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R&P ASSOCIATES
COMMUNICATING WITH SPECIAL AUDIENCES Mr. John Gordon, Chair You have requested that I submit to you an opinion on the legal implications of the Randolph-Sheppard Act to the proposed provisions of Section 8. Unfortunately, neither the Randolph-Sheppard Act (20 U.S.C. 107 et Seq) nor its implementing regulations at D.F.R. 34 part 395 speak clearly to the issue of just how much business information can be required by the State Licensing Agency (SLA) of an individual licensee’s operation of his/her facility. C.F.R. 395.4(a) states: in part: “The state licensing agency shall promulgate rules and regulations which have been approved by the Secretary and which shall be adequate to assure the effective conduct of the State’s vending facility program ( including state licensing agency procedures covering the conduct of full evidentiary hearings) and the operation of each vending facility in accordance with this part and with the requirements and conditions of each department, agency, and instrumentality in control of the maintenance, operations, and protection of Federal property including the conditions contained in permits, as well as in all applicable Federal and State laws, local ordinances and regulations….” Clearly the SLA has the right to expect vendors to submit sufficient reports on facility operations to justify the amount of set-a-side claimed by the Facility based on net income. The Act and its Regulations do not, however, leave the issue in the sole discretion of the State Licensing Agency. First, there is a presumption of “reasonableness” in the State’s policies and regulations. It is not reasonable for the State to expect reports on information which is not relevant to the direct management of the vending program. Then there is the safeguard of the right of any licensee to file a grievance over any action of the state licensing agency to which he/she objects. Most importantly, both the Act and the Regulations require the “Active Participation” of the elected Committee of Managers in the formulation of Program policies. If this provision is not respected by the SLA, the Committee has the option of filing an objection with the Secretary against the proposed rule making. On the face of it, Section 8 may well be duplicative of sections 4.2-4.5 of the BEP Administrative Manual. I do not have a current copy of the Manual so I could not do a cross comparison. General Observation: It seems to me that the requirements in Section 8 are, in many parts, excessive and exceed the “reasonableness” standard general applied by RSA. To cite an example, the rules provide that a Manager conduct a physical inventory at the end of September. Yet the forms he/she is required to submit require an inventory adjustment. I know of programs that do require monthly inventory reports. If that is what you, the Committee and the SLA want, then the rules should say that. The rules for submitting the monthly facility report cannot be used as a back door approach to creating new policy or rule makings. In addition, the entire process seems unduly burdensome and expensive to the individual licensed manager without providing the SLA with any needed financial data. The net effect of this procedure is to cost the average Manager three percent of his her spendable income. I arrive at this estimated amount based on the fact that a Licensed Manager using the Centralized Accounting firm will pay a 9 (nine) percent set-a-side while the Manager using his/her own accountant pays only 6 (six) percent in set-a-side. Obviously, it is assumed that the vendor using an independent accountant is incurring at least three percent of their net proceeds for such service. Let me say that I know of no other BEP in the country that requires this form of monthly accounting system. Further, I believe that you charge a vendor an additional set-a-side for using centralized accounting is a “clear and indefensible” violation of the Act and Regulations. You might sell accounting services as management services if it was done for every Licensed Manager, but certainly not the way the Illinois state licensing agency does it. There are other glaring deficiencies with this proposal. The Federal Accounting Standards Board (FASB) does not support accounting systems which are part “cash” and part “accrual” based systems. Besides, the accrual of payroll is a waste of time which generates no useful information. In 8.3-C, it suggested that vending machine income be recorded on the cash register, if the facility had one. Of course, both concepts violate state sales tax laws. Vending machines typically have a different sales tax provisions than do counter transactions. And, apparently, there are still facilities in the Illinois Program which do not have cash registers. This is a violation of sales tax laws in all the states with which I am familiar. Section 8-4 “settlement of assets, liabilities and equity” is presumptuous at best, and, of course, is not really doable. It seems to me that the SLA is more into playing at sophisticated accounting than they are interested in managers’ incomes and obtaining reasonable information to operate the program. Recommendations: 1. Demand that facilities be operated on a purely “cash” accounting basis to help reduce accounting expense and to avoid potential conflicts between reports. 2. Decide whether a physical inventory is required each month, or only at the end of September, and change the monthly report to reflect such a decision. 3. Eliminate “turn-in” systems. The purpose of the Program, according to (20 U.S.C. 107-F) is to train blind persons to become facility managers. The turn-in system is demeaning. 4. Simplify the report to get rid of the balance sheet stuff. The Program needs to know your sales, your purchases, your labor, and other related expenses. 5. If it is good enough for the Internal Revenue Service as a business expense, then it should be good enough for the SLA. All they accomplish by not permitting such expenses is additional accounting fees when you do your tax return, thus further reducing your personal income. Remember, the purpose of the Program, as set forth in the Act, is to improve the economic opportunities for blind persons through improved remunerative employment. If you have any questions, please contact me at your convenience. Respectfully Submitted, Ralph Sanders |
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