Gab Decision 117
September 29, 1980 University of California -- Summer Salaries
Docket No. 79-2 Coster, Clarence; Przybylinski, Donald Settle,
Norval Panel Chairman
This case involves a disallowance dated June 20, 1977 by the
Financial Advisory Services Branch, Division of Contracts and Grants,
National Institutes of Health, subsequently sustained by the NIH Grant
Appeals Board (NIH Grant Appeals Board Decision, University of
California, NIH-GA-77-3 (DCG), dated October 20, 1978, and transmitted
to Grantee by letter dated December 14, 1978). The $193,596 disallowed
represents a portion of costs charged for salaries of faculty members
holding federally funded summer research appointments at Grantee's
Berkeley and Los Angeles campuses in fiscal years 1972 and 1973. The
disallowance was taken based on the Agency's determination that the
researchers were paid during the summer quarter at a monthly rate in
excess of the rate at which they were paid during the three
non-federally funded academic quarters, in violation of Section J.7.j.
of Federal Management Circular (FMC) 73-8. We find that, although the
researchers were not in fact paid in excess of the monthly rate for
their academic year salaries, the disallowance should be sustained on
the ground that Grantee violated Section J.7.a. of FMC 73-8 by paying
some researchers at a higher rate than others during the summer quarter
without any justification for the difference in rates. Since the amount
which is not allowable on this basis may differ from the amount
disallowed by the Agency, the Agency is directed to recompute the
disallowance.
This decision is based on Grantee's application for review, the
Agency's response to the appeal, the record made in the course of the
proceedings before the NIH Grant Appeals Board, and the parties'
responses to an Order to Show Cause issued by the Board Chairman and to
a letter from the Board's Executive Secretary requesting further
information and briefing. In its response to the latter communication,
Grantee requested an opportunity to discuss its position with the Board
and the Agency prior to decision. We have determined, however, that an
informal conference pursuant to 45 CFR 16.8(b)(1) would not be useful,
and, accordingly, have proceeded to decision.
The faculty members in question had academic year appointments
covering three quarters for which they were usually paid in equal
installments over a twelve-month period. In addition, they were
employed during the remaining quarter as researchers on federally funded
projects. Grantee regarded the summer quarter as equal in length to an
academic quarter, and its policy accordingly called for payment during
the summer quarter at a daily rate calculated by dividing one-third of a
researcher's academic year salary by 57, which was the average number of
"teaching days" in an academic quarter. Thus, the daily rate at which
a
faculty member whose academic year salary was $18,000 would be paid
during the summer quarter would be determined as follows:
1/3 x $18,000 = $6,000.
$6,000 divided by 57 = $105.26, daily rate.
The Agency took the position, however, that this method of payment
violated Section J.7.j. of FMC 73-8, which provides in pertinent part as
follows:
Salary rates for periods outside the academic year. Charges for work
performed by faculty members on Government research during the summer
months or other periods not included in the base salary period will be
determined for each faculty member at a monthly rate not in excess of
that which would be applicable under his base salary. . . .
Although the Department's regulations implementing FMC 73-8 (formerly
OMB Circular A-21) were not published until after the costs in question
were incurred (45 CFR Part 74, Subpart Q, Appendix D, 38 FR 26274,
26292, September 19, 1973), the Agency asserted in response to an
inquiry by the Board's Executive Secretary that copies of OMB Circular
A-21 were provided to all educational institutions to which grants were
awarded and that such institutions were advised of the applicability of
that circular in several publications issued prior to one or both of the
fiscal years in question here. (Memorandum from Associate Director for
Extramural Research and Training, NIH, to Board's Executive Secretary,
dated 5/24/79.) No contention was made by Grantee that it was not bound
by the provision cited above.
The disallowance was based on a finding of the Department's audit
agency that payments to researchers in the months of July and August
exceeded in each month one-ninth of their academic year salaries, a
situation which the Agency found did not comply with the requirement of
FMC 73-8 that the monthly rate at which a researcher is paid during the
summer quarter not exceed that which would be applicable under his base
year salary. The Agency determined in addition that the summer quarter
was not in fact the same length as each of the three academic quarters,
finding that faculty members worked 65 days during an academic
quarter--57 teaching days plus eight interquarter days--but only 57 days
during the summer quarter. If that were the case, the result would also
be that researchers were paid at a higher rate during the summer than
during the academic year, in violation of FMC 73-8. Each of the
Agency's grounds for disallowance is discussed separately below.
