GAB Decision 011
December 3, 1975 Health Maintenance Organization of South Carolina,
Charleston, South Carolina; Docket No. 25; Grant No. 04-P-0000053-03
Bernstein, Bernice; Dukes, David DeGeorge, Francis
The issue in this case is whether under the circumstances of this
case, this grant should have been terminated by the Administrator of the
Health Services Administration.
BACKGROUND
The grant was terminated on the basis of both administrative and
programmatic considerations after evaluation by a Panel convened for
that purpose. The Panel had recommended termination in accordance with
12 major findings made by it which are:
1. The grantee lacked an adequate accounting system.
2. The grantee used 1974 grant funds to pay $42,922 in expenditures
incurred during the 1973 grant period in violation of applicable policy.
3. The grantee made excessive and otherwise improper payments for
salaries including bonuses, sudden increases in base salary of
employees, clothing allowances for a secretary and payments to an
individual who did not perform any work on the HMOSC grant.
4. Payment of entertainment expenses of a public relations
representative was made from grant funds.
5. The grantee had inadequate personnel records.
6. The grantee lacked a written travel policy and failed to comply
with standardized government travel regulations.
7. The grantee leased more space than required for project
operations and subleased space to Management Services, Inc. of South
Carolina from July, 1973 to February, 1974 for less than its cost to the
HMOSC. (Grantee officers had a financial interest in Management
Services, Inc. of South Carolina).
8. The grantee paid insurance premiums on the life of a principal
officer of HMOSC in violation of applicable policy.
9. The grantee charged interest charges, documentary fees, and
stamps on loans to grant funds in violation of applicable policy.
10. the grantee transferred a camera purchased with grant funds to
an employee without placing funds from the sale into the grant account.
11. The grantee paid for meals for employees at local restaurants
out of grant funds.
12. The grantee failed to make substantial progress toward the
accomplishment of the purposes for which the grant was awarded.
In addition to these specific findings of the Panel which recommended
termination, there were other specific serious findings of both the
General Accounting Office and the HEW Audit Agency some of which were
cited by that Panel but many of which were not there treated.
The grantee, in his appeal, gave a very general rebuttal to some
charges and admitted others. Accordingly he was invited to respond in
more specific detail. The grantee was also specifically requested to
provide written responses to the GAO Audit and the HEW Audit Agency
audit reports and to provide a response to the GAO comments on the
grantee's attack of the GAO made in the original appeal document plus
briefing on any additional matter he might wish. The grantee responded
by restating his arguments against the GAO Audit in a general way but
refused to respond with specific evidence on the various charges made,
preferring instead to "incorporate by reference thereto all prior
responses both written and oral."
DISCUSSION
In appealing this case the grantee initiated a process whereby he
proposed to prove the PHS actions wrong. When asked to dispute "in
detail each specific charge you wish to challenge" in the GOA and HEW
audits he responded basically by referring to unidentified previous
written responses which he did not submit to the Board but which the
Board believes may refer to an undated, unsigned document addressing in
a general way some of the audit findings handed in by the grantee during
the hearings conducted by the termination Panel, and to unidentified
previous oral responses whose utility to the Board is unfathomable. The
Board notes that the grantee did not avail himself of his opportunity at
an earlier stage to respond to the audit exceptions at the invitation of
the HEW Audit Agency.
The Board does not consider itself bound by the views of the
termination Panel and in some respects its own findings would have been
more adverse to the grantee than those of the termination Panel.
On the basis of the record submitted, enough of the findings of the
termination Panel are conceded or clearly established to conclude that
termination is warranted.
Taken together the grantee's behavior shows a pattern of disregard of
basic grant requirements and a pattern of violations that involved
special benefits to employees, officers, and organizations connected
with the officers which amply justified termination. These are found
against a background of a basic lack of sound management practices and
controls, lack of an adequate accounting system accompanied by serious
violations of fund accounting rules, and lack of travel policies
accompanied by a serious violation of travel rules. For purposes of
exemplification some of the charges the Board concluded were true
included:
- A public relations representative was paid in excess of her
approved salary.
- A camera was purchased without authorization and then transferred
to an employee without the proceeds going to the grant account as is
required.
- Travel vouchers were not submitted and excessive advances were not
accounted for.
- Grant funds were used to pay the transportation costs of the
members of the corporate officers families.
- Toys were purchased out of travel funds for an employee's child.
- First class air transportation was used routinely in violation of
government policy.
- An employee was paid a weekly travel allowance whether he traveled
or not.
- Duplicate payments for travel were made.
- Personnel paid for out of grant funds devoted their efforts to a
separate organization incorporated by officers of the grantee. The same
organization was the beneficiary of an arrangement under which it sublet
space from the grantee for less than the pro rata cost of the space to
the grantee.
- Fire insurance premiums, life insurance premiums, and interest
costs were paid from grant funds in violation of explicit government
policies.
We find that on the basis of evidence of improper administration of
the grant funds provided, this termination was reasonable and amply
justified.
DECISION
The decision in favor of termination, supported by the program
office, and the special Panel established to consider the case, and made
by the Administrator of the Health Services Administration is sustained.
OCTOBER 04, 1983