Gab Decision 046
September 11, 1978 Afro-American Cultural Education Center, Inc. Docket
No. 76.1 DeGeorge, Francis; Dukes, David Miles, Theodore Panel Chairman
I. History of Case
This case involves an appeal by the Afro-American Cultural Education
Center, Inc. ("Center" or "Grantee") from the disallowance
by the Office
of Education ("OE") of five items in the grant for fiscal year 1975,
No.
OEG-9-74-0093. The grant had originally been made to the Greater Los
Angeles Urban Coalition ("Coalition" or "original Grantee")
for the
training of teachers who would be assigned to inter-racial classes in
the Los Angeles School System. The training was done by Center as a
component of the original grantee, with day-to-day administration by Mr.
James Kendricks under the overall supervision of the director of
Coalition. A dispute arose between Kendricks and Coalition, and in
December of 1974 he was terminated as an employee of Coalition. He
brought an action in state court to be reinstated, which was settled on
the following terms, relevant here, with the concurrence of OE:
1. The grant was transferred from Coalition to Center, effective 2/
1/75.
2. Center would be authorized to make disbursements with regard to
accrued leave balances of transferred employees and items ordered prior
to the date of the transfer, but delivered thereafter.
OE subsequently disallowed the following items under the grant to
Center. The first was a payment by grantee of $3,152 to Mr. Kendricks,
which has variously been described as accrued leave and/or termination
pay or salary for work performed between December 13, 1974 (the date of
his dismissal by Coalition) and January 31, 1975 (the last day Coalition
had the grant under the settlement agreement).
The second amount disallowed was $1,900 attributable to accrued leave
owed to Center's treasurer, Mr. Walker, based on his period of
employment by Coalition prior to the transfer. The third item was
$1,125 attributable either to pre-transfer accrued leave or to work
performed after the transfer by two instructors, Britton and Dixon. The
fourth item was a payment of $1,196 to IBM for lease of a typewriter
from November 1974 to June 1975. The fifth and final item was $3,400
listed as consulting fees to Kendricks and Walker for services to the
project after the transfer of the grant to Center.
An Order to Show Cause was issued by the Board in October of 1976,
and the responses to that Order presented alternative explanations of
certain of the items set forth above. The first item was initially
described as accrued leave, but after OE argued that Kendricks was not a
"transferred employee" within the meaning of the settlement, grantee's
second position was that the payment reflected both accrued leave and
salary due for work performed prior to the transfer. With respect to
the second item, Walker initially withdrew $1,900 which he claimed was
owed as accrued leave. The original grantee gave Walker a check for
$1,100 for his accrued leave, whereupon Walker returned $1,100 to the
project account, keeping the other $800. The Board, in evaluating the
responses to the Order to Show Cause, issued an Interlocutory Decision
which disposed of several issues and invited the parties to brief a
number of questions regarding the various items. OE submitted a timely
response to the invitation to brief. The copy of the decision intended
for grantee's counsel was originally misdelivered, and a second copy was
sent. However, grantee never responded to the invitation to brief
contained in the Order.
The Board is concerned about striking a balance between excessive
inquiries and the need to reach its decisions on the basis of good
information. In addition, the Board is conscious of the limited
resources of a number of grantees, and is reluctant to decide questions
by default which might be decided the other way if fully presented. On
the other hand, we now have in this case an initial appeal, a response,
two responses to an Order to Show Cause, and one response to an
invitation to brief. In the following we have disposed of the issues to
the maximum feasible extent on the basis of uncontested information in
the case file or on grounds which would not be affected by the last
round of briefing. In a few instances, the inferences from material
already submitted were adverse to Grantee, and we believe we are free,
and indeed required, to take the failure to respond into account in
deciding such questions.
II. Decision
With respect to the first item, we previously ruled that the item was
properly disallowed to the extent that it reflected salary due for
pre-transfer services. OE provided a verified recapitulation of
Kendricks' salary history under the grant to Coalition (the Birdsall
affidavit) which indicated that Coalition had paid Kendricks all salary
and accrued leave due from July 1, 1974 to December 13, 1974. It is not
clear from the language of the Original Grantee's Personnel Policies
whether the applicable leave policy ("use or lose" after 12 months)
referred to calendar years or fiscal years. Given the nature of
Coalition's activities, it is most likely that it referred to fiscal
years. The Birdsall affidavit accounting for leave due Kendricks is
consistent with that interpretation. (Coincidentally, we note that the
amount disallowed, $3,152, is about what Kendricks' salary would have
come to from 12/13/74 to 1/31/75, while an additional two weeks of
accrued leave, if owed, would have only been $989.58.)
Accordingly, we affirm the disallowance of item 1. (We do not reach
the question of whether Mr. Kendricks was a "transferred employee"
within the meaning of the settlement.)
With respect to the second item, accrued leave of Mr. Walker, since
he paid back $1,100, the only amount currently at issue is $800. As is
the case with Mr. Kendricks, the affidavit submitted by OE indicates
that Mr. Walker has been paid all that was owed him by way of accrued
leave. Since Grantee has not shown that Walker was entitled to any
more, we affirm the disallowance of the $800 still at issue.
With respect to the payments to Instructors Britton and Dixon,
grantee initially took the position that the payments to Britton and
Dixon were for accrued leave for the period from July 1, 1974 - January
31, 1975. In response to the Order to Show Cause, however, it contended
that the payments represented salary for February, 1975.
