Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
 
DATE: March 12, 1998

SUBJECT: Action for Youth Christian Council, Inc.

Docket No. A-96-191

Decision No. 1651

DECISION

Action for Youth Christian Council, Inc. (AFYCC) appealed a decision by the Public Health Service (PHS) Ad Hoc Appeals Review Committee (Review Committee) to terminate AFYCC's grant. AFYCC's project was funded as part of PHS's "Minority Community Health Coalition Development and Implementation of HIV/AIDS Centered Education/Prevention Grant Project" (MCHC Project).
The Review Committee upheld the termination based on its finding that AFYCC failed to comply with major requirements of the grant. Specifically, the Review Committee found that: (1) AFYCC did not form or sustain the coalition that was the fundamental purpose for the grant award or otherwise make any progress in achieving project goals; (2) there was inadequate fiscal and programmatic oversight by AFYCC's Board of Directors, resulting in inadequate stewardship of federal funds; and (3) AFYCC lacked the leadership, management, and accountability necessary to perform the objectives of the MCHC Project grant.

Section 74.61(a)(1) of 45 Code of Federal Regulations (C.F.R.) (1994) provides that [a]wards may be terminated in whole or in part only . . . if a recipient materially fails to comply with the terms and conditions of an award. For the reasons stated below, we conclude that the record substantiates the Review Committee findings and that termination was therefore warranted based on material failures to comply with the terms and conditions of the award. AFYCC requested an in-person hearing to present evidence and witnesses on many fiscal issues. Under 45 C.F.R. . 16.11(a) the Board will approve a request for a hearing where it "finds there are complex issues or material facts in dispute the resolution of which would be significantly aided by a hearing." In light of the existing record, however, termination was warranted on essentially uncontested programmatic deficiencies. Moreover, the matters upon which AFYCC seeks further development at a hearing would not affect the outcome on the fiscal findings because, without relying on the disputed issues, the record is sufficient to show that there were material fiscal failures. Any disputed issues concerning the fiscal findings do not need to be resolved since they are not material or relevant to the outcome of this case. Accordingly, we find that no additional proceedings are required in order to decide this appeal.

I. Background

A. MCHC Project Grants

The purpose of the MCHC Project was to "provide limited resources [up to $105,000 for each year of a three-year project] to plan and develop a minority community health coalition to address the specific health education services needed by a defined population in a specified community." PHS App. F., Tab 3 at 4. These grants were intended to support development of formal coalitions of community organizations (or to enable an existing community coalition to modify its organizational structure, purpose, policies or practices) to address minority-targeted health issues in an attempt to eliminate or reduce the risk of acquiring or transmitting HIV and other sexually transmitted diseases, as well as providing information on other health issues important to the target population (e.g., tuberculosis, obesity and nutrition, asthma control, and management of diabetes). Id. at 4-5.

B. AFYCC's Application and Subsequent Funding

AFYCC applied for a MCHC Project grant on April 30, 1994. In its application, AFYCC stated that it was founded in 1991 to --

reduce the risk factors associated with substance abuse, welfare dependency, teenage pregnancy, juvenile delinquency, child abuse, exacerbation of health problems and HIV/AIDS epidemic through EDUCATION on the community level.

PHS App. F., Tab 4 at 3. AFYCC requested the MCHC Project grant to enhance its efforts to provide education to its target population. Specifically, AFYCC stated:

As a COMMUNITY BASED ORGANIZATION we are here to provide a linkage where there is a gap in services. Through the People of Color Initiative - Morehouse School of Medicine/DHR; and Volunteers from National Community Service - formerly ACTION/VISTA we can intensify outreach to the local community promoting and developing coalitions with these funds.

Id. Further, AFYCC provided an organizational chart that detailed its staffing, services, and activities. In addition, the application listed AFYCC's Board of Directors, its Executive Board and other members, and volunteers. See PHS App. F., Tab 4 at 4-5. Finally, the application contained five objectives for the first grant year. The main objectives were providing a weekly public service radio program, enhancing AFYCC's church-related coalition (to train ministers to discuss HIV/AIDS issues with their congregations), and providing workshops to various groups in AFYCC's target community to disseminate information on various high-risk activities and other health issues. Id. at 21.

In evaluating AFYCC's application, PHS pointed out several weaknesses; however, PHS stated:

The strong letters of support indicate that the AFYCC is viewed [as] a positive force in the health education arena and will have the support from every segment of the County. AFYCC is culturally relevant to the community in which it serves and it is believed that while the application could have been technically much better, this applicant has a good shot of changing attitudes, practices and the knowledge base of black residents in Meriwether County.

