GAB Decision 363
November 30, 1982 Tennessee Health Maintenance Organization Plans, Inc.;
Docket No. 82-145 Garrett, Donald; Teitz, Alexander Settle, Norval
The Tennessee Health Maintenance Organization Plans, Inc. (Grantee,
THMOP) appealed a decision by the Public Health Service Grant Appeals
Board (PHS Board), upholding a disallowance of $5,125 for a portion of
the project director's salary and travel costs. /1/
This dispute arises under a Public Health Service (PHS) grant to
study the feasibility of a Health Maintenance Organization for the
Nashville, Tennessee area. The grant was made pursuant to Title XIII of
the PHS Act and was for a period from July 1, 1979 to June 30, 1980.
Since the dispute concerns an amount under $25,000 and Grantee
received review from the PHS Board before appealing to the Departmental
Grant Appeals Board, this Board's special expedited review procedures
apply. 45 CFR 16.12(d) (1981). Thus, we reviewed the record in this
case to determine whether the PHS Board's decision was clearly
erroneous. Grantee was advised of this standard in the Board's
acknowledgment of the notice of appeal.
We uphold the PHS Board's decision with respect to $1,892 in travel
costs and $1,548 charged to the grant for the project director's salary.
However, based on the record before us, we conclude that it was clearly
erroneous for the PHS Board to uphold the disallowance by the Public
Health Service of $1,685 charged to a U.S. Department of Labor grant
program for the project director's salary.
I. The Travel Costs.
The PHS Board upheld the disallowance of $1,892 in travel costs
because it determined that Grantee had exceeded its travel budget to an
extent requiring prior approval for the expenditures from PHS. The PHS
Board (2) said that prior approval was required for travel which
exceeded the budgeted amount by $500 or 25% of the budgeted amount,
whichever was greater. PHS Grants Policy Statement, October 1976, p.
28. PHS maintained that Grantee's travel budget for the period from July
1, 1979 to June 30, 1980 was $1,320, and that the $1,892 disallowed
represented the amount in excess of the travel budget for which prior
approval was required. /2/ The PHS Board did not find any evidence to
indicate that prior approval had been granted.
Grantee did not submit any arguments or information regarding the
disallowed travel costs, and our review of the record did not indicate
that the PHS Board's decision was clearly erroneous on this issue.
Therefore, Grantee's appeal concerning the $1,892 in travel costs is
denied.
II. The Project Director's Salary.
The PHS Board upheld the disallowance of PHS grant funds in the
amount of $1,548 for the project director's salary for the period from
July 1 to July 25, 1979. The Board also upheld the disallowance of
Comprehensive Employment and Training Act (CETA) funds paid to the
project director for August and September 1979. CETA is administered by
the U.S. Department of Labor.
PHS had initially disallowed all claims for the project director's
salary for the period from July 1 to September 30, 1979. The
disallowance was based on a provision in the Notice of Grant Award which
limited the use of grant funds to expenses directly related to the
recruitment of a project director until the regional office approved a
project director. Notice of Grant Award, Standard Provision No. 1, July
20, 1979. The regional office approved John Edwards as the project
director on September 20, 1979, and Mr. Edwards resigned his affiliation
with the CETA program effective September 30.
A. The disallowance of salary costs paid for with PHS grant funds.
The PHS Board rejected PHS's determination that the project director
could receive a salary only for periods after the regional office
approved his appointment. The PHS Board held that since the regional
office eventually approved Mr. Edwards as the project director, his
salary costs should be allowed from the date that Grantee appointed him
to that position. The PHS Board held that Grantee's Board of Directors
appointed Mr. Edwards as the (3) project director on July 25, 1979 and
upheld the disallowance for only that portion of his $2000-a-month
salary ($1,548) for the period prior to July 25. /3/ PHS said that Mr.
Edwards received a salary from CETA funds during the period prior to
July 25.
Grantee argued before this Board that approval of the project
director was made a matter of record at its July 25 Board of Directors
meeting, but that Mr. Edwards performed the duties of the project
director from July 1.
We find that it was not clearly erroneous for PHS to disallow grant
funds for Mr. Edwards' salary prior to July 25, 1979. The record shows
that there was disagreement as to who would serve as project director
and that Grantee did not resolve this dispute until Mr. Edwards was
appointed project director on July 25. See, e.g., PHS Memorandum,
September 20, 1982, p. 2. It was therefore not unreasonable for PHS to
refuse to fund a "project director" salary prior to the date that
one
was appointed.
This does not, however, resolve the issue of whether Mr. Edwards was
entitled to any compensation from grant funds for his work during that
period. PHS did not dispute that Mr. Edwards was working at THMOP prior
to his appointment as project director. Further, Standard Provision No.
