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CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
IN THE CASE OF  


SUBJECT: White Mountain Apache Tribe,

Petitioner,

DATE: September 20, 2001

             - v -

 

The Inspector General

 

Docket No. A-2000-103
Decision No. 1787
DECISION
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FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

The White Mountain Apache Tribe (Tribe) appealed a July 12, 2000 determination by the Administration for Children and Families (ACF) disallowing $86,432 in federal Head Start funding claimed by the Tribe from December 1, 1996 through November 30, 1997. ACF found that the Tribe had violated 45 C.F.R. 1301.20 by failing to meet the non-federal matching requirement. Specifically, the disallowance represented the shortfall in the Tribe's 20% non-federal matching requirement for the year in issue.

The record consists of the parties' briefs and evidentiary submissions. Based on the analysis below, we sustain this disallowance in its entirety.

BACKGROUND

A. Law

The Head Start Improvement Act of 1992, Public Law No. 102-40, provides in section 2(c) that "[f]inancial assistance extended under this subchapter for a Head Start program shall not exceed 80 percent of the approved costs of the assisted program or activities," and gives the Secretary the authority to reduce the required non-federal share below 20% if he determines that certain circumstances are present. 42 U.S.C. 9835(b). The applicable regulations at 45 C.F.R. 1301.20(a) provide that "Federal financial assistance granted under the act for a Head Start program shall not exceed 80 percent of the total costs of the program" except in certain circumstances. (The regulations have not been amended to reflect the Secretary's expanded authority under the Head Start Improvement Act of 1992 to reduce the required non-federal share.) The regulations further provide:

(b) The non-Federal share will not be required to exceed 20 percent of the total costs of the program.

In addition, Department-wide regulations contain requirements for cost sharing or matching which applied here pursuant to 45 C.F.R. 1301.10. Section 74.23 of 45 C.F.R. provides in pertinent part:

(a) To be accepted, all cost sharing or matching contributions, including cash and third party in-kind, shall meet all of the following criteria:
(1) Are verifiable from the recipient's records;
(2) Are not included as contributions for any other federally-assisted project or program;
(3) Are necessary and reasonable for proper and efficient accomplishment of project or program objectives;
(4) Are allowable under the applicable cost principles;
(5) Are not paid by the Federal Government under another award, except where authorized by Federal statute to be used for cost sharing or matching;
(6) Are provided for in the approved budget; and
(7) Conform to other provisions of this part, as applicable.

B. Facts

The facts of this case are undisputed. Tribe Reply Br. at 1. During the period December 1, 1996 through November 30, 1997, the Tribe received $1,300,799 in federal Head Start funding, expending $1,245,818 of that amount. As part of its grant, the Tribe was required to provide non-federal matching funds totaling at least 20% of the project cost. An independent audit for the period in issue revealed that the Tribe provided $203,415 in non-federal matching funds.(1) ACF Br. at 1-2.

In its opening brief, a letter dated November 8, 2000, the Tribe maintained that it had made additional in-kind contributions that were "more than enough . . . to cover the questioned cost." Specifically, the Tribe asserted that the total cost of lease payments it had made for the "five buildings" occupied by its Head Start program was sufficient to satisfy the shortfall in its matching requirement. Tribe Br. at 1.

As a result of discussions with the independent auditors, ACF learned that the Tribe actually owned the building for which it claimed lease payments. Consequently, ACF notified the Tribe that it could not claim what in essence would be a lease payment to itself as part of the non-federal match. Rather, under the applicable guidelines, the Tribe could only claim a use allowance or depreciation for its facilities used for grant purposes. See Office of Management and Budget (OMB) Circular A-87, Att. B, 15 (made applicable by 45 C.F.R. 92.22(b)). ACF indicated that it would be willing to apply a depreciation or use allowance to reduce the disallowance if the Tribe could produce documentation proving that the Head Start program was the sole occupant of the building at issue during the period of the disallowance and that the building was not built with federal funds. ACF Br. at 2-3; Tribe Letter to ACF and the Board (December 29, 2000), Att. C.

The Tribe argued that ACF's position on what was available to the Tribe as non-federal match was overly narrow. The Tribe maintained that OMB Circular A-87 did not restrict what can be claimed as match, but merely provided one way for an Indian tribe to meet its match. The Tribe then pointed to several Executive Orders (Nos. 13175, 13083 and 13132) which, it asserted, when read together required ACF to engage in a "government-to-government relationship with each Indian nation." The Tribe took the position that this relationship included the "fair resolution, without litigation or prosecution, of grant compliance disputes." The Tribe argued that Indian nations must be given the benefit of the doubt and of governmental cooperation when referencing federal mandates, laws and regulations. Tribe Supplemental Br. at 1-3 (February 6, 2001).

Following submission of its brief and discussions with ACF, the Tribe elected to pursue the depreciation or use allowance and agreed to produce documentation acceptable to ACF to receive such a credit. A depreciation or use allowance is a method of allocating the cost of a fixed asset to periods benefitting from asset use. OMB Circular A-87, Att. B, 15 a. The depreciation or use allowance would have allowed the Tribe to offset against the disallowance up to two percent of the cost of the building in question. Id. at 15 d. Subsequently, however, the Tribe indicated that a December 1993 fire had "irreparably" destroyed the documentation necessary to satisfy ACF. Nevertheless, the Tribe maintained that it owned the building, the Head Start program was the sole occupant and non-federal funds were used in construction. The Tribe then offered to provide "a sworn affidavit" to that effect as "adequate legal evidence" to justify a reduction of the disallowance. In the alternative, the Tribe asked the Board to waive the entire $86,432 disallowance. Tribe Second Supplemental Br. at 2-3 (June 8, 2001).

