPA Statutory Provisions on Monitoring The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 GEPA Statutory Provisions on Monitoring Under the State-Administered Programs, the Secretary may require the State to submit a plan for monitoring compliance by local agencies, including “periodic visits by State personnel…to determine whether such programs are being conducted in accordance with such requirements.” - 20 USC 1232c Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Single State Application - 20 USC 1232d Each program must be administered in accord with all applicable statutes, regulations, program plans, and applications Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 So SEA serves as the fiduciary for all the federal funds under S/A programs Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 The SEA is the “recipient” of funds for S/A programs and the Secretary seeks recovery from the “recipient.” - 20 USC 1234a Brustein & Manasevit, PLLC © 2017. All rights reserved.

GEPA Measure of Recovery The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 GEPA Measure of Recovery “A recipient determined to have made an unallowable expenditure …shall be required to return funds in an amount that is proportionate to the extent of the harm its violation caused to an identifiable federal interest” Sec. 453 (a)(1) Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 “Identifiable Federal Interest” includes: Serving only eligible beneficiaries Providing only authorized services or benefits Complying with set-asides Excess cost requirements MOE Comparability Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 SNS Matching Preserving integrity of planning, application, record keeping, reporting requirements Maintaining accountability for use of funds Sec. 453 (a)(2) Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 “Such amount shall be reduced in whole or in part by an amount that is proportionate to the extent the mitigating circumstances caused the violation.” Sec. 453 (a)(1) Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 “Mitigating Circumstances” exist “only” when it would be unjust to compel the recovery of funds because the State or LEA actually and reasonably relied upon erroneous written guidance from ED. - 34 CFR 81.33 Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 To prove mitigating circumstances, recipient made an expenditure based on a 90 day letter and ED did not respond -34 CFR 81.33 Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Query Should other factors (e.g. equitable offset) be used to determine “proportionate harm?” Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 What types of reviews may lead to recovery of funds? Audit report Investigative report Monitoring report Any other evidence 34 CFR 81.30 Brustein & Manasevit, PLLC © 2017. All rights reserved.

Brustein & Manasevit, PLLC © 2017. All rights reserved. The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement Fall Forum 2017 ~ Nov 29-Dec 1 2017 Legal Disclaimer 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. Brustein & Manasevit, PLLC © 2017. All rights reserved.