DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: Narragansett Indian DATE: September 22, 1989 Tribe Docket
No. 87-195 Audit Control No. CIN A-01-87-06670 Decision
No. 1103
DECISION
The Narragansett Indian Tribe (Grantee/Tribe) appealed a decision by the
Office of Human Development Services, Administration for Native
Americans (ANA, Agency), to disallow $210,680 based on an audit report
for two fiscal years ending June 30, 1985. This appeal initially
involved ANA Grant Nos. 90NA0213/01 and 90NA0074/03. However, during the
Board proceedings the parties resolved their dispute with regard to all
the disallowed costs except for $145,834 attributable to the Tribe's
failure to document the full 20 percent non-federal share required for
Grant No. 90NA0074/03.
In our discussion, we examine the Tribe's contention that it was not
actually the recipient of Grant No. 90NA0074/03 and is, therefore, not
accountable for the disallowance resulting from the non-federal share
deficiency. We conclude that the Tribe, which submitted the application
for assistance and was named as the recipient on the notice of grant
award, was the recipient of the grant. We reach this determination
notwithstanding the fact that a tribally controlled corporation, which
the Tribe asserted was the actual recipient, was involved in operating
the grant program on the Tribe's behalf. In light of the Tribe's
concession that it could not properly document the required non-federal
share amount, we also uphold the disallowance of $145,834.
Before proceeding to the discussion, we first summarize the somewhat
unique procedural history of this case. As we explain in greater detail
below, after numerous time extensions and stays, the parties were
ultimately unable to agree on how the Grantee could account for the
amount disallowed based on the non-federal share requirement.
Consequently, the parties could not settle that part of the case. It
was only at this point that the Tribe asserted that it was not in fact
the recipient of the grant and was not financially responsible for the
non-federal share deficiency. Although ANA did not object to the
Tribe's raising this issue, and both ANA and the Board have fully
considered it, the fact that it was raised late in an already lengthy
proceeding serves to undercut the legitimacy of the Tribe's argument
that it was not the grant recipient.
PROCEDURAL HISTORY
Throughout the pendency of this appeal, the Board granted numerous time
extensions or stays to permit the parties a full opportunity to address
the issues and to seek to a mutually agreeable settlement. Below, we
detail some of the more significant aspects of the procedural background
as an aid to understanding the context in which we consider and decide
the remaining substantive issues.
This case was filed in late l987. By May of l988, the parties had
resolved all the disallowed amounts except for the $145,834 disallowed
based on ANA's determination that the Tribe had failed to document the
full 20 percent non-federal share for Grant No. 90NA0074/03. From May
to September 1988, the Tribe consistently indicated to the Board that a
settlement of this remaining issue was pending because it did not
dispute the debt. The Tribe indicated that it was attempting to
negotiate an acceptable repayment plan. The Agency did not object to
the Tribe's efforts in this regard. However, the Agency finally wrote
to the Board on September 26, 1988, and indicated that its position was,
essentially, that the Tribe owed the Federal Government $145,834 and
that, since the Tribe had conceded that it owed the debt, the Tribe had
to pay this amount. The Agency explained that the grant at issue was
closed and, as a result, the Tribe could not add the amount owed to a
current grant.
Thereafter, on October 20, 1988, the Board convened a telephone
conference "to clarify what remained at issue in this case." The
Tribe's Director of Finance stated:
We are taking a position that we do have the option of meeting the
lack of matching funds in a prior period with matching funds in a
current period and the issue of whether we have a grant currently
or not has been a sticking point. . . . The non-federal share
amount was not documented properly. We agree with that assessment.
Our disagreement is as to the remedy at this point, but we agree
with that assessment.
During this call, the Tribe agreed to send the Agency a letter, with a
copy to the Board, stating that no issue, other than the one of
repayment, remained in this case. The next day, the Board confirmed the
call and the agreed upon procedures. The Tribe failed, however, to make
this submission.
