82-000032 Division Of Employment And Training vs. Indian River Community College Status: Closed Recommended Order on Monday, March 22, 1982.

Summary: Contractor required to repay state for improperly spent grant funds.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF LABOR & EMPLOYMENT )

SECURITY, DIVISION OF EMPLOYMENT )

AND TRAINING, )

)

Petitioner, )

)

vs. ) CASE NO. 82-032

)

INDIAN RIVER COMMUNITY COLLEGE, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held before the Division of

Administrative Hearings by its duly designated Hearing Officer, DONALD R.

ALEXANDER, on March 4, 1982, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Sonja P. Mathews, Esquire

Suite 117-Montgomery Building

2562 Executive Center Circle, East

Tallahassee, Florida 32301

For Respondent: R. Dale Trefelner

Indian River Community College

3209 Virginia Avenue

Fort Pierce, Florida 33450

BACKGROUND

On November 24, 1981, Petitioner, Department of Labor and Employment

Security, Division of Employment and Training, issued its Final Determination

concerning certain expenditures of funds by Respondent, Indian River Community

College, under the Comprehensive Employment and Training Act (CETA). In the

Final Determination, Petitioner recommended that $18,197 in expenditures made

under various contracts be disallowed because Respondent had failed to comply

with applicable regulations, and that it repay the Department that amount of

monies.

Respondent disputed the recommendation and requested a formal hearing

pursuant to Subsection 120.57(1), Florida Statutes. The matter was forwarded to

the Division of Administrative Hearings on January 4, 1982, with a request that

a Hearing Officer be assigned to conduct a hearing. By Notice of Hearing dated

February 9, 1982, the final hearing was scheduled for March 4, 1982, in

Tallahassee, Florida.

At the final hearing Petitioner presented the testimony of James Harris,

Division Internal Auditor, and Alicia Faughn, Division Employment Training

Specialist, and offered Petitioner's Exhibits 1-6, each of which was received

into evidence. Respondent presented the testimony of R. Dale Trefelner, CETA

Director for the College, and offered Respondent's Exhibit 1, which was received

into evidence.

Pursuant to the provisions of Rule 28-5.1055, Florida Administrative Code,

the undersigned made a diligent inquiry of Respondent's prospective

representative, R. Dale Trefelner, during a non-adversary proceeding, under oath

and on the record, to assure that the prospective representative was qualified

to appear in this proceeding and capable of representing the rights and

interests of Respondent. Such a finding was made and read into the record.

Proposed findings of fact and conclusions of law were filed by Petitioner

on March 15, 1982, and have been considered by the undersigned in the

preparation of this order. Findings of fact not included in this order were

considered irrelevant to the issues, immaterial to the results reached, or not

supported by competent and substantial evidence.

At the outset of the hearing, Petitioner and Respondent stipulated that (1)

the recommended disallowance of $2,036 in costs in Item (1)(a) was proper and

that Respondent would repay this amount, and (2) $274 in costs in Item (7)(a)

previously recommended for disallowance should be allowed. Remaining at issue

is whether Respondent should be required to repay $12,315 in monies allegedly

expended in violation of applicable rules and standards.

Based upon all the evidence, the following findings of fact are determined:

FINDINGS OF FACT

1. The State of Florida is the recipient of financial assistance through a

grant from the United States Department of Labor under the terms of the

Comprehensive Employment and Training Act (CETA). The monies are to be used to

provide job training and employment opportunities for economically

disadvantaged, unemployed or underemployed persons. Petitioner, Department of

Labor and Employment Security, Division of Employment and Training, acting on

behalf of the State, disburses the Federal monies to various units of local

government pursuant to contracts entered into by Petitioner and those units.

Such contracts require that all monies expended thereunder be in accordance with

applicable regulations. As is pertinent here, these regulations include

portions of Sections 675 and 676 of Volume 20, Code of Federal Regulations, and

Procedural Instructions 77-10 and 79-25 issued by the Department.

2. The Department, in conjunction with an outside independent certified

public accounting firm, is responsible for auditing CETA contracts to insure

compliance with applicable regulations. Any costs found to be in contravention

of Federal or State regulations are recommended to be disallowed. After the

audit is completed a Final Determination is issued by the Department containing

its determination of allowable and non-allowable costs. The final disposition

of these costs at the State level is appealable to and reviewed by the United

States Department of Labor.

3. As is pertinent here, Petitioner and Respondent, Indian River Community

College, entered into Contract Nos. 79MP-2U-10-66-05, 79MP-1F-10-66-05-01, 80ET-

85-10-66-05-015 and 80ET-86-10-66-05-030 covering various periods in 1979 and

1980. These contracts were subsequently audited by the Department and found to

contain the following discrepancies:

(a) Under Contract No. 79MP-2U-10-66-05, one Michell L. Cleveland was

employed in a Title II-D program effective May 3, 1979. Cleveland had

previously been certified as eligible to participate by the Florida State

Employment Service (FSES) on April 10, 1979. Prior to his participation in the

CETA program, Cleveland was self-employed. However, his application did not

reflect when he terminated his self-employment status. Therefore, Cleveland's

income could not be verified as required by applicable rules. During his tenure

with CETA, Cleveland was compensated $1,951 for his services.

