Title 34—Education--Volume 1
PART 81—GENERAL EDUCATION PROVISIONS ACT—ENFORCEMENT
§ 81.1   Purpose.
The regulations in this part govern the enforcement of legal requirements under applicable programs administered by the Department of Education and implement Part E of the General Education Provisions Act (GEPA).
§ 81.2   Definitions.
The following definitions apply to the terms used in this part:
Administrative Law Judge (ALJ) means a judge appointed by the Secretary in accordance with section 451 (b) and (c) of GEPA.
Applicable program means any program for which the Secretary of Education has administrative responsibility, except a program authorized by—
(a) The Higher Education Act of 1965, as amended;
(b) The Act of September 30, 1950 (Pub. L. 874, 81st Congress), as amended; or
(c) The Act of September 23, 1950 (Pub. L. 815, 81st Congress), as amended.
Department means the United States Department of Education.
Disallowance decision means the decision of an authorized Departmental official that a recipient must return funds because it made an expenditure of funds that was not allowable or otherwise failed to discharge its obligation to account properly for funds. Such a decision, referred to as a “preliminary departmental decision” in section 452 of GEPA, is subject to review by the Office of Administrative Law Judges.
OES means the OHA Electronic System or any successor system designated by the Department.
Party means either of the following:
(a) A recipient that appeals a decision.
(b) An authorized Departmental official who issues a decision that is appealed.
Recipient means the recipient of a grant or cooperative agreement under an applicable program.
Secretary means the Secretary of the Department of Education or an official or employee of the Department acting for the Secretary under a delegation of authority.
§ 81.3   Jurisdiction of the Office of Administrative Law Judges.
(a) The Office of Administrative Law Judges (OALJ) established under section 451(a) of GEPA has jurisdiction to conduct the following proceedings concerning an applicable program:
(1) Hearings for recovery of funds.
(2) Withholding hearings.
(3) Cease and desist hearings.
(b) The OALJ also has jurisdiction to conduct other proceedings designated by the Secretary. If a proceeding or class of proceedings is so designated, the Department publishes a notice of the designation in the Federal Register.
§ 81.4   Membership and assignment to cases.
(a) The Secretary appoints Administrative Law Judges as members of the OALJ.
(b) The Secretary appoints one of the members of the OALJ to be the chief judge. The chief judge is responsible for the efficient and effective administration of the OALJ.
(c) The chief judge assigns an ALJ to each case or class of cases within the jurisdiction of the OALJ.
§ 81.5   Authority and responsibility of an Administrative Law Judge.
(a) An ALJ assigned to a case conducts a hearing on the record. The ALJ regulates the course of the proceedings and the conduct of the parties to ensure a fair, expeditious, and economical resolution of the case in accordance with applicable law.
(b) An ALJ is bound by all applicable statutes and regulations and may neither waive them nor rule them invalid.
(c) An ALJ is disqualified in any case in which the ALJ has a substantial interest, has been of counsel, is or has been a material witness, or is so related to or connected with any party or the party's attorney as to make it improper for the ALJ to be assigned to the case.
(d)(1) An ALJ may disqualify himself or herself at any time on the basis of the standards in paragraph (c) of this section.
(2) A party may file a motion to disqualify an ALJ under the standards in paragraph (c) of this section. A motion to disqualify must be accompanied by an affidavit that meets the requirements of 5 U.S.C. 556(b). Upon the filing of such a motion and affidavit, the ALJ decides the disqualification matter before proceeding further with the case.
§ 81.6   Hearing on the record.
(a) A hearing on the record is a process for the orderly presentation of evidence and arguments by the parties.
(b) Except as otherwise provided in this part or in a notice of designation under § 81.3(b), an ALJ conducts the hearing entirely on the basis of briefs and other written submissions unless—
(1) The ALJ determines, after reviewing all appropriate submissions, that an evidentiary hearing is needed to resolve a material factual issue in dispute; or
(2) The ALJ determines, after reviewing all appropriate submissions, that oral argument is needed to clarify the issues in the case.
