45 C.F.R. PART 1641—DEBARMENT, SUSPENSION AND REMOVAL OF RECIPIENT AUDITORS
Title 45 - Public Welfare
Authority: 42 U.S.C. 2996e(g); Pub. L. 105–277.
Source: 64 FR 67507, Dec. 2, 1999, unless otherwise noted.
In order to assist in ensuring that recipients receive acceptable audits, this part sets out the authority of the Legal Services Corporation (“LSC”) Office of Inspector General (“OIG”) to debar, suspend or remove independent public accountants (“IPAs”) from performing audit services for recipients. This rule informs IPAs of their rights to notice and an opportunity to be heard on actions involving debarment, suspension or removal, and the standards upon which such actions will be taken. This part applies to IPAs performing audit services for recipients, subrecipients or other entities which receive LSC funds and are required to have an audit performed in accordance with guidance promulgated by the OIG. Adequate evidence means information sufficient to support the reasonable belief that a particular act or omission has occurred. Audit services means the annual financial statement audit of a recipient, including an audit of the recipient's financial statements, systems of internal control, and compliance with laws and regulations. Contract means an agreement between a recipient and an IPA for an IPA to provide audit services to the recipient. Conviction means a judgment or conviction of a criminal offense by any court, whether entered upon a verdict or plea, including but not limited to, pleas of nolo contendere. Debarment means a decision by the debarring official to prohibit an IPA from soliciting or entering into new contracts to perform audit services for recipient(s) based upon a finding by a preponderance of the evidence that any of the causes for debarment set out in §1641.7 exist. Debarment may cover an IPA's contracts with all recipients or with one or more specific recipients. Debarring official is the official responsible for debarment, suspension or removal actions under this part. The OIG legal counsel is the debarring official. In the absence of an OIG legal counsel or in the discretion of the Inspector General, the debarring official shall be the OIG staff person or other individual designated by the Inspector General. Indictment means a charge by a grand jury that the person named therein has committed a criminal offense. An information, presentment, or other filing by competent authority charging a criminal offense shall be given the same effect as an indictment. IPA means an independent public accountant or firm of accountants. Knowingly means that an act was done voluntarily and intentionally and not because of mistake or accident. Material fact means one which is necessary to determine the outcome of an issue or case and without which the case could not be supported. Person means an individual or a firm, partnership, corporation, association, or other legal entity. Preponderance of the evidence means proof by information that, compared with that opposing it, leads to the conclusion that the fact at issue is more probably true than not. Removal means a decision by the debarring official to prohibit an IPA from performing audit services in subsequent years of an existing contract with one or more specific recipients based upon a finding by a preponderance of the evidence that any of the causes set out in §1641.18 exist. Suspension means a decision by the debarring official, in anticipation of a debarment, to prohibit an IPA from soliciting or entering into new contracts to perform audit services for recipient(s) based upon a finding of adequate evidence that any of the causes referred to in §1641.13 exist. Suspension may preclude an IPA from soliciting or entering into new contracts with all recipients or with one or more specific recipients. An IPA may be debarred, suspended or removed under this part only if the IPA is specifically named and given notice of the proposed action and an opportunity to respond in accordance with this part. (a) Actions against individual IPAs. Debarment, suspension or removal of an individual IPA, debars, suspends or removes that individual from performing audit services as an individual or as an employee, independent contractor, agent or other representative of an IPA firm. (b) Actions against IPA firms. (1) Debarment, suspension or removal shall affect only those divisions or other organizational elements materially involved in the relevant engagement and as to which there is cause to debar, suspend or remove. (2) The debarment, suspension or removal action contemplated in paragraph (b)(1) of this section may include any firm that is an affiliate, subcontractor, joint venturer, agent or representative of the IPA firm only if such firm was materially involved in the relevant engagement and is specifically named and given notice of the proposed action and an opportunity to respond in accordance with this part. (3) The debarment, suspension or removal action contemplated in paragraph (b)(1) of this section may include an individual officer, director, or partner responsible for the engagement, or an individual employee, independent contractor, agent, representative or other individual associated with an IPA firm only if such individual is specifically named and given notice of the proposed action and an opportunity to respond in accordance with this part. A debarment, suspension