IN THE MATTER OF INSTITUTO Docket No. 94-7-SA
DE BANCA Y COMERCIO, Student Financial
Respondent. Assistance Proceeding
ORDER DENYING RESPONDENT'S MOTION TO DISMISS
On November 17, 1993, the Director of the Institutional
Monitoring Division issued a
Final Audit Determination (FAD) against Respondent. Respondent filed a Request for Review
of the FAD on January 5, 1994. On March 4, 1994, Respondent filed a Motion to Dismiss, with
one attachment, alleging that the FAD was issued by someone other than a "designated ED
official." On March 14, 1994, the Office of Student Financial Assistance Programs
U.S. Department of Education ("ED" or "Department") filed a
memorandum in opposition
(SFAP Response), which also included several attachments. On March 18, 1994, Respondent
filed a reply. For the reasons given below, Respondent's motion to dismiss is denied.
34 C.F.R. §668.112See footnote 1
defines a "final audit determination" as "the written notice of a
determination issued by a designated ED official based on an audit of an institution's
participation in any or all of the Title IV, HEA programs covered under this subpart."
defines a "designated ED official" as "an official of the Education Department
to whom the
Secretary has delegated the responsibilities referred to in this subpart." Despite the fact
under § 668.116(d), the institution in a subpart H proceeding bears the ultimate burden of
persuasion, previous decisions have held that the Department bears the burden of production to
establish a prima facie case. This includes the burden of presenting evidence sufficient to
establish to a reasonable person that the FAD was issued by the person to whom the Secretary
delegated the responsibilities under § 668.112 to issue final audit determinations. In
the Matter of Stautzenberger College, Dkt. No. 90-102-SA, U.S. Dep't of Educ. (Final
Decision April 2, 1991); see also In the Matter of Berk Trade and Business School, Dkt.
No. 91-5-SP, U.S. Dep't of Educ., (Initial Decision Dec. 10, 1992), aff'd by the Secretary
(Decision of the Secretary March 19, 1993). The Secretary has held that when SFAP fails to
establish that the FAD was
issued by a designated ED official, the FAD is void ab initio. In the Matter of Atlanta
College of Medical and Dental Careers, Dkt. No. 91-93-SA, U.S. Dep't of Educ. (Decision
of the Secretary February 16, 1994).See footnote 2
Initially, the tribunal will address Respondent's claim that the documents submitted with SFAP's Response were untimely submitted and thus are inadmissible. § 668.116(e)(1) prescribes the types of evidence that may be submitted in a Subpart H proceeding. The documents submitted with SFAP's Response are labelled as Attachments A (with corresponding Exhibits A through E) and B. They include a declaration by a Department official, several delegation memoranda, a delegation log, and excerpts from the Department of Education's Mission and Organization Manual. The only category under § 668.116(e)(1) in which these materials conceivably could fit is that of "[o]ther ED records and materials," which are admissible only "if the records and materials were provided to the hearing official no later than 30 days after the institution's filing of its request for review." § 668.116(e)(1)(v). Respondent filed its request for review on January 6, 1994. Therefore, if these documents were "other ED records and materials," they could be submitted no later than February 5, 1994. These materials were not submitted until March 14, 1994, concurrently with the filing of SFAP's Response. Therefore, if these documents were "other ED records and materials," they would be inadmissible under § 668.116(f) because they were not timely submitted under § 668.116(e)(1)(v).
However, § 668.118(c) authorizes the tribunal to base
findings of fact on matters given
official notice. "[O]fficial notice may be regarded as two kinds--(1) official notice in a
sense which is the same as judicial notice and (2) official notice in an enlarged sense which
permits an administrative agency to adduce matters personally known to it or acquired outside
the hearing but which requires all matters thus officially noticed be made known to the
2 Am. Jur. 2d Administrative Law § 385; see also id. at §§ 386-388.
Thus, the agency is not required to pretend ignorance of facts known to it. Therefore, to the
extent that the documents
submitted with SFAP's Response are internal Department documents prepared in the usual
course of business and thus represent matters personally known to the Department, and were not
prepared specifically for the purposes of this proceeding, the tribunal will take official notice of
these documents.See footnote 3
The tribunal notes Respondent's objection to the use of official notice based on the
refusal of the tribunal in Stautzenberger to take official notice of various documents,
including, inter alia, U.S. Education Department Departmental Directive A:GEN:1-104,
Delegations of Authority, dated August 15, 1989,See
and the Audit Resolution System Handbook with appendices.See footnote 5
The tribunal in Stautzenberger noted §668.118(c), which authorized the
tribunal to take official notice, but declined on the basis that "this provision does not apply
facts that are crucial to the central factual controversy which must, of course, be proven through
traditional evidentiary methods." Stautzenberger at 4 n.2 (citation omitted).See footnote 6
However, more recent decisions of both the Secretary and other
tribunals effectively have
taken official notice of internal Department documents, including delegations of authority and
Departmental Directive A:GEN:1-104. See, e.g., In the Matter of Long Beach College of
Business, Dkt. No. 92-132-SP, U.S. Dep't of Educ. (Initial Decision Nov. 30, 1993),
rev'd on other grounds (Decision of the Secretary Feb. 16, 1994); see also Berk at
11 n.4.See footnote 7
The tribunal in Long Beach considered both A:GEN:1-104 and delegation
documents despite the fact that they had not been introduced within the time periods specified in
§ 668.116(e)(1)(v). Although the
Secretary reversed the decision because he found that the FAD had been issued by the
designated ED official, the Secretary did consider these documents.