(c) At a party's request, the ALJ shall confer with the parties in person or by conference telephone call before determining whether an evidentiary hearing or an oral argument is needed.
§ 81.7   Non-party participation.
(a) A person or organization, other than a party, that wishes to participate in a case shall file an application to participate with the ALJ assigned to the case. The application must—
(1) Identify the case in which participation is sought;
(2) State how the applicant's interest relates to the case;
(3) State how the applicant's participation would aid in the disposition of the case; and
(4) State how the applicant seeks to participate.
(b) The ALJ may permit an applicant to participate if the ALJ determines that the applicant's participation—
(1) Will aid in the disposition of the case;
(2) Will not unduly delay the proceedings; and
(3) Will not prejudice the adjudication of the parties' rights.
(c) If the ALJ permits an applicant to participate, the ALJ permits the applicant to file briefs.
(d)(1) In addition to the participation described in paragraph (c) of this section, the ALJ may permit the applicant to participate in any or all of the following ways:
(i) Submit documentary evidence.
(ii) Participate in an evidentiary hearing afforded the parties.
(iii) Participate in an oral argument afforded the parties.
(2) The ALJ may place appropriate limits on an applicant's participation to ensure the efficient conduct of the proceedings.
(e) A non-party participant shall comply with the requirements for parties in § 81.11 and § 81.12.
§ 81.8   Representation.
A party to, or other participant in, a case may be represented by counsel.
§ 81.9   Location of proceedings.
(a) An ALJ may hold conferences of the parties in person or by conference telephone call.
(b) Any conference, hearing, argument, or other proceeding at which the parties are required to appear in person is held in the Washington, DC metropolitan area unless the ALJ determines that the convenience and necessity of the parties or their representatives requires that it be held elsewhere.
§ 81.10   Ex parte communications.
A party to, or other participant in, a case may not communicate with an ALJ on any fact in issue in the case or on any matter relevant to the merits of the case unless the parties are given notice and an opportunity to participate.
§ 81.11   Motions.
(a) To obtain an order or a ruling from an ALJ, a party shall make a motion to the ALJ.
(b) Except for a request for an extension of time, a motion must be made in writing unless the parties appear in person or participate in a conference telephone call. The ALJ may require a party to reduce an oral motion to writing.
(c) Parties must file motions with the ALJ, and serve them upon the other party, as provided under § 81.12.
(d) Except for a request for an extension of time, the ALJ may not grant a party's written motion without the consent of the other party unless the other party has had at least 21 days from the date of service of the motion to respond. However, the ALJ may deny a motion without awaiting a response.
(e) The date of service of a motion is determined by the standards for determining a filing date in § 81.12(d).
§ 81.12   Filing requirements.
(a) Method of filing. (1) Any written submission to an ALJ or the OALJ under this part, including pleadings, petitions, and motions, must be filed by submission to OES unless a party shows the ALJ good cause why its written submission cannot be filed electronically. A party filing electronically is responsible for ensuring that a complete and legible document was successfully submitted in a format for electronic filing permitted under OHA procedures.
(2) If the ALJ permits a party to file a written submission in paper format, the filing party must file the written submission with the ALJ or the OALJ by hand-delivery or regular mail.
(b) Filing date. (1) The filing date for a written submission to an ALJ or the OALJ is the date the document is—
(i) Submitted to OES; or
(ii) Hand-delivered or mailed, if the ALJ has permitted the written submission to be filed in paper format.
(2) If a scheduled filing date falls on a Saturday, Sunday, or Federal holiday, the filing deadline is the next business day.
(c) Service to other parties. (1) The filing of a written submission to OES constitutes service on other parties.
(2) If a party is permitted by the ALJ to file a written submission in paper format, the party must serve a copy of the written submission on the other party on the filing date by hand-delivery or regular mail. Any such written submission to the ALJ or OALJ must be accompanied by a statement certifying that the material was served on the other party on the filing date.
§ 81.13   Mediation.