or removal is effective as set out in the debarring official's decision to debar, suspend or remove, issued pursuant to §1641.22. (a) Debarment. (1) Debarment generally should not exceed three years, but may be for a shorter period based on a consideration of the evidence presented by the IPA. Debarment may exceed three years in extraordinary circumstances. (2) If a suspension precedes a debarment, the suspension period shall be considered in determining the debarment period. (3) The debarring official may extend an existing debarment for an additional period if the debarring official determines, based on additional facts not previously in the record, that an extension is necessary to protect LSC funds. The standards and procedures in this part shall be applied in any proceeding to extend a debarment. (b) Suspension. (1) The debarring official may determine that a cause for suspension exists, but that an investigation or other legal or debarment proceeding should be completed before proceeding to a debarment. Suspension shall be for a temporary period pending the completion of an investigation or other legal or debarment proceedings, including a proceeding conducted by the OIG, a law enforcement or other government agency, an investigative or audit official from another OIG, a court, or a state licensing body or other organization with authority over IPAs. (2) If debarment proceedings are not initiated within 12 months after the date of the suspension notice, the suspension shall be terminated unless an official or organization conducting a proceeding referred to in paragraph (b)(1) of this section requests its extension in writing. In such cases, the suspension may be extended up to an additional six months. In no event may a suspension be imposed for more than 18 months, unless debarment proceedings have been initiated within that period. (3) The OIG shall notify the appropriate official or organization conducting a proceeding referred to in paragraph (b)(1) of this section, if any, of the suspension within 10 days of its implementation, and shall notify such official or organization of an impending termination of a suspension at least 30 days before the 12-month period expires to allow an opportunity to request an extension. (4) The limit on the duration of a suspension in paragraph (b)(2) of this section may be waived by the affected IPA. (c) Removal. Removal shall be effective for the years remaining on the existing contract(s) between the IPA and the recipient(s). (a) IPAs debarred from providing audit services for all recipients are prohibited from soliciting or entering into any new contracts for audit services with recipients for the duration of the specified period of debarment. Recipients shall not knowingly award contracts to, extend or modify existing contracts with, or solicit proposals from, such IPAs. Debarred IPAs also are prohibited from providing audit services to recipients as agents or representatives of other IPAs. (b) IPAs debarred from providing audit services for one or more specific recipient(s) are prohibited from soliciting or entering into any new contracts for audit services with such recipient(s) for the duration of the period of debarment as determined pursuant to this part. The affected recipient(s) shall not knowingly award contracts to, extend or modify existing contracts with, or solicit proposals from, such IPAs. Debarred IPAs also are prohibited from providing audit services to the affected recipient(s) as agents or representatives of other IPAs, and are required to provide prior written notice to the debarring official before providing such services to other recipients. Debarred IPAs also must provide prior written notice of the debarment to any recipient for which the IPA provides audit services. Before debarring an IPA, the OIG shall provide the IPA with a hearing in accordance with the procedures set out in §§1641.7 through 1641.9. Such hearing shall be held entirely by written submissions, except: (a) Additional proceedings shall be held under §1641.10 if the debarring official finds there is a genuine dispute of material fact; and/or (b) A meeting may be held under §1641.9(c). The debarring official may debar an IPA from performing audit services in accordance with the procedures set forth in this part upon a finding by a preponderance of the evidence that: (a) The IPA has failed significantly to comply with government auditing standards established by the Comptroller General of the United States, generally accepted auditing standards and/or OIG audit guidance as stated in the OIG Audit Guide for Recipients and Auditors, including the Compliance Supplement for Audits of LSC Recipients, and in OIG Audit Bulletins; (b) The IPA is currently debarred from contracting with any Federal agency or entity receiving Federal funds, including when the IPA has stipulated to such debarment; (c) The IPA's license to practice accounting has been revoked, terminated or suspended by a state licensing body or other organization with authority over IPAs; (d) The IPA has been convicted of any offense indicating a breach of trust, dishonesty or lack of integrity, or conspiracy to commit such an offense, and the conviction is final; or (e) The IPA has been found subject to a civil judgment for any action indicating a breach of trust, dishonesty or lack of integrity, or conspiracy to take such