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

2. “ ”

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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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?
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4. Efforts at Deregulation
The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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Supplement not Supplant – withdrawn 1/17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Transgender/Title IX guidance - rescinded
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
Executive Order 13771
Reducing Regulation
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6. 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
OMB Directive M June 15, 2017 “Reducing Burden”
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
OMB Directives
Federal Agencies no longer required to report “metrics” measuring the impact of the UGG
COFAR is disbanded
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8. Is Compliance Still Important?
The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
Is Compliance Still Important?
YES!
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
Bruman Wall of Shame
Recovery Actions
Front Page of Newspaper
Jail Time/OIG Investigations
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12. False Claims Act Recoveries
The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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 U.S. Code 3729
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
Required Certification – 2 CFR (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”
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
What is the legal basis for imposing consequences for non-compliance of grant conditions?
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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)
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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)
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
OIG determined both states misspent Title I funds.
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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.
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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.
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
Many of the conditions of the grant are included in GEPA, and EDGAR, and UGG.
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21. 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
Has Compliance Taken a Backseat to Performance?
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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.”
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23. “Over” means “above in authority”
The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
“Over” means “above in authority”
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
While non-compliance results in consequences – think corrective action!!!
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25. 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
What has changed?
New Emphasis on Timely Corrective Action
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
UGG Definition of “Cooperative Audit Resolution”
“Federal Agencies offering appropriate relief for past noncompliance when audits show prompt corrective action has occurred”
2 CFR (d)
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27. What does “appropriate” mean?
The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
What does “appropriate” mean?
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
The UGG proposed regulation on cooperative audit resolution used the term “amnesty.”
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29. Does Appropriate Relief mean Amnesty?
The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
Does Appropriate Relief mean Amnesty?
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30. Must Single Auditors look at Compliance?
The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
Must Single Auditors look at Compliance?
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
Yes!!!
Auditors must determine whether the auditee has complied with federal statutes, regulations and the terms and conditions of federal awards - 2 CFR (d)
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
The principal compliance requirements are included in the compliance supplement - 2 CFR (d)(2)
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
The UGG threshold for auditors to report questionable costs is $25,000
but
ED does not adopt that policy
-p. 229 of EDGAR
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34. 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
Must the Pass-Through look at compliance?
YES!!
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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 (d)
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36. GEPA Statutory Provisions on Monitoring
The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
Single State Application - 20 USC 1232d Each program must be administered in accord with all applicable statutes, regulations, program plans, and applications
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
So SEA serves as the fiduciary for all the federal funds under S/A programs
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
The SEA is the “recipient” of funds for S/A programs and the Secretary seeks recovery from the “recipient.” - 20 USC 1234a
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40. GEPA Measure of Recovery
The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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)
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
“Identifiable Federal Interest” includes:
Serving only eligible beneficiaries
Providing only authorized services or benefits
Complying with set-asides
Excess cost requirements
MOE
Comparability
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
SNS
Matching
Preserving integrity of planning, application, record keeping, reporting requirements
Maintaining accountability for use of funds
Sec. 453 (a)(2)
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
“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)
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
“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 CFR 81.33
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
To prove mitigating circumstances, recipient made an expenditure based on a 90 day letter and ED did not respond -34 CFR 81.33
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
Query Should other factors (e.g. equitable offset) be used to determine “proportionate harm?”
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
What types of reviews may lead to recovery of funds?
Audit report
Investigative report
Monitoring report
Any other evidence
34 CFR 81.30
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The Fork in the Road: Aligning ‘New Flexibility’ with Federal Grants Requirement
Fall Forum 2017 ~ Nov 29-Dec
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.
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