(a) Voluntary mediation is available for proceedings that are pending before the OALJ.
(b) A mediator must be independent of, and agreed to by, the parties to the case.
(c) A party may request mediation by filing a motion with the ALJ assigned to the case. The OALJ arranges for a mediator if the parties to the case agree to mediation.
(d) A party may terminate mediation at any time. Mediation is limited to 120 days unless the mediator informs the ALJ that—
(1) The parties are likely to resolve some or all of the dispute; and
(2) An extension of time will facilitate an agreement.
(e) The ALJ stays the proceedings during mediation.
(f)(1) Evidence of conduct or statements made during mediation is not admissible in any proceeding under this part. However, evidence that is otherwise discoverable may not be excluded merely because it was presented during mediation.
(2) A mediator may not disclose, in any proceeding under this part, information acquired as a part of his or her official mediation duties that relates to any fact in issue in the case or any matter relevant to the merits of the case.
§ 81.14   Settlement negotiations.
(a) If the parties to a case file a joint motion requesting a stay of the proceedings for settlement negotiations, or for approval of a settlement agreement, the ALJ may grant a stay of the proceedings upon a finding of good cause.
(b) Evidence of conduct or statements made during settlement negotiations is not admissible in any proceeding under this part. However, evidence that is otherwise discoverable may not be excluded merely because it was presented during settlement negotiations.
(c) The parties may not disclose the contents of settlement negotiations to the ALJ. If the parties enter into a settlement agreement and file a joint motion to dismiss the case, the ALJ grants the motion.
§ 81.15   Evidence.
(a) The Federal Rules of Evidence do not apply to proceedings under this part. However, the ALJ accepts only evidence that is—
(1) Relevant;
(2) Material;
(3) Not unduly repetitious; and
(4) Not inadmissible under § 81.13 or § 81.14.
(b) The ALJ may take official notice of facts that are generally known or capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.
§ 81.16   Discovery.
(a) The parties to a case are encouraged to exchange relevant documents and information voluntarily.
(b) The ALJ, at a party's request, may order compulsory discovery described in paragraph (c) of this section if the ALJ determines that—
(1) The order is necessary to secure a fair, expeditious, and economical resolution of the case;
(2) The discovery requested is likely to elicit relevant information with respect to an issue in the case;
(3) The discovery request was not made primarily for the purposes of delay or harassment; and
(4) The order would serve the ends of justice.
(c) If a compulsory discovery is permissible under paragraph (b) of this section, the ALJ may order a party to do one or more of the following:
(1) Make relevant documents available for inspection and copying by the party making the request.
(2) Answer written interrogatories that inquire into relevant matters.
(3) Have depositions taken.
(d) The ALJ may issue a subpoena to enforce an order described in this section and may apply to the appropriate court of the United States to enforce the subpoena.
(e) The ALJ may not compel the discovery of information that is legally privileged.
(f)(1) The ALJ limits the period for discovery to not more than 90 days but may grant an extension for good cause.
(2) At a party's request, the ALJ may set a specific schedule for discovery.
§ 81.17   Privileges.
The privilege of a person or governmental organization not to produce documents or provide information in a proceeding under this part is governed by the principles of common law as interpreted by the courts of the United States.
§ 81.18   The record.
(a) The ALJ arranges for any evidentiary hearing or oral argument to be recorded and transcribed and makes the transcript available to the parties. Transcripts are made available to non-Departmental parties at a cost not to exceed the actual cost of duplication.
(b) The record of a hearing on the record consists of—
(1) All papers filed in the proceeding;
(2) Documentary evidence admitted by the ALJ;
(3) The transcript of any evidentiary hearing or oral argument; and
(4) Rulings, orders, and subpoenas issued by the ALJ.
§ 81.19   Costs and fees of parties.
The Equal Access to Justice Act, 5 U.S.C. 504, applies by its terms to proceedings under this part. Regulations under that statute are in 34 CFR part 21.