1 as interpreted by the PHS Board would not by itself preclude payment
of a salary to Mr. Edwards. The PHS Board interpreted that (4)
provision to allow reasonable start-up costs for the project, including
"routine operating costs incurred for staff salaries, rent, office
supplies, and furniture. . . ." PHS Board decision, p. 2. Under this
interpretation, it would appear that Mr. Edwards could receive some
compensation as a staff member prior to his appointment as project
director.
PHS noted, however, that Grantee paid Mr. Edwards an apparently
substantial salary from CETA funds during that period. Grantee has not
submitted any evidence to show that the salary from CETA funds was not
reasonable compensation for his services prior to his official
designation as project director by Grantee on July 25. Therefore, we
uphold the PHS Board decision denying payment of a salary of $1,548 from
PHS grant funds to supplement the CETA funds for the period before
Grantee appointed Mr. Edwards project director, subject to the
following. If Grantee maintains that salary paid to Mr. Edwards from
PHS funds was for "start-up" activities directly benefitting the PHS
grant, for which he was not compensated by his salary from CETA funds,
Grantee may present evidence in support of this claim to PHS within 10
days of receiving this decision. PHS should then determine how much, if
any, salary costs should be allowed from PHS for Mr. Edwards' services
for the period prior to July 25. If, after reviewing the evidence, PHS
denies the claim, Grantee may return to the Board within 30 days of
receiving the negative determination to contest this determination only.
B. The disallowance of salary costs paid for with CETA funds.
The PHS Board held that Grantee's billings to the CETA program for
the project director's salary for August and September 1979, should also
be disallowed. The PHS Board said that THMOP was a sub-grantee under
CETA and that the project director was paid a salary from CETA funds for
July, August, and September. The PHS Board found no evidence that this
was a duplicate salary, even though Mr. Edwards also received salary
from PHS grant funds after Grantee appointed him project director.
The PHS Board did not indicate why it upheld the disallowance of
salary from CETA funds for August and September. Further, the PHS Board
did not state any authority for PHS, or the PHS Board, to disallow U.S.
Department of Labor funds. The record does not show that PHS was acting
in the capacity of a lead audit agency, or any other capacity which
might imply authority for PHS to take action on behalf of another
Department. PHS was given a further opportunity in a telephone
conference to explain its disallowance of the CETA funds, but PHS did
not provide any additional information at that time. (5) Without any
basis in the record to support the PHS Board's action regarding these
funds, the Board finds that it was clearly erroneous for the PHS Board
to uphold the disallowance of $1,685 in salary costs charged to the CETA
program. /4/
III. Conclusion
For the reasons stated above, the Board sustains the disallowance of
$1,892 in travel costs, $1,548 in salary costs paid from PHS grant
funds, subject to our reservation on p. 4, and reverses the disallowance
of $1,685 in salary costs paid from U.S. Department of Labor funds. /1/
Grantee appealed $16,084 to the PHS Board. This amount
consisted of operating costs, including the project director's salary
($13,892), travel costs ($1,892), and a typewriter purchase ($300). The
PHS Board allowed $10,959 in salary costs and for the typewriter
purchase, upheld the disallowance of a portion of salary costs in the
amount of $3,233, and upheld the disallowance of $1,892 in travel costs.
/2/ PHS said Grantee's travel budget was $1,320 even though the travel
budget shows $1,520. PHS said that $200 was deducted because of an
overall budget reduction and that Grantee was notified of that action.
Grantee did not dispute this statement. /3/ The PHS Board held
that Standard Provision No. 1 was based on a PHS policy bulletin and
that the version which appeared in the Notice of Grant Award incorrectly
stated the provision. The portion emphasized below was the basis for
the PHS Board's determination to allow the additional $10,659 in salary
costs. The PHS Board said that the provision should have read: "Within
90 days of the effective date of the grant award, the project must have
the commitment to enter on duty of a project director acceptable to the
Regional Office. Until an acceptable project director is approved
during this period, use of grant funds, related to the recruitment of a
project director, is limited to necessary and otherwise allowable costs
which the grantee could not reasonably avoid." (emphasis added) Office
of Health Maintenance Organization Program Management Bulletin No. 49,
July 2, 1979. Although we would not hold a grantee to a version of a
condition stricter than that which appeared in the Notice of Grant
Award, in this case the version found applicable by the PHS Board is
more favorable to the grantee than the version which did in fact appear.
Since the PHS Board determined that the provision entitled Grantee to
additional funds, we accept the PHS Board's interpretation in deciding
it does not impose on Grantee obligations of which Grantee may not have
had notice. /4/ We do not by this decision express any opinion on
whether the U.S. Department of Labor may disallow or take any other
action concerning these funds.
OCTOBER 22, 1983