GAB Decision 610
December 14, 1984
Mercer County Department of Human Services;
Settle, Norval; Teitz, Alexander Ford, Cecilia
Docket No. 84-122
The Mercer County Department of Human Services (County) appealed a
decision by the Office of Human Development Services (Agency) to
disallow $4,114 charged by the Mercer County Head Start Program (Mercer
Head Start) against Head Start funding for the 1982 program year. /1/
The Agency based the disallowance on its finding that Mercer Head Start
had used Head Start funds to repay a disallowance assessed against it
under the Department of Agriculture's (USDA) Child Care Food Program
(CCFP). CCFP distributes USDA funds to eligible institutions, including
Head Start centers. The CCFP disallowance resulted from a determination
that Mercer Head Start failed to provide adequate documentation for
certain individuals participating in the CCFP during the period January
1 through June 30, 1982. The Agency contended that the disallowed costs
were allocable to the CCFP and thus could not be charged to Head Start
funding. The County maintained that these costs were properly charged
to Head Start. As explained below, we conclude that these costs may not
be charged to Head Start funds and uphold the disallowance.
This appeal was under our expedited process at 45 CFR 16.12. This
decision is based upon documentary evidence presented by both parties, a
brief submitted by the Agency, and the tape of a telephone conference
between the Board and the parties conducted October 30, 1984. The
County chose not to file a formal brief.
(2) Background
Under the National School Lunch Act (Act), 42 USC Sec. 1751 et seq,
the USDA is the primary source of funding for food service in Head
Start. In this instance, USDA funding is made available to Mercer Head
Start through CCFP. The Act provides that:
The Secretary shall require as a condition of eligibility . . . that
the member of the household who executes the application furnish the
social security account number of all adult members of the household of
which such person is a member. 42 USC 1758(d)(i)
The County's notice of appeal indicated that, along with language
similar to 42 USC 1758(d)(i), a participant's application also states
that:
Provision of these social security numbers is not mandatory, but the
failure to provide the numbers will result in the denial of the
application for free or reduced-priced benefits . . .
Pursuant to an audit for the period January 1 to June 30, 1982, CCFP
officials determined that 30 claims submitted by Mercer County Head
Start under the food program were invalid due to a failure to provide
the required social security numbers and, in some cases, the absence of
any food program applications at all. CCFP disallowed those claims and
Mercer Head Start then remitted $4,113.56 to CCFP in August 1983.
In an August 23, 1983 letter to the New Jersey Bureau of Child
Nutrition Programs (Bureau) which administered CCFP aid, the Deputy
Director of Finance for Mercer Head Start stated that the failure to
provide social security numbers "was the direct result of a transitional
upheaval in our Social Services Division." Additionally, the Deputy
Director provided documentation aimed at reducing the disallowance. On
September 2, 1983, the Bureau returned the documentation indicating that
since the audit was closed additional documentation could not be
accepted. However, the Bureau did inform Mercer Head Start of its right
to appeal the audit findings and provided the procedures for pursuing an
appeal. Mercer Head Start formally appealed the CCFP audit findings to
the Bureau by letter dated December 22, 1983. On January 17, 1984, the
Bureau rejected Mercer Head Start's appeal as untimely. /2/
(3) An Agency audit of Mercer Head Start for the program year ending
October 31, 1982 revealed that the $4,113.56 repaid to CCFP came from
Head Start funds. The Agency disallowed the expenditure as for costs
not properly allocable to the Head Start program and, therefore, not
chargeable to Head Start funds. The disallowance letter also stated
that:
Head Start does not pay for food costs which arise as a result of the
grantee's failure to present adequate documentation in order to obtain
the available reimbursement from USDA.
In its brief before the Board, the Agency noted that in 1980 it had
entered into an agreement with USDA formalizing their understanding that
USDA is the prime provider of food service funds for the Head Start
program and that Head Start funds will only be used to pay for food
service costs not covered by CCFP. The Agency indicated that examples
of food service costs which could appropriately be charged to Head Start
funds are costs of meals which exceed the established USDA rate and food
costs for staff. This agreement was discussed in a January 28, 1982
Agency transmittal (ACYF-PI-82-2) distributed to all Head Start grantees
(this action transmittal instructed grantees how to budget for food and
nutrition costs). (Agency Exhibit E)
The Agency argued that, under applicable federal cost principles, a
cost properly allocable to one federal grant program, may not be
allocated to another program. See OMB Circular A-87 (C)(1)(f). /3/
Additionally, the Agency pointed out that OMB Circular A-87 (C)(2)(b)
prohibits shifting a cost allocable to a particular grant program to
another grant program to avoid any restrictions imposed by law or grant
principles.
