Under a new policy that is to take effect Oct. 1, schools, research institutions, and other organizations can be barred from receiving any federal grants or contracts if they, or their top employees, are placed on a list of individuals and organizations deemed unworthy of trust because of past illegal or improper actions.
Under “debarment and suspension’’ regulations recently published by the Office of Management and Budget, agencies can add names to the new, governmentwide list for improprieties ranging from a conviction for fraud to default on a large government loan.
People on the list will be at least temporarily ineligible for any federal aid other than entitlements, such as food stamps or Social Security. The debarment could last for up to three years and could be shortened or renewed by the debarring agency.
The purpose of the regulations, according to OMB, is to ensure that wrongdoers barred by one agency from receiving grants or contracts cannot obtain federal money from another agency. The new rules represent a modification of an initial version, offered by OMB a year ago, that contained more sweeping language.
But critics of the regulations say federal officials could still use them to cut political enemies off from government aid, that entire organizations could be debarred for the actions of individuals, and that people could be put on the list simply for associating with the wrong individuals.
“What they are doing is putting thousands of people on a list and telling everyone to stay away from them,’' said Shannon Ferguson, technical director of OMB Watch, an organization that keeps tabs on the budget agency.
“It’s like something out of a Kafka novel,’' commented Bruce Hunter, associate director of the American Association of School Administrators.
Mr. Ferguson and Sally Potter, government-relations specialist for the National Education Association, both said, however, that the final rule was much more palatable than OMB’s original proposal.
“Although we still have concerns about the whole thing, we are certainly pleased at the direction in which OMB has moved,’' Ms. Potter said. “There is clearly less potential for abuse of these guidelines.’'
She and Mr. Ferguson lauded the agency for making some of the grounds for debarment clearer and for limiting others.
A provision subjecting organizations to debarment for the actions of individuals was altered so that only key employees, and not support staff such as janitors, could trigger debarment. Additionally, the final rule specifies that defaulting on a small federal loan, such as a student loan, would not trigger debarment.
“We feared that if one teacher were found to have defaulted on a student loan, the entire school district could have found itself on the ineligible list,’' Ms. Potter said.
Representative Jack Brooks, chairman of the House Government Operations Committee, told OMB that he also was pleased with the changes, although the Texas Democrat said last year in a letter to the agency that the debarment proposal “offends many of the basic precepts upon which this nation is founded.’'
An aide to the Representative said he was reserving final judgment until he heard from “the people who will be affected,’' because “they are the ones who really know what the impact will be.’'
OMB agreed to collect public comments on the regulations, although agencies are not bound to consider comments made after the publication of final rules.
Questions on Defense
Mr. Ferguson and Ms. Potter said they were most concerned that the regulations do not afford the accused enough opportunity to defend themselves.
Targets for debarment must be given an opportunity to contest the action, and the burden of proof is on the federal agency seeking to place them on the list.
But the agency must only prove that a “preponderance of the evidence’’ backs its position, a lower standard than that required in a criminal prosecution. An agency also has the authority to deny the accused access to documents or witnesses, Mr. Ferguson said.
Final decisions rest with agency officials. And individuals or organizations can be temporarily suspended from eligibility--and their federal aid cut off--if “there exists adequate evidence’’ of an infraction and “immediate action is necessary to protect the public interest,’' the rules state.
Agencies were given the option of instituting further appeal procedures of their own, and the Education Department has requested comments from the public on whether it should.
Aggrieved parties could also ask for judicial review of their cases. Agencies would have to proceed carefully, Mr. Ferguson said, with the knowledge that such challenges are certain to occur.
However, he said, the debarred individual would have to prove his innocence, and would have to meet a higher standard of proof than that required to place him on the list.
Education Department officials said they would not debar an individual, much less an institution, for minor or inadvertent offenses, and that they would act only in cases that directly involved federal funding. But the debarment regulations give agencies broad authority to act.
“It gives them complete discretion,’' Mr. Ferguson said. “If there were two guys doing the same thing wrong, they could go after one or both or neither.’'
“That’s the thing that’s worried us all along,’' said Ms. Potter. “We don’t want to see this used selectively against individuals or programs someone doesn’t like.’'
Grounds for Debarment
Grounds cited by the rules for placing an individual or organization, including an educator or a school, on the ineligible list include:
Conviction or civil judgment for such offenses as fraud, price fixing, embezzlement, theft, bribery, or “any other offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a person.’'
The offenses would not have to be committed in connection with a public contract or grant, but could relate to private activities of an individual or company.
