GAB Decision 279
April 20, 1982 Upstate Medical Center of the State University of New
York; Docket No. 81-215 Ford, Cecilia; Garrett, Donald Settle, Norval
The Upstate Medical Center (Center) appealed a decision of the Ad Hoc
Grant Appeals Review Committee of the Public Health Service (Agency)
upholding an Agency decision to disapprove the Center's request to
rebudget $69,000. /1/
The Board has concluded that the Agency was unreasonable in failing
to address the substantive elements of the Center's explanation of why
it considered the rebudgeting appropriate. If the Agency does not
approve the request after further review of the Center's information, it
should then provide the Center with a more substantial response.
Background.
In September, 1980, the Agency's Health Resources Administration
awarded the Center a multi-year discretionary grant under Section 780 of
the Public Health Service Act, as amended (42 U.S.C. 295g) to help
establish a department of family medicine. Appeal File, item 1. The
approved grant application budgeted $16,200 for certain computer
hardware for a data retrieval network. Appeal File, item 4.
In June, 1981, the Center requested Agency permission to rebudget
$69,000 from the "personnel" category to two other categories, so
the
Center could then use the funds to pay for more hardware, (2) software,
and service contracts related to the data retrieval network. Appeal
File, item 2. The Agency disapproved the request, stating --
While the establishment of data retrieval network was approved as a
project objective, Federal funding of the equipment and materials for
the network was not requested and absorption of this cost through
rebudgeting is not considered appropriate. Appeal File, item 3.
The Agency gave the Center a right to appeal under 42 CFR Part 50,
subpart D (1980).
The decision of the Ad Hoc Review Committee.
In its appeal to the review committee, the Center argued that the
$16,200 originally budgeted for the data network at first appeared
adequate, but that later "it became clear that the amount requested and
received would be insufficient." Appeal File, item 4, pp. 1-2. The
Center's explanation was that "there have been several changes in the
capabilities and availability of State University computer support which
we originally thought would be available." Id., p. 2. The Center also
explained what it considered to be the benefits of the network as it
would be under the rebudgeting proposal. Id.
The review committee denied the appeal. Appeal File, item 5. It
held that there was no evidence that availability of university computer
equipment was discussed before award or that it was a factor in setting
the amount of funding for the network; "therefore", the denial of
the
rebudgeting request was "wholly within (the) discretion" of the Grants
Management Officer and "entirely compatible with the provisions and
understandings on which the grant award was based." Id., p. 2.
The Center then appealed to this Board.
The parties' positions on appeal to this Board.
In material submitted to this Board, the Center provided further
explanation of its view of the importance of an expanded network, and
the reasons why the Center felt it was necessary to reprogram its funds.
Appeal File, item 6; Center's brief. We need not examine these reasons
in view of our holding. The Agency responded that it had "no arguments
to present regarding the appellant's statement." Memorandum from James
A. Walsh to the Board dated March 26, 1982. The Center did not submit a
reply to the latter memorandum. (3) Discussion.
The Center did not contest the authority of the Agency to disapprove
the rebudgeting in this case. The record does not contain any Agency
(or Center) specification of the regulatory basis of disapproval
authority; /2/ however, the Center asked for approval in the first
place, and in any event has now been put on notice of Agency
disapproval.
While the Agency's discretion to give or deny approval of the
rebudgeting request is not contested, the record of the manner in which
the Agency exercised its discretion does not show even the most minimal
explanation to the Center of the Agency decision. The original Agency
decision, insofar as reflected in the record, consists of only the one
sentence quoted on page 2 above. The first half of the sentence,
stating that "federal funding of the (4) equipment and materials for the
network was not requested" in the grant application, was simply wrong,
as the Agency's own review committee found. Appeal File, item 5, p. 1.
The Center received $16,200 for equipment and materials specifically for
the network. The second phrase in the sentence -- "absorption of this
cost through rebudgeting is not considered appropriate" -- is so
conclusory and uninformative that it suggests an arbitrary decision and
arguably an abuse of discretion. Indeed, use of the passive voice even
leaves unclear who considered the rebudgeting inappropriate.