§ 81.20   Interlocutory appeals to the Secretary from rulings of an ALJ.
(a) A ruling by an ALJ may not be appealed to the Secretary until the issuance of an initial decision, except that the Secretary may, at any time prior to the issuance of an initial decision, grant review of a ruling upon either an ALJ's certification of the ruling to the Secretary for review, or the filing of a petition seeking review of an interim ruling by one or both of the parties, if—
(1) That ruling involves a controlling question of substantive or procedural law; and
(2) The immediate resolution of the question will materially advance the final disposition of the proceeding or subsequent review will be an inadequate remedy.
(b)(1) A petition for interlocutory review of an interim ruling must include the following:
(i) A brief statement of the facts necessary to an understanding of the issue on which review is sought.
(ii) A statement of the issue.
(iii) A statement of the reasons showing that the ruling complained of involves a controlling question of substantive or procedural law and why immediate review of the ruling will materially advance the disposition of the case, or why subsequent review will be an inadequate remedy.
(2) A petition may not exceed 10 pages, double-spaced, and must be accompanied by a copy of the ruling and any findings and opinions relating to the ruling.
(3)(i) The petition must be filed electronically, and served upon the ALJ and other parties, by submission to OES on behalf of the Office of the Secretary unless a party shows the Secretary good cause why the petition cannot be filed electronically.
(ii) If the Secretary permits a party to file a petition in paper format, the filing party must file the petition with the Office of Hearings and Appeals (OHA) on behalf of the Secretary by hand-delivery or regular mail. The filing party must provide a copy of the petition to the ALJ at the time the petition is filed, and a copy of the petition must be served upon the other parties by hand-delivery or regular mail.
(c) If a party files a petition under this section, the ALJ may state to the Secretary a view as to whether review is appropriate by submitting a brief statement addressing the party's petition within 10 days of the ALJ's receipt of the petition for interlocutory review. The ALJ must serve a copy of the statement on all parties by submission to OES and, if the Secretary has permitted paper filing, by hand-delivery or regular mail.
(d)(1) A party's response, if any, to a petition or certification for interlocutory review must be filed within seven days after service of the petition or certification, and may not exceed 10 pages, double-spaced, in length.
(2) A copy of the response must be filed to OES unless the party shows the Secretary good cause why the response cannot be filed electronically. If the ALJ permits a party to file a petition in paper format, the filing party must file the petition with OHA on behalf of the Secretary by hand-delivery or regular mail.
(3) If the Secretary has permitted a party to file the response in paper format, the party must file a copy of the response with the ALJ, and serve a copy of the response on all parties, on the filing date by hand delivery or regular mail.
(e)(1) A party's response, if any, to a petition or certification for interlocutory review must be filed within seven days after service of the petition or certification, and may not exceed ten pages, double-spaced, in length. A copy of the response must be filed with the ALJ by hand delivery, by regular mail, or by facsimile transmission.
(2) A party shall serve a copy of its response on all parties on the filing date by hand-delivery or regular mail. If agreed upon by the parties, service of a copy of the response may be made upon the other parties by facsimile transmission.
(f) The filing of a request for interlocutory review does not automatically stay the proceedings. Rather, a stay during consideration of a petition for review may be granted by the ALJ if the ALJ has certified or stated to the Secretary that review of the ruling is appropriate. The Secretary may order a stay of proceedings at any time after the filing of a request for interlocutory review.
(g) The Secretary notifies the parties if a petition or certification for interlocutory review is accepted, and may provide the parties a reasonable time within which to submit written argument or other existing material in the administrative record with regard to the merit of the petition or certification.
(h) If the Secretary takes no action on a request for interlocutory review within 15 days of receipt of it, the request is deemed to be denied.
(i) The Secretary may affirm, modify, set aside, or remand the ALJ's ruling.
§ 81.30   Basis for recovery of funds.
(a) Subject to the provisions of § 81.31, an authorized Departmental official requires a recipient to return funds to the Department if—
(1) The recipient made an unallowable expenditure of funds under a grant or cooperative agreement; or
(2) The recipient otherwise failed to discharge its obligation to account properly for funds under a grant or cooperative agreement.
