§1574. Fiscal controls; sanctions

(a) Establishment of State controls; cost principles; procurement standards; monitoring; noncompliance; certification to Secretary; corrective action; report to Congress

(1) Each State shall establish such fiscal control and fund accounting procedures as may be necessary to assure the proper disbursal of, and accounting for, Federal funds paid to the recipient under subchapters II and III of this chapter. Such procedures shall ensure that all financial transactions are conducted and records maintained in accordance with generally accepted accounting principles applicable in each State.

(2) The Secretary shall prescribe regulations establishing uniform cost principles substantially equivalent to such principles generally applicable to recipients of Federal grants funds. At a minimum, such standards shall provide that, to be allowable, costs must-

(A) be necessary and reasonable for proper and efficient administration of the program under this chapter;

(B) be allocable to the program under this chapter; and

(C) not be a general expense required to carry out the overall responsibilities of State, local, or federally recognized Indian tribal governments except as specifically provided by this chapter.

(3) The Governor, in accordance with minimum requirements established by the Secretary in regulations, shall prescribe and implement procurement standards to ensure fiscal accountability and prevent fraud and abuse in programs administered under this chapter. The Secretary, in establishing such minimum requirements, shall consult with the Inspector General of the Department of Labor and take into consideration relevant aspects of the circulars issued by the Director of the Office of Management and Budget. Such minimum requirements shall include provisions to ensure that for States, substate areas, and service delivery areas-

(A) procurements shall be conducted in a manner providing full and open competition;

(B) the use of sole source procurements shall be minimized to the extent practicable, but in every case shall be justified;

(C) procurements shall include an appropriate analysis of the reasonableness of costs and prices;

(D) procurements shall not provide excess program income (for nonprofit and governmental entities) or excess profit (for private for-profit entities), and that appropriate factors shall be utilized in determining whether such income or profit is excessive, such as-

(i) the complexity of the work to be performed;

(ii) the risk borne by the contractor; and

(iii) market conditions in the surrounding geographical area;

(E) procurements shall clearly specify deliverables and the basis for payment;

(F) written procedures shall be established for procurement transactions;

(G) no grantee, contractor, subgrantee, or subcontractor shall engage in any conflict of interest, actual or apparent, in the selection, award, or administration of a contract or grant under this chapter;

(H) all grantees and subgrantees shall conduct oversight to ensure compliance with procurement standards; and

(I) procurement transactions between units of State or local governments, and any other entities organized principally as the administrative entity for service delivery areas, shall be conducted on a cost reimbursable basis.

(4) The Governor shall annually conduct on-site monitoring of each service delivery area and substate area within the State to ensure compliance with the procurement standards established pursuant to paragraph (3).

(5) If the Governor determines that a service delivery area or substate area is not in compliance with the procurement standards established pursuant to paragraph (3), the Governor shall-

(A) require corrective action to secure prompt compliance; and

(B) impose the sanctions provided under subsection (b) of this section in the event of failure to take the required corrective action.

(6) The Governor shall biennially certify to the Secretary that-

(A) the State has implemented the procurement standards established under paragraph (3);

(B) the State has monitored substate areas and service delivery areas to ensure compliance with the procurement standards as required under paragraph (4); and

(C) the State has taken appropriate action to secure compliance pursuant to paragraph (5).

(7) If the Secretary determines that the Governor has not fulfilled the requirements of this subsection, the Secretary shall-

(A) require corrective action to secure prompt compliance; and

(B) impose the sanctions provided under subsection (f) of this section in the event of failure of the Governor to take the required corrective action.

(8) The Secretary, in consultation with the Inspector General, shall review the implementation of this subsection and submit a report to the appropriate committees of the Congress, not later than October 1, 1995, evaluating the effectiveness of this subsection in ensuring fiscal accountability and containing such recommendations as the Secretary determines to be appropriate.

(b) Noncompliance; action by Governor; appeal to Secretary; action by Secretary

(1) If, as a result of financial and compliance audits or otherwise, the Governor determines that there is a substantial violation of a specific provision of this chapter or the regulations under this chapter, and corrective action has not been taken, the Governor shall-

(A) issue a notice of intent to revoke approval of all or part of the plan affected; or

(B) impose a reorganization plan, which may include-

(i) restructuring the private industry council involved;

(ii) prohibiting the use of designated service providers;

(iii) selecting an alternative entity to administer the program for the service delivery area involved;

(iv) merging the service delivery area into 1 or more other existing service delivery areas; or

(v) other such changes as the Secretary or Governor determines necessary to secure compliance.

(2)(A) The actions taken by the Governor pursuant to paragraph (1)(A) may be appealed to the Secretary under the same terms and conditions as the disapproval of the plan and shall not become effective until-

(i) the time for appeal has expired; or

(ii) the Secretary has issued a decision.

(B) The actions taken by the Governor pursuant to paragraph (1)(B) may be appealed to the Secretary, who shall make a final decision not later than 60 days of the receipt of the appeal.

(3) If the Governor fails to promptly take the actions required under paragraph (1), the Secretary shall take such actions.

(c) Comptroller General's evaluation; report to Congress; Comptroller's access to records

(1) The Comptroller General of the United States shall, on a selective basis, evaluate the expenditures by the recipients of grants under this chapter in order to assure that expenditures are consistent with the provisions of this chapter and to determine the effectiveness of each recipient in accomplishing the purposes of this chapter. The Comptroller General shall conduct the evaluations whenever he determines it necessary and he shall periodically report to the Congress on the findings of such evaluations.