action, and the judgment is final. (a) Before debarring an IPA, the OIG shall send the IPA written notice of the proposed debarment. The notice shall be sent in a manner that provides evidence of its receipt and shall: (1) State that debarment is being considered; (2) Identify the reasons for the proposed debarment sufficient to put the IPA on notice of the conduct or transaction(s) upon which a debarment proceeding is based; (3) Identify the regulatory provisions governing the debarment proceeding; and (4) State that debarment may be for a period of up to three years or longer under extraordinary circumstances. If the OIG has determined that extraordinary circumstances warranting debarment in excess of three years may exist, the notice shall so state. (b) A copy of the notice also shall be sent to the affected recipient(s), if any, which may comment on the proposed action in the time frame set out in §1641.9. (a) The IPA shall have 30 days from receipt of the notice within which to respond. (b) The response shall be in writing and may include information and argument in opposition to the proposed debarment, including any additional specific information pertaining to the possible causes for debarment, and information and argument in mitigation of the proposed period of debarment. (c) The response may request a meeting with the debarring official to permit the IPA to discuss issues of fact or law relating to the proposed debarment, or to otherwise resolve the pending matters. Any such meeting shall take the form that the debarring official deems appropriate and shall be held within 20 days of the response. If the IPA requests an in person meeting, it shall be held at LSC headquarters. (d) Failure to respond to the notice shall be deemed an admission of the existence of the cause(s) for debarment set forth in the notice and an acceptance of the period of debarment. In such circumstances, without further proceedings, the debarring official may enter a final decision stating the period of debarment. (a) In actions not based upon a conviction or civil judgment under §1641.7 (d) or (e), if the debarring official finds that the IPA's submission raises a genuine dispute of material fact, the IPA shall be afforded an opportunity to appear (with counsel, if desired), submit documentary evidence, present witnesses, and confront any witnesses the OIG presents. If the debarring official finds that the IPA's submission does not raise a genuine issue of material fact, additional proceedings will not be provided. In such case, the hearing shall be held entirely by written submissions, except that a meeting may be held under §1641.9(c). (b) If the debarring official determines additional proceedings to be warranted, OIG shall notify the IPA. Such notice shall include notice of the procedures under which such proceedings shall be conducted. (c) A transcribed record of any additional proceedings shall be prepared and a copy shall be made available to the IPA without cost. (d) The debarring official may refer disputed material facts to a fact finder, who need not be a member of the OIG staff, for fact finding, analysis and recommendation. (a) IPAs suspended from providing audit services for all recipients are prohibited from soliciting or entering into any new contracts for audit services with recipients for the duration of the suspension. Recipients shall not knowingly award contracts to, extend or modify existing contracts with, or solicit proposals from, such IPAs. Suspended IPAs also are prohibited from providing audit services to recipients as agents or representatives of other IPAs. (b) IPAs suspended from providing audit services for one or more specific recipient(s) are prohibited from soliciting or entering into any new contracts for audit services with such recipient(s) for the duration of the period of suspension as determined pursuant to this part. The affected recipient(s) shall not knowingly award contracts to, extend or modify existing contracts with, or solicit proposals from, such IPAs. Suspended IPAs also are prohibited from providing audit services to the affected recipient(s) as agents or representatives of other IPAs, and are required to provide prior written notice to the debarring official before providing such services to other recipients. Suspended IPAs also must provide prior written notice of the suspension to any recipient for which the IPA provides audit services. Before suspending an IPA, the OIG shall provide the IPA with a show cause hearing in accordance with the procedures set out in §§1641.13 through 1641.15. Such hearing shall be held entirely by written submissions, except that a meeting may be held under §1641.15(c). The debarring official may suspend an IPA in accordance with the procedures set forth in this part upon adequate evidence that: (a) A cause for debarment under §1641.7 may exist; (b) The IPA has been indicted for or convicted of any offense described in §1641.7; (c) The IPA has been found subject to a civil judgment described in §1641.7(e), whether the judgment is final or not. (d) The IPA has been suspended from contracting with a Federal agency or entity receiving Federal funds including when the IPA has stipulated to the suspension. (a) Before suspending an IPA, OIG shall send it written notice of cause to suspend. Such notice shall: (1) Include a directive to show cause, signed by the