(b) An authorized Departmental offcial may base a decision to require a recipient to return funds upon an audit report, an investigative report, a monitoring report, or any other evidence.
§ 81.31   Measure of recovery.
A recipient that made an unallowable expenditure or otherwise failed to discharge its obligation to account properly for funds shall return an amount that—
(a) Meets the standards for proportionality in § 81.32;
(b) In the case of a State or local educational agency, excludes any amount attributable to mitigating circumstances under the standards in § 81.23; and
(c) Excludes any amount expended in a manner not authorized by law more than five years before the recipient received the notice of a disallowance decision under § 81.34.
§ 81.32   Proportionality.
(a)(1) A recipient that made an unallowable expenditure or otherwise failed to account properly for funds shall return an amount that is proportional to the extent of the harm its violation caused to an identifiable Federal interest associated with the program under which it received the grant or cooperative agreement.
(2) An identifiable Federal interest under paragraph (a)(1) of this section includes, but is not limited to, the following:
(i) Serving only eligible beneficiaries.
(ii) Providing only authorized services or benefits.
(iii) Complying with expenditure requirements and conditions, such as set-aside, excess cost, maintenance of effort, comparability, supplement-not-supplant, and matching requirements.
(iv) Preserving the integrity of planning, application, recordkeeping, and reporting requirements.
(v) Maintaining accountability for the use of funds.
(b) The appendix to this part contains examples that illustrate how the standards for proportionality apply. The examples present hypothetical cases and do not represent interpretations of any actual program statute or regulation.
§ 81.33   Mitigating circumstances.
(a) A recipient that is a State or local educational agency and that has made an unallowable expenditure or otherwise failed to account properly for funds is not required to return any amount that is attributable to the mitigating circumstances described in paragraph (b), (c), or (d) of this section.
(b) Mitigating circumstances exist if it would be unjust to compel the recovery of funds because the recipient's violation was caused by erroneous written guidance from the department. To prove mitigating circumstances under this paragraph, the recipient shall prove that—
(1) The guidance was provided in response to a specific written request from the recipient that was submitted to the Department at the address provided by notice published in the Federal Register under this section;
(2) The guidance was provided by a Departmental official authorized to provide the guidance, as described by that notice;
(3) The recipient actually relied on the guidance as the basis for the conduct that constituted the violation; and
(4) The recipient's reliance on the guidance was reasonable.
(c) Mitigating circumstances exist if it would be unjust to compel the recovery of funds because the recipient's violation was caused by the Department's failure to provide timely guidance. To prove mitigating circumstances under this paragraph, the recipient shall prove that—
(1) The recipient in good faith submitted a written request for guidance with respect to the legality of a proposed expenditure or practice;
(2) The request was submitted to the Department at the address provided by notice published in the Federal Register under this section;
(3) The request—
(i) Accurately described the proposed expenditure or practice; and
(ii) Included the facts necessary for the Department's determination of its legality;
(4) The request contained the certification of the chief legal officer of the appropriate State educational agency that the officer—
(i) Examined the proposed expenditure or practice; and
(ii) Believed it was permissible under State and Federal law applicable at the time of the certification;
(5) The recipient reasonably believed the proposed expenditure or practice was permissible under State and Federal law applicable at the time it submitted the request to the Department;
(6) No Departmental official authorized to provide the requested guidance responded to the request within 90 days of its receipt by the Department; and
(7) The recipient made the proposed expenditure or engaged in the proposed practice after the expiration of the 90-day period.
(d) Mitigating circumstances exist if it would be unjust to compel the recovery of funds because the recipient's violation was caused by the recipient's compliance with a judicial decree from a court of competent jurisdiction. To prove mitigating circumstances under this paragraph, the recipient shall prove that—
(1) The recipient was legally bound by the decree;
(2) The recipient actually relied on the decree when it engaged in the conduct that constituted the violation; and
(3) The recipient's reliance on the decree was reasonable.
