DAB Decision 65
September 26, 1979 Head Start of New Hanover County, Inc., Wilmington,
North Carolina; Docket No. 78-94; Decision No. 65 Dukes, David V.;
Kelly, Bernard E. Mason, Malcolm, S.
SUMMARY
(The following summary is prepared on the responsibility of the
Executive Secretary of the Board as a convenience to the interested
public. It is not an official part of the decision and has not been
reviewed by the Panel. Similar official summaries of earlier cases
appear in 45 CFR Part 16 Appendix.)
Grantee appealed from the determination of the Director, Grants
Administration Division, Office of Human Development Services, Region
IV, disallowing $1,001 charged to its Head Start grant for out-of-town
travel for which OHDS found there was no documentation, and $5,484 by
which OHDS found grantee fell short of the non-Federal share requirement
applicable to the grant. The Board assumed that the non-Federal share
issue was no longer before the Board when, after grantee in its appeal
stated that it wanted to make up the shortage, the Agency in its
response indicated that grantee was being permitted to increase its
non-Federal contribution in a later year specifically for that purpose.
Although the Board did not find any specific requirement binding on
grantee that travel costs be documented, it stated that the requirement
for documentation of costs was so basic that OHDS need not rely on any
specific provision as a basis for the disallowance. Grantee did not
dispute that there was no contemporaneous documentation of the travel.
The Board observed, however, that if grantee could provide some proof,
such as affidavits from the individuals involved, that the trips were in
fact made, that might provide adequate assurance that Federal funds were
not improperly used. The documentation submitted by grantee was,
however, vague, imprecise, and incomplete, and the Board denied the
appeal, noting that although grantee might, if afforded a further
opportunity, present support for some part of the remaining
disallowance, the kind of after-the-fact documentation supplied by
grantee becomes even more unsatisfactory the more it is tailored to meet
repeated invitations for proof.
DECISION
Read Start of New Hanover County, Inc. ("grantee") appealed to the
Board
from the determination of the Director, Grants Administration Division,
Office of Human Development Services (OHDS), Region IV, dated April 28,
1978, disallowing a total of $6,485 charged to grantee's Head Start
grant for the year ended May 31, 1977. This amount consisted of $1,001
charged for out-of-town travel for which OHDS found there was no
documentation, and $5,484 by which OHDS found grantee fell short of the
non-Federal share requirement applicable to the grant. The record on
which this decision is based consists of grantee's application for
review, OHDS's response to the appeal, and the responses of both parties
to an Order to Develop Record issued by the Board Chairman.
I. Non-Federal Share
The non-Federal share issue is no longer before the Board. Grantee in
its application for review conceded that it was $5,484 short of the
non-Federal share requirement, and, although it advanced certain
arguments which denied responsibility for the shortage, stated that it
was trying to make up the shortage. In its response to the appeal, OHDS
indicated that the notice of grant award for the year ending May 31,
1979, permitted grantee to make up the shortage by increasing that
year's non-Federal contribution. In the Order to Develop Record, the
Board Chairman stated that, in light of these facts, "it is assumed that
this issue is no longer before the Board," but nevertheless gave grantee
an opportunity to indicate whether it wished the Board to review the
issue. Grantee's response to the Order does not contain any mention of
the non-Federal share issue.
II. Travel Costs
OHDS's notification of disallowance stated that $1,001 in travel costs
was disallowed based on the findings in the report of an independent
auditor. According to the audit report, grantee did not have any
documentation for $1,001 of the total of $1,801 which it charged to the
grant at a per diem rate for out-of-town travel. Grantee's application
for review did not deny that the travel costs were not documented, but
argued that the only documentation which was required was travel
vouchers signed by an authorized grantee official, and that grantee's
failure to obtain such written authorization should be excused since
grantee was unaware of this requirement and did not exceed the amount
budgeted for travel.
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Since neither the notification of disallowance nor the audit report
cited any specific requirement for documentation of travel costs, the
Board's Executive Secretary requested that OHDS provide such citations
in its response to the appeal. None of the three provisions cited by
OHDS constitute a clear requirement binding on grantee for documentation
of travel costs. We hold, however, that a recipient of Federal grant
funds has an inherent responsibility to maintain some sort of
documentation which establishes that the funds were properly expended,
and that grantee has failed to live up to this responsibility with
respect to the funds in question here.
OHDS cited as one basis for the disallowance 45 CFR 74.61(a), which
requires that "(g)rantee financial management systems" provide for
"(r)
ecords which adequately identify the source and application of funds for
grant... activities" and for "(a)ccounting records which are supported
by source documentation." The Order to Develop Record suggested that
this provision requires simply that such systems be established, and
that this requirement was satisfied since grantee had asserted without
contradiction that it had a travel policy providing for $25 a day per
diem and requiring hotel receipts. The Order noted that this reading of
the provision was supported by the Head Start Audit Guide (revised
January 1977), which directs auditors to determine whether the grantee's
accounting system (referencing specifically the financial management
systems required by Section 74.61(a)) includes certain procedures, and
to recommend needed improvements. The Audit Guide does not direct the
auditors to recommend the disallowance of funds related to any
deficiencies in the accounting system. (Read Start Audit Guide, p. 12.)