PHS App. F., Tab 5 at 4. AFYCC's grant application for a three-year MCHC Project was approved. AFYCC was awarded $105,000 for the first budget period, from September 30, 1994 through September 29, 1995.
Prior to the end of the first program year, AFYCC submitted a progress report and request for funding for the second year. See PHS App. F., Tab 7. AFYCC stated that it had not conducted all the planned workshops, had not implemented the weekly public service radio program, and that it was having difficulty with getting cooperation from ministers for the church-related coalition. AFYCC stated, however, that it was advised that "sometimes emerging organizations over project what they may actually be able to accomplish." Id. at 1. Finally, AFYCC stated that for the second year it needed to explore professional consulting services to aid in the development of community coalitions, and to seek out other community based organizations for coalition possibilities. Id. at 3. On August 16, 1995, a notice of grant award for $105,000, with applicable terms, was sent to AFYCC providing funding for the budget period September 30, 1995 through September 29, 1996. See PHS App. F., Tab 8.


C. Site Visit and Suspension

A federal site visit was conducted on November 30 and December 1, 1995 to monitor the progress of AFYCC's grant program. See PHS App. F., Tab 11, site visit report at 1. The reviewers determined that a coalition had not been developed and progress on the other objectives had been less than anticipated. Additionally, the reviewers questioned "inappropriate transactions," most of which were expenditures found not properly charged to MCHC project funds. The reviewers examined financial transactions for the period September 1 through November 30, 1995 and found generally that the Executive Director was responsible for misappropriating federal funds and had done so without the authority or knowledge of the Board of Directors. See PHS App. F., Tab 11 at 5. Specifically, the reviewers questioned: (1) double pay checks received by the Executive Director; (2) car rental expenses; (3) credit report expenses; (4) personal expenses and other questionable expenditures charged to the grant program; (5) Amoco credit card charges; (6) personal utility expenses; (7) unsupported disbursements made to the Executive Director in eight different checks; (8) absence of payments for AFYCC's employee federal tax withholding and state unemployment tax; and (9) the transfer of $12,000 for a house purchase. Id. at 5-14.

Further, in their debriefing recommendations, the reviewers advised AFYCC's Executive Director that she needed to move quickly to develop the coalition, if the grant was to continue. Additionally, reviewers told the Executive Director that if the strategies originally proposed in the grant were not working, she should contact PHS to discuss options and alternatives. Id. at 14. Finally, with regard to operating the project, the reviewers informed the Executive Director that --


-- every employee should complete a daily time and effort report as a back-up to a request for payment of salaries [some payroll payments were not supported by time sheets];
-- the person requesting payment and the person approving the payment should be different individuals [most payments had been both requested and approved by the Executive Director];
-- she should contact some of the universities and colleges in the area and try to elicit the assistance of [business or management] graduate students . . . to assist in organizational development; and
-- once the fiscal issues are resolved, the State Office of Rural Health [would] be asked to assist in working with [AFYCC] for board training and other technical areas.

PHS App. F., Tab 11, site visit report at 14-15.
Based on the site visit report findings, PHS suspended the grant effective December 15, 1995. The suspension was based on AFYCC's "failure to comply with programmatic requirements . . . inappropriate use of federal funds, and poor management capabilities to provide adequate stewardship of federal funds." The notice included a copy of the site visit report and informed AFYCC that there would be a follow-up review of all fiscal records.

D. Follow-up Site Visit and Termination

The follow-up site visit was conducted on January 8, 1996. PHS App. F., Tab 12 at 2. The follow-up report listed over $20,000 in unallowable charges to grant funds found after a review of all transactions from
September 1, 1994 through November 30, 1995. The follow-up report also discussed other fiscal and management problems in AFYCC's program and recommended termination of the grant. See PHS App. F., Tab 12.
Subsequently, by letter dated March 4, 1996, PHS terminated the grant based on the findings of the two reviews. On April 4, 1996, AFYCC appealed. After reviewing the documentation submitted by AFYCC to support its appeal, the Review Committee upheld the termination based on its conclusion that AFYCC had failed to comply with major requirements of the grant. The Review Committee adopted the review reports and found: (1) that AFYCC did not form or sustain the coalition that was the fundamental purpose for the MCHC Project grant award or otherwise make any progress in achieving project goals; (2) that AFYCC's inadequate fiscal and programmatic oversight resulted in inadequate stewardship of federal funds; and (3) that AFYCC lacked the leadership, management, and accountability necessary to meet the objectives of the MCHC Project grant.