Citing both Mercer Head Start's failure to initially provide the
requisite documentation to support its claim with CCFP and its eventual
failure to pursue its appeal of the CCFP disallowance in a timely
fashion, the Agency argued that Mercer Head Start had not administered
its program in an efficient manner and that a decision by this Board in
favor of Mercer Head Start would reward negligent program administration
and permit Mercer Head Start to avoid the CCFP requirements.
(4) The County argued that the language in the CCFP application,
which indicates that although the provision of social security numbers
is not mandatory, failure to do so will result in a denial of a benefit,
is contradictory. Additionally, the County stated that although it
could not question the Agency's disallowance on technical terms, the
"philosophical and humanistic" arguments against denying Head Start
funding mandated reversal of the disallowance. /4/
Analysis
During the course of this appeal the County has not denied the facts
as presented by the Agency, but has offered various reasons for the
absence of the required social security numbers, indicating either that
there were technical problems collecting the applications or that
certain recipients simply decided not to provide social security
numbers.
The reasons for the absence of the social security numbers, which led
to CCFP's disallowance, are irrelevant to our consideration of the
disallowance before us. /5/ The costs in question are clearly costs
which would have been allowable under CCFP if properly and timely
documented. Therefore, these costs are clearly not within the exception
of "costs not covered by USDA" set out in the Agency-USDA (5) agreement.
The costs disallowed by CCFP simply cannot be charged to Head Start. As
a participant in a federal grant program, and in order to assist
individual participants in realizing the full benefit of the program,
Mercer Head Start was obliged to abide by all conditions attached to the
receipt of federal funds. The Agency's arguments regarding the
impropriety of shifting costs from one program to another accurately
reflect the requirements of the applicable cost principles and,
therefore, persuade us that these costs are not allowable under Head
Start.
While we are not unsympathetic to the financial hardship which may
result from this disallowance the facts here lead to the conclusion that
Mercer County Head Start must bear this burden. Any arguments regarding
potentially contradictory language in the individual CCFP applications,
technical problems encountered during the collection of the social
security numbers or applications, or philosophical arguments regarding
the impact of the disallowance should have been made to the Bureau. The
Agency has correctly determined that Mercer Head Start's attempt to
shift the burden of the disallowance to the Head Start program was
improper. In determining the merits of any appeal, this Board is bound
by all applicable laws and regulations. (45 CFR 16.14) Therefore, we
uphold this disallowance.
Conclusion
For the reasons set out above, we uphold the full disallowance of
$4,113.56. /1/ The Mercer County Department of Human Services provided
Head Start funds to the Mercer County Community Action Program to
operate the Mercer County Head Start Program. Representatives from both
the county department and the Head Start program participated in the
appeal. Appellant's designation as "County" refers to all participants
on the appellant's behalf. /2/ The County offered no reason for
the failure to pursue an appeal with CCFP in a timely fashion.
/3/ OMB Circular A-87 sets out the principles for determining the
allowable costs of programs administered by State, local, and
federally-recognized Indian tribal governments under grants from and
contracts with the Federal Government. OMB Circular A-87 is
incorporated by reference into the federal regulations applicable to
this grant by 45 CFR 74.171. /4/ In the conference call, the
County also indicated that for the 30 disallowed claims it was later
able to obtain all 13 missing social security numbers as well as
completed applications containing social security numbers for some of
the 17 claims for which there was initially no application. The record
shows that this was the information submitted to CCFP after that audit
was closed. Eighteen completed applications are in the record for this
appeal; it is unclear why, but these applications do not contain the
statement concerning the consequences of the failure to provide social
security numbers cited in the County's notice of appeal. /5/ We
agree with the Agency that, since Mercer County Head Start was able to
obtain the social security numbers in all thirteen instances where it
had an application but no numbers and given the further failure to
pursue a timely appeal with CCFP, this case does not present the issue
of whether, should an applicant decline on principle to supply a social
security number, the food costs would properly be borne by Head Start
funds (as "costs not covered by USDA"). On the facts here this appeal
simply involves the failure to properly document 30 CCFP claims in a
timely fashion.
MARCH 19, 1985