Inter-Tribal Council of California, DAB No. 1596 (1996)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

SUBJECT: Inter-Tribal Council of California
Docket No. A-96-104
Control No. 09-92-007PD
Decision No. 1596

DATE: August 26, 1996

DECISION

The Inter-Tribal Council of California (ITCC) appealed
the determination of the Administration for Children and
Families (ACF) declining to reduce a disallowance of
$139,498.62 by the amount of $60,854, which ITCC argued
could be used to offset the disallowance.

For the reasons stated below, we sustain ACF's
determination that the $60,854 in tribal funds were not
available to offset the unallowable expenditures at issue
and, we affirm the disallowance.

BACKGROUND

ACF initially disallowed $147,312 based on a financial
review of ITCC's 1990-91 Head Start program. ITCC
appealed that disallowance to the Departmental Appeals
Board (Board) which affirmed the disallowance after
reducing the total disallowed amount. DAB No. 1418
(1993).

The facts relating to the original disallowance are set
out in DAB No. 1418. In that decision, the Board
concluded that ITCC had incurred unallowable costs in
operating its Head Start program during the period at
issue. The Board modified the amount of the disallowance
based on its finding and affirmed a total of $139,498.62.

No further administrative appeal is available as to that
decision. 1/

However, during that case, the Board determined that an
independent audit report reflected a transfer of funds
from tribal to corporate in the amount of $60,854 between
April 1, 1990 and December 31, 1990. DAB No. 1418,
at 19. ITCC represented in that case that this amount
constituted tribal funds in excess of the federal grant
award which it spent on its Head Start program, and ACF
did not dispute this characterization. Id. at 19, n.14.
The Board noted that, if these funds were not necessary
to meet required non-federal share, they could be applied
to unallowable costs and thereby be used to reduce the
amount of the federal funds disallowed (assuming they
were not restricted to specific costs and were applied to
allowable expenditures in the same period as the
unallowable expenditures which they would offset). Id.
at 19-21. The Board remanded to ACF to "determine the
extent to which the $60,854 has not yet been accounted
for." ITCC was permitted to return to the Board, if it
disagreed with ACF's determination on this issue, "for a
review of this limited calculation issue only." Id. at
21.

ACF determined that audit results showed that $60,854
"was in fact used to cover an overcharge to [ITCC's]
indirect costs for the period ending December 31, 1990."
ACF Determination Letter at 2. ACF stated that the
permissible indirect costs (at a rate of 5.73%) were
$56,279, but the audited indirect costs were $124,105.
The transfer of $60,854 offset most of the $67,826
difference, and ACF indicated that it chose not to pursue
disallowance of the remaining difference of $6,972.
However, ACF determined that, since the remanded amount
was already used to offset the overcharge of indirect
costs, it was not available to offset the disallowance of
unallowable costs.

ANALYSIS

Both ACF's determination and the Board's acknowledgment
of the appeal made clear that the only issue before the
Board is whether the $60,854 in tribal funds spent on
Head Start can be used to offset a portion of the total
disallowance. ACF Determination Letter at 2; Board
Acknowledgment at 2. ITCC was instructed in the
acknowledgment to submit its "complete argument about why
the decision appealed from is wrong . . . addressing
issues raised by the remand of the $60,854 only, and an
appeal file which contains any documents supporting" its
position. Board Acknowledgment at 2.

Nevertheless, the bulk of ITCC's submissions merely
consisted of arguments or documents relating to the
original disallowance, and were therefore irrelevant. To
the extent ITCC addressed the relevant issue of whether
the $60,854 in tribal funds were available to cover the
unallowable expenditures and hence offset a portion of
the disallowance, its argument was essentially that the
money had been spent, one way or another, on the Head
Start program. 2/ Even if we accept that all the money
was in fact spent on the Head Start program, however,
ITCC has completely failed to address the point made by
ACF, i.e., that the $60,854 in tribal funds spent on Head
Start were already used to account for an indirect cost
overrun. Since ITCC did not dispute ACF's specific
finding in this regard, we have no basis to conclude that
the $60,854 in tribal funds could be used to offset the
disallowance affirmed in DAB No. 1418.

ITCC also objected that the issue about the $60,854 "has
been in the system for three (3) years." ITCC Reply Br.
at 1. The possibility that these tribal funds might have
been spent in a manner that would permit an offset of a
portion of the disallowance was first raised in DAB No.
1418. In that case, the parties did not provide
sufficient information for the Board to reach a
conclusion. Therefore, the Board provided guidance to
the parties and remanded the issue for further
development. While it is true that the Board decision
was issued in June 3, 1993 and ACF did not issue its
determination on the remand until February 26, 1996, ACF
expressly waived interest on the remanded portion of the
disallowance for that period. ACF Determination Letter
at 2 (February 26, 1996). Therefore, the concern
expressed by ITCC that interest was permitted to accrue
before a decision was made is without foundation. Cf.
ITCC Appeal at 2.

CONCLUSION

For the above reasons, we uphold ACF's determination that
the $60,854 at issue on remand cannot properly be applied
to reduce the amount of the disallowance affirmed in DAB
No. 1418.

___________________________
Judith A. Ballard

___________________________
M. Terry Johnson

___________________________
Cecilia Sparks Ford
Presiding Board Member

* * * Footnotes * * *


1. We note that an unrelated matter involving the
termination of ITCC's Head Start grant which was also
appealed to the Board was resolved by the dismissal of
that appeal with prejudice on June 14, 1996.
2. It was not clear from ITCC's submissions in what
way the $60,854 at issue was actually spent. For
example, ITCC argued as follows: "Our Budget revisions
do not carry names on the budgets and this alone makes
for most of this $60,000.00 that is in controversy. As
you can see, this explains the half time for these
positions that ACF has based its answers on. The
expansion of 84 additional children in September mandated
all the time these employees could give to the Head Start
program. Each child and parent had to have a complete
file worked up and new sites and personnel had to be
trained." ITCC Reply Br. at 1 (exhibit references
omitted).