II. Analysis

Below we discuss each of the findings made by the Review Committee. While AFYCC tried to explain or justify its failure to comply with the terms and conditions of the award, it failed to provide any evidence or argument that would support a conclusion that the PHS termination was wrong. The first section discusses AFYCC's failure to form or sustain a community coalition or otherwise make progress on project goals. The second section discusses the inappropriate transactions found by the reviewers to demonstrate inadequate stewardship of federal funds, and the third section discusses AFYCC's inadequate leadership and management.

A. Failure to form or sustain a coalition or otherwise make progress on project goals

In its first-year progress report and request for funding for the second program year, AFYCC conceded that it was having problems getting cooperation for its coalition. PHS App. F., Tab 7 at 1. However, AFYCC also stated that sometimes emerging organizations "over project" what they may actually be able to accomplish, and AFYCC stated that it would seek professional consulting services to aid in the development of a community coalition in the second program year. Id. at 1 and 3.

While PHS funded AFYCC for the second grant year, the first site visit report, which was conducted shortly after the start of the second program year, found that the other members of AFYCC's proposed coalition, We Care and Woodbury Miracle Fellowship Church, "never consummated the signed agreement." Further, the reviewers determined that, although AFYCC indicated that it had been networking with a variety of organizations, AFYCC had been unable to develop its coalition. PHS App. F., Tab 11, site visit report at 3.

As previously stated, the MCHC Project grants were intended to provide a limited amount of funding to community organizations to develop formal coalitions (or to enable existing community coalitions) to address minority-targeted health education and prevention issues. While AFYCC's grant application included copies of Memoranda of Agreement with We Care and Woodbury "to be an active part of this Minority Health Coalition," the record contains no evidence that these or any other organizations ever participated in any MCHC activities. Also, these agreements were to be evaluated and updated yearly and both agreements expired during April 1995. AFYCC blamed the Project Director for the failure of the coalition to make any progress. AFYCC asserted that the Project Director had failed the community and AFYCC. AFYCC's March 11, 1997 submission at 2. Despite AFYCC's assertion, the record before us shows that AFYCC failed to achieve the primary and fundamental goal of its grant program because no coalition had been formed or sustained.

With regard to the progress on other project goals, AFYCC asserted that education sessions conducted during February and April of 1995 were evidence of project activities. AFYCC's appeal to the Review Committee at 1. PHS App. F., Tab 14. AFYCC submitted no other evidence or argument about project activities and only sought to excuse its failure to perform. That AFYCC can point to no program activities after April of 1995 is strong evidence that AFYCC failed to make sufficient progress on the funded project.
Thus, we conclude that AFYCC materially failed to comply with the terms of the grant award because it failed to form a community coalition or otherwise make progress on project goals.


B. Inadequate stewardship of federal funds

Cost principles for non-profit organizations receiving federal funds are set forth in Office of Management and Budget Circular A-122 (OMB A-122). OMB A-122 is made applicable to HHS grants to non-profit organizations by 45 Code of Federal Regulations (CFR) .74.27(a)(1994). Among other requirements, OMB A-122 provides that allowable costs must "be reasonable for the performance of the award and be allocable thereto" as well as "[b]e adequately documented." See OMB A-122, Attachment (Att.) A, . A, 2. a. and g. A cost is allocable to a particular grant, in accordance with the relative benefits received, if 1) it is incurred specifically for the award, 2) if it benefits both the award and other work and can be reasonably distributed according to the relative benefit, or 3) if it is necessary to the overall operation of the organization. See OMB A-122, Att. A, . A, 4. a. This Board has long held that a grantee bears the burden of documenting the allowability of costs charged to federal funds. See, e.g., Rio Bravo Association, DAB No. 1161 (1990); Columbus County Services Management, Inc., DAB No. 1567 (1996).

MCHC project funds were to be used for: "personnel to coordinate the coalition's activities; consultants; support services; materials; and justified domestic travel." Funds were not to be expended for equipment except as justified in order to conduct the project. Notice of Availability of Funds, 59 Fed. Reg. 12,000, 12,004 (1994).