Subsequently, ACF stated that "[i]n view of the unusual nature of the Tribe's situation," it would accept the Tribe's proposed supplemental documentation "if it were coupled with a statement by the Tribe's Head Start Director that it had used the facility on which it was claiming a user fee for housing the Head Start program during 1996-7." ACF Letter to the Board (July 16, 2001).

The Tribal Chairman provided a letter in which he reiterated, with qualifications,(2) that the building in question was owned by the Tribe, built with non-federal funds, and occupied only by the Head Start program for the period in issue. Although this letter did not appear to be what ACF requested, the Tribe nevertheless requested that the disallowance be reduced by $14,400 (2% x $720,000 building cost). The Tribe indicated that it would repay the remainder, $72,032 ($86,432 - $14,400), of the disallowance. The Tribe also asked that any interest which had accumulated on this final amount (i.e., the $72,032) from the date of its notice of appeal be waived as considerable time was spent by both parties to this appeal gathering information requested by the Board. Letter from Dallas Massey, Sr. (July 13, 2001).

ANALYSIS
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The central issue for our consideration is whether the Tribe has adequately documented a use allowance in order to reduce the shortfall in its non-federal share. Further, the Tribe has also requested that the Board waive the interest accumulating on what would be the remaining disallowance, if the depreciation or use allowance applied, from the time it filed its appeal, if not the entire disallowance.

There is no relief available to the Tribe. A grantee bears the burden of documenting its expenditure of federal funds. See, e.g., Texas Migrant Council, Inc., DAB No. 1743 at 4 (2000); Ute Indian Tribe, DAB No. 1739 at 4 (2000); Child Opportunity Program, Inc., DAB No. 1700 at 1 (1999). This principle is equally applicable to amounts claimed as non-federal share. See, 45 C.F.R. 74.23. Here, ACF was willing to accept a sworn statement by the Tribal Chairman regarding the source of funding for construction of the building in issue, coupled with a statement from the Tribe's Head Start Director that the program was the sole occupant of the building during the period in question.

The Tribe produced nothing justifying a reversal of any portion of this disallowance. The Tribe produced only identical, unsworn statements from its Chairman and the Head Start Executive Director, even though ACF requested affidavits. Further, these statements were prepared in the course of litigation in which the Tribe was a participant. By agreement of the parties, the statements were meant to take the place of records documenting the Tribe's position. Thus, the unsworn and "informal" nature of the statements and the equivocal nature of their contents render them insufficient support for any non-federal share amount. The Tribe submitted nothing from which ACF could reasonably conclude that credit for depreciation or a use allowance was appropriate.

The Tribe also requested that we waive the interest accumulated on the remainder of the disallowance after applying credit for depreciation or use allowance and, at an earlier stage in the proceedings, asked that we waive the entire disallowance.

This Board has long held that we decide only the merits of disputes between parties and that we have no authority to waive a disallowance. North Central West Virginia Community Action Association, Inc., DAB No. 1604 at 5 (1996); Guam Dept. of Public Health and Social Services, DAB No. 1050 at 8 (1989).

Similarly, we do not have the authority to waive any interest which may accumulate on a disallowance. Interest itself is not part of the disallowance. Once the Board concludes that there is a valid debt, the Federal Claims Collection Act regulations at 45 C.F.R. Part 30 provide a separate process for the Secretary (or his designee within an operating division or regional office) to determine how the debt should be repaid. United Maine Families, DAB No. 1707 at 5-6 (2001). Nothing in this decision precludes the Tribe from engaging in discussions to resolve its indebtedness with the appropriate operating division of ACF.

Finally, the Tribe's reliance on the interrelationship of several Executive Orders affecting treatment of Native Americans is misplaced. The Board has previously noted that there is authority for the proposition that any statute meant to benefit Native American tribes should be construed liberally in favor of the tribes. See Arizona Health Care Cost Containment System, DAB No. 1779 at 8-9 (2001). Here, however, no such statute is at issue. The Tribe entered into a grant relationship with ACF involving Head Start, a program intended to benefit low-income children generally. In doing so, the Tribe bound itself to comply with all applicable program laws and regulations governing both its use of federal funds as well as the resolution of program disallowances.

CONCLUSION

Based on the preceding analysis, we sustain ACF's disallowance of $86,432.

JUDGE
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Donald F. Garrett

Cecilia Sparks Ford

Marc Hillson
Presiding Board Member

FOOTNOTES
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1. The Tribe's match was comprised of $45,422 in volunteer services and $157,993 in contributed indirect costs.

2. The Tribal Chairman noted that his assertions were made "[t]o the best of . . . [his] recollection as a member of the community" and not based on written records. Further, his statement was "subject to retraction should he or any other federal agent or tribal employee locate any written document which illustrates that federal funds were used . . . ." Letter from Dallas Massey, Sr. (July 13, 2001).

CASE | DECISION | ANALYSIS | JUDGE | FOOTNOTES