GAB Decision 254
February 9, 1982 Somerset Community Action Program; Docket No. 80-172
Garrett, Donald; Settle, Norval Teitz, Alexander
The Somerset Community Action Program (SCAP or Grantee) appealed the
disallowance of $2,507 by the Office of Human Development Services
(Agency) of costs claimed under a Headstart grant for the period
September 1, 1977 through August 31, 1978.
The issues in this case involve the benefit and allocability to the
Headstart grant of $1933 in travel (local and non-local) and $574 in
consultant costs incurred by SCAP.n1 For reasons stated below, we uphold
the disallowance in part and reverse it in part.
There are no material issues of fact in dispute. We have, therefore,
determined to proceed to decision based on the written record, including
the parties' responses to an Order to Show Cause issued by the Board.
Discussion
1. Local Travel Costs
a. Background concerning costs claimed as local travel
SCAP during the period of the disallowance, in addition to other
community programs, operated day-care centers at three different
locations within Somerset County. The Grantee contended that local
staff travel for inter-center purposes and for "unpredictable reasons?
related to the Headstart program was necessary.
The Agency responded that travel costs must be documented so as to
show they were related to and benefited the Headstart program, and that
Grantee's documentation was insufficient in this regard.
(2) In response to the Order to Show Cause, the Grantee submitted
spplemental documentation for local travel, with the explanation that
the expenditures were for: vehicle maintenance and upkeep; staff
participation in workshops and seminars related to program planning; day
to day operations; and the hiring of an Assistant Director of Finance,
which was necessary for the survival of all programs.
The Agency determined that Grantee's new documentation was also
insufficient, stating that, while the documents tended to show that the
expenditures were made for travel expenses, they did not show that the
expenses were incurred for the benefit of the Headstart program.
b. Analysis of costs claimed as local travel
Part 74, Subpart Q, Appendix F, paragraph B. of 45 CFR states, in
part:
2. Factors affecting allowability of costs. Factors to be considered
in determining the allowability of individual items of cost include (a)
reasonableness, (b) allocability,...
4. Definition of allocability. A cost is allocable if it is
assignable or chargeable to a particular cost objective, such as a
grant/contract, project, product, service, process, or other major
activity, in accordance with the relative benefits received or other
equitable relationship.
These provisions are made applicable to the Grantee's project by the
Office of Human Development (OHD) Grants Administration Manual,
published January 1, 1977.
Section 2928 of 42 U.S.C. describes the purpose of Headstart grants
as follows:
(The) planning, conduct, administration, and evaluation of a
Headstart program focused primarily upon children from low-income
families who have not reached the age of compulsory school attendance
which (1) will provide such comprehensive health, nutritional,
educational, social, and other services as will aid the children to
attain their full potential, and (2) will provide for direct
participation of the parents of such children in the development,
conduct, and overall program direction at the local level.
(3) The Board's Order to Show Cause directed the Grantee to show how
the Grantee's costs benefited the Headstart program as described in
section 2928. The Order noted that a grantee generally has the burden
of documenting the allowability of project costs. See Neighborhood
Services Department, Decision No. 110, July 15, 1980; University of
Minnesota, Decision No. 44, August 14, 1978.
Although the Grantee submitted additional documentation in response
to the Order, the Grantee did not break down and analyze the costs in a
comprehensive and coherent manner. Based on our own analysis of the
documentation, we have determined that most of it is insufficient for a
variety of reasons. On the other hand, the Agency was incorrect in
stating that none of the documentation shows any benefit to Headstart.
Below, we discuss first our reasons for accepting some of the
documentation as adequate to support the allowability of $116.60 in
local travel costs. Then we discuss our general reasons for upholding
the disallowance of the remaining costs in this category.
Since the Grantee did not number its documentation or present
arguments which it related to specific documents, our analysis must
necessarily be in summary form with examples where appropriate.
c. Allowable local travel costs
Some of the costs are sufficiently documented as relating to the
Headstart program directly or to Grantee's Child Development Program
(CDP). Although some services to children at Grantee's Lewis Street
Center were funded through Title XX of the Social Security Act, it
appears from the documents that the CDP was primarily for Headstart
children. Documentation for some of Grantee's local travel supports the
conclusion that these costs benefited Headstart activities.
In addition, the Grantee submitted a copy of the lease for vehicles
used in transportation. This lease states that the vehicles would be
used to provide transportation for day-care activities and specifically
refers to Headstart. Some of the costs claimed by the Grantee were
related to vehicle maintenance and were allocated to each program.
