GAB Decision 308
June 8, 1982 Child Care Association of Wichita/Sedgwick County; Docket
No. 82-1 Ford, Cecilia; Garrett, Donald Settle, Norval
In an amended "Notice of Financial Assistance Awarded" dated
September 23, 1981, the Regional Office of the Office of Human
Development Services (Agency) reduced the level of funding for the Head
Start program of the Child Care Association of Wichita/Sedgwick County
(Grantee) for the period May 1, 1981 through April 30, 1982. In its
appeal to the Board, the Grantee raised three issues relating to the
amended Notice, but the Board determined that it had jurisdiction over
only one portion of the dispute: the reduction of $18,270 from what had
originally been awarded for delegate agency indirect costs.
The Grantee pursued an informal appeal within the Regional Office
before coming to the Board. Because the amount over which the Board has
jurisdiction was less than $25,000, the Board used the expedited
procedures, set out in 45 CFR 16.12 (1981), which included two telephone
conferences which were recorded and transcribed. Based on the record,
we overturn the Agency's determination pertaining to the $18,270.
After some initial confusion, both parties agreed that the Grantee
was mandated to charge the indirect costs of the delegate agency as a
direct cost to its grant and did in fact charge these costs as such.
The Grantee presented evidence which indicated that the $18,270 had been
obligated by the Grantee and received by it prior to the time that the
Agency amended the grant notice, four months into the program year
(Transcript of May 3, 1982 conference, p. 2).
According to the Agency, its action was taken to correct an earlier
"Notice of Financial Assistance Awarded" which by mistake awarded
funds
in excess of the Grantee's funding ceiling as set out in a pre-award
"Letter of Understanding." The Grantee's argument, in effect, was
that
there was no valid reason for the Agency's action, especially in light
of past dealings. We agree with the Grantee for the following reasons:
(1) For three out of the last four program years (including the one
in question), the amount of direct costs on each Notice of Grant Awarded
exceeded the amount listed as the "official Federal funding level"
on
(2) each Letter of Understanding from the Regional Office (in one year,
the amount was the same). The added amount was composed at least in
part of the indirect costs claimed by the Grantee on behalf of the
delegate agency (Transcript of May 3, 1982 conference, pp. 3 - 4). The
actions of the Agency therefore contradict its argument that each Letter
of Understanding somehow established an absolute funding ceiling.
(2) Not only were the funding levels in the Notices higher than in
the Letters, but the Agency admitted that even the Notices themselves
had been amended upwards in prior years (Transcript of May 13, 1982
conference, p. 4). Each Letter of Understanding was at best a pre-award
announcement of a minimum funding level or a funding target. The Agency
has not provided anything beyond conclusory arguments to rebut this.
(3) The Agency has not provided any evidence or even alleged that the
$18,270 was not obligated and used in accordance with the terms and
conditions of the grant, and was not in all ways a valid expenditure.
There was, therefore, no programmatic reason enunciated by the Agency
which would prevent the expenditure of the $18,270.
Essentially, the Agency's entire case is that it made a "mistake"
in
awarding more than the amount projected in the Letter of Understanding.
It provided no explanation of what made this a "mistake" as contrasted
with prior years in which the award amount was also higher than the
amount projected in the Letter of Understanding. In addition, the
Agency has not provided any explanation of its authority to recoup funds
in circumstances where the funds, once awarded, had so thoroughly and
reasonably vested in the Grantee, based on the mere allegation of a
"mistake."
Under the provisions of 45 CFR Part 74, Subpart M, the Agency's
actions were unauthorized. This section of the regulations provides for
two types of actions which can be taken to prevent a grantee from
obligating awarded grant funds: termination and voiding.
"Termination" of a grant in part can be "for cause" (74.115(a))
or
"on other grounds" (74.115(b)). "For cause" means a grantee
has
materially failed to comply with the terms of the grant. There has been
no such allegation in this appeal so that termination for cause would
not have been appropriate. "Other grounds" means with the consent
of a
grantee or by the grantee. Neither situation occurred here so that
there was no termination on other grounds.
A grant may be voided only if there has been a determination that the
award was obtained fraudulently or was otherwise illegal or invalid from
inception (74.110(d)). There has been no allegation of fraud, but, in
effect, the Agency has alleged that the award of the funds was invalid
from inception because it was impermissibly above a funding ceiling.
(3) As explained above, however, the Agency has not provided any
evidence that the sum mentioned in the Letter of Understanding
represented a funding ceiling. Further, there is nothing in the record
to indicate that the funds were obtained or expended for other than
lawful and allowable expenditures consistent with program objectives.
Therefore, there is no basis for us to conclude that a portion of the
grant was properly voided.
We do not mean to imply that the Agency would be precluded from
recovering funds clearly awarded in error. Rather, our holding
essentially is that the Agency's allegation that there was an error in
this case is not supported by the record.
Conclusion
For the reasons stated above, we overturn the Agency's determination
to reduce the Grantee's award by $18,270.
OCTOBER 22, 1983