AFYCC's submissions addressed primarily the financial transactions questioned in the review reports. While there were some questioned transactions which AFYCC did not address, for others AFYCC asserted that records were missing or had been tampered with. AFYCC also asserted that the federal reviewer who conducted the second site visit had engaged in "obstruction of justice," in part by restricting the Executive Director's access to the offices and by working with some grantee staff. AFYCC's November 5, 1996 submission at 5. AFYCC requested a hearing to "provide evidence and witnesses." Id. at 12. Notwithstanding any matters contested by AFYCC, however, we conclude that the record on its face shows that there were "inappropriate transactions" and that these transactions are a sufficient basis for concluding that AFYCC did not exercise adequate stewardship over federal grant funds. As addressed more fully below, AFYCC charged expenses which were unrelated to the funded project, such as car rental expenses, personal loans and utility bills, and expenses for its food assistance program. The record demonstrates that AFYCC had no financial controls for documenting, requesting, and approving expenditures that would assure that only allowable, allocable costs were paid from federal funds. It is clear that AFYCC treated these funds as unrestricted support for its operations as a whole. In an effort to justify charges which are apparently improper, AFYCC makes arguments that show a fundamental lack of understanding about both the scope of the funded project and how federal funds should be managed. Moreover, we do not infer from the fact that PHS has not proceeded to disallow any expenditures that PHS regarded AFYCC's financial management system as satisfactory. Since this is not a disallowance action, however, we do not need to reach definitive conclusions or resolve every disputed issue about the questioned expenditures. Indeed, because the grant was not audited as required, it is not possible to fully evaluate some of AFYCC's arguments about the allowability of particular costs. In any event, we do not need to develop the record further since we are reviewing the questioned costs solely to determine whether AFYCC exercised inadequate stewardship over federal funds.

1. Double pay checks

The reviewers reported that the Executive Director received a salary for the position of Project Director. Additionally, after the resignation of the Community Developer in September 1995, the Executive Director, on at least two occasions, received salaries for both the Project Director and Community Developer positions. Further, the reviewers found that the Executive Director, who had fiscal authority to order the issuance of checks, instructed the accounting service to issue her payment for both positions. Finally, on another occasion, the Executive Director instructed the accounting service to withhold $447.43 of the former Community Developer's salary and issue a check in that amount to her because she had performed some of the Community Developer's duties from June to August.
AFYCC asserted that the Executive Director believed that she could properly receive salaries for both the Community Developer and Project Director positions, since both positions were part-time and she was performing both jobs. AFYCC asserted that the payments were proper under the PHS Grants Policy provision that allowed salary costs "to the extent that they are reasonable and conform to the established, consistently applied policy of the organization." AFYCC's November 5, 1996 submission at 7.

Although the Executive Director was apparently a volunteer in an unpaid position, this still does not justify paying the Executive Director the salaries for both the Community Developer and Project Director positions. Both positions were funded for 80% of effort. There are no time and effort reports that would support a finding that the Executive Director spent 160% of full time on the duties of these positions. Moreover, AFYCC provided no evidence to show that its organization had an established, consistently applied policy which would permit the payments in question. The Board has long held that a grantee bears the burden of documenting the allowability of costs charged to federal funds. It does not appear here that dual compensation, in circumstances such as this one, is reasonable. In Nicholas County Community Action Association, DAB No. 1209 (1990), the Board upheld the agency's determination that the grantee could not pay one individual two full-time salaries from federal funds. Although in this case, the positions at issue were not quite full-time positions, AFYCC has provided no basis for paying both salaries to AFYCC's official while she was supposedly acting as a volunteer.

2. Personal expenses

With regard to personal expenses, the reviewers questioned, among other things, a $973 loan made to a volunteer at the organization. AFYCC made somewhat contradictory arguments regarding this item. AFYCC's first argument was that bank statements that it submitted as evidence show that no funds from the grant at issue were used for this loan. AFYCC's November 5, 1996 submission at 2. AFYCC submitted two bank statements, one dated 12/29/95 and the other for the period 11/01/95 through 11/30/95. See AFYCC's App. F., Tab 11. Conversely, however, AFYCC also argued that the file that contained the repayment was missing from AFYCC's office, and that the employee was instructed by a PHS reviewer not to repay the loan.

The bank statements do not support AFYCC's position. Despite AFYCC's assertion that these statements show that no grant funds were used for this loan, there is nothing in these bank statements that would connect the initial loan or the loan repayment to these accounts. The reviewers determined that the loan at issue came from grant funds. AFYCC has never provided any documentation to contradict the reviewers' determination. Moreover, AFYCC does not dispute that the loan was unrelated to the grant purposes.

