4.11 Debt and Debt Collection

4.11.2 Establishment of Debt

Effective date: TBD

Debt can be established for contracts as well as individual participants or vendors. A debt to DWD-DET is established when costs are disallowed in writing by one of the following:

• An audit resolution findings and determinations letter.
• A complaint and appeal ruling.
• A report of an investigation.
• A grant closeout report.
• A monitoring report.

4.11.3 Collection of Debt

Effective date: TBD

Collection options available to DWD-DET include but are not limited to the following:

1. Cash Repayment. Requiring cash repayment from non-federal sources.
2. Withholding Funds. Withholding from current grant costs an amount equal to the disallowed costs to offset the debt.
3. Noncash Repayment. Requiring repayment with the use of stand-in costs. Stand-in costs are costs paid from non-federal sources that a recipient proposes to substitute for disallowed costs.¹ In-kind contributions do not qualify as stand-in costs. To be valid substitutions, the proposed stand-in costs must:
   1. Have been reported as uncharged program costs under the same title and program year as were the disallowed costs;
   2. Have been incurred in compliance with laws, regulations, and contractual provisions governing expenditures;
   3. Be accounted for in the recipient's financial system records;
      and
   4. Not result in a violation of cost limitations.

• ¹ 2 CFR 200.1 "Disallowed costs"

4.11.4 Waiver of Sanctions Relating to Debt

Effective date: TBD

A waiver of all or a part of the sanctions relating to a grant debt can be obtained. If the Department of Labor (DOL) determines that the recipient and DWD-DET have demonstrated substantial compliance with the applicable requirements, sanctions against the state may be waived. DWD-DET may transfer this waiver to the recipient. All waiver requests must be processed through DWD-DET. The recipient must request the waiver and must demonstrate that it has established an adequate subcontracting system that includes timely monitoring and audit resolution activities.¹

Waivers will only be issued by DOL if the improper expenditure of grant funds:

1. Occurred at the subrecipient level;
2. Was not due to willful disregard, gross negligence, failure to observe accepted administrative standards, or did not constitute fraud;
   or
3. If fraud did exist:
   1. It was perpetrated against the recipient.
   2. The recipient discovered, investigated, reported, and cooperated in any prosecution of the fraud perpetrator.
   3. No waiver will be granted unless DOL determines that further collection action would be inappropriate or would prove futile.

A waiver request must be accompanied by the resolution reports that established the debt. If the Department of Labor-Employment and Training Administration (ETA) grant officer is resolving the finding, a request for waiver shall be made prior to the conclusion of the informal resolution period, normally 60 days from the date of the ETA grant officer's initial determination letter.²

• ¹ 20 CFR § 683.740
• ² 20 CFR 683.740(b)

4.11.5 Disposition of Collected Debts

Effective date: TBD

Disallowed costs that are due to serious violations or illegal acts must be remitted to ETA. Remit these funds to DWD-DET for submission to ETA.

In other cases, the recovered amounts may be reprogrammed. Documentation relating to the repayment of the liability and reprogramming of the funds should be maintained for review and audit.

4.11.6 Other Actions

Effective date: TBD

In accordance with legislation and regulations, nothing in this section shall prevent:

• The recipient being responsible for the actions of the subrecipient.¹
• The recipient being charged interest on the debt at the rate set by DWD-DET beginning 30 calendar days after the debt is established. The date from which interest is computed is not extended by litigation or filing any form of appeal.²
• The DOL imposing sanctions directly on the recipient.³

• ¹ 20 CFR § 683.710
• ² 2 CFR § 200.346
• ³ 20 CFR § 683.700

4.11.7 Local Collection Procedures

Effective date: TBD

Local collection procedures must include sound fiscal controls and a process for collecting debts.¹ Recipients must have written debt collection procedures in place to identify and recapture improper payments in a timely manner. Examples of improper payments include duplicate payments, payments to an ineligible party, payment for ineligible goods or services, or payment for goods or services not received.

Recipients must develop and maintain written debt collection procedures for collecting debts the recipient establishes against their subrecipients.

The procedures shall, at a minimum, include:

• Written notification to subrecipients of the establishment of the debt.
• Possible sanctions if the debt is not paid.
• Notification of appeal rights.
• Notification of the date the debt will be considered delinquent, including interest charges, if appropriate.
• Steps to be taken to systematically collect outstanding debt such as debt collection letters at specific intervals.
• Establishment of an accounts receivable system.
• Standards for terminating, compromising, or litigating debts.

• ¹ 20 CFR § 200.400