DAB Decision 80
February 6, 1980 Pinellas Opportunity Council, Inc.; Docket No. 79-58;
Decision No. 80 Kelly, Bernard E.; Malone, Thomas Mason, Malcolm S.
(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 his not been
reviewed by the Panel. Similar official summaries of earlier cases
appear in 45 CFR Part 16 Appendix.)
Grantee appealed from a determination by the Chief, Technical Assistance
Branch, Office of Financial Management, Office of Human Development
Services, Region IV, disallowing $28,635 expended in excess of the
authorized budget for its program year H Head Start grant. OHDS denied
both Grantee's request for a supplemental award and its subsequent
request to use unexpended funds from its program year J grant to cover
the program year H overexpenditures. The Board denied the appeal on the
grounds that the Board had no authority to increase the amount of the
program year H grant and that the excess costs were not allocable to
program year J and therefore could not be properly charged to that
year's grant.
DECISION
I. Procedural Background.
Pinellas Opportunity Council, Inc. (Grantee), appealed by letter dated
March 21, 1979, from the February 14, 1978, determination of the chief,
Technical Assistance Branch Office of Financial Management, OHDS, Region
IV, disallowing $28,635 expended in excess of the authorized budget for
its program year H Head Start grant (for the year ended December 31,
1976). Grantee stated that an appeal was not filed within 30 days of
the February 14, 1978, adverse determination (as required by 45 CFR
16.6(a)(1)) because the original of that document was never received.
Grantee further stated that an appeal was not filed within 30 days of
OHDS's February 9, 1979, letter confirming the disallowance because that
letter was not received until February 26, 1979. The Board Chairman
determined that good cause had been shown for granting an extension of
time to file the application for review, and accepted the appeal.
(Letter from Board's Executive Secretary to Grantee dated May 16, 1979.)
On October 9, 1979, an Order setting forth the facts and issues as they
appeared from the record and directing Grantee to show cause why the
appeal should not be denied on certain grounds (set forth below) was
issued by the Board Chairman. The Order was based on the application
for review and attachments, documentation furnished by Grantee in
response to a letter from the Board's Executive Secretary dated May 16,
1979, and a copy of the relevant audit report, which was obtained by
Board staff. The Agency, which was invited but not required to submit
briefing in response to the Order, chose not to do so. No response was
received from Grantee, and upon inquiry by Board staff, Grantee stated
that it did not intend to file a response. We therefore adopt the
tentative conclusions stated in the Order and rule against Grantee.
II. Statement of the Case.
The audit report on which the disallowance is based (Audit Control No.
04-76224) shows that Grantee expended $29,873 in excess of the amount
budgeted for its program year H Full-Year/Full-Day Head Start program.
The Agency permitted Grantee to set off against that amount $l,238 in
unexpended funds in the account for its program year H Full-Year/
Part-Day Handicapped Cluster Training program, resulting in the $28,635
disallowed.
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Grantee concedes that it expended in excess of the amount budgeted for
program year H. It asserts, however, that this occurred only because
there were unanticipated increases in the costs of goods and services
due to inflation, forcing it to spend more than it had previously spent
in order to maintain the quality of its program for the same number of
children. As discussed below, Grantee cannot properly claim Federal
funds in excess of the amount awarded even if the overexpenditures were
due to circumstances beyond its control. Moreover, documentation
submitted by Grantee with its application for review indicates that some
of the overexpenditures were due to expanded activities rather than
merely increased prices. Grantee accounted for the overexpenditures as
follows: additional supplies required for new in-house projects
($3,680); extra repairs made to maintain licenses for its Head Start
Centers ($1,560); medical and dental care for children no longer
eligible for Medicaid ($3,156); increased insurance costs ($3,282);
unanticipated repairs on older vehicles ($11,004); and increased utility
costs ($1,163).
