SUBJECT: Huron Potawatomi,

DECISION

Huron Potawatomi, Inc. (the Band) appealed the determination of the Administration for Native Americans (ANA) dated November 13, 2002, based on an audit, disallowing $60,474 drawn down by the Band under three ANA grants but never expended. ANA found that since the grants had expired in August 1999, the Band was required to return the unexpended funds to the federal government. During the proceedings in this appeal, ANA disallowed an additional $8,641 representing unexpended funds drawn down under one of the three grants after the period covered by the audit.

On appeal, the Band argued that it had accounted for all of the disallowed funds. Specifically, the Band argued that in 2001, it had expended a total of $30,810 for the purposes for which two of the grants had been awarded. The Band also argued that it had repaid $25,401 of the funds in question by reducing its draw downs for other grants it received from ANA. The Band further argued that it was entitled to $12,904 for indirect costs it incurred in 1997 and 1998 under one of the grants. In addition, the Band took the position that, to the extent the funds had not been accounted for, repayment should not be required because
"(1) the Band acted in good faith, (2) ANA would likely have approved a no-cost extension, had one been requested, and (3) economic hardship." Band submission dated 12/12/02, at 3.

For the reasons discussed below, we conclude that all of the Tribe's arguments are unavailing. Accordingly, we sustain the disallowance in full.

Background

The disallowance relates to three ANA grant awards. Grant No. 90NA1603 was awarded under the Social and Economic Development program for the period June 1, 1995 to May 31, 1996. ANA approved a no-cost extension of the grant to August 31, 1996. Grant No. 90NA1860 was awarded under the Social and Economic Development program for the period July 1, 1997 through June 30, 1998. ANA approved a no-cost extension of the grant to December 31, 1998. Grant No. 90NR0105 was awarded under the Tribal Environmental Regulation program for the period September 1, 1998 to August 31, 1999. ANA submission dated 2/20/03, Tabs B-D; ANA submission dated 5/7/03, Tabs F and G. It appears that none of the grants were subsequently renewed.

The report of an organization-wide audit for the period January 1, 1999 to December 31, 1999 included a finding that the Band had a total of $60,474 in funds from expired grants in its possession that needed to be returned to the Department of Health and Human Services (HHS). ANA submission dated 2/20/03, Tab A at 40. In response to the audit finding, the Band acknowledged that it had certain unexpended grant proceeds on hand as of December 31, 1999, but indicated that some of the funds were properly expended during 2000 and possibly during 2001. See 11/13/02 disallowance letter at 2. In the disallowance letter, ANA directed the Band to return the $60,474 to HHS, stating that the Band -

is in violation of 45 CFR 92.20(b)(3) and 45 CFR 92.50(d)(2) for failure to maintain effective control over grantee cash and failure to immediately refund to the Federal agency any balance of unobligated cash advanced that is not authorized to be retained for use in other grants. Such cash was not returned to the Federal government in a timely manner.

Id.

Section 92.20(b)(3) of 45 C.F.R. states:

Internal control. Effective control and accountability must be maintained for all grant and subgrant cash, real and personal property, and other assets. Grantees and subgrantees must adequately safeguard all such property and must assure that it is used solely for authorized purposes.

Section 92.50(d)(2) of 45 C.F.R. states:

The grantee must immediately refund to the Federal agency any balance of unobligated (unencumbered) cash advanced that is not authorized to be retained for use on other grants.

Part 92 of 45 C.F.R. comprises the Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments. The Band did not dispute that it was subject to these requirements.

On appeal, the Band acknowledged that it did not refund the disallowed amounts to HHS at the time the grants expired, as required by 45 C.F.R. � 92.50(d)(2). ⁽¹⁾ However, the Band took the position that it had subsequently accounted for all of these funds. We address separately below each of the Band's arguments with respect to how it accounted for these funds. We then proceed to address the Band's arguments as to why repayment was not required even if the funds were not accounted for.

1. Expenditures in 2001

According to the Band, it accounted for some of the disallowed funds by making expenditures for grant purposes in 2001. The Band attributed $20,254 of these expenditures to Grant No. 90NA1603 and $10,556 to Grant No. 90NA1860. The Band appeared to argue that these were new expenditures made for the same purposes for which the grants were awarded. The Band asserted that the expenditures "are all supported by narratives of program objectives met," but did not identify the specific costs for which the expenditures were made. Band submission dated 12/12/02, at 3.