(b) Under Contract No. 79MP-1F-10-66-05-01, one Lois D. Creek was

employed in a Title VI sustainment program. She had come to the college after

being certified eligible by the FSES on June 25, 1979. Although she was

employed before entering the CETA program, an audit of her application disclosed

that the exact date her employment was terminated had not been shown.

Therefore, the Department was unable to determine if she was unemployed 10 of 20

weeks prior to her application being filed as required by applicable rules.

Creek received $1,858 in CETA funds while employed with Respondent.

(c) Respondent employed one Omar Ali under Contract No. 80ET-85-10-66-

05-015. In order to determine eligibility, it was necessary for Respondent to

compute Ali's prior income. In doing so, Respondent's intake officer

erroneously annualized his income over the preceding three months instead of

using the preceding six months as required by Department rules. As a

consequence, Ali's income was understated. A later Department audit revealed

that Ali's six-month annualized income exceeded 70 percent of the lower living

standard income level of $3400 per year and that he was ineligible to

participate in the program. While employed by CETA, Ali received $1,738 in

benefits.

(d) Lois D. Creek was again employed in a Title II-D program under

Contract No. 80ET-86-10-66-05-030 during 1980. She received $3,392 in

compensation for her services. Because her application failed to show the dates

of prior employment, the Department was unable to determine if Creek was

eligible for participation in the program. Respondent later determined that

Creek was ineligible for participation; however, by this time Creek had

terminated her employment.

(e) Under Contract No. 80ET-86-10-66-05-030, Respondent employed one

Doris White beginning in October, 1980. White was certified as being eligible

by Respondent's intake officer based upon information supplied by White during

her initial interview. During the course of a routine audit at a later

undisclosed time, Respondent discovered White had understated her income,

thereby making her ineligible for the program. She was immediately terminated

from her position. However, before the error was discovered, White received

$3,379 in compensation.

4. Respondent contends that in three instances, the individuals (Cleveland

and Creek) had been certified as eligible to participate by the Florida State

Employment Service. It then relied upon these representations in hiring the

participants. Respondent acknowledged, however, that the applications were not

completely filled out in accordance with applicable rules.

5. As to Ali, Respondent asserts that the intake employee who filled out

the application misinterpreted vague and ambiguous instructions on how to

compute prior income. It argues it should not be penalized for an unintentional

error, particularly where the instructions ware less than clear.

6. Finally, Respondent contends that, because of the volume of

applications in 1980, and a shortage of manpower, it necessarily had to rely

upon the accuracy of income data submitted by White, and others, to ascertain

eligibility. It added that through an internal audit, her ineligibility was

detected, and she was promptly terminated from employment. Respondent has

subsequently implemented additional screening steps to insure that ineligible

applicants are not hired.

7. On or before March 31, 1979, the FSES undertook the responsibility of

certifying the eligibility of participants for Title VI Project Job contracts.

If a participant was later found to be ineligible, the subgrantee (Respondent)

was not responsible for disallowed costs associated with that individual.

However, effective April 1, 1979, the responsibility for verifying the

eligibility of applicants in Title VI PJ contracts was placed upon the

subgrantees and they were no longer relieved of liability. Notification of this

change was furnished by Petitioner to all FSES offices by bulletin dated January

25, 1979. Whether the subgrantees were formally notified in a similar manner

was not disclosed.

CONCLUSIONS OF LAW

8. The Division of Administrative Hearings has jurisdiction of the subject

matter and the parties thereto pursuant to Subsection 120.57(1), Florida

Statutes.

9. Pursuant to the provisions of Chapter 17, United States Code, 801 et

seq. the State of Florida has received grants from the United States Department

of Labor for the purpose of establishing programs to provide comprehensive

employment and training services for "economically disadvantaged persons."

10. Subsection 450.55(2), Florida Statutes, reposes in Petitioner the

responsibility for carrying out the duties and responsibilities assigned to the

State of Florida under CETA. These duties include ". . .(signing) contracts on

behalf of the state. . .with program operators contracting with the state under

the Comprehensive Employment and Training Act. . ." Subsection 450.55(3),

Florida Statutes.

11. Five items remain at issue and will be discussed separately.

A. Mitchell L. Cleveland - It is alleged that Cleveland's application

did not provide the date of termination from his self-employed status. 20 CFR

676.75-3(b)(1) requires that ". . .[a] full and complete application must be

taken on all applicants in order to establish participant eligibility."

