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11-1300-16459-2 |
STATE OF
OFFICE OF ADMINISTRATIVE HEARINGS
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In the Matter of the Appeal of the Minnesota Department of
Education’s Demand for Reimbursement of Child and Adult Food Care Program
Overpayments. |
ORDER ON CROSS MOTIONS FOR SUMMARY
DISPOSITION |
The above-entitled matter
came before Administrative Law Judge Barbara L. Neilson on the parties’ cross
motions for summary disposition. The
Department filed its motion on
Beverly A. Bryant, Assistant Attorney General,
Based upon the file, record, and proceedings herein, and for the reasons set forth in the accompanying Memorandum, the Administrative Law Judge makes the following:
1. The parties’ cross motions for summary disposition are denied. This matter shall proceed to hearing.
2. A telephone conference call will be held on Wednesday, December 28, 2005, at 2:30 p.m. to set a hearing date in this matter. The Administrative Law Judge will initiate the call.
Dated: December 15, 2005.
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s/Barbara L. Neilson |
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BARBARA L. NEILSON |
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Administrative Law Judge |
MEMORANDUM
Background regarding the
Federal Child and Adult Care Food Program
Under the
federal Child and Adult Care Food Program (“the Program”),[1]
federal funds are provided for nutritious meals and snacks served to adults and
children receiving care at family child care homes, child care centers, and
other locations. The United States
Department of Agriculture (“USDA”) has promulgated regulations with respect to
the Program, which are set forth in 7 C.F.R. Part 226. The USDA Food and Nutrition Service (“FNS”)
administers the Program through grants issued to the states[2]
which are typically administered by the state educational agency. These state agencies enter into a written
agreement with the USDA “for the administration of the Program in the state in
accordance with the provisions of [7 C.F.R. Part 226].”[3]
The state agencies thereafter enter into
agreements with sponsoring organizations to administer Program operations for
day care providers,[4] and the sponsoring
organizations enter into contracts with day care providers to provide meals to
enrolled children.[5]
The
regulations promulgated under the Act define “sponsoring organization” to mean
“a public or nonprofit private organization which is entirely responsible for
the administration of the food program in . . . [o]ne or more day care homes .
. . .”[6] The federal law specifies that, to be eligible
to participate in the Program, an “institution”[7]
(defined to include sponsoring organizations) must satisfy certain criteria,
including “accept[ing] final administrative and financial responsibility for
management of an effective food service”; “provid[ing] adequate supervisory and
operational personnel for overall monitoring and management of the child care
food program”; and (with respect to sponsoring organizations), “employ[ing] an
appropriate number of monitoring personnel . . . as approved by the State.”[8] As part of the application process, renewing
sponsoring organizations must demonstrate that “appropriate and effective
management practices [are] in effect to ensure that the Program operates in
accordance with [7 C.F.R. Part 226];” they have “an adequate number and type of
qualified staff to ensure the operation of the Program in accordance with [7
C.F.R. Part 226];” they employ “staff sufficient to meet the ratio of monitors
to facilities;” and they meet numerous other requirements.[9] Renewing sponsoring organizations are also
required to document in their management plans that they will “[p]erform
monitoring in accordance with § 226.16(d)(4), to ensure that sponsored
facilities accountably and appropriately operate the Program.”[10] Applicants must submit a detailed management
plan that describes the procedures they will follow in administering the
Program and identifies staff assigned to manage and monitor the Program.[11] The rules governing the Program make it clear
that “[e]ach sponsoring organization shall accept final administrative and
financial responsibility for food service operations in all child care and
adult day care facilities under its jurisdiction.”[12]
The
disbursements made by the states under the Program “shall be made only for the
purpose of assisting in providing meals to children attending institutions, or
in family or group day care homes.”[13] The rules specify that reimbursement is
provided “for meals served to children enrolled in approved day care homes.”[14] The sponsoring organization submits monthly
claims to the state agency for the number of meals served by the day care