In any event, the Secretary's recent decision in In the Matter of
Baytown Technical School, Inc., Dkt. No. 91-40-SP, U.S. Dep't of Educ. (Decision of the
Secretary April 12, 1994) is dispositive. In that decision, the Secretary upheld the judge's
decision to admit exhibits
despite the fact that they were untimely under § 668.116(e)(2). In doing so, the Secretary
the hearing officer's responsibility to oversee the course of the administrative process and ensure
a fair and impartial proceeding.
Therefore, based on these precedents, the tribunal will take official
notice of certain of
the documents submitted by SFAP with its Response. Nonetheless, the doctrine of official
notice lies within the discretion of the tribunal,See
which will use official notice only to the extent that doing so is consistent with this
tribunal's responsibility to oversee the course of the
administrative process and ensure a fair and impartial hearing.
Specifically, the tribunal takes official notice of the Department of Education documents found at Exhibits A, B, C, D, and E of Attachment A to SFAP's Response. The tribunal also takes official notice of the excerpts from the Department's Mission and Organization Manual found at Attachment B to SFAP's Response. However, the tribunal does not take official notice of the Declaration of Wilma J. Hodo found at Attachment A, which is not a Department document prepared in the usual course of business, but instead is simply a document that was prepared specifically for the purpose of this proceeding and thus qualifies as an "other ED record or material" under § 668.116(e)(1)(v). Therefore, because this document was not timely
submitted, it is inadmissible and will be excluded from consideration in this proceeding.
Turning to the issue of whether or not the FAD was issued by a
designated ED official,
The FAD in the instant case was signed by the Director, Institutional Monitoring Division. Ex.
R-1-7. Departmental Directive A:GEN:1-104, attached to Respondent's motion, states at page 1
that approved functional statements are one of the sources of authority within the Department for
taking actions and making decisions that have legal significance. The Department of Education's
Mission and Organization Manual, contained in SFAP Attachment B, states on page 1 that it
"includes all approved functional statements in the Department . . ." That Manual
that "The [Institutional Monitoring] Division is the action office for resolving external
institutions participating in SFAP programs and monitors compliance with the audit
requirement." Therefore, this constitutes a valid source of authority for the Institutional
Monitoring Division to issue the FAD in question.
For these reasons, the tribunal finds that the FAD at issue in this proceeding was issued by a "designated ED official" as required by § 668.112.See footnote 9 9 Accordingly, Respondent's Motion to
Dismiss is hereby DENIED. The suspension of briefing schedule issued on March 7, 1994, is
hereby rescinded. Respondent shall file its brief on or before July 6, 1994. SFAP shall
file its reply brief on or before July 20, 1994.
Judge Richard F. O'Hair
Issued: June 9, 1994
S E R V I C E
A copy of the attached document was sent to the following:
Stanley A. Freeman, Esq.
Powers, Pyles, Sutter & Verville, P.C.
1275 Pennsylvania Ave., N.W.
Washington, D.C. 20004-2404
Howard D. Sorensen, Esq.
Office of the General Counsel
U.S. Department of Education
400 Maryland Ave., S.W.
FOB-6, Room 4083
Washington, D.C. 20202-2110
If information has come to an agency's attention in the course of
investigation of the
pending case, it should be adduced only by the ordinary process . . . But if the
information has been developed in the usual course of business of the agency, if it has
emerged from numerous cases, if it has become part of the factual equipment of the
administrators, it seems undesirable for the agencies to remain oblivious of their own
experience [and, they should take notice of such facts.]"
1 KOCH, ADMINISTRATIVE LAW AND PRACTICE § 6.37 (1985) (quoting A.G. Final Rep.
at 72). While Koch notes that this approach has been criticized and has been supplanted by the distinction between legislative and adjudicative facts, the tribunal considers the Attorney General Committee's approach to be useful in understanding the distinction between legislative and adjudicative facts, as well as in determining which facts can be noticed and which facts must be proven.
Other evidence is similarly inconclusive. The document at SFAP
Ex. E entitled
"Amendment to Delegations of Authority" [emphasis added] uses three separate
control numbers to describe the April 22, 1991 delegation. This suggests that the Directors of
DAPR and SFAP
were delegated the authority to issue FADs. However, the April 22, 1991 delegation also stated
that the authority to issue FADs was reserved to the Director, DAPR if the Chief, Audit Review
Branch was recused from involvement because of a conflict of interest. Such a statement would
be superfluous if the Director, DAPR already had this authority.
In conclusion, because the tribunal finds that the Director, Institutional Monitoring Division had the authority to issue the FAD in question, the tribunal declines to resolve the issue of whether the authority to make and issue final audit determinations was delegated solely to the Chief, Audit Review Branch, DAPR, or was also delegated to the Directors of SFAP and DAPR.
Consequently, it is also unnecessary at this time to resolve the issue of whether or not the
Institutional Monitoring Division is the same office as the former Division of Audit and Program