GAB Decision 007
November 1, 1974 Tulane University; Docket No. 2 Malone, Thomas;
Dukes, David Van Orman, William
This is an appeal pursuant to 45 CFR Part 16 from a determination
made by the Social and Rehabilitation Service after reviewing HEW
audit-AC #06-30046 to sustain the findings of improper transfer of
salary charges to avoid overdrafts. The undersigned members of the
Grant Appeals Board have been designated as a panel of three for the
disposition of the instant case. This decision is made on the basis of
documents submitted to the Board.
BACKGROUND
On January 8, 1973 the HEW Audit Agency transmitted to Tulane
University a copy of its report on the review of DHEW grants and
contracts for the period July 1, 1968 through June 30, 1971 to Tulane
University. The purpose of the audit was to determine that costs
claimed were reasonable, allowable and allocable under the applicable
cost principles, OMB Circular A-21.
The auditors concluded that the University was transferring salary
and other costs between Federal grants in order to avoid deficiencies
caused by overruns or for other reasons of convenience.
As a result of this audit, the Director of the Division of Project
Grants Administration, SRS, wrote the grantee on June 20, 1973
disallowing $576 of costs on grant SRS-296T-69-0 for improper transfer
of salary charges and $1,844 of costs on grant VRA-44-P-30043/6-08 for
improper transfer of salary charges. The University is appealing this
SRS determination on the basis that retroactive transfers, per se, do
not constitute a deliberate effort to avoid overdrafts.The University
does not dispute the fact that retroactive transfers were made.
FACTS
1. The auditors contend that $1,844 was transferred from a PHS grant
to a VRA grant three months after the PHS grant had expired.
(2) 2. The grantee contends that the retroactive transfer was made
because of an internal breakdown related to the changing of account
numbers and that the PHS grant was not overdrawn but was underspent by
$3,878 which was returned to the government. In addition the grantee
states that the figure for the transfer given is incorrect and should be
$1,956.57.
3. The auditors contend that $576 was transferred from an OE grant
to an SRS grant three months retroactively and two months after both
grants had expired.
4. The grantee contends that during budget preparation clerical
error resulted in salary being charged to an OE grant that should have
been charged to the SRS grant. The error caused the overdraft and the
correction of the error eliminated the overdraft. In addition the
grantee states that the amount transferred was $383.98, not $576.
5. Section C4.b of Circular A-21 provides that any cost allocable to
a particular research agreement under the standards provided in the
circular may not be shifted to other research agreements in order to
meet deficiencies caused by overruns or other fund considerations, to
avoid restrictions imposed by law or by terms of the research agreement
or for other reasons of convenience.
DISCUSSION
Applicable cost principles provide essentially that costs charged to
a project must be allocable to that project. One means of assuring this
is contained in Section C.4.b. of Circular A-21 which prohibits the
shifting of cost to other agreements to avoid overruns or for other
reasons of convenience. Any rebudgeting therefore, especially
retroactive, which results in the avoidance of cost overruns must be
carefully considered.
The two disallowances involve two different grants and essentially
different circumstances.
In one case, grant 44P30043/6-08, the retroactive transfer of
approximately $1,844 was made from a grant on which $3,878 was returned.
This does not seem to indicate that the transfer was made to avoid an
overdraft on the PHS grant. Even if the transfer were not made, no
overdraft would result.
(3) In the case of SRS-29T-69-0 however, the retroactive transfer did
result in an overdraft being avoided. In such cases we believe the
burden of proof is on the grantee to establish that the purpose of the
transfer was not to avoid the overdraft. Any other position on our part
would render section C.4.b. of Circular A-21 almost meaningless and
certainly unenforceable.
DECISION
The appeal as it relates to grant 44P-30043/6-08 is sustained. The
appeal as it relates to grant SRS-296T-69-0 is denied and after
verification of amount by SRS the appropriate amount shall be returned
to the government in the manner prescribed by SRS.
OCTOBER 22, 1983