Urban Indian Health Board, Inc., DAB No. 315 (1982)

GAB Decision 315

June 28, 1982 Urban Indian Health Board, Inc.; Docket No. 81-62 Ford,
Cecilia; Teitz, Alexander Settle, Norval


The Urban Indian Health Board, Inc. appealed a decision of the
Alcohol, Drug Abuse, and Mental Health Administration (ADAMHA) Grant
Appeals Committee to uphold a decision by the National Institute on
Alcohol Abuse and Alcoholism (NIAAA). NIAAA disallowed $77,658.81 in
costs claimed for alterations and renovations during the 01 and 02
budget periods of the project, on the basis that there was insufficient
documentation to support the claimed costs.

After this appeal was filed with the Board, the parties agreed to
mediate this dispute in an attempt to resolve or clarify the issues.
During the process of mediation, the Agency reviewed documentation
submitted to the Board by the appellant in support of alteration and
renovation costs charged to the grant. Pursuant to this review, the
Agency determined that $14,282.66 of costs were acceptable as charges to
the grant. /1/ Therefore, the amount in dispute here, as a result of
the mediation process, is $63,376.15.


For reasons discussed below, we sustain the decision of the ADAMHA
Grant Appeals Committee, except for the amount the Agency found
adequately supported by documentation.

Discussion

NIAAA based its determination on an audit report by an outside
auditor which stated that there was not sufficient documentation to
support $77,658.81 claimed as alteration and renovation costs. The
ADAMHA Grant Appeals Committee upheld the NIAAA decision on the grounds
that appellant "did not provide any documentation or information that
would refute the findings" of the auditor. Decision of the ADAMHA Grant
Appeals Committee dated March 31, 1981. (2)$TIn its appeal to this
Board, appellant challenged these findings, stating that the accountants
had not taken all possible measures to determine whether the alteration
and renovation work had been done. Appellant also stated that if there
had been any impropriety in the expenditures, it would have been
discovered and reported, inasmuch as all checks for expenditures and
vouchers must be authorized by the Director of appellant's organization
and signed by two members of its Board of Directors as well as verified
by appellant's fiscal department. Letter from appellent dated May 27,
1981. In a subsequent letter to the Board, appellant contested the
accuracy of the audit performed, claiming that a comprehensive audit
could not be performed within aproximately three hours, the time that
the auditor allegedly spent at appellant's office. Appellant's letter
dated August 28, 1981 and Exhibit B to that letter.

The Agency reviewed documents consisting of copies of cancelled
checks and invoices submitted to the Board by appellant in support of
the alterations and renovations charged to the grant. The alteration
and renovation costs in question were to have been incurred for
renovations at the project site, a detoxification center, located on
Laguna Street. The appellant also operated a health clinic on Julian
Street which was not part of the NIAAA project. As a result of this
review, the Agency found that $14,282.66 of the costs were adequately
supported by documentation; the documentation indicated where the work
was performed or where the supplies were used. Some of the
documentation reviewed by the Agency, however, which is described more
fully below, indicated that many of the costs charged to NIAAA for which
documentation was submitted were not for work done at the project site
but were for alterations and renovations of the health clinic on Julian
Street. Memorandum from Agency dated June 4, 1982 with attached work
papers; Appellant's file 2, 5, 6, and 7. The Agency discovered other
problems with appellant's documentation. These problems also are
described below.

The documentation contained in Appellant's File 1 contained copies of
order forms from a building supply company with cancelled checks issued
to that company. This documentation contained no indication of where
the supplies were delivered or for what work the supplies were to be
used. Appellant's File 2 contained documentation indicating that
$7,218.00 in costs were for renovations performed at the health clinic
and therefore were not related to the NIAAA project. File 3 of
appellant's documentation was for building supplies. The documentation,
however, provided no information as to where the supplies were used or
for what work the supplies were to be used. Appellant's File 4
contained checks issued to a contractor. These checks were not
supported by contracts or invoices to indicate if the work was performed
or where it was (3) performed. File 5 contained invoices and checks
from a plumbing contractor; some of the cancelled checks were not
supported by invoices, some of the invoces indicated they were for work
done at the health clinic, and some of the invoices did not indicate
where the work was performed. Appellant's File 6 contained cancelled
checks and invoices for painting services. Some of the invoices were
for services performed at the health clinic, and some were for services
rendered but the worksite was unknown. Some were for painting the
outside of the building and an outside back wall at the project site;
these are unallowable costs because only work required to change the
interior of a structure may be claimed as alteration and renovation
costs. PHS Supplement Grants Administration Manual, Chapter 1-44-30.A.
File 7 contained documentation consisting of invoices from and checks
issued to a paint company. The majority of invoices did not indicate
where the paint was used or indicated that the paint was charged to the
health center. File 8 of appellant's documentation contained
miscellaneous invoices; two of the invoices indicated the materials and
work were for the health clinic and two invoices did not indicate where
the work was performed or where the supplies were used.

The Board reviewed the Agency's workpapers as well as the
documentation submitted by appellant and finds that the Agency
appropriately determined that the documentation, for other than the
allowable costs, was not sufficient to support the alteration and
renovation costs charged to the grant. It is a fundamental principle of
grant administration that a grantee have documentation to support that
claimed expenditures were, in fact, incurred to further the purposes of
the project and for the project in question. New York State Department
of Social Services, Decision No. 204, August 7, 1981; Head Start of New
Hanover County, Inc., Decision No. 65, September 26, 1979; and
University of Minnesota, Decision No. 44, August 14, 1978. The Board
previously has stated that the appellant has the initial burden to
document costs and show that the claim for reimbursement is proper. New
York State Department of Social Services, supra.

The appellant here challenged the audit; however, its arguments do
not overcome the initial burden placed on a grantee to establish with
documentation the allowability of costs claimed. The responsibility to
support costs with documentation begins at the time the cost is incurred
and charged to the grant. This responsibility to support costs,
however, does not stop there. If an audit report makes findings that
certain claims for expenditures are not proper, the grantee has a
continued responsibility to show in response to that audit, and again
later during an appeal of those findings, that its claim was proper. In
the instant case, the appellant had an obligation to provide
documentation sufficient to show that its claim for alteration and
renovation costs was proper. (4) The documentation in the record
supports a well-grounded apprehension on the part of the Agency that the
costs claimed for alterations and renovations were for materials and
labor costs incurred at other than the grant-supported project site. In
order to determine whether the costs claimed were for the project site,
the documentation, to be sufficient, would have to indicate where, in
fact, the materials were used and where, in fact, the work was
perfomred, and if it was performed at all. The documentation did not
indicate this. Therefore, the Agency reasonably determined that
appellant's documentation failed to support the claimed expenditures for
alteration and renovation costs for the project.

Conclusion

For the reasons stated above, we sustain the decision of the ADAMHA
Grant Appeals Committee, except for the amount the Agency found
adequately supported by documentation during mediation. Thus, we uphold
the disallowance in the amount of $63,376.15. /1/ The documentation
provided by appellant totaled $83,864.54 in claimed costs.
During a conference call between the parties and the Board, the Agency
and the appellant acknowledged that the Board's intention to deduct the
amount of the acceptable costs from the original disallowance, rather
than the total claimed, was appropriate.

OCTOBER 22, 1983