provider. The amount of reimbursement
provided is based on the number of meals served to enrolled children multiplied
by the appropriate reimbursement rate for each type of meal the provider is
approved to serve. The state agency pays
the reimbursable amounts to the sponsoring organization, and the sponsoring
organization then distributes the payment to the day care provider.[15] The state agency is provided funding by the
USDA for the purpose of conducting audits of participating institutions.[16] The state agency is responsible for
ongoing oversight of sponsoring organizations, including regular reviews to
ensure compliance with Program regulations.[17]
The federal
law states that “[t]he State may recover funds disbursed [to eligible
institutions] if the State determines that the institution has engaged in fraud
or abuse with respect to the program or has submitted an invalid claim for
reimbursement.”[18] However, the rules promulgated by the USDA
specify that “[s]tate agencies shall disallow any portion of a claim for
reimbursement and recover any payment to an institution not properly payable
under this part [7 C.F.R. Part 226].”[19] A Notice issued by the FNS on May 25, 2004,[20]
states that, while unearned funds paid to a provider by a sponsoring
organization must be recovered by the State agency from the sponsor “in most
instances,” in exceptional cases the State agency may decided to forego
collection from the sponsoring organization “to the extent that the sponsor is
able to demonstrate that it (1) was not
responsible for the overpayment and (2)
had made every reasonable effort to recover the funds.”[21]
In
Underlying Facts
Based upon
the submissions of the parties in connection with the cross motions for summary
disposition, it appears that the underlying facts in this case are as follows. The Respondent, the Minnesota Licensed
Family Child Care Association, is an organization comprised of family child
care providers, other provider associations, and support groups. The Respondent
has entered into Sponsoring Authority agreements with the MDE to administer the
Program for family day care providers since 1978.[24] The Respondent has repeatedly applied for and
received approval from the state to be a sponsoring organization. It has never had an application denied.[25] The Respondent agreed as part of its Sponsoring
Authority agreement with the Department to “comply with the program statutes
and program regulations applicable to the programs covered by this
agreement.” The Respondent also agreed
that it would “comply with any MN Department of Children, Families &
Learning[26] policy memorandums and
other written directives interpreting the program statutes and regulations.”[27]
The
Respondent entered into sponsorship agreements with day care providers Ker
Vang, Blia Xiong, Zhia Vang, and Lee Vang to reimburse them for meals served to
eligible children enrolled in their day care homes. Zhia Vang also worked as a Program monitor
under contract with Respondent. Monitors
are to visit the homes of day care providers on a periodic basis to verify the
number of children enrolled and the type of meals being served. During fiscal years 1999-2000, 2000-2001,
and 2001-2002, the Respondent submitted reimbursement claims for each of the
above four individuals totaling $54,994.77, $24,316.12, $85,455.45, and
$125,095.50.[28]
In 2004,
the Respondent discovered that these day care providers stole over $200,000 of
Program funds by presenting requests for meals and snacks that had never
actually been served to children. The
above four members of the group were convicted of defrauding the Program. Between June 30, 2004, and November 9, 2004,
the Respondent sent each of these individuals a Notice of Serious Deficiency
based upon their conviction for child care fraud and submission of false claims
under 7 C.F.R. § 226.16(l)(2)(ii) for children who were not enrolled in
day care or who did not exist. The
Respondent determined that each of these individuals was required to pay back
to the Program the amounts of $44,233.42, $24,316.12, $58,516.41, and
$107,271.34, respectively. The
Respondent also terminated their agreements to participate in the Program and
disqualified them from future participation in the Program.[29]
In the
spring of 2002, two months before the Hennepin County Fraud Investigative Unit
executed its initial search warrant that led ultimately to convictions of the
providers, MDE performed a regular review of Respondent’s operation. The MDE’s review included drop-in visits of a
sample of the Respondent’s providers.
The Respondent had noticed that a large portion of their Hmong providers
were submitting “block” claims for reimbursement (i.e., claims that included
the maximum number of meals within each time period), and communicated their
concerns to the MDE’s Program Reviewer.