(e) If a Departmental official authorized to provide the requested guidance responds to a request described in paragraph (c) of this section more than 90 days after its receipt, the recipient that made the request shall comply with the guidance at the earliest practicable time.
§ 81.34   Notice of a disallowance decision.
(a) If an authorized Departmental official decides that a recipient must return funds under § 81.30, the official gives the recipient written notice of a disallowance decision. The official sends the notice by certified mail, return receipt requested, or other means that ensure proof of receipt.
(b)(1) The notice must establish a prima facie case for the recovery of funds, including an analysis reflecting the value of the program services actually obtained in a determination of harm to the Federal interest.
(2) For the purpose of this section, a prima facie case is a statement of the law and the facts that, unless rebutted, is sufficient to sustain the conclusion drawn in the notice. The facts may be set out in the notice or in a document that is identified in the notice and available to the recipient.
(3) A statement that the recipient failed to maintain records required by law or failed to allow an authorized representative of the Secretary access to those records constitutes a prima facie case for the recovery of the funds affected.
(i) If the recipient failed to maintain records, the statement must briefly describe the types of records that were not maintained and identify the recordkeeping requirement that was violated.
(ii) If the recipient failed to allow access to records, the statement must briefly describe the recipient's actions that constituted the failure and identify the access requirement that was violated.
(c) The notice must inform the recipient that it may—
(1) Obtain a review of the disallowance decision by the OALJ; and
(2) Request mediation under § 81.13.
(d) The notice must describe—
(1) The time available to apply for a review of the disallowance decision; and
(2) The procedure for filing an application for review.
§ 81.35   Reduction of claims.
The Secretary or an authorized Departmental official as appropriate may, after the issuance of a disallowance decision, reduce the amount of a claim established under this subpart by—
(a) Redetermining the claim on the basis of the proper application of the law, including the standards for the measure of recovery under § 81.31, to the facts;
(b) Compromising the claim under the Federal Claims Collection Standards in 4 CFR part 103; or
(c) Compromising the claim under § 81.36, if applicable.
§ 81.36   Compromise of claims under General Education Provisions Act.
(a) The Secretary or an authorized Departmental official as appropriate may compromise a claim established under this subpart without following the procedures in 4 CFR part 103 if—
(1)(i) The amount of the claim does not exceed $200,000; or
(ii) The difference between the amount of the claim and the amount agreed to be returned does not exceed $200,000; and
(2) The Secretary or the official determines that—
(i) The collection of the amount by which the claim is reduced under the compromise would not be practical or in the public interest; and
(ii) The practice that resulted in the disallowance decision has been corrected and will not recur.
(b) Not less than 45 days before compromising a claim under this section, the Department publishes a notice in the Federal Register stating—
(1) The intention to compromise the claim; and
(2) That interested persons may comment on the proposed compromise.
§ 81.37   Application for review of a disallowance decision.
(a) If a recipient wishes to obtain review of a disallowance decision, the recipient shall file a written application for review with the Office of Administrative Law Judges, c/o Docket Clerk, Office of Hearings and Appeals, and, as required by § 81.12(b), shall serve a copy on the applicable Departmental official who made the disallowance decision.
(b) A recipient shall file an application for review not later than 60 days after the date it receives the notice of a disallowance decision.
(c) Within 10 days after receipt of a copy of the application for review, the authorized Departmental official who made the disallowance decision shall provide the ALJ with a copy of any document identified in the notice pursuant to § 81.34(b)(2).
(d) An application for review must contain—
(1) A copy of the disallowance decision of which review is sought;
(2) A statement certifying the date the recipient received the notice of that decision;
(3) A short and plain statement of the disputed issues of law and fact, the recipient's position with respect to these issues, and the disallowed funds the recipient contends need not be returned; and
(4) A statement of the facts and the reasons that support the recipient's position.