The interlocutory decision stated that the personnel policies
submitted by grantee providing that instructional staff will be granted
one calendar month of vacation after 12 consecutive months of service
did not appear to authorize pay in lieu of vacation. However, it also
ordered OE to provide copies of all of Coalition's leave policies and a
verified statement regarding which policy was applicable to Britton and
Dixon because of confusion created by OE's claim in its response to the
appeal that these individuals were not entitled even to paid leave. The
interlocutory decision further indicated that grantee's claim that the
payments represented salary for February, 1975 was not sufficiently well
documented to permit it to reach a decision on that basis, and ordered
grantee to provide pertinent documentation.
OE submitted in response to the interlocutory decision an affidavit
signed by the former project director of Coalition stating that Britton
and Dixon were hired as consultants beginning July 1, 1974, as evidenced
by the fact that no payroll deductions were made from their checks, and
that as such, they were not entitled to leave. A schedule of
instructional staff at Coalition under the FY 1975 grant lists Britton
and Dixon as consultants rather than employees. It is also asserted
that even if Britton and Dixon were employees, under the applicable
personnel policies, they would not have been entitled to be paid for any
accrued leave because payment was proper only upon termination. The
leave policy submitted by Grantee in the original appeal is silent on
the question of pay in lieu of vacation. The one submitted by OE in
response to the interlocutory decision is quite clear on the point.
We conclude that Britton and Dixon were working on a consultant basis
during FY 1975 and were entitled to no leave under applicable Coalition
policies. The Board's interlocutory decision did leave open the
possibility that the payments might be justified as salary. However,
since grantee did not provide the verified recapitulation of salaries as
called for, the Board has no basis for sustaining the appeal on this
item, and it is, accordingly, denied.
With respect to the typewriter rental, the transfer agreement is
quite clear that grantee should not make payments for goods or services
delivered prior to the transfer date. The interlocutory decision
requested grantee to document the cost of renting the typewriter which
would be allocable to the post-transfer period. Although grantee did
not respond, OE indicated that grantee's files showed disbursements at
the rate of $128.80 per month. That is consistent with the $230 a month
rate reflected in the $1,840 disallowed. The Board believes the appeal
should be allowed to the extent rental costs are documented for the
post-transfer period, which comes to $644.00.
The final item is the payment of $3,400 to Kendricks and Walker for
consultant services in training of new personnel and setting up of
various office procedures in connection with Center's becoming a
grantee. OE's position on this item is that, first, Kendricks and
Walker, as employees of the grantee, were precluded from serving as
consultants by virtue of 45 CFR Part 100, Appendix D, PG.31; second,
that they had not provided necessary documentation, assuming that they
could be so compensated; third, that they did not, in fact, provide any
such services; and finally, that the services allegedly provided were
without value.
In out interim order, we took the position that grantee was subject
to the bar against employees being engaged as consultants, but in view
of certain inconsistencies in the record, ordered Grantee to provide a
schedule of all compensation paid to Kendricks and Walker for services
rendered from 2/1/75 to 6/30/75. In addition, we requested the views of
both parties 1) on the question of whether there would be any basis for
reimbursing Kendricks and Walker for the reasonable value of any
services rendered to the project, even if they were provided in improper
form, and 2) on the value of services, if any, actually performed.
Grantee did not respond to any of those requests; OE did not deal
with the legal question raised, but did express its views about the lack
of value of the services allegedly provided.
The Board's disposition of the item is as follows: First, we adopt
the position taken in the Order to Show Cause, that there is a bar to
employees of institutions covered by Appendix D of 45 CFR Part 100
serving as consultants on OE funded projects, and the interim holding in
the Interlocutory Order, that this grantee was subject to that portion
of the regulations, rather than the portion applicable to "educational
institutions."
However, we note that in the budget included in the application
submitted by grantee at the time of the transfer of the grant, there was
an item of $5,000 for "initial costs" which was reduced to $1,000
by OE
in the approved budget. The auditors' report charged the $3,400 to this
item, but questioned the entire amount on the basis that it was not
clear that it had benefited the project.
Under these circumstances, we are not prepared to say that in the
unusual situation of a mid-grant transfer, where a transitional item is
included in the budget, the bar against engaging employees as
consultants could never be waived, or held not to apply in the case of
compensation to officers of an institution, not otherwise directly
engaged in providing services to the funded project. We are likewise
reluctant to conclude, on the basis of a paper record, that services of
the two highest ranking officials at an institution approved as a
grantee by the funding agency have no reasonable value. However, OE's
assertion that Kendricks and Walker each received $850 in salary during
the period in question was not adequately refuted or explained by a
categorical denial by grantee's attorney, when grantee is in a position
to provide the complete factual picture on the issue of who was
compensated for what services during what period.
Accordingly, in light of grantee's failure to respond to the
Interlocutory Order on Item No. 5, we hereby affirm the disallowance by
OE of the sum of $3,400 paid to Kendricks and Walker for consultant
services allegedly performed during February of 1975.
Conclusion
For the foregoing reasons, the items which are the subject of this
appeal are disposed of as follows: Item 1, the OE disallowance of
$3,152 to Kendricks for salary prior to the transfer and/or accrued
leave due from Coalition, is affirmed. Item 2, the disallowance of the
$800 of accrued leave due Walker still in issue, is affirmed. Item 3,
the disallowance of $1,125 to Britton and Dixon for accrued leave or for
work performed in February 1975 is affirmed. Item 4, the payments to
IBM for the lease of a typewriter are allowed in the amount of $640.00
reflecting payments of $28.00 per month from February 1975 to July 1975.
Item 5, the disallowance of the payment of $3,400 to Kendricks and
walker for consultant services in connection with the grant is affirmed.
The findings and conclusions set forth in our Interim Order of August
16, 1977 are incorporated into this Final Decision, and are subject to
the same rights as any other part of this decision.
OCTOBER 04, 1983