The Reviewer subsequently selected 11 Hmong providers to be included in
her drop-in visits, but did not discover any problems with these providers.[30]
The
provider fraud was uncovered by
After the
MDE learned of the convictions, it required the Respondent to verify the
existence of all of the children identified by each of the providers as having
been served meals and snacks during the relevant time period. The Respondent submitted an affidavit
indicating that it sought to verify the existence of the children who had been
listed by the providers by sending letters to last known addresses reflected on
enrollment forms that were 3 to 6 years old, checking the listed addresses to
confirm that residences existed at those addresses, and attempting to contact parents
at their last known phone numbers. The Respondent
contends that the verification process was complicated by language and cultural
issues and the fact that three to six years had passed. Ultimately, the MDE required the Respondent
to include in the overpayment amount all costs related to children who could
not be independently verified, resulting in an overpayment calculation higher
than the total restitution required by the plea agreements.[34]
On
Ker Vang $45,053.67
Blia Xiong $24,316.12
Zhia Vang $77,411.37
Lee Vang
$118,163.22[35]
Since the notice of appeal was served, Blia Xiong has repaid the total
amount of overpayments made to her.[36] The Department agrees that that amount is no
longer involved in this appeal.[37]
On
The federal
statute requires state agencies to offer a fair hearing in accordance with USDA
regulations to institutions aggrieved by an action of the state as it affects
participation in the Program or a claim for reimbursement.[41] The rules require that state agencies offer
an administrative review for certain actions, including a demand for the
remittance of an overpayment.[42] The MDE selected the contested case
procedures set forth in the Administrative Procedure Act, Minn. Stat. Chapter
14, as its administrative review process. Pursuant to 7 C.F.R. § 226.6(k)(5)(x)
and appeal procedures adopted by the Minnesota Department of Education, the
decision ultimately issued by the Administrative Law Judge will be the final
administrative determination in this matter.
Summary disposition is the administrative equivalent of summary judgment. Summary disposition is appropriate where there is no genuine issue as to any material fact and one party is entitled to judgment as a matter of law.[43] The Office of Administrative Hearings has generally followed the summary judgment standards developed in judicial courts in considering motions for summary disposition regarding contested case matters.[44]
The moving party has the initial burden of showing the absence of a genuine issue concerning any material fact. A genuine issue is one that is not sham or frivolous. A material fact is a fact whose resolution will affect the result or outcome of the case.[45] To successfully resist a motion for summary judgment, the nonmoving party must show that there are specific facts in dispute that have a bearing on the outcome of the case.[46] A nonmoving party cannot rely on pleadings alone to defeat a summary judgment motion.[47] The nonmoving party must establish the existence of a genuine issue of material fact by substantial evidence; general averments are not enough to meet the nonmoving party’s burden under Minn. R. Civ. P. 56.05.[48]
When considering a motion for summary judgment, the facts must be viewed in the light most favorable to the non-moving party,[49] and all doubts and factual inferences must be resolved against the moving party.[50] If reasonable minds could differ as to the import of the evidence, judgment as a matter of law should not be granted.[51]
Allegations
and Contentions of the Parties
The Department’s demand that the Respondent reimburse the overpayment made
to the day care providers is based on its interpretation of the Sponsoring
Authority agreement, federal regulations, and federal case law arising under
the Comprehensive Employment and Training Act of 1973 (“CETA”) and other
federal grant programs. The Department
asserts that, under 7 C.F.R. § 226.14(a), state agencies must disallow any
portion of a claim for reimbursement and recover any payment to an institution
that was not properly payable under the Program. Because, under 7 C.F.R. § 226.13(a), payments
under the Program are to be made “only to sponsoring organizations operating
under an agreement with the State agency for the meal types specified in the
agreement served to enrolled non-resident children and eligible enrolled
children of day care home providers, at approved day care homes,” the MDE
asserts that there simply is no entitlement to reimbursement for meals that
were not actually served.
The Department contends that the Respondent, as the sponsoring
organization, is jointly liable for the overpayments made to the day care
providers and must repay the Department for amounts paid for meals that were
not served, regardless of whether fraud was committed by the day care providers
without the Respondent’s knowledge. In
support of this argument, the Department emphasizes that the annual Sponsoring
Authority agreements signed by the Respondent acknowledged the Respondent’s obligation
to comply with Program statutes and regulations. Those regulations include 7 C.F.R. § 226.16(c),
which states that “[e]ach sponsoring organization shall accept final financial
and administrative responsibility for food service operations in all child care
and adult day care facilities under its jurisdiction.” The Department draws an analogy to cases under
the CETA program[52] which allowed the federal
government to recoup overpayments from state agency grantees even though it was
sub-grantees who misspent the funds or failed to maintain proper documentation. The Department asserts that these cases apply
here because the relationship between the MDE and the Respondent is also
governed by a contract between the parties and each subcontractor is liable to
the higher tier contractor for administration of the Program.
The Department further argues that the only actions subject to review by
the Administrative Law Judge in this proceeding are the Department’s demand for
recoupment of the overpayment and the Respondent’s compliance with the demand,
and that the Respondent should not be afforded an opportunity in this
proceeding to demonstrate that it falls within the exceptional circumstances
noted in the May 25, 2004, FNS Notice. The
Department asserts that the only issue before the Administrative Law Judge in
this proceeding is whether the Respondent is liable for the overpayment and in
what amount, not the further issue of whether the state agency should decide
whether to waive all or part of the debt.