debarring official, which shall inform the IPA that unless the IPA responds within 10 days as provided in §1641.15, a suspension will be imposed; (2) Identify the reasons for the proposed suspension sufficient to put the IPA on notice of the conduct or transaction(s) upon which a suspension proceeding is based; (3) Identify the regulatory provisions governing the suspension proceeding; and (4) State that, if imposed, the suspension shall be for a temporary period pending the completion of an investigation or other legal or debarment proceeding. (b) A copy of the notice also shall be sent to the affected recipient(s), if any, who may comment on the proposed action in the time frame set out in §1641.15. (a) The IPA shall have 10 days from receipt of the notice within which to respond. (b) The response shall be in writing and may include information and argument in opposition to the proposed suspension, including any additional specific information pertaining to the possible causes for suspension, and information and argument in mitigation of the proposed period of suspension. (c) The response may request a meeting with the OIG official identified in the notice to permit the IPA to discuss issues of fact or law relating to the proposed suspension, or to otherwise resolve the pending matters. (1) Any such meeting shall take such form as the debarring official deems appropriate and shall be held within 10 days of the response. (2) No meeting will be held if a law enforcement official, an investigative or audit official from another OIG, a state licensing body or other organization with authority over IPAs, or a governmental agency has advised in writing that the substantial interest of a governmental unit would be prejudiced by such a meeting and the debarring official determines that the suspension is based on the same facts as the pending legal proceedings referenced by the law enforcement official. (d) Failure to respond to the notice shall be deemed an admission of the existence of the cause(s) for suspension set forth in the notice and an acceptance of the period of suspension. In such circumstances, the OIG may proceed to a final decision without further proceedings. Removed IPAs are prohibited from performing audit services in subsequent years under an existing contract(s) with one or more specific recipients. The affected recipient(s) shall not extend existing contracts with such IPAs. Removed IPAs also are prohibited from providing audit services to the affected recipient(s) as agents or representatives of other IPAs, and are required to provide prior written notice to the debarring official before providing such services to other recipients. Removed IPAs also must provide prior written notice of the removal to any such recipient. (a) Before removing an IPA, the OIG shall provide the IPA with a hearing in accordance with the procedures set out in §§1641.18 through 1641.21. Such hearing shall be held entirely by written submissions, except: (1) Additional proceedings shall be held under §1641.21 if the debarring official finds there is a genuine dispute of material fact; and/or (2) A meeting may be held under §1641.20(c). (b) A Notice of Proposed Removal normally will be accompanied by a Notice of Proposed Debarment, and the proceedings may be consolidated. The debarring official may remove an IPA from performing audit services in accordance with the procedures set forth in this part upon a finding by a preponderance of the evidence that: (a) The IPA has failed significantly to comply with government auditing standards established by the Comptroller General of the United States, generally accepted auditing standards and/or OIG audit guidance as stated in the OIG Audit Guide for Recipients and Auditors, including the Compliance Supplement for Audits of LSC Recipients, and in OIG Audit Bulletins; (b) The IPA is currently debarred from contracting with any Federal agency or entity receiving Federal funds, including when the IPA has stipulated to such debarment; (c) The IPA's license to practice accounting has been revoked, terminated or suspended by a state licensing body or other organization with authority over IPAs; (d) The IPA has been convicted of any offense indicating a breach of trust, dishonesty or lack of integrity, or conspiracy to commit such an offense, and the conviction is final; or (e) The IPA has been found subject to a civil judgment for any action indicating a breach of trust, dishonesty or lack of integrity, or conspiracy to take such action, and the judgment is final. (a) Before removing an IPA, the OIG shall send the IPA written notice of the proposed removal. The notice shall be sent in a manner that provides evidence of its receipt and shall: (1) State that removal is being considered; (2) Identify the reasons for the proposed removal sufficient to put the IPA on notice of the conduct or transaction(s) upon which a removal proceeding is based; (3) Identify the regulatory provisions governing the removal proceeding; and (4) State that removal shall be for the years remaining on the existing contract(s) between the IPA and the recipient(s). (b) A copy of the notice also shall be sent to the affected recipient(s), if any, which may comment on the proposed action in the time frame set out in §1641.20. (a) The IPA shall have 30 days from receipt of the notice within which to respond. (b) The response