I. Monthly Rate
With respect to the first ground, Grantee asserts that, although the
researchers were paid summer salaries which exceeded in some months
one-ninth of their academic year salaries, this was offset by the fact
that, in other months, they were paid less than one-ninth of their
academic year salaries. It contends that since no researcher was paid
more than three-ninths of his academic year salary for the entire
summer, it complied with the intent of Section J.7.j.
We accept Grantee's argument in this respect. The Order to Show
Cause suggested that the intent of Section J.7.j. "is simply that no
researcher be paid at a higher rate for Federally sponsored research
than he is paid for his services during the regular academic year when
no Federal funds are involved," a statement with which neither party has
disagreed. Assuming for the moment that the summer quarter was equal in
length to an academic quarter, if a researcher's total pay for the
summer quarter did not exceed one-third of his academic year salary,
then the intent of Section J.7.j. would not be frustrated. (Since the
researchers' academic year salaries were paid in twelve monthly
installments, their summer salaries cannot be compared with the amount
paid in a particular academic quarter.) As long as the rates were
comparable, we do not believe that Section J.7.j. requires that the
amounts paid actually be expressed in terms of monthly rates.
Moreover, we find improper the Agency's comparison of one-ninth of
the academic year salary--or the average monthly salary for the academic
year--with the salary paid during a particular calendar month in the
summer quarter. It appears from the record that the 57 teaching days in
the summer quarter may have been distributed over four calendar months,
more or less as follows: 10 days in June, 21 days in July, 22 days in
August, and 4 days in September. The teaching days in an academic
quarter apparently would have been similarly distributed over more than
three calendar months. Even if each quarter covered three full calendar
months, the number of teaching days may have varied from month to month
due to the number of calendar days in a particular month as well as the
timing of weekends and holidays. Thus, if Section J.7. j. is read as
requiring a comparison of salaries on the basis of monthly rates, the
only meaningful comparison would be of the average monthly pay during
the academic year and the average monthly pay during the summer quarter.
In this case, in no instance did the latter exceed the former.
II. Length of Quarter
The Agency's conclusion that an academic quarter was longer than the
57 days used to determine pay for the summer quarter is based on the
fact that there were eight days following each quarter during which
faculty members were expected to perform activities such as marking exam
papers, counseling students, and sitting on administrative committees.
In response to Grantee's assertion that there was no reduction in a
faculty member's academic year salary if he did not report for duty on
interquarter days, the Agency argued that Grantee had done nothing to
indicate to faculty members that their services during the interquarter
period were merely voluntary.
There is no evidence in the record to show whether or not faculty
members were aware that they were not required to report for duty during
the interquarter period in order to receive their full academic year
salary. We conclude, however, that the interquarter period did not in
any event involve the regular, sustained effort of the 57 teaching days,
and that Grantee thus had a legitimate basis for excluding the
interquarter period from its summer pay calculations. We note also that
the activity performed during the summer-- research--was so different in
nature from teaching that even if the interquarter period were not an
issue, it would not be clear that one research day was the precise
equivalent of one teaching day. Given these circumstances, the Agency's
insistence that a researcher had to work 65 days during the summer
quarter to justify payment at the same rate as during an academic
quarter seems to us to be without merit. While we find Grantee's policy
for payment of summer salaries at a rate based on a 57-day quarter
proper, its practice with respect to summer salaries was unacceptable,
as discussed below.
III. Difference in Summer Rates
We find no basis in Section J.7.j. for objection to Grantee's payment
of its researchers at a rate based on a 57-day quarter. We agree
however, with the Agency's position, taken in response to the Order to
Show Cause, that because Grantee did not consistently apply that rate,
it is not entitled to full Federal funding for payments made at that
rate under Section J.7.a. of the same circular. Section J.7.a.
requires that total compensation be "reasonable for the services
rendered," as well as conform "to the established policy of the
institution consistently applied."
