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:

   1. 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.

      
      

   2. 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.

      
      

   3. 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.

      
      

   4. 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.

      
      

   5. 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.

    
    

    1. 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.

       
       

    2. 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.

       
       

    3. 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.

       
       

    4. 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.

       
       

    5. 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

(904) 488-9675

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

Docket for Case No: 82-000032

Orders for Case No: 82-000032