shall be in writing and may include information and argument in opposition to the proposed removal, including any additional specific information pertaining to the possible causes for removal. (c) The response may request a meeting with the debarring official to permit the IPA to discuss issues of fact or law relating to the proposed removal, or to otherwise resolve the pending matters. Any such meeting shall take the form that the debarring official deems appropriate and shall be held within 20 days of the response. If the IPA requests an in person meeting, it shall be held at LSC headquarters. (d) Failure to respond to the notice shall be deemed an admission of the existence of the cause(s) for removal set forth in the notice and an acceptance of the removal. In such circumstances, without further proceedings, the debarring official may enter a final decision removing the IPA. (a) In actions not based upon a conviction or civil judgment under §1641.18(d) or (e), if the debarring official finds that the IPA's submission raises a genuine dispute of material fact, the IPA shall be afforded an opportunity to appear (with counsel, if desired), submit documentary evidence, present witnesses, and confront any witnesses the OIG presents. If the debarring official finds that the IPA's submission does not raise a genuine issue of material fact, additional proceedings will not be provided. In such case, the hearing shall be held entirely by written submissions, except that a meeting may be held under §1641.20(c). (b) If the debarring official determines additional proceedings to be warranted, OIG shall notify the IPA. Such notice shall include notice of the procedures under which such proceedings shall be conducted. (c) A transcribed record of any additional proceedings shall be prepared and a copy shall be made available to the IPA without cost. (d) The debarring official may refer disputed material facts to a fact finder, who need not be a member of the OIG staff, for fact finding, analysis and recommendation. (a) Standard of proof. (1) A debarment or removal must be based on a finding that the cause or causes for debarment or removal are established by a preponderance of the evidence in the administrative record of the case. (2) A suspension must be based on a finding that the cause or causes are established by adequate evidence in the administrative record of the case. (b) The administrative record consists of any information, reports, documents or other evidence identified and relied upon in the Notice of Proposed Debarment, the Notice of Proposed Suspension, or the Notice of Proposed Removal, together with any relevant material contained in the IPA's response or submitted by an affected recipient. In the case of debarment or removal, when additional proceedings are necessary to determine disputed material facts, the administrative record also shall consist of any relevant material submitted or presented at such proceedings. (c) Failure of the OIG to meet a time requirement of this part does not preclude the OIG from debarring, suspending or removing an IPA. In extraordinary circumstances, the OIG may grant an IPA an extension of the time requirements set out in this part. (d) Notice of decisions. IPAs shall be given prompt notice of the debarring official's decision. A copy of the decision also will be sent to the affected recipient. If the debarring official debars, suspends or removes an IPA, the decision shall: (1) Set forth the finding(s) upon which the decision is based; (2) Set forth the effect of the debarment, suspension or removal action and the effective dates of the action; (3) Refer the IPA to its procedural rights of appeal and reconsideration under §1641.24; and (4) Inform the IPA that a copy of the debarring official's decision will be a public document and the fact of debarment, suspension or removal will be a matter of public record. (e) If the debarring official decides that a debarment, suspension, or removal is not warranted, the Notice may be withdrawn or the proceeding may be otherwise terminated. (f) If the debarring official deems it appropriate, the debarring official may, at any time, settle by agreement with the IPA a debarment, suspension, or removal action. Such a negotiated settlement may include the imposition of appropriate conditions on the IPA. Exceptions to the effects of debarment, suspension or removal may be available in unique circumstances, when there are compelling reasons to use a particular IPA for a specific task. Requests for such exceptions may be submitted only by the recipient requiring audit services. The Inspector General may except a contract from the effects of debarment, suspension or removal upon a written determination that a compelling reason exists for using the IPA in the particular instance. (a) Appeal and reconsideration generally. A debarred, suspended or removed IPA may submit the debarring official's decision for appeal or reconsideration in accordance with this section. Within 60 days, IPAs shall be given notice of decisions on appeal and reconsideration. The relief, if any, granted upon appeal or reconsideration shall be limited to the relief stated in the decision on the appeal or reconsideration. (b) Appeal. (1) A debarred, suspended or removed IPA may appeal the decision to the Inspector General, who may uphold, reverse or modify the debarring official's