1 On April 17, 1996, a
Secretary's Order was signed delegating jurisdiction to issue final agency
decisions under, inter alia, the Job Training Partnership Act of 1982, as amended, 29
U.S.C. §§ 1501-1791 (1988 and Supp. IV 1992), and the implementing regulations
at 20
C.F.R. Part 627, to the newly created Administrative Review Board. 61 Fed. Reg. 19978
(May 3, 1996). Secretary's Order 2-96 contains a comprehensive list of the statutes, executive
order
and regulations under which the Board now issues final agency decisions.
2 This case involves an audit for
grant expenditures during the period July 1, 1989 through June 30, 1992. Administrative file at
14,
42. Statutory guidelines for allowable expenditures under the Act that are applicable to this case
are
therefore those in effect prior to the amendments to the Act of September 7, 1992, Pub. L. No.
102-367, Title I, Subtitle B, § 117, 106 Stat. 1035. References to the regulations are for
those in
effect during the period covered by the audit except for regulations concerning procedures
pertinent
to the hearing before the Administrative Law Judge, which are accordingly noted.
3] We note the following
provisions
concerning limitations on expenditures of JTPA grant funds that are pertinent to the discussion to
follow. Section 629.38(a) provides these three categories of expenditures that are allowable
under
Section 108 of the Act: training, administration and participant support. 20 C.F.R. §
629.38(a);
see 29 U.S.C. § 1518. Expenditures under the JTPA must not only be allowable
under the Act but must also be properly allocated under one of the foregoing categories. 20
C.F.R.
§ 629.38(a); see OMB Circular No. A-87, 60 Fed. Reg. 26484, 26491 (May 17,
1995). Section 629.39 of the regulations implements the Section 108(a), (b) limits on the
percentage
of funds that may be expended under the administration category. 20 C.F.R. § 629.39;
see 29 U.S.C. § 1518(a), (b). Employment generating activities are allowable
under
the Act, 29 U.S.C. § 1604(19), but employment generating activities per se,
see discussion infra at II., may be charged only to the administration costs
category, see Order at 7-9 and authorities cited therein.
4 For references to the exhibits
of
record, we will follow the ALJ's example, R. D. and O. at 2 n.2, and abbreviate as follows: U.S.
government exhibit, GX; Complainant/TDOC exhibit, CX; Intervenor/MRGDC exhibit, IX. For
references to the hearing transcript, we will use "HT."
5 Of the $42,296 in costs that
were
at issue before the ALJ under Finding 2, the Grant Officer has challenged the ALJ's findings
regarding
only $17,869. See Gr. Ofcr. Initial Brief at 19-23;
R. D. and O. at 6-13. These costs are at issue under both Finding 2 and Finding 3. See
Gr. Ofcr. Initial Brief at 5 n.2; R. D. and O. at 15 n.12; GX 1 at 21.
6 As discussed infra,
EGA costs are allocable under the category of administrative costs and are therefore subject
to
the fifteen percent cap on administrative costs imposed under Section 108(a), (b) of the Act, 29
U.S.C.
§ 1518(a),(b). Order at 19 (citing Williams' deposition at 42-46); see 29 C.F.R.
§ 629.39(a)(1).
7 The Grant Officer testified that
an incubator center provides assistance through shared resources to developing businesses and
that
certain costs associated with the space and staff needed for such a center could qualify as
allowable
EGA under the Act. HT at 238-42. Paul Edwards, the Deputy Executive Director for MRGDC,
testified that his agency had worked on job creation and job development in a manner that
"could,
at some level, be defined as an incubator without walls," T. 506-07, 554-56, but he did not
testify that an incubator center had been established.
8 Edwards' description of an
incubator center, i.e., "a place where people come in with ideas for business,"
differs from the definition provided by the Grant Officer, "a center . . . set up wherein a
number
of businesses could be started, i.e. a start-up project for businesses and working in the center,
they may
share various types of services, such as receptionist, secretarial types of services, accounting
services,
. . . equipment, copy machines and so forth." HT at 238.
9 In view of the foregoing
disposition regarding the costs for the Bates/Balderas/Urbina contracts, we need not address
MRGDC's
contention, MRGDC Brief at 19, that the Grant Officer failed to properly raise an exception to
the
ALJ's finding in this regard in the Statement of Exceptions.
10 The total cost of the
University of Texas contract was $5,000; the Grant Officer determined, after issuance of the
Final
Determination, that only one-half of that cost was expended from JTPA funds. Gr. Ofcr. Initial
Brief
at 22 n.9; see R. D. and O. at 13; HT at 169-73.
11 The total amount of costs
for EGA charged to the PSC category that was disallowed in Finding 3 of the Final
Determination was
$822,257; this amount was reduced prior to hearing by the allowance of costs chargeable to the
training
category in the amount of $102,690. Gr. Ofcr. Initial Brief at 8 n.4; HT at 8; see R. D.
and O. at 15 n.12.