(e) The ALJ who considers a timely application for review that substantially complies with the requirements of paragraph (c) of this section may permit the recipient to supplement or amend the application with respect to issues that were timely raised. Any requirement to return funds that is not timely appealed becomes the final decision of the Department.
§ 81.38   Consideration of an application for review.
(a) The ALJ assigned to the case under § 81.4 considers an application for review of a disallowance decision.
(b) The ALJ decides whether the notice of a disallowance decision meets the requirements of § 81.34, as provided by section 451(e) of GEPA.
(1) If the notice does not meet those requirements, the ALJ—
(i) Returns the notice, as expeditiously as possible, to the authorized Departmental official who made the disallowance decision;
(ii) Gives the official the reasons why the notice does not meet the requirements of § 81.34; and
(iii) Informs the recipient of the ALJ's decision by certified mail, return receipt requested.
(2) An authorized Departmental official may modify and reissue a notice that an ALJ returns.
(c) If the notice of a disallowance decision meets the requirements of § 81.34, the ALJ decides whether the application for review meets the requirements of § 81.37.
(1) If the application, including any supplements or amendments under § 81.37(d), does not meet those requirements, the disallowance decision becomes the final decision of the Department.
(2) If the application meets those requirements, the ALJ—
(i) Informs the recipient and the authorized Departmental official that the OALJ has accepted jurisdiction of the case; and
(ii) Schedules a hearing on the record.
(3) The ALJ informs the recipient of the disposition of its application for review by certified mail, return receipt requested. If the ALJ decides that the application does not meet the requirements of § 81.37, the ALJ informs the recipient of the reasons for the decision.
§ 81.39   Submission of evidence.
(a) The ALJ schedules the submission of the evidence, whether oral or documentary, to occur within 90 days of the OALJ's receipt of an acceptable application for review under § 81.37.
(b) The ALJ may waive the 90-day requirement for good cause.
§ 81.40   Burden of proof.
If the OALJ accepts jurisdiction of a case under § 81.38, the recipient shall present its case first and shall have the burden of proving that the recipient is not required to return the amount of funds that the disallowance decision requires to be returned because—
(a) An expenditure identified in the disallowance decision as unallowable was allowable;
(b) The recipient discharged its obligation to account properly for the funds;
(c) The amount required to be returned does not meet the standards for proportionality in § 81.32;
(d) The amount required to be returned includes an amount attributable to mitigating circumstances under the standards in § 81.33; or
(e) The amount required to be returned includes an amount expended in a manner not authorized by law more than five years before the recipient received the notice of the disallowance decision.
§ 81.41   Initial decision.
(a) The ALJ makes an initial decision based on the record.
(b) The initial decision includes the ALJ's findings of fact, conclusions of law, and reasoning on all material issues.
(c) The OALJ transmits the initial decision to the Secretary and to the parties by submission to OES and, if filing in paper format was permitted by the ALJ, by certified mail, return receipt requested, or by another parcel service with delivery confirmation.
(d) For the purpose of this part, “initial decision” includes an ALJ's modified decision after the Secretary's remand of a case.
§ 81.42   Petition for review of initial decision.
(a)(1) If a party seeks to obtain the Secretary's review of the initial decision of an ALJ, the party must file a petition for review by submission to OES on behalf of the Office of the Secretary unless the party shows the ALJ good cause why the petition cannot be filed electronically.
(2) If the ALJ permits a party to file a petition for review in paper format, the filing party must file the petition with the ALJ by hand-delivery or regular mail.
(b) A party must file a petition for review not later than 30 days after the date it receives the initial decision. The party is deemed to have received the initial decision on the date the initial decision is uploaded to OES or, if filing in paper format was permitted by the ALJ, the party is deemed to have received the initial decision on the delivery date indicated by the certified mail or parcel delivery records.
(c) Electronically filing a petition to OES for review constitutes service on the other party.
(d) If the ALJ has permitted the petition to be filed in paper format, then—
(1) The party must serve a copy of the petition on the other party on the filing date by hand delivery or by “overnight” or “express” mail. If agreed upon by the parties, service of a copy of the petition may be made upon the other party by a method approved by the ALJ.
