Organization of the Forgotten American, DAB No. 850 (1987)

DEPARTMENTAL GRANT APPEALS BOARD

Department of Health and Human Services

SUBJECT:  Organization of the Forgotten American

Docket No. 86-108
Audit Control No. 10-65036
Decision No. 850

DATE:  March 20, 1987

DECISION

The Organization of the Forgotten American (Grantee) appealed the
disallowance by the Office of Human Development Services, Administration
for Native Americans (ANA/Agency), of $5,091 in costs claimed under ANA
grant no. 90NA0236/01 for the budget period June 1, 1984 through June
30, 1985.  ANA funds are awarded to Grantees for programs which promote
the economic and social self-sufficiency of Native Americans.  See 45
CFR 1336 (1984). The Agency disallowed costs in two areas because the
Grantee failed to provide satisfactory documentation for the questioned
costs.  The Agency disallowed $3,191 on the ground that the Grantee
failed to provide the required 20 percent federal matching share, and
$1,900 in travel costs on the ground that the travel was not incurred
specifically for purposes of the grant.

For the reasons discussed below, we uphold the Agency's disallowance in
full.

Discussion

  A.  Non-federal share

In the disallowance letter, dated May 21, 1986, the Agency notified the
Grantee that its remaining non-federal or matching share was $3,191.
The Agency arrived at this figure by (1) using the total federal share
of $79,111 as the grant's maximum permissable 80 percent federal share,
(2) calculating the Grantee's required minimum 20 percent non-federal or
matching contribution to the grant, i.e., $19,778, and (3) subtracting
the Grantee's proven match of $16,587, to arrive at the $3,191
shortfall.

The Grantee made two written submissions to the Board, and it made final
oral arguments in a conference call held in this case.  In its initial
submission, the Grantee argued that its non-federal share requirement
for the grant involved in this disallowance was 20 percent of the
federal monies ($79,111), or $15,822.  Thus, since it had already
provided $16,587, the Grantee argued that it had provided $765 in excess
of the required amount.

In its second submission, the Grantee, for the first time, requested a
matching share "waiver" in accordance with 45 CFR 1336.50(b)(3)(ii).  1/
The Grantee maintained that a waiver may be granted when an applicant
can document that reasonable efforts to obtain cash or in-kind
contributions for the purpose of the project from third parties have
been unsuccessful; it submitted letters from various organizations to
illustrate its unsuccessful attempts recently to solicit contributions.
(Grantee's October 10, 1986 submission, Ex. I)

The Agency maintained that the Grantee's method of calculation of the
non-federal share was simply wrong.  The Agency argued that the
Grantee's position is inconsistent with the applicable regulation at 45
CFR 1336.50(b)(1), which requires the Grantee to provide 20 percent of
the total grant (project) cost.  Moreover, the Agency contended that
this identical requirement was set out in its April 1981 ANA Audit
Guide, section 3.24.  (Agency's brief, Ex. O)

 


In its response to the Grantee's request for a waiver, the Agency
rejected the request and stated that a waiver of the non-federal share
requirement at this time is inappropriate.  The Agency maintained that
the waiver provision under 45 CFR 1336.50(b)(2) requires that a request
for a waiver be made as part of a prospective grantee's application.
The Agency argued that the requirement that a waiver request be made at
the time of the application is of major importance because the request
for a waiver is a determining factor whether or not to award the grant.
To allow the request at this time would therefore be unjust to the other
grant applicants.

Section 1336.50 of 45 CFR states, in part:

  (b)  Cost sharing or matching - (1)  Policy.  Recipients of financial
  assistance . . . are required to provide a matching share of 20
  percent of the approved cost of the assisted project.  (emphasis
  added)

The Board is bound by all applicable laws and regulations, 45 CFR 16.14,
and therefore, must enforce all of them, including the cost-sharing
regulation applicable to the Grantee.  There is no question that the
regulation specifies a 20 percent match, and that the percent must be
applied to the total of all project costs, not just those costs
represented in federal dollars.

Moreover, the Grantee is also bound by the terms and conditions of the
grant or project agreement.  A copy of the Notice of Financial
Assistance Award, submitted by the Grantee, indicated at line 15A that
the total federal approved budget was $90,000. Further, at line 17, the
total recipient participation was listed as $22,500 or 20 percent.
(Grantee's June 20, 1986 submission, Ex. A)  If we were to accept the
Grantee's argument that its non-federal share is 20 percent of the
federal share, the amount listed at line 17 would be $18,000, not
$22,500.  Therefore, we find that the Grantee's argument is completely
without merit, that the Grantee had notice of its obligation under the
grant award, and that the Grantee had constructive knowledge of this
requirement.