12 Also under Finding 3 of
the Final Determination, the ALJ reversed the Grant Officer's disallowance of EGA costs
charged to
the training costs category of Section 629.38(e)(1). R. D. and O. at 19-25. The Grant Officer
does
not challenge this aspect of the ALJ's decision. Gr. Ofcr. Initial Brief at 9 n.5.
13 The hearing in this case
was requested on April 12, 1994. GX 1 at 4. Section 636.10(g), as quoted supra, has
been in effect since 1993. The ALJ cited its predecessor provision, which was found at 20
C.F.R.
§ 629.57(i). R. D. and O. at 5. The two provisions are identical, except that
"Secretary" was referred to throughout Section 629.57(i) instead of "Grant
Officer."
14 The ALJ defined
prima facie case as "relevant evidence sufficient to enable a reasonable person to
draw from it the inference sought to be established,'" quoting from McCormick,
Evidence 789-790 (2d ed. 1972). R. D. and O. at 5. Although not noted by the ALJ, that
definition was also relied on by the court in State of Maine v. United States Dep't of Labor,
669 F.2d 827, 830 (1st Cir. 1982), which involved a grant officer's final determination under
the predecessor statute, the Comprehensive Employment and Training Act of 1973, Pub. L. No.
93-203, 87 Stat. 839 (1973)(repealed 1978).
15Greenwich Collieries
involved claims for benefits under the Black Lung Benefits Act, as amended, 30 U.S.C.
§
901 et seq., and the Longshore and Harbor Workers' Compensation Act, as amended, 33
U.S.C. § 901 et seq., and the application by DOL of the "true doubt
rule" to these claims. Under this rule, a finding by the ALJ that the conflicting evidence
was
equally probative was considered to give rise to "true doubt" which was to be
resolved in
favor of the claimant. The Court determined that this practice, which allowed the claimant to
win when
the parties' evidence was evenly balanced, was in conflict with Section 7(c) of the APA, which
requires
the successful claimant's evidence to preponderate. 114 S.Ct. at 2259.
16 In Quechan Indian
Tribe, the court concluded that the Secretary had established a violation of statutory
restrictions
on expenditures by a CETA grantee; the court concluded that the grantee spent grant funds on
"programs for which they were intended" but "failed to meet its burden of
proving
that certain specified administrative expenditures were made in furtherance of the grants'
purposes, and
also that program participants met the condition of eligibility." 733 F.2d at 736. In
First
Nat'l Bank of Bellaire, the court relied on the provision at Section 7(c) of the APA that the
proponent of a rule or order has the burden of proof to conclude that, although the Comptroller
bore
the burden to establish a violation of the lending limitations provided in 12 U.S.C. § 84,
the
bank bore the burden of establishing that the exception to lending limitations provided by
Section
84(13) was applicable. 697 F.2d at 683.
17 We reject the Grant
Officer's contention that the ALJ ruled, in the November 3, 1995 Order, that the Grant Officer
had
established a prima facie case. Gr. Ofcr. Initial Brief at 17. As urged by TDOC and
MRGDC, TDOC Brief at 4-5; MRGDC Brief at 12, the ALJ ruled only on the question of law
before
him regarding the interpretation of Section 108(b)(2)(A) of the Act as it pertained to evidence
that
would support a prima facie case of non-compliance with the JTPA. Order at 12.
18 The Grant Officer points
out, Reply Brief at 2-3, that MRGDC attempts to confuse the issues at hand regarding the
disallowance
of EGA costs charged to the participant support category by the grant recipients with the
question of
whether the EGA would otherwise qualify as an allowable cost under the administrative costs
category.
MRGDC Brief at 3-11. As indicated supra, expenditures for activities that directly result
in the placement of JTPA eligible individuals and participants into jobs, see R. D. and O.
at 6-7 (citing JTPA Conf. Rep. No. 97-889, Sept. 28, 1982 and 20 C.F.R. § 629.37(a))
qualify
as allowable EGA costs under the administrative costs category, subject to the fifteen percent
cap. To
be chargeable to the participant support costs category, on which there is no percentage cap,
however,
expenditures that would otherwise be considered EGA costs must be shown to have directly
benefitted
specific, identifiable JTPA participants or eligible individuals. Order at 7-10 and authorities
cited
therein.
19 The TDOC has been
renamed the Texas Workforce Commission since the initiation of this adjudication. See
TDOC Brief; Gr. Ofcr. Reply Brief at 4 n.3.
20 As indicated
supra at n. 5, the costs at issue under Finding 2 of the Final Determination were also at
issue under Finding 3. We have agreed with the Grant Officer that the $628,115 in EGA costs
that
were at issue in Finding 3 should be disallowed; of those costs, we have also agreed that the
$2,500
UT contract and the $8,444 JCL contract should also be disallowed on the additional basis that
those
costs do not qualify as EGA, as concluded by the Grant Officer under Finding 2.