(2) Any petition submitted under this section in paper format must be accompanied by a statement certifying the date that the petition was served on the other party.
(e) A petition for review of an initial decision must—
(1) Identify the initial decision for which review is sought; and
(2) Include a statement of the reasons asserted by the party for affirming, modifying, setting aside, or remanding the initial decision in whole or in part.
(f)(1) A party may respond to a petition for review of an initial decision by filing a statement of its views on the issues raised in the petition, as provided for in this section, not later than 15 days after the date it receives the petition.
(2) If the ALJ has permitted the written submission to be filed in paper format, a party must serve a copy of its statement of views on the other party by hand delivery or mail and certify that it has done so pursuant to the provisions of paragraph (d) of this section.
(g)(1) The filing date for petitions under this section is the date the document is—
(i) Electronically filed; or
(ii) Hand-delivered or mailed, if permitted to file in paper format.
(2) If a scheduled filing date falls on a Saturday, Sunday, or a Federal holiday, the filing deadline is the next business day.
§ 81.43   Review by the Secretary.
(a)(1) The Secretary's review of an initial decision is based on the record of the case, the initial decision, and any proper submissions of the parties or other participants in the case.
(2) During the Secretary's review of the initial decision there shall not be any ex parte contact between the Secretary and individuals representing the Department or the recipient.
(b) The ALJ's findings of fact, if supported by substantial evidence, are conclusive.
(c) The Secretary may affirm, modify, set aside, or remand the ALJ's initial decision.
(1) If the Secretary modifies, sets aside, or remands an initial decision, in whole or in part, the Secretary's decision includes a statement of reasons that supports the Secretary's decision.
(2)(i) The Secretary may remand the case to the ALJ with instructions to make additional findings of fact or conclusions of law, or both, based on the evidence of record. The Secretary may also remand the case to the ALJ for further briefing or for clarification or revision of the initial decision.
(ii) If a case is remanded, the ALJ shall make new or modified findings of fact or conclusions of law or otherwise modify the initial decision in accordance with the Secretary's remand order.
(iii) A party may appeal a modified decision of the ALJ under the provisions of §§ 81.42 through 81.45. However, upon that review, the ALJ's new or modified findings, if supported by substantial evidence, are conclusive.
(3) The Secretary, for good cause shown, may remand the case to the ALJ to take further evidence, and the ALJ may make new or modified findings of fact and may modify the initial decision based on that new evidence. These new or modified findings of fact are likewise conclusive if supported by substantial evidence.
§ 81.44   Final decision of the Department.
(a) The ALJ's initial decision becomes the final decision of the Department 60 days after the recipient receives the ALJ's decision unless the Secretary modifies, sets aside, or remands the decision during the 60-day period.
(b) If the Secretary modifies or sets aside the ALJ's initial decision, a copy of the Secretary's decision is provided to the parties by submission to OES. If the ALJ has permitted written submissions to be filed in paper format, the decision will be sent by certified mail, return receipt requested, or by another parcel service with delivery confirmation. The Secretary's decision becomes the final decision of the Department on the date it is electronically filed or, if sent via parcel delivery service, on the delivery date indicated by the certified mail or parcel delivery records.
§ 81.45   Collection of claims.
(a) An authorized Departmental official collects a claim established under this subpart by using the standards and procedures in 34 CFR part 30.
(b) A claim established under this subpart may be collected—
(1) 30 days after a recipient receives notice of a disallowance decision if the recipient fails to file an acceptable application for review under § 81.37; or
(2) On the date of the final decision of the Department under § 81.44 if the recipient obtains review of a disallowance decision.
(c) The Department takes no collection action pending judicial review of a final decision of the Department under section 458 of GEPA.
(d) If a recipient obtains review of a disallowance decision under § 81.38, the Department does not collect interest on the claim for the period between the date of the disallowance decision and the date of the final decision of the Department under § 81.44.