With regard to other questioned expenses, the Executive Director stated that she used grant funds to purchase food for a Thanksgiving dinner for AFYCC's Board members and staff, and that she received reimbursement for a $65 personal check written to a food bank. Further, the Executive Director stated that, since she used her personal car going to and from work, when her personal car was vandalized, the federal grant properly paid for the costs for a temporary rental car. Finally, AFYCC did not address the costs questioned for appliance purchases. Notwithstanding AFYCC's statements and explanations with regard to these costs, AFYCC has not shown how these costs related to the purpose for which the MCHC Project grant was awarded, which was to provide limited funding for coalition development and health education for high risk members of its community. Therefore, these expenditures were inappropriate.

Finally, we note that the same reasoning applies to a $12,000 transfer for a house purchase and the charges for credit reports. On November 10, 1995, AFYCC issued a check for $12,000 in the name of the owner of the property being occupied by AFYCC (ostensibly as a down payment for purchase of the property). According to the reviewers, the check was retained by the Executive Director and deposited into her personal checking account, but the check did not clear AFYCC's account because of insufficient funds. Thereafter, a second check for $12,000 was issued directly to the Executive Director and listed on AFYCC's corporate payroll account as an "advancement on salary to purchase house." PHS App. F., Tab 11, site visit report at 5. The record shows also that in anticipation of the house purchase, the Executive Director charged to this grant credit report expenses for herself and the Board President (the Executive Director's mother). On or about December 5, 1995, the Executive Director returned the $12,000 to AFYCC's corporate general fund account (after this transaction was questioned during the first site visit). AFYCC also submitted detailed explanations related to these two checks. However, these transactions should not have occurred in the first place, since the MCHC Project grant funds were not awarded to support the purchase of real property or any activity associated with such a purchase.


3. Personal utility expenses, credit card charges and unsupported disbursements

The reviewers determined that AFYCC issued check #1545 on August 31, 1995 for $145 to the City of Hogansville to cover someone's utility expenses. Further, the reviewers determined that, prior to receiving the federal grant in September 1994, AFYCC's organization had incurred $1,814.70 in charges and penalties to the Amoco Oil Company. After the grant funds were received in October 1994, the organization used grant funds to pay the overdue Amoco bill with the understanding that the Executive Director and her stepfather would reimburse the corporation. In addition, the reviewers questioned eight checks (that were issued to the Executive Director) that they listed under "other questionable disbursements."
AFYCC combined its argument regarding utility expenses, credit card charges, and the checks noted by the reviewers as "other questionable disbursements." Contrary to the reviewers' finding, AFYCC summarily stated that no grant funds were used to pay any personal credit card expenses. Additionally, AFYCC appears to have confused the "personal utility expenses" cited by the reviewers with other expenses. Instead of addressing check #1545 (the $145 utility expense), AFYCC discussed check #1048 which concerned phone bill costs. However, check #1048 was an expenditure later questioned during the second site visit. See PHS App. F., Tab 12 and footnote 5. Finally, AFYCC summarily stated that "Check ## 1562 and 1564 [are] allowable expenditure[s]."

However, AFYCC did not provide any other information regarding these checks, and AFYCC did not address the other six checks. In any event, as with the other expenditures discussed in this section, AFYCC has failed to provide convincing evidence that these expenses were not charged to this grant or to show how these expenditures related to the purpose of the MCHC Project grant.

4. Approval to make expenditures

With regard to the reviewers' findings that the Executive Director inappropriately made the questioned expenditures without the authority or knowledge of the Board of Directors, AFYCC asserted that the Executive Director "followed Board of Directors instructions and authority." AFYCC's November 5, 1996 submission at 1. AFYCC asserted that, in part, minutes of Board meetings would support its position. AFYCC's November 5, 1996 submission at 1, and AFYCC App. F., Tab 1.

We have reviewed the minutes of ten Board meetings submitted by AFYCC. See AFYCC's App. F., Tab 1. The meetings occurred on the following dates: February 1, 1994; May 29, 1994; September 13, 1994; October 24, 1994; December 4, 1994; December 17, 1994; February 18, 1995; March 4, 1995; March 22, 1995, and September 14, 1995. However, AFYCC did not point to anything specific in the minutes that supported its argument. Indeed, in our review, minutes of two meetings, held on February 1, 1994 and May 29, 1994, apparently support the reviewers' position that the Executive Director made transactions without the knowledge or approval of the Board of Directors. Specifically, the record shows that credit card charges, one of the items questioned by the reviewers, for purchases made before the September 30, 1994 effective date of the grant were not allocable to the grant at issue. In particular, an excerpt from the minutes of the February 1, 1994 meeting stated:

Ms. Stinson/Caldwell indicated that she [called] the Board members but none could help with a credit card at this time. She ... did one in her name and [Action for Youth Christian Council] for Office Depot and Lowes to get the equipment needed. Ms. Stinson/Caldwell also bought a computer. . . . We need one to help get grants.