Even if the Band documented that it made otherwise allowable expenditures in 2001, that does not provide a basis for reversing this part of the disallowance. The Board has previously held that expenditures that are incurred outside the grant term are not allocable to the grant activities for which the grant was originally awarded. Anishinaubag Intercultural Program, DAB No. 1477 (1994), and decision cited therein. A cost must be allocable to the grant to which it is charged in order to be allowable. See Office of Management and Budget Circular A-87, "Cost Principles for State and Local Governments," Appendix A, � C.3 (made applicable to state and local governments by 45 C.F.R. � 92.22(b)). Thus, the expenditures the Band alleged it made in 2001 were unallowable because they were not allocable to the grants that ended several years earlier.

Moreover, as ANA pointed out, the applicable regulations require that grant funds be obligated during the funding period of the grant and that obligations be liquidated within 90 days after the close of that period. See 45 C.F.R. � 92.23(a) and (b). ⁽²⁾ The Band did not allege that the expenditures it made in 2001 were for obligations it incurred during the term of either Grant No. 90NA1603 or Grant No. 90NA1860. In addition, even if the funds in question had been obligated in a timely manner, the obligations were not liquidated within the 90-day period required by the regulations.

2. Amounts not drawn down under other ANA grants

The Band took the position that it had repaid $25,401 of the unexpended funds by reducing the amount requested from ANA through the Payment Management System. Specifically, the Band asserted that it had a "negative draw" of $2,428 on March 26, 2001 which it "allocated" to Grant No. 90NR0105 and a "negative draw" of $22,973 on September 25, 2001 which it "allocated" to Grant No. 90NA1860. Notice of Appeal dated 12/12/02, attached "Master Grant Reconciliation Worksheet." According to the Band, the negative draws represented amounts it was entitled to under other ANA grants but which it did not draw down. In essence, the Band sought to offset unexpended funds from Grant Nos. 90NR0105 and 90NA1860 by funds which it would otherwise have drawn down for allowable expenditures under other ANA grants.

This theory of repayment has no merit. In some circumstances, it may be appropriate to offset a debt owed by a grantee to the grantor agency by an amount of funds due to the grantee from the same agency. Here, however, the Band merely alleged that it was due funds in the amount of the negative draw for each of two other ANA grants without providing any documentation to establish that it in fact incurred and paid that amount of allowable costs under these other grants. Thus, although it had ample opportunity to provide such documentation, the Band failed to establish that there was a debt owed to it by ANA which it could properly offset against some of the unexpended funds it owed to ANA. ⁽³⁾

In support of the Band's position, the Band's Finance Director asserted that "[w]hen initially contacting the [Division of Payment Management], I was prepared to cut a check to the ANA to repay these amounts, but was instructed that this 'negative grant draw' was the appropriate mechanism by which to accomplish this." Band submission dated 12/12/02, at 2. To the extent that this constitutes an argument that ANA is estopped from disallowing the amounts of the negative draws, that argument must fail. The prevailing view in the federal courts is that equitable estoppel does not lie against the federal government, if indeed it is available at all, absent at least a showing of affirmative misconduct. See, e.g., Northstar Youth Services, Inc., DAB No. 1884 (2003), and cases cited therein (including Office of Personnel Management v. Richmond, 496 U.S. 414 (1990) and Heckler v. Community Health Services of Crawford County, Inc., 467 U.S. 51 (1984)). An allegation that incorrect advice was provided by the Division of Payment Management is not evidence of affirmative misconduct.

Moreover, in order for traditional estoppel to lie against a party, the following elements must be met: (1) the party against whom estoppel is sought must have misrepresented the facts; (2) the party asserting estoppel must have reasonably relied on those facts; and (3) the reliance must have resulted in some harm or detriment to the party asserting estoppel. Id. The latter two elements are not present here. The purported advice of the Division of Payment Management was contrary not only to principles of federal appropriations law but also to the applicable regulations. Thus, the Band could not reasonably rely on this advice. Moreover, the Band was not prejudiced by reliance on this advice, which merely delayed its return of the unexpended funds to HHS.