As noted previously, Grantee's policy was to pay researchers during
the summer quarter at a daily rate calculated by dividing one-third of a
researcher's academic year salary by the 57 teaching days in an average
quarter. The audit report relied on by the Agency indicated, however,
that some researchers at Grantee's Berkeley and Los Angeles campuses
were in fact paid at a daily rate which was calculated by dividing
one-third of their academic year salaries by 65 (57 teaching days plus
eight inter-quarter days), resulting in a daily rate of $92.30 for a
researcher with an $18,000 academic year salary. According to the audit
report, researchers with the same academic year salaries, sometimes in
the same department, were paid at different rates during the summer
quarter. The Order to Show Cause noted that Grantee "did not explain
the difference in rates paid as attributable to differences in
researchers' academic year salaries, qualifications, research projects
or any other criteria," and directed Grantee to show cause why the
appeal should not be denied on that ground.
In its response to the Order, Grantee denied that any summer salaries
were paid at a rate based on a 65-day quarter. It admitted, however,
that in some instances summer salaries were paid in monthly installments
of one-ninth of the academic year base salary, and that if a researcher
worked less than the full summer quarter, he might under certain
circumstances be paid less under the one-ninth monthly installment
method than under the 57-day quarter daily rate method. (Grantee
indicated that this lesser amount might be equivalent to the amount
which would have been paid under a 65-day quarter daily rate method.)
Grantee nevertheless argued that the amount paid under the 57-day
quarter daily rate method reflected the amount to which the researcher
was actually entitled under University policy and that the University
would be obligated to honor any claim for the difference between that
amount and any lesser amount paid under the one-ninth monthly
installment method. It further argued that any underpayment resulting
from the use of the one-ninth monthly installment method was the result
of an administrative error and should not be used as a basis for finding
a violation of Section J.7.a. Finally, it argued that such errors
"would not impact adversely on the Federal government since failure to
adjust salary to the 57-day pay entitlement basis would result in lesser
charges to Federal projects than would have otherwise been authorized
under University policy."
We find Grantee's arguments unpersuasive. Section J.7.a. requires
that salaries conform "to the established policy of the institution
consistently applied." (Emphasis added.) Grantee's policy regarding
summer salaries, however formally promulgated, is not the measure of its
compliance with Section J.7.a. The test is, rather, how that policy was
applied, or the summer salaries actually paid. Since Grantee has
conceded that it paid summer researchers at its Berkeley and Los Angeles
campuses at different rates, resulting in some cases in the payment of
different amounts for equal periods of work, without any basis other
than a failure to adequately monitor the payment practices at those
campuses, we are compelled to find that it did not comply with Section
J.7.a.
IV. Amount of Disallowance
The Agency indicated that the amount originally disallowed
represented the difference, if any, between the amount paid to each
researcher in each month of the summer quarter and one-ninth of his
academic year salary. That disallowance was based on the finding that
Grantee violated Section J.7.j. of FMC 73-8, a finding which we reject.
Our finding that Grantee instead failed to comply with Section J.7.a.
requires that an amount be disallowed which represents the difference
between the total summer salary received by each researcher paid on the
basis of a 57-day summer quarter and the lesser amount he would have
received had he been paid on a one-ninth monthly installment basis.
Asked to indicate what that amount should be, and later to explain how
it arrived at that amount, the Agency merely stated that the amount of
the disallowance would be the same as the disallowance originally taken,
while Grantee professed ignorance regarding how to determine the amount
in question.
We are therefore unable to indicate the amount of the disallowance
which is upheld. The Agency, however, should recompute the amount of
the disallowance in accordance with this Decision No., and advise
Grantee in writing of its determination, including a full explanation of
how it arrived at that amount. No time period is set for the Agency's
determination since it may have to request additional information from
Grantee, although it is encouraged to expedite the matter and act within
60 days. This Board will consider a timely appeal from the Agency's
determination should the matter not be resolved to Grantee's
satisfaction.
OCTOBER 04, 1983