By telephone on November 17, 1988, the Tribe's Finance Director stated
to the Board that the Grantee's auditors had subsequently indicated that
it had other funds, that were available during the disallowance period,
that could reduce the amount owed by the Tribe. The Tribe's
representative stated that the Tribe wanted an opportunity to submit
documentation of those funds to the Agency. On the same day, the
Agency's Discretionary Grants Management Branch Chief stated that, while
he had not received any paperwork at that point, if those funds existed,
they might be applicable to the disallowance. The Tribe, by letter
dated December 12, 1988, stated:
We have required the assistance of our CPA firm to verify our
analysis of payroll expenses during that period, and this has
caused some delay in our getting the material to [the Agency's
Discretionary Grants Management Branch Chief]. We hope to have the
material in finished form and ready for submission to DHHS within
10 days.
The Tribe did not make that submission until February 10, 1989. The
Agency reviewed the material and determined that the documentation
submitted by the Tribe had no bearing on the current disallowance. The
Tribe did not dispute the Agency's conclusion. The Board then convened
another telephone conference, on April 6, 1989, to discuss why this case
had not closed out as expected.
During the April 6 conference, the Tribe raised a new issue. During
this call, the Chief Sachem stated:
Our legal counsel has advised us not to make an admission as to
this [non-federal share] amount. As a matter of fact, if I
recall correctly the grantee at that time was not the same as
the Tribe. The grantee, the grant was made to The Education
Project, Inc., not to the Narragansett Indian Tribe. We contend
that we weren't the recipients of this grant.
In response to this, the Agency's attorney noted that the Tribe was
raising a totally new issue which the Agency would need to consider.
She also stated the Agency's understanding that the parties had agreed
that the Tribe was accountable for the non-federal share deficiency.
The Board then set a briefing schedule and held a final telephone
conference to permit the parties to address the Tribe's new contention.
DISCUSSION
ANA awarded Grant No. 90NA0074-03 to the Narragansett
Tribe, so the Tribe isaccountable to the Federal Government.
The Tribe argued that the Narragansett Tribal Education Project, Inc.
(Education Project) was the recipient of Grant No. 90NA0074/03 and is
the entity solely responsible for any discrepancies in that grant. The
Tribe maintained that the Education Project is a Rhode Island
"non-profit organization, with a Federal Employe[r] Identification
Number 1-05-036-8497-A1, separate from that of the Narragansett Indian
Tribe," which "has the right to sue and be sued." Tribe's April
18,
1989 submission. Further, the Tribe asserted that the Education
Project, as the recipient of the grant, should be the entity charged
with all the responsibilities of administration of the grant and all
accountability for federal funds.
While the Agency explained that either the Tribe or the Education
Project would have been eligible for the grants in question in this
case, because both were existing non-profit corporations, the Agency
argued that the grants in question were awarded to the Narragansett
Tribe, regardless of what Tribal entity subsequently utilized the funds.
We agree.
The Education Project's Articles of Association, which the Tribe
submitted, provide, in relevant part:
Said corporation is constituted for the purpose of carrying out
the educational, charitable, religious, scientific and literary
work of the Narragansett Tribe of Indians [emphasis added] . . .
.
Tribe's April 18, 1989 submission,
p. 5of Attachments.
In addition, the by-laws of the Education Project provide in Article II
that:
Section 1. All voting right in the corporation shall be vested
in the Narragansett Tribe of Indians. Section 2. Voting rights
of the Narragansett Tribe of Indians shall be deemed to be
properly exercised when exercised by the duly authorized
officers of that tribe.
Agency's August 9, 1989 submission, Tab
B.
Further, the "HISTORICAL NARRATIVE STATEMENT" of the Tribe describes
the Education Project as the Tribe's "business arm." Agency's August
9,
1989 submission, Tab G, p. 3.
Accordingly, we find that the Education Project, while it may be a
separate non-profit corporation, is controlled by the Tribe and was
formed specifically as the Tribe's business arm. Further, we find that
the Education Project's purpose is totally focused on activities that
exclusively benefit the Tribe. It was not designed to benefit Indians
in general.
Moreover, we find that the Agency has provided conclusive evidence that
the grant in question was awarded to the Tribe. Although the record
contains many references to the Education Project and a number of
financial status reports or other submissions from the Tribe in
connection with the grant were made in the Education Project's name, all
that is consistent with the Education Project's role as an
organizational unit charged with carrying out activities in the
performance of the grant on the Tribe's behalf (and may simply show a
lack of precision in making written reports to the Agency). The
applications for assistance filed in connection with Grant No.
