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Illinois Officials Sue E.D. Over Operations of Audit Appeal Board

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Springfield, Ill--In a case with multimillion-dollar implications, and perhaps some political ramifications, Illinois school authorities are suing the U.S. Education Department over an obscure audit appeal board they claim is stacked against them.

In a lawsuit filed last week, the Illinois State Board of Education and the Chicago school board asked the U.S. District Court for the District of Columbia to bar the federal agency and its Education Appeals Board from acting on three appeals pending from Illinois, involving about $4.3 million.

The complaint, Illinois State Board of Education v. Bell, involves federal audits of funds spent in Illinois. It argues that the state's due-process rights have been violated by the operations of the appeals board and contends federal education authorities have violated the Freedom of Information Act.

A spokesman for the Education Department said the agency has no comment on the matter.

The Illinois suit contends that the appeals board is biased against the state and, unless the court steps in, will "issue negative findings or take other action that will have the effect of causing large financial liability" to the state and Chicago.

"The negative action," says the complaint, "will not be based on the merits of the case [but] out of prejudice and bias and for reasons not au-thorized by law." It also claims that, without court intervention, federal officials will "alter and destroy documents and other evidence which is relevant to this case."

The state filed suit after deciding its challenge to federal audit findings in the three cases would be futile through the established appeal process.

The audits, all of which date back more than a decade, involve federal funds earmarked for teacher retirement and for programs benefiting disadvantaged students (Title I) in Chicago and East St. Louis.

Actual Reimbursement

Julia Quinn Dempsey, chief counsel for the state board, said the suit was initiated for two reasons. First, she said, federal officials have recently been insisting on actual reim-bursement of disputed expenditures rather than allowing the state to offset the funds against future grants, as they had done previously.

Second, Illinois officials became convinced that the operations of the appeal board precluded them from receiving a fair hearing, according to Ms. Dempsey.

Don Drone, the internal auditor for the state board, said a dispute over $20,000 three years ago was settled "rather amicably" with federal officials by offsetting the funds, using a state-paid employee on a federal program. But he added "we've seen a considerable hardening, a total reversal of position," in the last year or so.

Ms. Dempsey says she, together with Texas education officials who are also concerned about the board, outlined problems with the audit ap-peals board to the staff of the U.S. House Government Operations Committee. She told the committee that "if there is going to be a long-term answer to this problem, there will have to be legislation removing the board from the Education Department or strict reforms to force it to follow administrative procedures."

She complained that the appeals board does not permit cross-examination of witnesses, presentation of evidence, or other legal procedures enabling appellants to build a case. She also claimed that the appeals board's members consistently uphold the findings of auditors.

Ms. Dempsey added that the only recourse from the rulings of those panels is an appeal to the Secretary of Education and then to federal appellate court.

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