It contends that the decision whether or not to waive a debt is left to
the discretion of the MDE and the Respondent’s equitable arguments can be
addressed to the Department later, after the issue of liability is addressed in
the present proceeding.
The Respondent disagrees that the issues in this matter are limited in
the fashion suggested by the Department.
The Respondent asserts that, even if the Respondent is found responsible
as a matter of law for the overpayments, a hearing is still necessary to
determine fact issues relating to the precise amount of the overpayments the
Respondent should be required to pay. In
this regard, the Respondent emphasizes that the Department’s overpayment demand
of $264,944.38 exceeds by $30,607.09 the amount the convicted providers were
required to pay as restitution in the criminal proceedings ($234,337.29). The Respondent also challenges the basis for the
Department’s determination of the amount of the overpayment. The Respondent’s Director alleged in her
affidavit that the Respondent faced significant challenges when it sought to
verify the existence of all of the children identified on enrollment forms
prepared three to six years earlier, due to the lapse of time as well as
language and cultural issues, and that it was very difficult to accurately
determine which of the children claimed by the convicted providers actually
received meals and which did not. The
Respondent alleges that the Department ultimately required the Respondent to
include in the overpayment all amounts related to children who could not be
independently verified, and implicitly challenges the fairness or propriety of
that requirement.
The Respondent also contends that the Program regulations recognize that
there are some circumstances where it is acceptable for the state agency to
relieve sponsoring organizations from the requirement to repay improperly-paid
reimbursements. Specifically, the
Respondent asserts that 7 C.F.R. 226.14(c) implicitly recognizes that there
will be times when a State agency will not collect overpayments by stating
that, “[i]f FNS does not concur with the State agency’s action in . . . failing
to collect an overpayment, FNS shall notify the State agency of its intention
to assert a claim against the State agency.”
In addition, the Respondent argues that it should be afforded an
opportunity to make a record at a hearing in this matter that repayment should be
excused because the Respondent falls within the exceptional circumstances set
forth in the 2004 FNS Notice. The
Respondent alleges that it meets the criteria of the FNS Notice because
(1) it had no knowledge of the fraud, it
followed monitoring procedures that were approved by MDE and were consistent
with those used by other Minnesota sponsoring organizations, and it was not
responsible for the overpayments to the day care providers, and (2) it has made every reasonable effort to
recover the funds by cooperating with the Hennepin County investigators and
promptly notifying the MDE when it learned that charges would be filed. The
Respondent points out that the MDE was also unable to uncover the fraudulent scheme
when it conducted its own review.[53]
Analysis
After careful consideration of the Program statute and rules, the Sponsoring Authority agreement, the 2004 FNS Notice, and relevant case law, the Administrative Law Judge concludes that genuine issues of material fact remain for hearing with respect to the amount of the overpayment for which the Respondent should be held responsible. For that reason, neither party is entitled to judgment as a matter of law, and the parties’ cross motions for summary disposition must be denied.
Although the mere fact that the restitution ordered in the criminal proceedings against the day care providers was lower than the amount demanded by the Department is not sufficient in itself to create a genuine issue of material fact with respect to the accuracy of the amount of the Department’s repayment demand, other issues raised by the Respondent concerning the amount of the overpayment demand do support the conclusion that there are genuine issues of material fact that must be resolved in this matter. For example, the Respondent, through the affidavit of its Director, questioned the propriety of the Department’s calculation of the overpayment amount and raised questions about the fairness of the Department’s insistence that the overpayment amount include all charges related to children who could not be independently verified three to six years after the charges were incurred.