Section 1336.50(b)(2) of 45 CFR states:

  Application.  If an applicant wishes to request a waiver of the
  requirement for a 20 percent non-Federal matching share, it must
  include with its application for funding a written justification that
  clearly explains why the applicant cannot provide the matching share
  and how it meets the criteria.  (emphasis added)

As noted above, the Board does not have the authority to waive the
Grantee's non-federal share requirement for the grant at issue.  The
regulation is unambiguous and clearly provides the standards for
approving a waiver.  Moreover, the Agency's refusal to grant a waiver at
this time is reasonable, because it is clear that the Grantee did not
meet the requirements in the regulation.

Finally, the Grantee contended that the Certified Public Accountant
(CPA) for this grant had donated an additional $2,640 of in-kind
contribution which the Agency did not include in its calculation of the
original $16,587 non-federal share amount provided by the Grantee.
(Grantee's October 10, 1986 submission, Ex. G-1)  The record does not
indicate that this information was submitted before this time.

The Agency rejected the Grantee's documentation for an additional $2,640
of CPA in-kind services to be added to its non-federal share
contribution for two primary reasons.  First, the Agency argued that the
documentation was inadequate.  The Agency maintained that two-thirds of
the document is blanked out, and that the document is not dated.
Further, the Agency argued that the document reveals that at least
one-half of the in-kind services were performed in 1986 rather than
1985, and that the services may have related to matters other than the
grant at issue.  2/  Secondly, the Agency stated, in the conference
call, that although it did not look behind the original $16,587 of
non-federal share in-kind volunteer services, it felt that any
additional amounts for CPA services for a grant of this size was
inappropriate.  Moreover, the Agency questioned the cost listed for each
item in the document.  3/  Finally, even though the record does not show
what the $16,587 consisted of, the record suggests that some portion
also was accounting services (See, e.g., Ex. D to Notice of Appeal).

 

 


The Agency's refusal to accept the Grantee's additional $2,640 of
in-kind contribution is reasonable and within the Agency's authority.
4/  The Agency's finding that the document is insufficient on its face
is a legally sufficient basis for the disallowance.  On the face of the
document, the Agency has found significant weaknesses not rebutted by
the Grantee.  The Board has previously found that while we will accept
non-contemporaneous documentation, the sufficiency of the documentation
will be carefully scrutinized.  Indiana Department of Public Welfare,
Decision No. 772, August 7, 1986.  In the instant case, we find that the
Agency reasonably determined that the Grantee has not sufficiently met
its burden of documentation.  Furthermore, we agree that on its face,
the amount claimed as accounting services has been insufficiently
justified, was submitted after the fact, and that the Grantee has not
substantively responded to the questions raised by the Agency.

  B.  Unallowable travel expenditures

Prior to a March 1985 trip taken by two of its former employees to
Washington, D.C. and New York City, the Grantee arranged with the Agency
to advance its employees the money for the trip, and to be reimbursed by
the Agency, indicating that the travel was grant-related.  In March
1985, during the trip to Washington, D.C., the employees were reimbursed
by the Agency with the intent that they would in turn give the money to
the Grantee upon their return from the trip.  However, the employees did
not return the money to the Grantee.  As a result of the subsequent
audit, the Agency concluded that the travel was not grant-related and
disallowed $1,900 as unallowable travel expenditures.  The Agency
directed the Grantee to reimburse the money to the grant. (Agency's
brief, Exs. A and C)

The Grantee maintained that it was informed by the Agency that it would
be reimbursed for staff travel expenses and that, therefore, the Agency
is obligated to reimburse it.  The Grantee also contended that since the
Agency "interfered with its internal management and day-to-day affairs,"
it must share

the responsibility of the Grantee's inability to collect the money
advanced to its former employees.  Additionally, the Grantee submitted
documentation to show that the travel by its former employees was
directly grant-related,  5/ and that it had attempted to collect the
money as directed, but its attempts have been unsuccessful.

The Agency argued that the trip the Grantee's former employees took was
for the purpose of carrying on organization business, but not for the
grant in question and that, accordingly, it is not obligated to
reimburse the Grantee from grant funds.  The Agency also denied the
Grantee's allegation that it interfered in the Grantee's activities.
Instead, the Agency maintained that it helped to administer the grant as
it was required to do. Finally, the Agency rejected the documentation
submitted by the Grantee because the documentation did not prove that
the travel directly involved grant-related activities.