The Agency, in its review of the additional documentation, did not
challenge the allocation formula used by the Grantee. Moreover, the
Grantee, in an undated letter addressed to the Agency's Chief Grants
Officer, received by the Agency on April 1, 1980, indicated that at the
Lewis Street site expenses would be allocated on a 67 percent (to Title
XX) and 33 percent (to Headstart) basis. Certain of the (4) Grantee's
documentation shows an allocation consistent with this formula, and we
find this acceptable to show the extent of benefit of the costs to
Headstart. /2/
We find that the following travel costs were documented by the
Grantee to show benefit to the Headstart program, have been properly
allocated, and were therefore allowable:
Cost Amount A & M Rental
21.00 Core Exchange, Distributor for Van 9.49 Equipment
and Parts for Van 20.47 Repair horn for Van
28.05 Travel to Fort Dix to secure lumber for 9.24
remodeling of Lewis Street Center Headstart Directors Meeting
16.80 Vehicle Towing 11.55 Total
$116.60
Accordingly, we reverse the disallowance of $116.60 in local travel
costs. /3/
d. Unallowable local travel costs
Most of the documentation submitted by the Grantee is clearly
inadequate. Some documents show that the Grantee incurred costs for
certain purposes but do not show that the costs were of benefit to the
Headstart program, while in other instances the documents do not even
show the nature of the costs.
(5) The Grantee stated that $94.72 of costs listed as "travel" were
actually spent for other purposes, but that the costs were still
legitimate. However, we cannot tell which documents support this
statement, and it appears that more than $94.72 of costs are related to
non-travel costs. For example, the documents include $127 in
expenditures for refreshments, meals, and babysitters for parent
involvement activities. Also, the Grantee submitted a payment voucher
for rental space in the amount of $5,750, an amount which is larger than
the entire disallowance. These are clearly not travel costs.
Moreover, some of the Grantee's documents relate to costs which are
specifically unallowable under applicable cost principles. The OHD
Manual provides a sample list of unallowable costs which might be
incurred in connection with grant supported activities. Fund raising
costs, specifically listed as unallowable, are described as follows:
Costs of organized fund raising including financial campaigns,
endowment drives, solicitation of gifts and bequests, and similar
expenses incurred solely to raise capital or obtain contributions. (Ch.
7, Par. A, 5 (g))
The Grantee submitted documents that listed five instances of fund
raising activities, including activities such as Children's Benefit
Conferences and distribution of tickets for fund raising events. These
costs are unallowable.
Further, there is a question of allowability of some of Grantee's
costs relating to refunding of the Headstart program. The Grantee has
not specifically stated under what authority these costs could be
claimed. A review of the pertinent regulations indicate that these
costs would be either bidding or proposal costs, or preaward costs.
They appear to be preaward costs. If these are bidding or proposal
costs, they would be allowable only as indirect costs. See 45 CFR Part
74, Subpart Q, Appendix F, paragraph G.3. If these are preaward costs
they would be allowable only with prior approval, which Grantee has not
alleged it had. See 45 CFR Part 74, Subpart Q, Appendix F, paragraph
G.30. Moreover, the connection between these costs and the Headstart
program is a tenuous one at most, since these costs are claimed for
travel and not the actual preparing of the application. In addition, it
is not clear how these costs could be allocated to the budget period
which is at issue here since they apparently relate to funding for
subsequent budget periods.
There is an additional question of Agency approval relating to some
of the expenditures. The Agency noted that some of the expenses may
have been exceptional and needed prior approval although the Agency did
not (6) submit any evidence to substantiate this statement. The travel
costs claimed for the person ultimately hired as Grantee's Assistant
Director of Finance may have required prior approval and more than usual
justification. The Grantee's documentation shows that the costs were
incurred for hotel expenses for two weeks while this person, who had
traveled from the West Indies, consulted on fiscal management issues.
The reasonableness of hiring a fiscal manager from the West Indies and
paying his expenses obviously requires sufficient justification, more
than a statement that he had the ability to do the job. Even if a
portion of the fiscal manager's costs could have been charged to the
Headstart program, the Grantee has not shown any allocation of costs or
supported its allegation of benefit to the Headstart program with
documentation.
Based on the reasons discussed above, we uphold the disallowance of
$1,816.40 in local travel costs.
2. Non-local Travel Costs
The Grantee submitted information describing the purposes for some of
the non-local travel. This information was (1) a list of each trip and
the type of meeting attended; (2) testimony provided to the Senate
Governmental Affairs Committee (opposing the inclusion of Headstart in
the proposed Department of Education), sponsored by the HEW Coalition;
and (3) testimony to the Subcommittee on Child and Human Development (on
the proposed White House Conference on Families), sponsored by the HEW
Coalition convened by the National Black Child Development Institute
(NBCDI).
The Grantee stated that it believed that the goals of the Headstart
program are achievable only if administration and staff remain aware of
events related to the needs and the directions of the program, which
included such activities as the ones whose travel costs are in dispute
here.
The Agency stated that the Grantee had not demonstrated that any of
the listed items were related to the objectives of the Headstart program
except in the broadest and most ambiguous way.
In response to the Grantee's new documentation, the Agency stated
that the material submitted added nothing to the issue of whether these
non-local travel costs were allocable to the Headstart program.
We agree that the documentation is insufficient to show that the
listed expenditures provided any benefit to Grantee's Headstart project.
Therefore, the non-local travel costs claimed by the Grantee are
unallowable.