Furthermore, the Respondent
demonstrated that there are fact issues regarding whether its situation falls
within the exceptional circumstances described in the 2004 FNS Notice so as to
warrant the conclusion that it should not be held responsible for the
overpayment. As noted above, the MDE’s Sponsoring Authority agreement with the
Respondent specifies in Clause 9 that “[t]he Sponsoring Authority . . . will comply with the program statutes and
program regulations applicable to the programs covered by this agreement. The Sponsoring Authority also will comply
with any [MDE] policy memorandums and
other written directions interpreting the program statutes and regulations.”[54] The latter language would appear to encompass
the 2004 FNS Notice issued to sponsoring authorities acknowledging that, in
exceptional cases, sponsoring organizations who demonstrate that they are not
responsible for an overpayment made to a day care provider and that they have made
every reasonable effort to recover the funds will not be held responsible for
overpayments. The content of the
2004 FNS Notice, and the inclusion of criteria to guide the decision whether a
sponsoring organization should be held responsible for overpayment to a day
care provider, suggests that, at least in some circumstances, sponsoring
organizations are not automatically to be held jointly liable for overpayments
made to day care providers.[55] The 2004
FNS Notice expressly permits consideration of the organization’s responsibility
for an overpayment and its efforts to recover the funds. Thus, unlike the situation in some of the cases cited by the Department, it is
evident here that sponsoring organizations are not always held strictly liable
for overpayments made to day care providers but can avoid repayment by showing
that certain circumstances were present.[56]
Under the USDA rules, the determination made by the Administrative Law Judge, who is serving as the administrative review official in this matter, is the final administrative determination to be afforded the Respondent.[57] As a matter of due process, the Respondent should be afforded an opportunity to develop a record in this proceeding regarding whether it meets the criteria set forth in the 2004 FNS Notice.
Accordingly, the parties’ cross motions for summary disposition are denied, and this matter shall proceed to hearing. A conference call has been scheduled for Wednesday, December 28, 2005, at 2:30 p.m. to set a hearing date. Counsel should inform the Administrative Law Judge as soon as possible if that date or time is inconvenient.
B.L.N.
[1] See 42 U.S.C. § 1766.
[2] 42 U.S.C. § 1766(a); 7 C.F.R. § 226.1.
[3] 42 U.S.C.
§1766(f)(1)(A); 7 C.F.R. § 226.3.
[4] 7 C.F.R. §
226.6(b).
[5] 7 C.F.R.
§226.18(b).
[6] 7 C.F.R. § 226.2.
[7] The term
“institution” is defined in the federal law to include “any public or private
nonprofit organization acting as a sponsoring organization for one or more family
or group day care homes.” 42 U.S.C. §
1766(a)(2)(E). The term “institution” is
defined in the regulations to include “a sponsoring organization, child care
center, outside-school-hours care center, emergency shelter or adult day care
center which enters into an agreement with the State agency to assume final
administrative and financial responsibility for Program operations.” 7 C.F.R. § 226.2.
[8] 42
U.S.C. §1766(a)(6).
[9] 7 C.F.R. §
226.6(b)(2)(vii)((B). With respect to
the monitoring of day care homes, section 226.16(b)(1) requires that sponsoring
organizations must employ the equivalent of one full-time staff person for each
50 to 150 day care homes they sponsor.
[10] 7 C.F.R. §
226(b)(2)(vii)(C)(4)(ii).
[11] 7 C.F.R. § 226.6(b) and (c); see also Mork Affidavit, ¶ 3 and Ex. A;
[12] 7 C.F.R. § 226.16(c).
[13] 42 U.S.C. §
1766(f)(1)(A).
[14] 7 C.F.R.§ 226.13(a) and (c).
[15] 7 C.F.R. § 226.13(c).
[16] 42 U.S.C. §
1766(i).
[17] See 7 C.F.R. §§ 226.6 and 226.8.
[18] 42 U.S.C. § 1766(f)(1)(B) (emphasis added).
[19] 7 C.F.R. §226.14(a) (emphasis added).
[20] See Ex. C to Bryant Affidavit.
[21] See Ex. C to Bryant Affidavit.
[22] See
Ex. A to Affidavit of Beverly Bryant.
[23]
[24] Mork Affidavit, ¶ 3; see Ex. B to Affidavit of Beverly Bryant.
[25] Mork Affidavit, ¶ 3.
[26] The Minnesota Department of Children, Families and Learning was renamed the Minnesota Department of Education in 2003.
[27] Bryant
Affidavit, Ex. B, clause 9A and Appendix A.
[28] Bryant
Affidavit, Ex. C. The Respondent did not
dispute the facts set forth by the MDE in its Memorandum, with the exception of
the precise amount of the overpayments due.
[29] Department’s
brief at 4-5; Mork Affidavit, ¶ 5.
[30] Mork Affidavit, ¶ 7
[31] Affidavit of Steve Halicki, ¶¶ 2, 4, 6.
[32] Mork Affidavit, ¶ 10; Halicki Affidavit, ¶ 1.
[33] Mork Affidavit, ¶ 10.
[34] Mork
Affidavit, ¶ 10.
[35] See Ex. C to Affidavit of Beverly
Bryant.