90NA0074/03 list the "Narragansett Tribe" in Block 4 as the Applicant
and both the "Narragansett Tribal Education Proj. Inc." (primary
application) and the "Narragansett Tribal Planning Dept." (application
for Amendment 1 to the grant) in Block 4 as the Organizational Units.
Both applications identify as the type of applicant in Block 8, item J,
Indian Tribe. The Notices of Financial Assistance Awarded for this
grant all list as the Recipient Organization (Block 10) the following:
Narragansett Tribe Narragansett Tribal Education Route 2
Kenyon, RI 02835 George R. Watson, Chief
Agency August 9, 1989 submission, Tab E.
As the Agency stated:
In the case now before the Board, the Respondent Agency
consistently directed [Notice of Financial Assistance Awards] and
Approval/Negotiation Sheets to the Tribe (Attachment, Tab E),
listing the tribes Internal Revenue "Employer Identification
Number," whenever appropriate. Moreover, Attachment, Tab F,
contains two Authorizations for Release of Funds under grant
#90NA0074, specifically naming the grantee as the Narragansett
Tribe.
Agency's August 9, 1989 submission,pp.
3-4.
The Tribe has not previously evidenced any objection to its grantee
status. Moreover, the Tribe never alleged that it did not, or could
not, cash any of the "checks" it received as a result of the Agency's
Authorizations for Release of Funds. See Agency's August 9, 1989
submission, Tab F.
Moreover, we find that 45 C.F.R. 74.3 (1983) is applicable to this case
and particularly relevant when read in conjunction with the foregoing
information. Section 74.3 provides, in relevant part:
The grantee is the entire legal entity even if only a particular
component of the entity is designated in the award document. For
example, a grant award document may name as the grantee an agency
of the State, or one school or campus of a university. In these
cases, the granting agency usually intends, or actually requires,
that the named component assume primary or sole responsibility for
administering the grant-assisted project or program. Nevertheless,
the naming of a component of a legal entity as the grantee in a
grant award document shall not be construed as relieving the whole
legal entity from accountability to the Federal Government for the
use of the funds provided.
Based on the foregoing findings, notwithstanding the Education Project's
role in operating the grant program on the Tribe's behalf, we conclude
that the Tribe is the entity awarded the grant involved in this appeal
and is, therefore, the recipient of the grant. Thus, the Tribe is
accountable for the disallowed amount. The Grantee must
document its full 20 percent non-federal share amount.
Section 1336.52(a) of 45 C.F.R. provides, with limited exceptions not
applicable here:
Federal financial assistance shall not exceed 80 percent of the
approved cost of the assisted project. . . .
Section 74.53(d) of 45 C.F.R. provides, in relevant part:
Records. Costs and third-party in-kind contributions counting
towards satisfying a cost-sharing or matching requirement must be
verifiable from the records of recipients or cost type contractors.
These records must show how the value placed on third-party in-kind
contributions was arrived at. To the extent feasible, volunteer
services shall be supported by the same methods that the
organization uses to support the allocability of its regular
personnel costs.
As noted above, the Tribe never asserted that it could document the
required 20 percent non-federal share of the total grant (project) cost.
Conversely, the Tribe admitted that, in fact, it did not properly
document the required non-federal share amount and that the only issue
remaining was repayment. October 20, 1988 Telephone Conference,
confirmed in the Board's October 21, 1988 letter to the parties.
Finally, in the telephone conference call to close the record in this
case, on August 23, 1989, the Board asked the Tribe what its response on
this issue would be, assuming the Board found that the Tribe was the
grantee. The Tribe simply stated that it would maintain that it is not
the grantee. The Tribe never directly contradicted or withdrew its
earlier admission. Moreover, there is no basis in this record to
conclude that the Tribe could in fact document the non-federal share at
issue. Therefore, based on the Tribe's previous admission on this issue
and the applicable regulations, we uphold the disallowance.
CONCLUSION
Based on the foregoing, we uphold the disallowance in full.
_________________________________
Judith A. Ballard
_________________________________
Norval D. (John) Settle
_________________________________
Cecilia Sparks Ford Presiding
Board