3. Unclaimed indirect costs

The Band argued that it had accounted for $12,904 of the unexpended funds when it made a prior period adjustment for the Band's fiscal year 2000 to reflect $12,904 the Band determined was expended in 1997 and 1998 for indirect costs under Grant No. 90NA1860. This adjustment is not a proper basis for reducing the disallowance. ANA noted that the Band entered into an Indirect Cost Negotiated Agreement with the Department of the Interior (DOI) for the period January 1, 1997 to December 31, 2001. ANA submission dated 2/20/03, Tab E. (DOI was the "cognizant agency" responsible for approving an indirect cost rate agreement for application to the Band's federal grants and contracts.) ANA stated:

The agreement is applicable to Federal grants received by the Band in that period, including Grant No. 90NA1860. Under the agreement carryforward calculations for 1997, 1998 and 1999 are to be accumulated and amortized over negotiated years 2002, 2003, and 2004. Thus, the Band is scheduled to receive compensation for its indirect costs for 1997 and 1998 in that three-year period. The charge it now claims to offset the disallowed amount appears to either already have been or will be compensated under the agreement. Allowing the Band to offset the disallowance by the claimed amount of indirect costs would result in the Band being compensated twice for the same expenditure.

ANA submission dated 5/7/03, at 8.

The Band disputed that it would be compensated under this indirect cost rate agreement for any indirect costs incurred in 1997 and 1998 under Grant No. 90NA1860. According to the Band, DOI will not allow the Band to recover indirect costs through the carryforward provision where the grantee "neglect[ed] to apply indirect costs to a grant (whether by error or because the grantor will not allow indirect costs to be applied)." Band submission dated 12/12/02, at 2. The Band did not point to any language in the indirect cost rate agreement or cite any other authority which supports this statement, however. Moreover, by signing the indirect cost rate agreement, the Band agreed to accept payment at the fixed rate indicated for any indirect costs it might have incurred. It is therefore irrelevant whether application of the rate to Grant No. 90NA1860 would fully compensate the Band for any indirect costs it actually incurred under that grant. Thus, we conclude that the Band was not entitled to use the unexpended funds to pay for any indirect costs incurred in 1997 and 1998 for Grant No. 90NA1860.

Furthermore, even if the indirect cost rate agreement negotiated by DOI did not apply here, there would be no basis for permitting the use of the unexpended funds to reimburse the Band for any indirect costs it incurred under Grant No. 90NA1860. The Financial Assistance Award for that grant shows "0" as the amount budgeted for indirect costs. The Board held in an identical situation that it has "no authority to allow any indirect costs by way of setoff or otherwise because that would constitute the making of an additional award." Gila River Indian Community, DAB No. 339, at 3 (1982). Thus, in the absence of an indirect cost rate agreement, the Band was not entitled to claim any indirect costs for the grant in question. ⁽⁴⁾

4. Other Arguments

The Band ultimately conceded that "ANA would be within its rights to disallow" the $30,810 the Band claimed was expended for grant purposes in 2001. Band submission dated 12/12/02, at 3. However, the Band nevertheless made several arguments as to why these funds should not be disallowed which we address in turn below. ⁽⁵⁾

First, the Band argued in essence that it should not be held responsible for the mismanagement of its grants by former employees, particularly when ANA did not identify problems resulting from the mismanagement at an earlier date. The Board has held, however, that a grantee "is responsible for the proper administration of its grant program, despite any problems it asserts it had with staff" and cannot rely on any such problems as a reason not to account for grant funds. Action for Youth Christian Council, DAB No. 1651, at 15 (1998). Moreover, the Band was on notice of the requirement in 45 C.F.R. � 92.50(d)(2) to return unexpended funds on hand after the close of a grant. Thus, while ANA was responsible for oversight of the grants it awarded, the fact that it did not request repayment of the unexpended funds at an earlier date does not excuse the Band's failure to return the funds. ⁽⁶⁾

Second, the Band asserted that "ANA has set a precedent of approving no-cost contract extensions in the past, when required in order to complete a program's objectives." Band submission dated 12/12/02, at 3. The Band then requested that ANA "consider a 'retroactive' no-cost extension, and allow the 2001 expenditures, which are all supported by narratives of program objectives met." Id. If ANA were to extend the terms of Grant Nos. 90NA1603 and 90NA1860 through the date in 2001 when the Band allegedly expended $30,810 for the purposes of these grants, the timing of the expenditures would no longer be a basis for disallowing them (although ANA could still determine that these costs were not otherwise allowable).