(2) Nothing in this chapter shall be deemed to relieve the Inspector General of the Department of Labor of his responsibilities under the Inspector General Act.

(3) For the purpose of evaluating and reviewing programs established or provided for by this chapter, the Comptroller General shall have access to and the right to copy any books, accounts, records, correspondence, or other documents pertinent to such programs that are in the possession, custody, or control of the State, a private industry council established under section 1512 of this title, any recipient of funds under this chapter, or any subgrantee or contractor of such recipients.

(d) Recipient's liability for noncomplying expenditures

Every recipient shall repay to the United States amounts found not to have been expended in accordance with this chapter. The Secretary may offset such amounts against any other amount to which the recipient is or may be entitled under this chapter unless he determines that such recipient should be held liable pursuant to subsection (e) of this section. No such action shall be taken except after notice and opportunity for a hearing have been given to the recipient.

(e) Conditions for recipient's liability; conditions for recipient's liability for subgrantee noncompliance; Secretary's discretion

(1) Each recipient shall be liable to repay such amounts, from funds other than funds received under this chapter, upon a determination that the misexpenditure of funds was due to willful disregard of the requirements of this chapter, gross negligence, or failure to observe accepted standards of administration. No such finding shall be made except after notice and opportunity for a fair hearing.

(2) In determining whether to impose any sanction authorized by this section against a recipient for violations by a subgrantee of such recipient under this chapter or the regulations under this chapter, the Secretary shall first determine whether such recipient has adequately demonstrated that it has-

(A) established and adhered to an appropriate system for the award and monitoring of contracts with subgrantees which contains acceptable standards for ensuring accountability;

(B) entered into a written contract with such subgrantee which established clear goals and obligations in unambiguous terms;

(C) acted with due diligence to monitor the implementation of the subgrantee contract, including the carrying out of the appropriate monitoring activities (including audits) at reasonable intervals; and

(D) taken prompt and appropriate corrective action upon becoming aware of any evidence of a violation of this chapter or the regulations under this chapter by such subgrantee.

(3) If the Secretary determines that the recipient has demonstrated substantial compliance with the requirements of paragraph (2), the Secretary may waive the imposition of sanctions authorized by this section upon such recipient. The Secretary is authorized to impose any sanction consistent with the provisions of this chapter and any applicable Federal or State law directly against any subgrantee for violation of this chapter or the regulations under this chapter.

(f) Emergency situations and immediate termination

In emergency situations, if the Secretary determines it is necessary to protect the integrity of the funds or ensure the proper operation of the program, the Secretary may immediately terminate or suspend financial assistance, in whole or in part, if the recipient is given prompt notice and the opportunity for a subsequent hearing within 30 days after such termination or suspension. The Secretary shall not delegate any of the functions or authority specified in this subsection, other than to an officer whose appointment was required to be made by and with the advice and consent of the Senate.

(g) Secretary's action against harassment of complainants

If the Secretary determines that any recipient under this chapter has discharged or in any other manner discriminated against a participant or against any individual in connection with the administration of the program involved, or against any individual because such individual has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter, or has testified or is about to testify in any such proceeding or investigation under or related to this chapter, or otherwise unlawfully denied to any individual a benefit to which that individual is entitled under the provisions of this chapter or the Secretary's regulations, the Secretary shall, within thirty days, take such action or order such corrective measures, as necessary, with respect to the recipient or the aggrieved individual, or both.

(h) Remedies not exclusive

The remedies under this section shall not be construed to be exclusive remedies.

( Pub. L. 97–300, title I, §164, Oct. 13, 1982, 96 Stat. 1348 ; Pub. L. 102–367, title I, §142, Sept. 7, 1992, 106 Stat. 1046 .)

Repeal of Section

Pub. L. 105–220, title I, §199(b)(2), (c)(2)(B), Aug. 7, 1998, 112 Stat. 1059 , provided that this section is repealed effective July 1, 2000.

References in Text

The Inspector General Act, referred to in subsec. (c)(2), probably means the Inspector General Act of 1978, Pub. L. 95–452, Oct. 12, 1978, 92 Stat. 1101 , as amended, which is set out in the Appendix to Title 5, Government Organization and Employees.

Amendments

1992-Subsec. (a). Pub. L. 102–367, §142(a), amended subsec. (a) generally. Prior to amendment, subsec. (a) consisted of pars. (1) to (3) relating to State fiscal controls and fund accounting procedures, biennial audits, and Federal audit standards.

Subsec. (b). Pub. L. 102–367, §142(b), amended subsec. (b) generally. Prior to amendment, subsec. (b) read as follows:

"(1) Whenever, as a result of financial and compliance audits or otherwise, the Governor determines that there is a substantial violation of a specific provision of this chapter or the regulations, and corrective action has not been taken, the Governor may issue a notice of intent to revoke approval of all or part of the plan affected. Such notice may be appealed to the Secretary under the same terms and conditions as the disapproval of the plan and shall not become effective until (A) the time for appeal has expired or (B) the Secretary has issued a decision.

"(2) The Governor shall withdraw the notice if the appropriate corrective action has been taken."

Effective Date of 1992 Amendment

Amendment by Pub. L. 102–367 effective July 1, 1993, see section 701(a) of Pub. L. 102–367, set out as an Effective Date of 1992 Amendment; Transition Provisions note under section 1501 of this title.

Section Referred to in Other Sections

This section is referred to in sections 1511, 1514, 1517, 1551, 1578 of this title.