Federal regulations clearly require that expenditures be supported with
adequate documentation.  45 CFR 74.61 (1984). The Board has consistently
held that a grantee has the burden to document expenditures.  See, e.g.,
New York City Human Resources Administration, Decision No. 720, January
30, 1986.  Further, we have said that it is a fundamental principle of
grant adminis- tration that a grantee must document that claimed
expenditures were reasonable and were incurred to further the purposes
of the grant.  Bullock County Health Services, Inc., Decision No. 360,
November 20, 1982.  The documentation submitted by the Grantee is
insufficient to support its claim.  The Grantee's exhibits are general
summaries of organizational affairs but do not support the Grantee's
assertion that the activities were grant-related. Exhibit H of Grantee's
October 10, 1986 submission stated, in part:

  I believe that we had a very eventful and successful trip, we however
  have some additional work to do on the Loan Grant application that we
  will begin at our [earliest] opportunity.


Further, Exhibit H-1 stated, in part:

  On Thursday . . . I worked with . . . ANA Program Specialist on the
  budget revision and getting the Loan Grant application.  We also met
  with . . . ANA Project Supervisor about our pending ANA Grant
  application.  We also talked to . . . former B.I.A. Commissioner . . .
  about some direction in funding sources for our loan application.

Even assuming that the above references related to the grant at issue,
which has not been shown, general references about a "loan grant
application" do not provide the type of documentation necessary to
support its entire claim.  The documents failed to show what percentage
of time, if any, was devoted to any grant- related activities.
Moreover, since the travel occurred in March 1985 and the grant period
ended in June 1985, it would appear that an application of any type
would not apply to the grant at issue.  Even providing the Grantee the
most liberal interpre- tation of its documents, they do not, in any
event, support travel to two cities for two employees over a ten-day
period. Finally, the Grantee has not provided any evidence to support
its vague claim that the Agency interfered with its day-to-day
activities.  However, even if the Grantee had provided such evidence,
this still would not have obligated the Agency to reimburse the Grantee
when it reasonably concluded that the Grantee's employees performed no
grant-related activities. Therefore, the Grantee alone must bear the
burden of its failure to collect the grant funds from its former
employees.

Conclusion

Based on the foregoing, we affirm the Agency's disallowance of $5,091.

 

                                ________________________________ Donald
                                F. Garrett

 

                                ________________________________ Charles
                                E. Stratton

 

                                ________________________________ Norval
                                D. (John) Settle Presiding Board Member

 

1.     The Grantee also argued that it relied on the guidance of Agency
officials for interpretation of federal guidelines. Additionally, the
Grantee indicated that it "felt it had received an implied approval" of
a less than 20 percent match from the Agency; however, the Grantee never
provided any specific reasons for its position.  The Agency maintained
that the Grantee never received such approval.  Moreover, the Agency
argued that the Grantee did not report any problems with its federal
share match requirement in any of the financial reports that are
required of grantees every three months during the grant period.  We
find that since the Grantee never specified any reasons why it felt that
it had received such approval from the Agency or provided any evidence
to support its position, the Grantee's argument is without merit.

Additionally, the Grantee pointed out some inconsistencies in the
Agency's brief, which allegedly caused confusion.  However, we find that
the mistakes were clerical in nature and not relevant to the issues at
hand.  Therefore, we do not repeat them here.  It is clear that the
Grantee understood the nature of the disallowance and was given every
opportunity to respond fully to the Agency's arguments.

2.     In the Board's conference call, the Board inquired whether an
affidavit could be submitted to further bolster the document submitted
by the Grantee.  However, the Agency rejected this suggestion because it
still questioned the listed cost of each item, as indicated in n. 3.

3.     For example, the Agency noted that the CPA listed, among other
things, 10 hours for the preparation of a letter at a cost of $60 per
hour, which totalled $600 for one letter.


4.     While it is not clear that the original $16,587 of in-kind
volunteer services represented only CPA services as the Agency suggested
might be the case, the Grantee has not submitted any documentation which
indicated that it received volunteer services from any other source.  In
the Grantee's notice of appeal, the Grantee stated that it had received
an "additional $2,640 of in-kind for professional services" from the
CPA.  (Grantee's Notice of Appeal, p. 2)

5.     The Grantee submitted two exhibits in its October 10, 1986
submission to support its position that the questioned travel by its
employees was grant-related.  Exhibit H is a one-page summary entitled
"New York City Report, 3/22 thru 3/26 1985," submitted by Robert V.
Bojorcas, OFA Executive Director.  Additionally, attached to this
summary is a list of foundations contacted by Robert V. Bojorcas.
Exhibit H-1 is a one-page summary, also submitted by Mr. Bojorcas,
entitled "Washington D.C. Trip, 3/17/85 thru