(7) Although the testimony submitted to the Senate Governmental
Affairs Committee did pertain to the Headstart program in general, there
is no evidence that the testimony specifically benefited the children in
the project or their families in keeping with the standards set up by
the statute. The testimony opposed the inclusion of the Headstart
program in the then proposed Department of Education. There is no proof
that this testimony was of any direct benefit to the particular
Headstart project under this specific grant.
The testimony before the Subcommittee on Child and Human Development
did not generally or specifically pertain to the Headstart program but
was addressed to overall concerns of the HEW Coalition and the NBCDI.
The Grantee claimed costs for one driver, Mr. Mallory, for two vans
which transported parents and staff of the Headstart program to the
NBCDI Awards Dinner. First, the Grantee gave an explanation for only
one driver, but there were two vans. Second, while the Grantee noted
that one of the goals of the Headstart program to to generate parent
involvement, this involvement is specifically stated to be at the local
level. See 42 U.S.C. 2928. The Grantee has not sufficiently shown how
attending a NBCDI Awards Dinner furthers the parent involvement goal of
the Headstart program.
3. Consultant Costs
The Grantee charged the costs of two consultants, Ms. Wade and Mr.
Taylor, to the Headstart program. These consultants were hired by the
SCAP organization and participated in all of the Grantee's programs.
The Grantee gave descriptions of the consultants, their
qualifications, and generally the duties they performed for SCAP.
Additionally, the Grantee stated that the fact that the individuals in
question played necessary and legitimate roles in the SCAP organization
should be sufficient evidence to justify their costs.
The Agency stated that the fact that an individual is under contract
to SCAP and has knowledge invaluable to that agency (SCAP) does not
indicate in any way the benefit of that person's specific services to
Headstart program objectives.
Additionally, the Agency made two comments on certain of the
Grantee's correspondence: (1) the May 5, 1977 correspondence, relating
to Ms. Wade, is dated prior to September 1, 1977, and does not
substantiate her services during the fiscal year ending August 31, 1978;
and (2) the correspondence relating to Mr. Taylor consistently
identifies (8) him as the Acting Executive Director of SCAP, a staff
position with an umbrella organization which sponsors the Headstart
program in addition to several other community programs. According to
the Agency, this represents no additional information and does not
substantiate Mr. Taylor's contributions, if any, to the Headstart
program.
The OHD Manual states:
Consulting fees paid (over and above salary) by grantees to their own
employees may not be charged to an OHD grant supported project.... (Ch.
3 Par. F, 3.)
It is unclear whether the consultant costs claimed by the Grantee
were over and above the salary paid to the individuals in question, or
were part of their salaries.
If the costs claimed by the Grantee were a part of the salaries and
not fees paid over and above the salary, the costs should have been
included in the overall administrative costs of the Grantee and not
charged as consultant costs.
A review of the May 5, 1977 document, relating to Ms. Wade, does
substantiate the Agency's claim that correspondence relating to her is
dated prior to the period in question.
The Grantee, by its own admission, conceded that Mr. Taylor was under
contract with SCAP to direct program and fiscal operations due to the
previous Director's leave of absence prior to her resignation. All
documents refer to Mr. Taylor as Acting Executive Director of SCAP. The
Grantee has not provided any evidence to show Mr. Taylor's benefit to
the Headstart program, or what portion of Mr. Taylor's cost could be
allocated to the Headstart program.
Therefore, the Grantee incorrectly claimed consultant costs for the
individuals in question.
Conclusion
For the reasons stated above, we find that the Grantee has
sufficiently documented a part of the disallowed costs, has shown that
the costs benefited the Headstart program and has properly allocated
these costs to the Headstart program. Therefore, we reverse $116.60 of
the disallowance. Further, based on the grounds that the Grantee has
not sufficiently documented the remaining costs disallowed or shown how
(9) these costs benefited the Headstart program, we uphold $2,390.40 of
the disallowance. /1/ These are the Agency's figures regarding the
amount disallowed for each type of cost. The Grantee's figures
are $1934.56 in travel costs and $572.44 in consultant costs. However,
since both parties agree on the total disallowed amount, and in view of
the decision made here, we will not attempt to reconcile the
discrepancy. /2/ With respect to other CDP costs, however, the Grantee
failed to show any type of allocation. We uphold the disallowance on
these items since Grantee did not show the extent of the benefit, if
any, to Headstart. /3/ The Agency also raised the issue of
approval with respect to Grantee's claim since these costs, though
admittedly incurred mostly for travel, were charged to the "other
expenditures" category of Grantee's budget. OHD policy does allow some
budget revisions without prior approval. Part 74, Subpart L of 45 CFR
requires prior approval for domestic travel only if the amount is in
excess of $500 or 125 percent of the amount originally budgeted,
whichever is greater. Grantee had budgeted $325 for travel and, thus,
could revise its budget to charge $175 in additional travel costs.
Since the additional amount we allow is less that $175, prior approval
is not an issue here.
SEPTEMBER 22, 1983