Petitions for Review of Orders of the United States Department of Labor
Before COFFEY and EASTERBROOK, Circuit Judges, and GRANT, Senior District Judge.*fn*
The City of Chicago petitions this court to review two decisions of the administrative law judge ("ALJ") concerning the failure of the Department of Labor ("DOL") to comply with the 120-day time limit set forth in 29 U.S.C. § 816(b). In both of his decisions, the ALJ determined that the failure of the DOL to render its "final determination" within the 120-day time limit did not constitute a jurisdictional bar. Thus, the DOL was not prevented from disallowing claims made by the City of Chicago for reimbursement of funds under Comprehensive Employment Training Act ("CETA"). We dismiss the City's petition for review.
Both cases arise from a financial and compliance audit of CETA grants awarded to the City of Chicago by the DOL. Under the grant procedure the DOL awards the City funds for various CETA projects and after a period of time it conducts an audit to ascertain if the City's expenditures of the funds were in compliance with CETA guidelines.
During the period from October 1, 1978 through September 30, 1979, the DOL, through its private auditors, conducted an audit covering approximately $152 million of grants received by the City of Chicago from the CETA program. The auditor's draft report recommended that approximately $5.3 million of the CETA funds spent by the City of Chicago be disallowed; and in addition, another $11.4 million in costs be questioned.*fn1 The DOL grant officer received the final audit report from the private accounting firm on April 30, 1982. Pursuant to section 106(b) of CETA, 29 U.S.C. § 816(b), the DOL had 120 days from that date to make its "final determination" of whether or not to disallow the City's expenditures. Title 29 U.S.C. § 816(b) provides:
"Whenever the Secretary receives a complaint from any interested person or organization ... which alleges, or whenever the Secretary has reason to believe ... that a recipient of financial assistance under this Act is failing to comply with the requirements of this Act, the regulations under this Act or the terms of the comprehensive employment and training plan, the Secretary shall investigate the matter. The Secretary shall conduct such investigation, and make the final determination required by the following sentence regarding the truth of the allegation or belief involved, no later than 120 days after receiving the complaint. If, after such investigation, the Secretary determines that there is substantial evidence to support such allegation or belief that such a recipient is failing to comply with such requirements, the Secretary shall, after due notice and opportunity for a hearing to such recipient, determine whether such allegation or belief is true." (emphasis added).
Between April 30 and October 29, 1982, the date the grant officer issued his final determination, the DOL and the City engaged in informal negotiations to resolve the sub-grantee audit findings pursuant to 20 C.F.R. 676.88(d).*fn2 The grant officer issued his initial determination on August 26, 1982, within the 120-day period, the 120 days expiring on August 27, 1982, and provisionally disallowed $11 million of the questioned $11.4 million expenditures relating to the unresolved sub-grantee audits. On October 29, 1982, the grant officer issued his final determination and refused to approve approximately $13.3 million of the City's expenditures; this amount consisted of $3.3 million in expenditures the auditors originally recommended be rejected and $11 million relating to the sub-grantee audits. Over the next few years, the City and the DOL continued to engage in informal negotiations finally culminating in a stipulation reciting that the City owed the DOL approximately $3.6 million. On June 22, 1984, the administrative law judge approved the stipulation, but denied the City's motion to strike and dismiss the grant officer's final determination for failure to observe the 120-day statutory time limit set forth in 29 U.S.C. § 816(b).
During the period from June 24, 1974 through September 3, 1974, the city also was awarded approximately $20 million in CETA grants. After reviewing the City's records, the DOL auditors determined that $80,000 of the $20 million grant was spent improperly by the City. The final report of the auditor was filed in January, 1976, and the grant officer issued his initial determination on March 20, 1981, finding that the City owed the DOL $50,000 for misspent CETA funds.*fn3 Between March 30 and May 11, 1981, the DOL and the City were partially successful in their efforts to reach an informal resolution concerning the contested expenditures. Thus, on May 11, 1981, the grant officer issued his final determination directing the City to repay approximately $18,000 of the disallowed expenditures. The City once more filed a motion with the administrative law judge requesting that he strike the grant officer's final determination as the DOL did not have jurisdiction since the grant officer failed to issue his final determination within the 120-day limit after receipt of the final audit report; however, the administrative law judge denied the City's motion to strike the final determination.*fn4
The issue presented to this court is whether the DOL's failure to issue its final determination within the 120-day period set forth in section 106(b) of CETA, 29 U.S.C. § 816(b), prevents the DOL from ...