- Improper use of federal funds or violation of the terms of a “public agreement,’' including “unsatisfactory performance of one or more public agreements.’'
The regulations would allow the Education Department and other agencies to act against grantees for virtually any action that violated a statute, a regulation, or the terms of a “public’’ contract, from a researcher’s failure to produce a required report to theft of government money.
Mr. Ferguson noted that agencies are free to define what “unsatisfactory performance’’ is. He also said that agencies could use the debarment regulations to intimidate grantees into repaying allegedly misspent grants in cases where they otherwise might have fought the repayment request.
“They’ve added a big arrow to their quiver here,’' he said. “They can say, ‘Pay us back or we’ll put you on the list.’''
‘Pattern of Abuses’
Wendy Zenker, director of the contracts division, said the department would act only when the infractions were “significant,’' or constituted “a pattern of abuses.’' She also said the department would act only against grantees who committed “willful’’ violations, not people who made unintentional errors.
“We recognize that debarment is a serious undertaking, and that there are other remedies available,’' she said.
Ms. Zenker also stressed that “our concern here is with the use of federal funds.’'
While the regulations could be interpreted to allow debarment for violation of nonfederal but “public’’ agreements, such as state contracts or agreements between workers and public employers, she said the department would act only on violations involving federal programs.
Failure to repay a single “substantial’’ debt, or several smaller debts owed to any federal agency.
The regulations specify that default on a single student loan would not be grounds for debarment, while default on a larger business loan could be. Taxes owed to the Internal Revenue Service are also exempted.
“Knowingly’’ doing business with a debarred company.
Grantees and contractors must require all companies they do business with to certify that they are not on the debarment list. Failure to do so would constitute grounds for placement on the list.
For example, a school that contracted for bus service with a listed firm could be debarred.
Mr. Ferguson said the prohibition would apply to any purchases or contracts involving a federal grantee, and that schools ought to examine carefully any organization that leases space in a school building.
But Ms. Zenker said the provision applies only to transactions that affect federally funded programs. She said that a school could purchase books from a debarred firm for courses that were not federally aided, but could not buy books from them for use in federally funded Chapter 1 or bilingual-education classes.
- Employing a debarred individual in a key position.
Under the regulations, federal grantees and contractors must submit certification that their “principal’’ employees are not on the debarment list, and a knowing violation would be grounds for inclusion.
In school districts, that definition would include most, if not all, administrators. Ms. Zenker said it would also include teachers with some administrative responsibilities for federal programs, such as those who oversee a school’s Chapter 1 effort.
School-board members could also be considered “principals,’' presenting a possible, though unlikely, scenario in which an elected official must be removed from office to restore a district’s grant eligibility.
Applicants for research grants would have to obtain certification from everyone who would work on the project, with the exception of “support personnel,’' such as clerical or janitorial workers.
Mr. Ferguson noted that if an individual were responsible for an infraction, a federal agency could debar just the individual, or could debar his employer, as well--or even business affiliates of his employer.
If, for example, a Chapter 1 coordinator were caught in an illegal act and debarred, Ms. Potter said, “I would like to think that the department would ensure that the Chapter 1 program doesn’t suffer, but I am concerned that the possibility exists the whole program would be hurt.’'
“One big question is how wide a reach this regulation will have,’' Mr. Ferguson said, adding that “a lot depends on who knew about it.’'
‘Knowledge’ of Infraction Key
The regulations state that an organization or individual can be held responsible for individual infractions when they “had knowledge of, approved of, or acquiesced in the misconduct in question, or where such misconduct was done for or on behalf of the person to which it is imputed.’'
But, Mr. Ferguson said, even if only an individual were placed on the list, his employer would probably have to fire him to retain federal eligibility.
The Education Department’s policy would depend on “the individual case, how extensive [the impropriety] is, who is involved,’' Ms. Zenker said.
“I don’t think it would be very likely that the department would take action against an entire school district because of an individual action,’' added Mary Hughes, policy- branch chief of the grants division.
“But we would probably not want that person involved in a federal grant,’' she said, agreeing that a school could be forced to fire a debarred individual.
The debarment regulations technically do not apply to student-aid programs, because the Higher Education Act provides a specific process to declare lenders or educational institutions ineligible for the program because of illegal or improper actions.
But if a student-aid participant is debarred by any federal agency, the department will audit them to determine if there are grounds to remove their student-aid eligibility, according to separate regulations published by the Education Department alongside the OMB rules.