There is some indication in the record that Grantee in fact recognized
that it could not properly charge the overexpenditures to the program
year H grant as originally awarded. Apparently at the suggestion of
OHDS officials, Grantee in July 1978 requested a supplemental award to
cover the overexpenditures, but its request was subsequently denied on
the ground that "(a)dditional funds are not available...." Grantee
also
stated that it restricted its spending in program year J, accumulating a
carryover balance of approximately $40,000 to $50,000, in the hope that
it might be permitted to apply these funds to cover the overexpenditure
in program year H. (There was also a similar overexpenditure in program
year I to which Grantee hoped to apply these funds. Grantee only alluded
to such an overexpenditure, however, and did not provide a copy of any
adverse determination relating to program year I or state that it was
appealing any such determination.) By letter to the Agency dated January
31, 1979, Grantee requested that it be permitted to use unexpended funds
from program year J to cover the program year H overexpenditures. The
Agency's letter confirming the disallowance stated in response to this
request that "our regulations preclude the transfer of prior period
costs to the current or the transfer of present period funds to cover
prior period costs."
III. Discussion.
Neither the Agency's original disallowance determination nor the letter
affirming it cited specifically the regulations or other provisions
relied on. The terms and conditions for Grantee's program year H grant
provide, however, that "(e)xpenses charged against program funds... may
not exceed the maximum limits set in the approved budget shown on the
OHD Statement of Grant Award or those in a budget subsequently amended
for that approved program..." (Section 3.) This provision prohibits
Grantee from charging the costs in question to the program year H grant
regardless of the mitigating circumstances which it pleads. It also bars
the use of program
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year J funds to cover the costs in question, since the effect would be
to increase the amount available for the program year H grant. There is
a serious question, however, as to whether the grant terms and
conditions are legally enforceable, since they were not published in the
Federal Register in accordance with 42 U.S.C. 2928f(d), which requires
the publication of all rules, regulations, guidelines, and instructions
for the Head Start program (among other programs) at least 30 days prior
to their effective date. (Cf. Ohio University, DGAB Docket No. 75-10,
Interlocutory Decision, August 16, 1977, at pp. 4-6; Head Start of New
Hanover County, DGAB Docket No 78-94, Decision No. 65, September ,6,
1979, at p. 3; Knox County Economic Opportunity Council, Inc., DGAB
Docket No. 78-14, Decision 'to. 68, October 29, 1979, at p. 2.) Despite
this question, two considerations appear decisive against the grantee.
To the extent that the appeal rests on the contention that the program
year H grant should be increased to cover those costs in excess of the
amount budgeted, with or without a formal supplemental award, we
conclude that the appeal should be denied. This Board is not vested
(with the authority to make an award of grant funds. With respect to
Grantee's contention that the excess costs are properly charged as a
cost of the program year I grant, it should be noted that the cost
principles applicable to the grant provided that a cost in order to be
allowable must be allocable to a grant, that is, "incurred specifically
for the grant." 45 CFR Part 74, App. Para. B (38 FR 26274, 26310
(September 19, 1973).) In its decision in Southern Methodist University,
DGAB Docket No. 76-8, Decision No. 41, October 19, 1977, considering an
identical provision applicable to an Upward Bound grant, the Board found
that the grantee had improperly charged room and board costs incurred
under one year's grant to the succeeding year s grant, since "(no)
benefit from incurrence of such cost could inure to (the succeeding
year's grant)." No contention was made by Grantee here that the costs in
question were of benefit to the program year J grant, which was awarded
two years after the grant under which they were actually incurred. This
case is distinguishable from that presented in Knox County Economic
Opportunity Council, Inc., DGAB Docket No. 78-14, Decision No. 68,
October 29, 1979, in which the Board, granting the appeal, found that
costs disallowed as in excess of Grantee's program year I grant were
allocable to its program year J grant as well, and that approval by the
Agency of the use of any available funds for the costs in question
appeared to have been accorded.
IV. Conclusion.
The Order directed Grantee to show cause why the appeal should not be
denied on the grounds that this Board has no authority to increase the
amount of the program year H grant and that the excess costs are not
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allocable to the program year J grant and therefore may not be properly
charged to that grant. In the absence of any such showing, we deny the
appeal on those grounds. D11 May 21, 1992