§ 98.92 Penalties and sanctions. ( a ) Upon a final determination that the Lead Agency has failed to substantially comply with the Act, the implementing regulations, or the Plan, one of the following penalties will be applied: ( 1 ) The Secretary will disallow any improperly expended funds;
( 2 ) An amount equal to or less than the improperly expended funds will be deducted from the administrative portion of the State allotment for the following fiscal year; or
( 3 ) A combination of the above options will be applied.
( b ) In addition to imposing the penalties described in paragraph (a) of this section, the Secretary may impose other appropriate sanctions, including: ( 1 ) Disqualification of the Lead Agency from the receipt of further funding under the CCDF; or
( 2 ) ( i ) A penalty of not more than four percent of the funds allotted under § 98.61 (i.e., the Discretionary Funds) for a Fiscal Year shall be withheld if the Secretary determines that the Lead Agency has failed to implement a provision of the Act, these regulations, or the Plan required under § 98.16;
( ii ) This penalty will be withheld no earlier than the second full quarter following the quarter in which the Lead Agency was notified of the proposed penalty;
( iii ) This penalty will not be applied if the Lead Agency corrects the failure or violation before the penalty is to be applied or if it submits a plan for corrective action that is acceptable to the Secretary; or
( iv ) The Lead Agency may show cause to the Secretary why the amount of the penalty, if applied, should be reduced.
( 3 ) ( i ) A penalty of five percent of the funds allotted under § 98.61 (*i.e.,* the Discretionary Funds) for a Fiscal Year shall be withheld for any For Fiscal Year the Secretary determines that the Lead Agency has failed to give priority for service in accordance with § 98.46(a);
( ii ) This penalty will be withheld no earlier than the first full Fiscal Year following the determination to apply the penalty;
( iii ) This penalty will not be applied if the Lead Agency corrects its failure to comply and amends its CCDF Plan within six months of being notified of the failure; and
( iv ) The Secretary may waive a penalty for one year in the event of extraordinary circumstances, such as a natural disaster.
( 4 ) ( i ) A penalty of five percent of the funds allotted under § 98.61 (*i.e.,* the Discretionary Funds) for a Fiscal Year shall be withheld for any Fiscal Year that the Secretary determines that the State, Territory, or Tribe has failed to comply substantially with the criminal background check requirements at § 98.43;
( ii ) This penalty will be withheld no earlier than the first full Fiscal Year following the determination to apply the penalty; and
( iii ) This penalty will not be applied if the State, Territory, or Tribe corrects the failure before the penalty is to be applied or if it submits a plan for corrective action that is acceptable to the Secretary.
( c ) If a Lead Agency is subject to additional sanctions as provided under paragraph (b) of this section, specific identification of any additional sanctions being imposed will be provided in the notice provided pursuant to § 98.91.
( d ) Nothing in this section, or in § 98.90 or § 98.91, will preclude the Lead Agency and the Department from informally resolving a possible compliance issue without following all of the steps described in §§ 98.90, 98.91 and 98.92. Penalties and/or sanctions, as described in paragraphs (a) and (b) of this section, may nevertheless be applied, even though the issue is resolved informally.
( e ) It is at the Secretary's sole discretion to choose the penalty to be imposed under paragraphs (a) and (b) of this section.
[63 FR 39981, July 24, 1998, as amended at 81 FR 67594, Sept. 30, 2016]