Petitioner's Composite Exhibit 2 confirms this omission, and it is concluded

that a violation of the foregoing rule has occurred. Although Respondent

contends that Cleveland had been certified eligible by FSES and relied upon this

certification in good faith, this defense is without merit since (a) Cleveland

was not a participant in a Title VI Project Job contract which relieved the

subgrantee of liability, and (2) in any event the certification occurred after

March 31, 1979, when liability for certification was placed upon the subgrantee.

B. Lois D. Creek-- The Final Determination asserts that Creek's

application failed to provide the dates of prior employment and therefore her

eligibility could not be determined. A copy of the application in question

supports the charge, and it is concluded that a violation of 20 CFR 676.75-

3(b)(1) has occurred.

Respondent's argument that Creek was certified as being eligible by

FSES is unavailing for the same reasons as were discussed in the preceding

section of this Order. Moreover, 20 CFR 676.75-3(2)(i), provides:

"[t]here shall be a review of all applications

as soon as possible after enrollment but not

later than 30 days after the date of enrollment,

by someone other than the intake officer, to

determine that:

(A) The application is complete;

Had such a review been made, the incomplete application would have been

discovered, and Creek's ineligibility ascertained.

C. Omar Ali - Through a mistake on the part of Respondent's intake

officer, Ali's prior income was incorrectly computed and his income understated.

The parties agree that Ali's actual income exceeded income limitations

prescribed by 20 CFR 674 and 675.5-2. Therefore, it is concluded that

Respondent has violated the foregoing standards by employing an ineligible

participant.

Respondent contends in mitigation the error was unintentional, and

indeed it was, and the Department rules were vague and ambiguous. Nonetheless,

had a proper 30-day review been conducted as required by 20 CFR 676.75-3(2)(i),

the error should have been discovered and corrective action taken. Moreover,

Procedural Instruction 79-25 refers the subgrantee to 20 C.F.R. 675.5 which

delineates the requirements for each Title and would have made clear any alleged

ambiguity.

D. Lois Creek - The same conclusions reached in paragraph B above are

applicable here, and it is concluded that a violation of the rules has occurred,

and Respondent should repay Petitioner the compensation which she improperly

received.

E. Doris White - White's eligibility was based upon erroneous

information given to Respondent. Although Respondent acknowledges that White

did not meet the poverty guidelines prescribed by 20 CFR 675.5-5(a)(1), the

College nonetheless contends it necessarily had to initially rely upon the

information submitted by an applicant since it had neither the resources nor

manpower to verify that data. Fairness and the practicalities of the situation

dictate that Respondent should not be faulted for having to initially rely upon

incorrect information given by an applicant. However, Federal rules are quite

specific as to subsequent procedures that should be promptly taken in verifying

an applicant's prior income. See 20 CFR 675.5-1(a); 20 CFR 676.75-3(b)(2)(B).

Those steps were not followed, and only when a later internal audit was

conducted was White's ineligibility discovered. During the interim she was paid

$3,379. Therefore, it is concluded that a violation of 20 CFR 675.5-5(1)(a) has

occurred, and Respondent is liable for White's compensation. 1/

12. It seems quite harsh to penalize Respondent for the full amount in

dispute, given the complex maze of State and Federal regulations that must be

strictly followed, and Respondent's lack of manpower and resources to adequately

comply with those regulations. 2/ However, the contractual agreement between

the parties is quite clear, and requires that the subgrantee repay any monies

improperly spent; otherwise the State itself would be liable for repayment to

the United States Department of Labor. Therefore, despite the unintentional

nature of the errors, Respondent should repay all monies in dispute.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is

RECOMMENDED that with the exception of Item (7)(a) previously agreed upon

by the parties, Respondent repay all costs recommended for disallowance in

Petitioner's Final Determination dated November 24, 1982.

DONE and ENTERED this 22nd day of March, 1982, in Tallahassee, Florida.

___________________________________

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings

The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of March, 1982.

ENDNOTES

1/ Respondent's reliance upon 20 CFR 676.88, which allows certain questioned

costs when no negligence on the part of the operator has occurred, is misplaced.

Relief under this section is obtainable only at the Federal level, and has no

applicability in a State forum.

2/ Respondent's Exhibit 1 bears out a part of this conclusion, for the

Department's own auditors were concerned about Respondent's lack of "clerical

help", its volume of "paper work", and "mediocre communications with DET in

Tallahassee as early as September, 1979.

COPIES FURNISHED:

Sonja P. Mathews, Esquire

Suite 117-Montgomery Building

2562 Executive Center Circle, East

Tallahassee, Florida 32301

Mr. R. Dale Trefelner

Indian River Community College

3209 Virginia Avenue

Fort Pierce, Florida 33450

Mr. Henry M. Warren

Division of Employment & Training

Room 303, Atkins Building

1320 Executive Center Drive

Tallahassee, Florida 32301