decision. (2) The appeal shall be filed in writing: (i) By a debarred or removed IPA, within 30 days of receipt of the decision; (ii) By a suspended IPA, within 15 days of receipt of the decision. (3) The Inspector General, at his or her discretion and after determining that a compelling reason exists, may stay the effect of the debarment, suspension or removal pending conclusion of his or her review of the matter. (c) Reconsideration. (1) A debarred, suspended or removed IPA may submit a request to the debarring official to reconsider the debarment, suspension or removal decision, reduce the period of debarment or removal, or terminate the suspension. (2) Such requests shall be in writing and supported by documentation that the requested action is justified by: (i) In the case of suspension, reversal of the conviction or civil judgment upon which the suspension was based; (ii) Newly discovered material evidence; (iii) Bona fide change in ownership or management; (iv) Elimination of other causes for which the debarment, suspension or removal was imposed; or (v) Other reasons the debarring official deems appropriate. (3) A request for reconsideration of a suspension which was based a conviction, civil judgment, or sanction that has been reversed may be filed at any time. (4) Requests for reconsideration based on other grounds may only be filed during the period commencing 60 days after the debarring official's decision imposing the debarment or suspension. Only one such request may be filed in any twelve month period. (5) The debarring official's decision on a request for reconsideration is subject to the appeal procedure set forth in paragraph (b) of this section.
Title 45: Public Welfare
PART 1641—DEBARMENT, SUSPENSION AND REMOVAL OF RECIPIENT AUDITORS
Section Contents
§ 1641.1 Purpose/Applicability.
§ 1641.2 Definitions.
§ 1641.3 Scope of debarment, suspension and removal.
§ 1641.4 Duration of debarment, suspension and removal.
§ 1641.5 Debarment.
§ 1641.6 Procedures for debarment.
§ 1641.7 Causes for debarment.
§ 1641.8 Notice of proposed debarment.
§ 1641.9 Response to notice of proposed debarment.
§ 1641.10 Additional proceedings as to disputed material facts.
§ 1641.11 Suspension.
§ 1641.12 Procedures for suspension.
§ 1641.13 Causes for suspension.
§ 1641.14 Notice of proposed suspension.
§ 1641.15 Response to notice of proposed suspension.
§ 1641.16 Removal.
§ 1641.17 Procedures for removal.
§ 1641.18 Causes for removal.
§ 1641.19 Notice of proposed removal.
§ 1641.20 Response to notice of proposed removal.
§ 1641.21 Additional proceedings as to disputed material facts.
§ 1641.22 Decisions of debarring official.
§ 1641.23 Exceptions to debarment, suspension and removal.
§ 1641.24 Appeal and reconsideration of debarring official decisions.
Subpart A—General
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§ 1641.1 Purpose/Applicability.
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§ 1641.2 Definitions.
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§ 1641.3 Scope of debarment, suspension and removal.
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§ 1641.4 Duration of debarment, suspension and removal.
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Subpart B—Debarment
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§ 1641.5 Debarment.
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§ 1641.6 Procedures for debarment.
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§ 1641.7 Causes for debarment.
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§ 1641.8 Notice of proposed debarment.
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§ 1641.9 Response to notice of proposed debarment.
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§ 1641.10 Additional proceedings as to disputed material facts.
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Subpart C—Suspension
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§ 1641.11 Suspension.
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§ 1641.12 Procedures for suspension.
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§ 1641.13 Causes for suspension.
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§ 1641.14 Notice of proposed suspension.
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§ 1641.15 Response to notice of proposed suspension.
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Subpart D—Removal
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§ 1641.16 Removal.
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§ 1641.17 Procedures for removal.
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§ 1641.18 Causes for removal.
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§ 1641.19 Notice of proposed removal.
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§ 1641.20 Response to notice of proposed removal.
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§ 1641.21 Additional proceedings as to disputed material facts.
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Subpart E—Decisions
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§ 1641.22 Decisions of debarring official.
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§ 1641.23 Exceptions to debarment, suspension and removal.
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§ 1641.24 Appeal and reconsideration of debarring official decisions.
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