GAB Decision 134
November 28, 1980
Docket No. 79-15
Community Relations - Social Development Commission in
Milwaukee County, Milwaukee, Wisconsin; Coster,
Clarence; Przybylinski, Donald Settle, Norval
Introduction
This case is an appeal of a disallowance of $6399 made by the Office
of Human Development Services (OHDS) in the Native American Program
(NAP) of the Community Relations-Social Development Commission in
Milwaukee County, Wisconsin (CR-SDC). The disallowance is based on an
audit of the NAP for the period of January 1 through December 31, 1977,
as directed by 45 CFR 1336.50(a)(1). OHDS notified the Grantee of the
recommended audit adjustments on June 13, 1978, the Grantee did not
reply or respond to the Agency notification, and on January 9, 1979, the
Agency disallowed $6,399 and directed the Grantee to make necessary
adjustments.
The Grantee filed an appeal with the Board on March 7, 1979
requesting review in the amount of $8,415 for fiscal years 1974 through
1977. In response to questions from the Board, the Grantee on May 30,
1979 modified the March 7, 1979 request, accepted the disallowances for
fiscal year 1974, 1975 and 1976 and requested review of $6,399 for
fiscal year 1977. The Grantee further stated that it would attempt to
resolve the issues pertaining to the disallowance and establish an
indirect cost rate would generate funds in excess of the amount
disallowed in the area of "administration fee charged in excess of
budget". It additionally requested that the subgrantee be held liable
for costs that were disallowed because of inadequate documentation.
This decision is based on the Grantee's application for review, Audit
Report 05-85428, the Agency's notification of disallowance, and the
Agency's response to the Grantee's application for review. The Grantee
did not respond to the Board's Invitation to Brief dated September 8,
1980.
Background
CR-SDC has received grants for funding of Native American Programs
from HEW since 1974. CR-SDC from 1974 through 1977 had a subgrant with
the Indian Urban Affairs Council (IUAC) for the operation of the grants.
CR-SDC, as grant recipient, budgeted for, received and expended federal
funds for the administration of these grants.
(2) CR-SDC stated that personnel turn-over and subgrantee
non-responsiveness made administration of the grant extremely difficult.
The Grantee stated that it had made numerous attempts to obtain
documentation for amounts disallowed but the subgrantee had failed to
provide necessary documents or respond to Grantee's requests. The
Grantee asserted that it was informed that as of January 1, 1977, the
grant would go directly to IUAC. When IUAC could not meet HEW grant
requirements, CR-SDC was asked to continue as the grantee, on a
month-by-basis, until January 1978 when IUAC became the grantee. The
Notice of Grant Awarded for the period in question, however, is for the
budget and project period of January 1, 1977 through December 31, 1977
and states that CR-SDC is the grantee organization; there is no
indication of a month-to-month agreement. Further CR-SDC suggested that
HEW hold IUAC responsible for part of the disallowance.
Discussion
Costs were disallowed due to lack of documentation for employee
development, travel, space, and consumable supplies, and for certain
administrative fees in excess of the budgeted amount.
With respect to the first issue, CR-SDC does not deny that it has
failed to document the costs but contends that (1) it was directed to
subgrant the grant; and (2) the necessary documentation is the
responsibility of IUAC. The Grantee has failed to provide any
documentation in support of its claim that OHDS directed it to subgrant.
The Notice of Grant Awarded makes no reference to the alleged
requirement. With regard to the second argument, the Notice of Grant
Awarded specifically put CR-SDC on notice that the grant was subject to
45 CFR Part 74. In particular, 45 CFR 74.3 states:
"Grantee" means the organization or person to which a grant is made
and which is accountable to the Federal Government for the use of the
funds provided. The term does not include any secondary recipients such
as subgrantees, contractors, etc., who may receive funds from a grantee
pursuant to a grant.
The legal relationship created by a grant award is between the Agency
and the Grantee. The subgrantee is accountable to the Grantee not the
Agency (see 45 CFR 74.3, definition of "subgrantee"). The Grantee
is,
therefore, responsible to the Agency for adequate documentation of
expenditures made by the subgrantee.
Because the Board has before it other cases pertaining to CR-SDC, the
Board was given notice that an Indirect Cost Negotiation Agreement was
executed (3) by the Grantee and Agency on May 12, 1980. On its face,
the Agreement states that a final rate of 9.2% applicable to all
programs is in effect for the period January 1, 1977 to December 31,
1977. Repeated efforts by Board staff to get the Agency's reaction as
to whether this Agreement did affect this appeal have been fruitless.
Therefore, we find that the Agreement on its face applies to this
appeal. The parties should determine what effect the rate has on the
amount in question.
Conclusion
For the reasons stated above, we find that the disallowance should be
upheld on the question of lack of documentation. We also find that an
indirect cost rate has been determined for 1977, and the parties should
determine what effect the rate has on the disallowed amount pertaining
to administrative costs. We suggest that this determination be made
within 30 days of the date of this decision. If no agreement can be
reached, the case may be reopened with this Board for further review.
MARCH 19, 1985