OHDS's response to the Order did not comment on this interpretation of
45 CFR 74.61(a).
OHDS also cited as a basis for the disallowance another provision in the
1977 Head Start Audit Guide (published as part of a proposed rule but
omitted from the final rule) which requires that "Head Start
agencies...adopt personnel policies and procedures for themselves and
delegate agencies covering... expenses incidental to official duties
including travel and per diem...." The Order to Develop Record noted
that, like 45 CFR 74.61(a), this provision appears only to require that
grantee have a travel policy in effect. OHDS did not dispute this
conclusion in its response to the Order.
OHDS cited as an additional basis for the disallowance provisions in the
Head Start Audit Guide requiring that all travel expenses be supported
by travel authorization documents, properly approved by an appropriate
grantee official; that all travel vouchers be approved by an authorized
grantee official; and that there be some indication that travel costs
were grant related, and that travel was necessary for the performance of
the grant. The Order observed that since the audit report indicates that
other travel costs for which there was no written approval were not
disallowed, it did not appear to be proper to base the disallowance of
the costs in question here on grantee's failure to obtain written
approval. The Order also noted that the Audit Guide states that the
necessity of the travel can be established by "trip reports, interviews,
etc." The Order indicated tentatively
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that since there was no indication in the audit report that the auditors
looked at trip reports or conducted interviews, there was no basis for
holding that the costs should be disallowed as unnecessary for the
performance of the grant. OHDS's response to the Order did not comment
on the Order's analysis of these provisions.
In view of the fact that the provisions cited by OHDS as a basis for the
disallowance are not clearly applicable by their own terms, we need not
reach the question, raised in the Order to Develop Record, whether they
were unenforceable against grantee on the ground that they were not
published in the Federal Register as required by 42 U.S.C. 2928f( d). We
note, however, that the Audit Guide on which OHDS relies was not issued
until January 1977, seven months after the grant in question was
awarded, and that, by OHDS's own admission, a copy of the Audit Guide
was not mailed to grantee until February 25, 1977, when the grant year
was three-quarters over. If OHDS expected the grantee to carry out its
grant program in accordance with the provisions of the Audit Guide, it
should at a minimum have given timely notice of those provisions to
grantee.
In this instance, however, we find that the requirement for
documentation of costs is so basic that OHDS need not rely for its
disallowance on any specific provision in the applicable guidelines.
(Cf. University of Minnesota, DGAB Decision No. 44, Docket No. 77-4,
August 14, 1978, p. 3.) Since there was no requirement for a particular
type of documentation, the Order to Develop Record suggested that if
grantee could provide some proof, such as affidavits from the
individuals involved, that the out-of-town trips in question were in
fact made, that might provide adequate assurance as a practical matter
that Federal funds were not improperly used. This suggestion was based
on the observation that grantee's per diem rate was only $25, and that,
even assuming a hotel bill as low as $15, the remaining $10 would have
been barely sufficient to cover the cost of food, leaving little room
for any abuse of the per diem payment. Accordingly, grantee was
requested to provide documentation, if any was available, showing that
the out-of-town trips in question were in fact made, and OHDS was
requested to comment on whether the documentation provided by grantee
adequately assured that the funds in question were properly expended.
In response to the Order, grantee submitted a list which grantee claims
identifies "trips" taken by staff members in 1976 but not documented
sufficiently to meet the auditor's requirements. The costs claimed for
the trips listed total $1,161.05. In support of these costs, grantee
submitted no documentation other than three "Affidavits to Verify
Travel.' Grantee states that the affidavits verify the attendance of
staff members 'other than the 3 staff members who are no longer with
Read Start," which appears to be an admission that some of the costs
claimed are not verified by the affidavits. The affidavits are signed
by persons identified as the director of Head Start of New Hanover
County, Inc., a secretary, and
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a "PI/Soc. Ser./Coord.." Each states that the person signing attended
one or more "Workshop(s) and/or conference(s)" in certain months of
1976
and was reimbursed "per diem and mileage at the approved rate." The
affidavits themselves do not indicate the number of days for which
travel costs were claimed or the sites of the workshops and conferences
or their nature.
It is possible that grantee felt that the conferences and workshops were
sufficiently identified in the list submitted, which does give general
descriptions (such as "Handicap Workshop" and "Home Base and
Split
Session Conference") for four of the five trips listed and sites for all
five of the conferences and workshops listed. Since this information is
not in the affidavits, however, it is not clear that the affidavits
relate to the costs claimed.
Grantee had been directed to submit documentation showing that the trips
were in fact made. It does submit after-the-fact affidavits prepared
for the purpose of this case. While after-the-fact documentation will
not necessarily be rejected by the Board (cf. University of the
Pacific, DGAB Decision No. 15, Docket No. 15, April 21, 1976, pages
3-4), such documentation is clearly less acceptable than contemporary
records and must face a burden of persuasion which it must meet by its
specificity and precision. The documentation supplied is vague,
imprecise and incomplete. Grantee was directed to brief the question
whether the documentation offered assures that the funds were properly
expended. It has clearly not shown that that is the case. Possibly, if
afforded a further opportunity to submit evidence and brief its
significance, grantee might present support for some part of the
remaining disallowance, but the kind of after-the-fact documentation
supplied by grantee becomes even more unsatisfactory the more it is
tailored to meet repeated invitations for proof. We do not feel that it
is appropriate to offer grantee still one more opportunity to make a
cogent case.
OHDS's response to the Order states only that the documentation is
inadequate to support the travel costs in question without citing any
particular deficiencies. We believe that it is clear even in the
absence of briefing by OHDS that the documentation provided is not
adequate to assure that the funds in question were properly expended.
Accordingly, the appeal is denied. D11 May 15, 1992