DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Eastern Band of Cherokee Indians
Docket No. 87-150
Decision No. 927
DATE: December 15, 1987
DECISION
The Eastern Band of Cherokee Indians (Grantee) appealed a determination
by
the Office of Human Development Services (OHDS, Agency)
disallowing
$85,308. This disallowance is for unobligated grant funds
which the
Grantee retained after the end of the budget period. The
Agency stated
that, under the provisions of 45 C.F.R. Part 74, any grant
funds paid to
a grantee by the federal government in excess of the amount to
which the
grantee is finally determined to be entitled under the terms of
the
grant must be returned to the federal government.
Our decision is based on the parties' submissions. 1/ For the
reasons
indicated below, we sustain the disallowance.
Background
Eastern Band of Cherokee Indians received a number of grants from
the
Office of Native American Programs (now the Administration for
Native
Americans, Office of Human Development Services) pursuant to the
Native
Americans Programs Act of 1974 (Pub. L. 93-644, section
11). This Act
authorized financial assistance to governing bodies of
Indian Tribes on
federal and state reservations for projects "to promote the
goal of
economic and social self-sufficiency." 2/ Grant No. 40359/07,
awarded
to the Grantee, was one of these grants. Under the terms of the
grant
award, OHDS provided $314,665 to the Grantee for the budget
period
February 1, 1980 to May 31, 1981. Of these funds, $85,308
remained
unobligated at the end of the budget period.
Subsequent to this grant award, OHDS awarded Grant No. 40359/08 for
the
next budget period June 1, 1981 to March 31, 1982. The award notice
did
not authorize use of the unobligated funds from the prior period
(07).
Agency's Appeal File, Exhibit 2. The award notice also stated
that the
project under which the previous grant had been made would end on
March
31, 1982. No further grant awards were made after March 31,
1982.
In 1986, OHDS obtained a copy of the combined financial statements of
the
Grantee for the fiscal year ending September 30, 1985 which were
included in
an audit report on the Grantee prepared by Grantee's
accountants for that
fiscal year. This statement identified the $85,308
as "due to other
governments" with an accompanying explanatory note.
That note stated:
Grant termination:
The Native
American Program, a special revenue fund,
was
used
to account for grant number 40359/07 of the
U.S.
Department of Health and Human Services. The
grant
terminated as of May 31, 1981 and the Fund has been
inactive
since then. Remaining grant funds of $85,308 have
been
transferred to, and recognized as a liability of,
the
General (Council) Fund.
Based on this audit report, OHDS disallowed these funds and requested
they
be returned.
On appeal, the Grantee acknowledged that "the unapplied funds are
properly
classified as due to the grantor agency in accordance with
governmental
accounting standards and grant guidelines." The Grantee,
however, stated that
it had received verbal approval from the OHDS
grants adminstration office to
retain and transfer the unexpended funds
to the Tribe's general funds and to
submit a proposal for their use.
The Grantee further stated that while a
proposal was submitted, no
response was received. The Grantee contended
that it believed that
certain expenditures made by the Tribe during
subsequent time periods
would have qualified, in any event, as proper uses
for grant funds under
Grant No. 40359. The Grantee requested approval
to apply the $85,308
unobligated fund balance to these expenditures. In
essence the Grantee
was requesting a supplemental, retroactive grant award to
support
expenditures made during the Tribe's fiscal years ending September
30,
1983 and 1984.
Analysis
The relevant law in effect during the grant award period provides
that
once a grant expires the grantee shall immediately refund or
otherwise
dispose of, in accordance with instructions from HHS, any
unobligated
balance of cash advanced to the grantee. 45 C.F.R. 74.111.
3/ The OHD
Grants Administration Manual, which was in effect during the
period at
issue here, states that the Department should treat the
unobligated
balance in one of three ways:
1. As an offset (deduction) from a
continuation award for the
current or a
succeeding budget period if there is one;
2. As a carryover for use in the
current budget period, in
addition to
the current grant award, for purposes requested
and
justified; or
3. As a refund to the Federal
government, if the unobligated
balance
is cash which has already been transferred to
the
grantee. . . .
OHD Grants Administration Manual, Chapter I(F) (1977). We agree
with
the Agency that only the third option applies. After March 31,
1982
there was no further grant awarded to the Grantee under this program
to
which this amount could be applied as an offset or as a carryover
of
funds. The regulations further provide that such unobligated
balances
constitute a debt owed by the Grantee to the federal
government. 45
C.F.R. 74.112.
OHD Grants Administration Manual specifically states in Chapter 1 (F)
with
regard to unobligated balances:
In no instance may a grantee use an
unobligated balance in a
budget period
subsequent to that for which the funds were
awarded
without prior written approval
from the authorized official of
the
granting office.
The Grantee admitted that there was no prior written approval to use
these
funds by the Agency. Moreover, the Grantee agreed that these
funds were
"properly classified as due" to OHDS. Despite the relevant
regulations
and Agency policy, however, the Grantee seeks to use these
funds for
expenditures made during fiscal years for which there were no
grant awards to
the Tribe under this program. The Grantee submitted
some documentation
pertaining to these expenditures and argued that they
would have been
appropriate expenditures if made under the grant program
in question.
4/ We agree with the Agency that it is immaterial whether
the Grantee
may have incurred expenditures in subsequent years which
would have qualified
for grant funds under the grant program in dispute
here. Inasmuch as
the unobligated funds were from the budget period
that ended on May 31, 1981
and no further grant awards under this
program were made after the project
period ended on March 31, 1982, the
Agency can require the Grantee to refund
the money; thus, none of the
unobligated funds could be lawfully used to pay
for these expenditures
made after the grant project had expired.
Moreover, to the extent the
Grantee is requesting a supplemental grant award,
this Board has no
authority to make an award of funds. Yakima Public
Schools, DGAB No. 81
(1980). As we just noted, the Agency can require
the unobligated
balance to be refunded. Notwithstanding the laudable
purposes for which
the Tribe apparently expended its funds in the succeeding
fiscal years,
we are aware of no basis for requiring the Agency to make a
retroactive,
supplemental grant award under the circumstances here.
.Conclusion
For the reasons discussed above, we sustain the Agency's disallowance
of
$85,308. 5/
________________________________ Donald
F.
Garrett
________________________________
Alexander
G. Teitz
________________________________
Cecilia
Sparks Ford Presiding Board Member
1. The Grantee had the opportunity under the Board's
procedures at
45 C.F.R. 16.8 to submit an initial brief and a reply brief
responding
to the Agency's submission; no reply was filed.
2. The regulations implementing this program are
contained in 45
C.F.R. Part 1336.
3. 45 C.F.R. Part 74 establishes requirements for the
administration
of grants awarded by HHS.
4. We note that the Agency construed the Grantee's
statement
concerning oral approval to retain the funds to argue that the
Agency
was estopped from taking this disallowance. Given the
Grantee's
unqualified statement as to the proper classification of these
funds, as
due OHDS, we think that the Grantee's argument is as we have
stated
above on page 2.
5. The Agency also required the return of any
interest earned on the
retained unobligated balance. Disallowance
letter, August 5, 1987. The
parties did not address this aspect of the
disallowance in their
submissions. We also uphold the disallowance to
the extent there was
interest earned on the retained funds. 45 C.F.R.
74.47(a).