[36] Halicki
Affidavit, ¶ 9; Mork Affidavit, ¶ 8.
[37] Department’s
Memorandum in Support of Motion at 6, n. 2.
[38] See Ex. D to Affidavit of Beverly
Bryant.
[39]
[40] Mork
Affidavit, ¶ 6.
[41] 42 U.S.C. §1766(e)(1).
[42] 7 C.F.R. §§
226.6(k)(2)(xi) and 226.6(k)(4).
[43] Sauter v. Sauter, 70 N.W.2d 351, 353 (
[44] See
[45] Illinois Farmers Insurance Co. v. Tapemark
Co., 273 N.W.2d 630, 634 (
[46] Thiele v. Stitch, 425 N.W.2d 580, 583 (
[47] White v.
[48]
[49] Ostendorf v. Kenyon, 347 N.W.2d 834 (
[50] See, e.g., Celotex, 477
[51]
[52] See,
e.g.,
[53] The Respondent also asserted that the MDE’s failure to
serve the Respondent with a Notice of Serious Deficiency or terminate the
Respondent from participation in the Program suggests that the MDE must have
concluded that the provider fraud was not the result of the Respondent
violating any Program regulations or standards, such as failing to operate in
conformance with the performance standards set forth in 7 C.F.R. 226.6(b)(18),
claiming reimbursement for meals not served, or failing to properly train or
monitor sponsored facilities in accordance with section 226.16(d). It maintains that the MDE is required to
issue a Notice of Serious Deficiency if it finds that a Sponsoring Authority
has committed these or any of the other serious infractions identified in
section 226.6(c)(3)(ii) of the regulations.
The Department pointed out that the Program regulations do not set forth
a deadline for the issuance of a Notice of Serious Deficiency, and the
Department may yet issue such a notice.
[54] Ex. B to
Bryant Affidavit.
[55] See also 42 U.S.C. § 1766(f)(1)(B) “[t]he
State may recover funds disbursed [to eligible institutions] if the
State determines that the institution has engaged in fraud or abuse with
respect to the program or has submitted an invalid claim for reimbursement”)
(emphasis added), and 7 C.F.R. 226.14(c) (“[i]f FNS does not concur with the
State agency’s action . . . in failing to collect an overpayment . . .
.”)
[56] For example,
in Bennett v. New Jersey, 470 U.S.
632 (1985), and Bennett v. Kentucky Dept.
of Education, 470 U.S. 656 (1985), the Supreme Court noted that there was
no indication in the statute at issue (Title I of the Elementary and Secondary
Education Act of 1965) that grantees could avoid repayment by showing that they
acted in good faith. In contrast, the
Ninth Circuit in Chicano Education &
Manpower Services v. U.S. Dept of Labor, 909 F.2d 1320 (9th Cir. 1990),
mentioned that the facts found by an Administrative Law Judge supported a
waiver of a repayment obligation by the Secretary of Labor in a CETA case, and
remanded the matter to the Secretary for a consideration of whether special
circumstances justified a discretionary waiver of a CETA overpayment.
[57] McKenzie v. Minnesota Office of the State
Auditor, OAH Docket No. 7-0700-13245-2 (Feb. 7, 2001), is not inconsistent
with this ruling. In the McKenzie case, an Administrative Law
Judge held a hearing on an alleged overpayment to an employee of the Auditor’s
Office and thereafter issued Findings of Fact, Conclusions, and Recommendations
to the Auditor. Detailed Findings were
made tracing the employment and pay history of the employee, the union wage
negotiations, and personnel policies relating to recovery of overpayments. The ALJ recommended that the amount of the
overpayment be affirmed. He further
recommended that the State Auditor, who had authority to make the final
decision, “exercise her discretion in deciding whether to continue pursuing the
OSA’s right to setoff” and that, if the OSA proceeded to set off the future
earnings of the employee to collect the overpayment, it negotiate with the
employee in good faith to determine a setoff plan that would not cause undue
hardship to the employee. The Memorandum
in McKenzie noted that there was no
basis for a determination that recovery of the overpayment was barred as a
matter of law or that the employee was entitled to relief. In contrast, the Administrative Law Judge in
the case at bar will be rendering the final administrative determination on the
overpayment issue, not a recommendation to the agency head. In addition, because the 2004 FNS Notice does
recognize an exception to the usual situation in which overpayment is required,
the Respondent should be permitted to develop a factual record concerning
whether it falls within that exception.