[Federal Register: June 6, 2001 (Volume 66, Number 109)]
[Page 30625-30627]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

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Part IV

Department of Education


Intent To Repay to the State of Illinois Department of Human Services 
Funds Recovered as a Result of a Preliminary Department Decision; 

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Intent To Repay to the State of Illinois Department of Human 
Services Funds Recovered as a Result of a Preliminary Department 

AGENCY: Office of Special Education and Rehabilitative Services, 
Department of Education.

ACTION: Notice of intent to award grantback funds.


SUMMARY: Under section 459 of the General Education Provisions Act 
(GEPA), 20 U.S.C. 1234h (1994), the U.S. Secretary of Education intends 
to repay to the State of Illinois Department of Human Services (IDHS), 
under a grantback arrangement, an amount equal to 75 percent of the 
principal amount of funds recovered by the U.S. Department of Education 
(Department) as a result of a Preliminary Department Decision (PDD). 
This notice describes the IDHS' plan for the use of the repaid funds 
and the terms and conditions under which the Secretary intends to make 
those funds available. This notice invites comments on the proposed 

DATES: We must receive your comments on or before July 6, 2001.

ADDRESSES: Address all comments about the proposed grantback to Syed M. 
Asghar, U.S. Department of Education, 400 Maryland Avenue, SW., room 
3215, Switzer Building, Washington, DC 20202-6132. If you prefer to 
send your comments through the Internet, use the following address: 

FOR FURTHER INFORMATION CONTACT: Syed M. Asghar. Telephone: (202) 205-
3015. If you use a telecommunications device for the deaf (TDD), you 
may call the Federal Information Relay Service (FIRS) at 1-800-877-
    Individuals with disabilities may obtain the document in an 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed in the preceding 


A. Background

    In August 1998, the Department recovered $4,942,253 from the IDHS 
under the terms of a Settlement Agreement entered into between IDHS and 
the Department on June 17, 1998, which resolved the audit determination 
of the June 20, 1997 PDD, bearing Audit Control Number 05-53012. The 
PDD originally sought a refund in the amount of $11,173,422 for 
violations of the Office of Management and Budget (OMB) Circular A-87 
relating to the charging of indirect costs to the State's Vocational 
Rehabilitation (VR) Services Program grants for Federal fiscal years 
(FYs) 1993 and 1994.
    The overclaimed indirect costs resulted from the organizationwide 
audit conducted in accordance with the Single Audit Act of 1984, Public 
Law 98-502, 31 U.S.C. 7501-7507, and the provisions of OMB Circular A-
128, ``Audits of State and Local Governments.''
    The claims involved the IDHS' administration of the State VR 
Services Program for Federal FYs 1993 and 1994. This program is 
authorized by the Rehabilitation Act of 1973, as amended (Act), 29 
U.S.C. 701 et seq. The Act authorizes grants to assist States to meet 
the current and future needs of individuals with disabilities so that 
those individuals may prepare for and engage in gainful employment to 
the extent of their capabilities.
    The PDD established the fact that IDHS' predecessor, the Illinois 
Department of Rehabilitation Services (DORS), had violated OMB Circular 
A-87 by overclaiming $11,173,422 in FYs 1993 and 1994 as indirect costs 
to the VR program. Based on documentation submitted by IDHS after it 
filed its application for review of the PDD with the Office of 
Administrative Law Judges, the Department agreed on June 16, 1998 to 
reduce its claims from $11,173,422 to $4,942,252.38. In August 1998, 
IDHS refunded these funds to the Department. On November 15, 1999, the 
IDHS requested grantback of $3,706,689, which represents 75 percent of 
these recovered funds.

B. Authority for Awarding a Grantback

    Section 459(a) of GEPA, 20 U.S.C. 1234h(a), provides that, whenever 
the Secretary has recovered funds under an applicable program because 
the recipient made an expenditure of funds that was not allowable, the 
Secretary may consider those funds to be additional funds available for 
the program and may arrange to repay to the grantee affected by that 
determination an amount not to exceed 75 percent of the recovered 
funds. The Secretary may enter into this grantback requested by the 
IDHS if the Secretary determines that the--
    (a) Practices and procedures of the IDHS and its predecessor that 
resulted in the findings have been corrected, and the State agency is, 
in all other respects, in compliance with the requirements of the 
applicable programs;
    (b) IDHS has submitted to the Secretary a plan for the use of the 
funds to be awarded under the grantback arrangement that meets the 
requirements of the program and, to the extent possible, benefits the 
population that was affected by the failure to comply or by 
misexpenditures that resulted in the PDD; and
    (c) Use of funds to be awarded under the grantback arrangement in 
accordance with the IDHS' plan would serve to achieve the purposes of 
the program under which the funds were originally granted.