The Agency had a responsibility to explain, however briefly, what the
basis was for its decision. See, Kent Community Mental Health Center
Services Board, Decision No. 138, December 1, 1980, and cases cited
therein.
The review committee's decision was equally uninformative, and in
addition contained conclusions which were beside the point. It does not
appear to us that the committee's basic conclusion -- that availability
of university computers was not a factor in grant award -- had more than
remote relevance to whether the rebudgeting request should have been
approved. The committee's finding that the Grants Management Officer's
decision was "compatible" with the understandings on which award was
based was equally insubstantial, and the committee's determination that
his decision was "therefore" within his discretion simply appears
to be
a non sequitur. Whatever the circumstances may have been at the time of
grant award, the Center should have been given reasons why its
explanation of changed circumstances was an insufficient basis for
approval of the rebudgeting.
We do not mean to suggest that the rebudgeting request necessarily
should have been approved. Indeed, on the face of it, eliminating
$69,000 in salaries (out of $233,944 budgeted for personnel) in favor of
computers certainly calls for critical review. We conclude merely that
since the Center made a rebudgeting request in good faith, and provided
reasons with supporting data, the Center should have received an
explanation from the Agency responsive to the request. We do not decide
here whether the rebudgeting should or should not have been approved
because we believe the Agency has a responsibility, and the programmatic
expertise, to make this judgment. The Agency, in effect, has not yet
made that judgment, and the Board will not perform that function for the
Agency.
Conclusion.
The Agency erred in failing to give the Center an explanation,
responsive to the Center's presentation of reasons, of the (5) bases of
the Agency disapproval of the rebudgeting request. The Agency should
now reexamine the Centerhs request (as set forth in materials in the
record of this case and other material the Agency may require the Center
to submit), and either approve the request or give the Center a more
reasonable and complete explanation of any disapproval. /3/ The
explanation should also specify the regulatory authority for the
disapproval.
/1/ Amendments to Board regulations in August, 1981, deleted our
jurisdiction over this particular type of dispute. See 45 CFR
16.5(a)(3) (1980) (old regulation); 45 CFR Part 16, Appendix A,
Paragraph C 1981) (46 Fed. Reg. 43821, August 31, 1981) (new
regulation). The Board provided an appeal forum for the Center in
response to a request from the Agency. Appeal File, item 8. /2/ A
"Program Guide" submitted with the Agency's response to the Center's
appeal states that a grantee may -- . . . rebudget funds to meet certain
unanticipated needs, when such departures from the approved budget
enhance the progress of the project toward its stated objective and
adhere to the requirements of the PHS Supplemental Chapter 1-510 . . .
of the DHHS Grants Administration Manual. p. 21. The latter document
provides, at 1-510-40 B.3.a, for prior approval of rebudgeting which
"results from changes in the scope . . . of the grant-supported
activities . . . ." There are other rebudgeting actions for which prior
approval is also required by the Manual, but they do not appear to be
applicable in this case. Generally, unless rebudgeting approval is
specifically required, " . . . budget changes under nonconstruction
grants do not require approval." 45 CFR 74.105(c) (1980). Provisions in
the Cost Principles requiring Agency approval of computer and other
equipment purchases do not appear to be applicable to the particular
type of grant and grantee in this case. 45 CFR Part 74, Subpart Q and
Appendices (1980), and 45 CFR Part 95, Subpart F (1980). We assume that
the prior approval sought and denied in this case is based on the
change-in-scope provision in the Grants Administration Manual. The
Agency failed to explain what, if any, requirement was applicable. This
is now required of final decisions. 45 CFR 74.304(c) (1981) (46 Fed.
Reg. 43822, August 31, 1981). /3/ Pursuant to the Agency request for
Board review, the Board will provide a forum for appeal of any such
further disapproval (after exhaustion of interim review under 45 CFR
Part 50). The Center should be aware that the Board would give the
Agency disapproval decision (assuming it is responsive as discussed
above) some deference, based on the Agency's exercise of its discretion
and expertise. See, Decision No. 138, supra.
OCTOBER 22, 1983