AFYCC's App. F., Tab 1, minutes dated February 1, 1994 at 1. Additionally, none of the other minutes submitted by AFYCC specifically address the expenditure items at issue in this appeal. Instead, the minutes vaguely reference a few of the questioned expenditures, without any specific discussions or determinations on these items. Additionally, the minutes referenced a need to improve the management of the organization.


5. Other Questioned Expenditures

The second site visit report described and listed, by date paid and check number, 43 expenditures totaling over $20,000 that represented unallowable charges to MCHC funds. See PHS App. F., Tab 12 at 3-5. (There is some overlap between these expenses and those questioned during the first site visit.) AFYCC specifically discussed only some of these items. See AFYCC's November 5, 1996 submission at 6-10.

Twelve items were for gas and other expenses for vans. AFYCC asserted that these were allowable charges to the MCHC grant because they were related to AFYCC's Food Closet program. There is, however, no basis for AFYCC's assertion that Food Closet expenses are allowable. MCHC funds are limited to coalition and education activities; neither the proposed budget in AFYCC's application nor the notice of grant award provide any funding for the Food Closet program. For one item, excess travel reimbursement paid to the Executive Director of $159.75, AFYCC's main response was to question expenses reimbursed to other officials but not mentioned in the site visit reports. In general, AFYCC explained the circumstances and reasons for the questioned items without presenting any bases for finding them allowable.

Thus, for the reasons stated above, we conclude that AFYCC materially failed to comply with the terms of its grant award because it provided inadequate stewardship over the MCHC Project grant funds

C. Failure to provide leadership and management

With regard to AFYCC's organization, the reviewers stated:

There is no one on the Board with expertise in accounting or fiscal affairs, no one who can provide input in the development of personnel policies and procedures, and no one who can develop a procedures manual for the operation of the corporation. Consequently, documents crucial to the smooth operation of the organization are less than adequate or nonexistent. There appears to be no checks and balances for any of the operations of the office and the relationship between the Executive Director and the Board of Directors is not well defined.


PHS App. F., Tab 11, site visit report at 4. AFYCC summarily argued that it did not receive the technical support that it needed, and that it had problems maintaining "good and hard working" Board members. AFYCC's November 5, 1996 submission at 1

There is no basis in this record for concluding what type of technical assistance, if any, AFYCC would have benefitted from. Moreover, given the purpose of the grant to provide limited support for coalition educational activities, we find no basis for concluding that PHS was obligated to provide any technical assistance. In any event, it does not appear that AFYCC's problem with finding adequate personnel constitutes a deficiency that could be remedied by PHS.

Moreover, AFYCC admitted that its problems were serious. AFYCC stated that - -

The Board do[es] admit it had serious problems and was desperately trying to reconstruct the Board. The Board had been receiving technical training [from another grantor] . . .
. . . Some members were not coming to meetings.
. . . The new Fiscal Manager stayed one month. Former Project Director was constantly gone on unauthorized trips and budget report was not done. . . .

AFYCC's November 5, 1996 submission at 11. In Arkansas Disability Determination For Social Security Administration, DAB No. 1443 (1993), the Board determined that a state grantee is required to assume the responsibility and liability for the actions of state employees. Similarly, in this situation, AFYCC is responsible for the proper administration of its grant program, despite any problems it asserts it had with staff or its Board. If AFYCC's employees have violated rules of its organization, then AFYCC must pursue these individuals through other available avenues, but cannot rely on this as a reason not to account for grant funds. See also Rural Day Care Association of Northeastern North Carolina, DAB No. 1489 (1994).

AFYCC has admitted that it had serious problems. Based on this and on the determinations above about inadequate financial stewardship and the failure to form or sustain a coalition or to make progress on project activities, we conclude that AFYCC failed to provide adequate leadership and management of its organization.

III. Conclusion

Accordingly, for the reasons stated above, we uphold PHS's termination of the MCHC Project grant.


Donald F. Garrett

M. Terry Johnson

Cecilia Sparks Ford
Presiding Board Member