C. Plan for Use of Funds Awarded Under a Grantback Arrangement

    Pursuant to section 459(a)(2) of GEPA, the IDHS has applied for a 
grantback totaling $3,706,689, which is 75 percent of the principal 
amount of the recovered funds, and has submitted a plan for use of the 
grantback funds. The agency will use the funds for the following 
    IDHS proposes to use the entire sum of requested grantback funding, 
$3,706,689, to augment case service provision by its counselors in its 
offices throughout the State. None of these funds will be used for 
administrative or operations expenses. Specifically, the major goal is 
to double the number of competitive outcomes while remaining at the 
same funding level. This means instead of successfully placing 
approximately 5,150 persons per year in competitive employment, IDHS 
projects a goal of 10,300.
    Instead of continuing to purchase an increasing amount of services 
from community rehabilitation providers, IDHS will train counseling 
staff to perform some of these functions themselves. IDHS maintains 
that this is a more efficient use of available funds. Counseling staff 
will take over services such as job development, job placement, and 
vocational assessment.
    Illinois is already on ``order of selection'' to serve customers 
having only significant and most significant disabilities and wants to 
avoid narrowing the order of selection any further than this. By using 
the grantback funds, the agency can open up more categories of 
disabilities for the provision of VR services.
    The procedural violation, which led to the repayment of Federal 
funds, has been corrected by the IDHS. IDHS' non-compliance with OMB 
Circular A-87 was due to the absence of appropriate Illinois General 
Revenue Fund (GRF) appropriations to allow DORS to allocate DORS' 
indirect administrative costs between State and Federal VR program 
related monies. In July 1997, IDHS, in order to come into compliance 
with OMB Circular A-87, instituted a revised budgeting procedure.
    An estimate is now prepared at the beginning of each State fiscal 
year to determine the amount of anticipated VR

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indirect costs reimbursements. A second estimate is made as to the 
amount of overall administrative costs associated with the transitioned 
DORS' staff (those administrative staff funded from a non-GRF 
appropriation). Both of these estimates are compared to determine what 
proportion of the anticipated funding will not be covered by the 
receipt of Federal indirect cost reimbursements. IDHS then requests 
from the Illinois General Assembly sufficient GRF funding to allow the 
State of Illinois to pay its share of indirect costs.
    Thereafter, whenever funding is required for administrative 
purposes, following the timeliness criteria mandated by the Cash 
Management Improvement Act, the indirect cost is calculated on the 
appropriate basis and drawn down from the Federal sources. As soon as 
this money is received, it is deposited into the Federal Vocational 
Rehabilitation Fund. At the same time, a proportionate amount of 
general revenue is drawn down to fund the non-Federal part of the 
operation. In this way, no overcommitment is made on receipts of 
Federal funds for administration, and only the appropriate parts 
associated with the Federal programs are claimed and deposited into the 
Federal Vocational Rehabilitation Fund.
    With the use of this process, the cost principles disallowances are 
eliminated. If the estimate of overall administrative costs is in 
error, there may be small adjustments necessary at the end of the 
Federal fiscal years to accommodate the under or over receipt of 
Federal funds associated with the administrative operations. If the 
adjustments require additional Federal revenue funding, then either 
adjustments will be made in the succeeding year or at the time of audit 
finalization for the appropriate fiscal year period.
    Since this procedure was instituted by the IDHS in July 1997, there 
have been no audit exceptions noted against the indirect costs charged 
to the Federal VR program and none are anticipated.

D. The Secretary's Determinations

    The Secretary has carefully reviewed the plan submitted by the 
IDHS. Based upon that review, the Secretary has determined that the 
conditions under section 459(a) of GEPA have been met.
    These determinations are based upon the best information available 
to the Secretary at the present time. If this information is not 
accurate or complete, the Secretary is not precluded from taking 
appropriate administrative action. In finding that the conditions of 
section 459(a) of GEPA have been met, the Secretary makes no 
determination concerning any pending audit recommendations or other 

E. Notice of the Secretary's Intent To Enter Into a Grantback 

    Section 459(d) of GEPA requires that, at least 30 days before 
entering into an arrangement to award funds under a grantback, the 
Secretary publish in the Federal Register a notice of intent to do so, 
and the terms and conditions under which the payment will be made.
    In accordance with section 459(d) of GEPA, notice is hereby given 
that the Secretary intends to make funds available to the Illinois 
Department of Human Services under a grantback arrangement. The 
grantback award would be in the amount $3,706,689, which is 75 
percent--the maximum percentage authorized by statute--of the principal 
amount recovered as a result of the settlement agreement.

F. Terms and Conditions Under Which Payments Under a Grantback 
Arrangement Would Be Made

    The IDHS agrees to comply with the following terms and conditions 
under which payments under a grantback arrangement would be made:
    (a) The funds awarded under the grantback must be spent in 
accordance with--
    (1) All applicable statutory and regulatory requirements;
    (2) The plan that the IDHS submitted and any amendments to the plan 
that are approved in advance by the Secretary; and
    (3) The budget that was submitted with the plan and any amendments 
to the budget that are approved in advance by the Secretary.
    (b) All funds received under the grantback arrangement must be 
obligated by September 30, 2001, in accordance with section 459(c) of 
    (c) The IHDS must, no later than January 1, 2002, submit a report 
to the Secretary that--
    (1) Indicates that the funds awarded under the grantback have been 
spent in accordance with the proposed plan and any amendments that have 
been approved in advance by the Secretary; and
    (2) Describes the results and effectiveness of the project for 
which the funds were spent.
    (d) Separate accounting records must be maintained documenting the 
expenditures of funds awarded under the grantback arrangement.
    (e) Before funds will be repaid pursuant to this notice, the IDHS 
must repay to the Department any debts that become overdue or enter 
into a repayment agreement for those debts.

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(Catalog of Federal Domestic Assistance Number 84.126 State 
Vocational Rehabilitation Services Program).
    Dated: June 1, 2001.
Francis V. Corrigan,
Deputy Director, National Institute on Disability and Rehabilitation 
[FR Doc. 01-14225 Filed 6-5-01; 8:45 am]