ANA did not respond to the Band's request for a retroactive no-cost extension of each of the two grants in question. We conclude, however, that such an extension would be inconsistent with HHS policy on no-cost extensions, which is contained in the HHS Grants Administration Manual (GAM) and is specifically applicable to all discretionary grants. Under the GAM, a grantor agency has the discretion to award a no-cost extension of a project in the following circumstances:

If support for a project is ending, the grants officer may noncompetitively extend the project for a limited time, usually a few months to provide for an orderly phase-out of Federal support. The grants officer may also extend any budget period for a few months for administrative reasons.

GAM Chapter 1-85-10 (emphasis added). Since Grant No. 90NA1603 ended in August 1996 and Grant No. 90NA1860 ended in December 1998, ANA would have to extend the terms of the grants for years instead of months as contemplated by the GAM in order to bring the 2001 expenditures within the terms of the grants. We also note that ANA previously approved a three-month no-cost extension of Grant No. 90NA1603 and a six-month no-cost extension of Grant No. 90NA1860. Thus, the Band had ample opportunity to expend all funds necessary to close out these grants.

Finally, the Band asserted that it "simply doesn't have the resources with which to repay the ANA" and that "[a]sking the Band to repay these funds now, after they have been spent on allowable activities (albeit too late), would represent a significant economic hardship to the Band." Band submission dated 12/12/02, at 3-4. In response to a similar allegation of inability to repay a disallowance, the Board stated that it does not have jurisdiction to forgive a disallowance where the grantee does not contest the legal or factual basis of the disallowance but merely seeks equitable relief. Harambee Child Development Council, Inc., DAB No. 1697 (1999). As indicated above, the Band ultimately conceded that the $30,810 was not allowable. Accordingly, the Band's request for equitable relief based on its inability to repay must fail.

Conclusion

For the reasons discussed above, we conclude that the Band must return all of the unexpended funds to HHS pursuant to 45 C.F.R. � 92.52(d)(2). Accordingly, we sustain the disallowance in full.

Cecilia Sparks Ford

Donald F. Garrett

Marc R. Hillson
Presiding Board Member

1. Although this section requires the return only of those funds not authorized to be retained for use on other grants, the Band did not argue that any such authority existed here.

2. These regulations read as follows:

(a) General. Where a funding period is specified, a grantee may charge to the award only costs resulting from obligations of the funding period unless carryover of unobligated balances is permitted, in which case the carryover balances may be charged for costs resulting from obligations of the subsequent funding period.

(b) Liquidation of obligations. A grantee must liquidate all obligations incurred under the award not later than 90 days after the end of the funding period (or as specified in a program regulation) to coincide with the submission of the annual Financial Status Report (SF-269). The Federal agency may extend this deadline at the request of the grantee.

3. ANA made much the same point in its briefing before the Board. See ANA submission dated 5/7/03, at 6. However, the Tribe elected not to file a reply to this submission. Nevertheless, this decision does not preclude ANA from considering any documentation the Band may provide in the future to establish that it incurred and paid allowable costs under the other grants for which it is entitled to be paid.

4. ANA also maintained that use of the unexpended funds for indirect costs violated the requirement at 45 C.F.R. � 92.23(b) that obligations be liquidated within 90 days after the close of the grant period. We disagree. The Band asserted that it had incurred and paid indirect costs during the grant period. Thus, the obligation was liquidated at that time, regardless of what funds were used.

5. The first and last of these arguments logically pertain to the remaining disallowed costs as well.

6. In February 2002, ANA deobligated $60,281 under Grant No. 90NA1860 and $10,147 under Grant No. 90NR0105. See ANA submission dated 2/20/03, Tabs C and D. It is unclear how these deobligated funds are related to the amounts in dispute here.