DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: Somerset Community DATE: April 14, 1989 Action
Program, Inc. Docket No. 88-174 Decision No. 1038
DECISION
The Somerset Community Action Program, Inc. (SCAP) appealed a
determination by the Office of Human Development Services (OHDS)
disallowing $3,325 charged to SCAP's Head Start grant for the year ended
August 31, 1987. The costs in question were incurred for five training
sessions which OHDS found were not relevant to SCAP's training needs.
(An additional $2,913 in training costs was allowed by OHDS.) For the
reasons set forth below, we uphold the disallowance of the cost of one
of the training sessions ($875) and reverse the disallowance of the cost
of the remaining four training sessions ($2,450).
The titles of the five training sessions in question were (1) A Weekend
in History Seminar, (2) Relaxation Seminar, (3) Crisis Normalization
Training Seminar, (4) Crisis Normalization Workshop, and (5) Burn Out
Seminar. Session (1) above was described by SCAP as a "clinical,
cultural workshop designed to help people become cognizant of the ways
in which they understand themselves as passive viewers of their
environment". SCAP further stated that participants in this training
session "learn how to be emotional and use culture (in broadest sense)
to work together with others to produce growth and development."
Session (2) was "designed to teach participants how to relax. Workshop
includes physical activity, as well as group discussions on the
emotional issues related to stress and relaxation." Sessions (3) and
(4) were intended to "address the issue of how to relate to stressful
situations in ways that help people reach out to each other instead of
isolating themselves." Session (5) was "designed to address the causes
and responses to burn-out. Participants learn to not handle issues
alone; learn how to work better with others around them." Letter from
SCAP to Board dated 2/28/89, Attachment B.
OHDS acknowledged that the amount charged by SCAP was within the
approved budget for training and parent activity costs. OHDS did not
question that the training described by SCAP was provided nor did it
allege that the amount expended for any of the training sessions was
excessive. The sole basis for the disallowance, as restated in the
brief submitted by OHDS in this appeal, was that the training did not
"advance program goals." OHDS brief dated 12/19/88, p. 6.
Citing the enabling legislation for the Head Start program, OHDS stated
that assistance is authorized only to "aid children to reach their full
potential," and "provide for direct participation of the parents,"
goals
to which it contended the training was not related. OHDS brief, pp.
5-6, quoting 42 U.S.C. 9833. This statement of the broad goals of the
Head Start program provides little guidance with respect to the
allowability of individual items of cost, however. The allowability of
these costs is governed by the cost principles for nonprofit
institutions, which include a general definition of reasonableness
applicable to all costs. This definition states, in pertinent part,
that--
A cost is reasonable if, in its nature or amount, it does not
exceed that which would be incurred by a prudent person under the
circumstances prevailing at the time the decision was made to
incur the cost. . . . In determining the reasonableness of a given
cost, consideration shall be given to:
a. Whether the cost is of a type generally recognized as
ordinary and necessary for the operation of the organization or
performance of the award.
OMB Circular A-122, Att. A, section A.3. (made applicable by 45 C.F.R.
74.174 (1981)).
We conclude that four of the five training sessions met this test of
reasonableness. In reaching this conclusion, we note that SCAP's
application for funding for the year in question (PY 20) proposed
"In-Service Efforts" in the area of "Mental Health." In
explaining what
it intended to do in this area, SCAP described its PY 19 training, which
consisted of a two-session "Stress Workshop" conducted by a "Mental
Health Consultant." OHDS appeal file, Ex. R-5, p. 21. OHDS indicated
that the training activities in the funding application were included in
SCAP's budget for PY 20. OHDS brief, p. 6. If training on stress as it
affected mental health was an approved budget item for the year in
question, then it was clearly a cost "recognized as necessary for the
operation of the organization or performance of the award" and was
reasonable under the cost principles. Training sessions (2) through (5)
identified above all dealt with the topic of stress and mental health.
Thus, we see no basis for OHDS's contention that these training sessions
were unallowable. Training session (1) ("A Weekend in History
Seminar"), on the other hand, does not clearly relate to any type of
training in the PY 20 budget. Absent other documentation establishing
that this type of training was regarded as necessary for the operation
of the organization or performance of the award, we find that the cost
of training session (1) was unallowable.
OHDS also argued that the training sessions failed to advance program
goals because the training was provided only to a limited group of
individuals. It noted that total attendance at the five sessions in
question was 16, while the nine training sessions for which OHDS allowed
funding each accommodated 15 to 20 people. (OHDS did not allege that
the cost of the training on a per capita basis was excessive, however.)
We do not agree that the costs were properly disallowed on this basis.
OHDS pointed out that in PY 20, SCAP had high staff turnover and was
hiring relatively inexperienced personnel. OHDS argued that the
questioned training sessions were "not the kind of basic program
oriented activities from which new personnel would derive a grounding in
the skills needed to function quickly in a new environment." OHDS
brief, p. 6. OHDS did not allege, however, that SCAP could have
anticipated the high turnover when planning its training program. In
any event, we agree with SCAP that, under the circumstances present in
PY 20, it was reasonable for SCAP to arrange training for selected staff
in an effort to provide them "with the skills necessary to lead and
stabilize the agency in this period." Letter from SCAP to Board dated
1/13/89, pp. 1-2.
OHDS further noted that SCAP had not followed through on its offer to
provide sworn statements by the training participants, and asserted that
the record therefore contained "no verification of the usefulness of the
training to the participants." Letter from OHDS to Board dated 3/21/89,
p. 2. In our view, the lack of the participants' evaluation of the
training related to stress and mental health is an inadequate basis for
disallowing the costs in the circumstances here since there is other
documentation establishing the reasonableness of the training costs. On
the other hand, we cannot assume the reasonableness of training session
(1) based on SCAP's unsupported assertion that the participants found it
helpful in relating to others involved in the operation of the Head
Start program.
Conclusion
For the reasons stated above, we sustain the disallowance in part and
reverse the disallowance in part.
________________________________ Donald F. Garrett
________________________________ Norval D. (John) Settle
________________________________ Judith A. Ballard Presiding
Board