GAB Decision 432
Docket No. 82-146
May 31, 1983
Welfare Research Institute;
Garrett, Donald; Ford, Cecilia Teitz, Alexander
Welfare Research Institute (Grantee) appealed $4,430 of the $5,560
disallowance made by the Office of Human Development Services (Agency,
OHDS) under the OHDS Research and Demonstration grant program of section
1110 of the Social Security Act (establishing social service research
institutes) for the period September 30, 1978 through September 30,
1980. The Agency's disallowance letter stated that $5,065 related to
excess travel costs and $495 related to tuition costs.
Background
Audit Report No. 02-21450, dated January 19, 1982, indicated that
there were $5,560 in unallowable costs claimed by Grantee and
recommended that that amount be disallowed as follows: (1) $512 in
unallowable and unreasonable taxi fares to and from meals; (2) $587 in
taxi fares over $4 for which no receipt was available; (3) $2,264 of
costs in excess of Grantee's maximum meal and lodging allowances; (4) a
remainder of $1,067 for which no reason was given; and (5) $1,130 for
two items (including the $495 mentioned above) for which the
disallowance was not contested and, therefore, will not be dealt with in
this decision. In addition, the Audit Report stated that there were
personal long distance phone calls that were unallowable but did not
state what part of the disallowance, if any, was attributable to these
phone calls.
Following the recommendations of the auditors, the Agency disallowed
$5,560. However, the disallowance letter did not even repeat the
characterizations used by the auditors as the basis for the disallowance
recommendations.The bases contained in the letter were merely $5,065
travel costs overstated," and "$495 tuition costs."
Grantee's brief asserted that, with regard to the $512 in taxi fares
to and from meals, the use of taxis was reasonable and necessary for
safety purposes under the circumstances that staff members work.
Grantee's position (2) on the $587 in taxi fares over $4 without
receipts was that Grantee was entitled to at least the first $4 of each
taxi fare because Grantee's travel guidelines required a receipt only if
the fare was over $4. /1/ Grantee stated that the $2,264 in disallowed
costs in excess of meal and lodging guidelines were allowable costs.
The basis for this position was that these costs were sustained by
Grantee's executive director who, as the chief executive officer of a
quasi-state organization, was exempt from the limits contained in
Grantee's travel guidelines. Grantee stated that although the long
distance telephone calls were not made during "normal" business hours,
they were business calls made during the business hours of the staff
member making the call. Although the Agency had not identified the
disallowance of car rentals in either the audit report or the
disallowance letter, Grantee, in its examination of the audit
workpapers, found $154.20 in disallowed car rentals /2/ among
workpapers, found $154.20 in disallowed car rentals /3/ among the $1,067
in miscellaneous items disallowed. Grantee stated that these car
rentals were used only where accessibility was difficult or where cost
effective in comparison to other forms of transportation.
The Agency's brief stated that the basis of the entire disallowance
was that Grantee had not submitted adequate documentation to support the
claim that the disallowed funds were properly allocable /4/ to the
grant.
A telephone conference was convened by the Board to clarify the
Agency's bases for the disallowance. The Agency's attorney stated that
the auditors had said that there was no evidence that the monies were
spent for the grant program. Grantee insisted that there was no
allocability issue in (3) this appeal - that the disallowance had been
made for entirely different reasons. The Board pointed out that the
Audit Report (upon which the disallowance was based) was not consistent
with the Agency's brief on the question of allocability. Examination of
page 26 of the audit report showed that the only item that the auditors
recommended for disallowance because of a question of allocability was
not appealed by Grantee. The Agency's attorney was requested to
determine what items, if any, were disallowed because of allocability.
The Agency was also requested to break down the $1,067 into its
component parts and to state the Agency's position with regard to
Grantee's claim that it was a quasi-state organization.
The Agency's response in writing to the Board's requests for
information discussed in the telephone conference stated that (1) $512
was disallowed because the Agency found that the use of taxis to and
from meals was unreasonable and (2) $2,264 (previously said to be cost
in excess of meal and lodging allowances) and (3) $1,067 (previously not
accounted for) were disallowed as unreasonable or unsupported by
adequate documentation. With respect to the allocability question, the
Agency stated that with regard to those costs which were disallowed due
to insufficient documentation or lack of documentation, it was not
possible for the Agency to make any determination as to whether the
expenditures were in fact allocable to the grant project. With regard
to Grantee's assertion that it was a quasi-state organization, the
travel of whose executive director was exempt from its travel
guidelines, the Agency stated that no notice of that position by Grantee
had been provided to the Agency in any submitted travel guidelines. The
Agency's contention was that without any notice of such an arrangement,
Grantee was held to the limitations contained in the travel guidelines.
The Agency's submission included a brakdown of the $1,067 portion of the
disallowance. The brakdown is contained in the $1,067 - miscellaneous"
portion of the analysis.
Grantee argued that the Agency's submission after the telephone
conference should not be accepted into the record by the Board because
the Agency's submission was not sent within five days of recript of the
summary of the telephone conference as provided for in that summary.
The Board decided that the Agency's submission would be made a part of
the record because the five day deadline was for the submission of
comments about the telephone conference, not for (4) the provision of
substantive information requested in the telephone conference. Grantee
was given an opportunity to respond to the Agency's submission and did
so.
Regarding the question of whether there is an issue of allocability
in this appeal and if there is, whether the Grantee has provided
information to substantiate its claim, the Agency has not provided any
information why the Agency has adopted a position different from that in
the audit report or why the documentation submitted in the appeal file
is not sufficient. Grantee in its appeal file provided lists, expense
reports, and receipts for the claimed items of cost. The lists provide
a detailed brakdown of questioned costs and explanations for at least
some of these costs. The Agency did not respond in any way to this
documentation. We determine, therefore, that the Agency has not
articulated clearly its contention that allocability is an issue in the
appeal, it has not shown why the auditors who reviewed Grantee's
documentation did not question allocation, nor has it shown why
documentation in the appeal file is not acceptable from the perspective
of allocability.
The disallowed items that were apealed are discussed below.
$512 - Taxi fares to and from meals
The Audit Report recommended that $512 be disallowed as taxi fares to
and from meals because these fares were unallowable and unreasonable.
The auditors stated that, particularly in urban areas, "there would be
sufficient restaurants within a given locale to preclude the need, even
for safety reasons, for the use of a taxi." (Audit Report, p. 32)
However, in the disallowance letter these fares were disallowed
generally as "travel costs overstated."
Grantee argued that taxi fares to and from meals should be allowable
because Grantee's employees frequently work in large urban areas,
warranting the use of taxis. Gantee indicated that many of the staff
members are female, traveling alone, and that much of the work is done
at night in inner cities. Grantee stated that staff tended to work
late, have a business related dinner, and then return to the place of
lodging. Grantee pointed out that in these frequent business related
dinners staff members did not always have a choice as to the location of
a meal. Grantee (5) asserted that the use of taxis to and from meals
was reasonable and allowable because of the safety afforded staff
members.
The Agency's brief stated that there was no documentation that these
taxi fares were allocable to the grant program. The allocability
question is discussed on page 4. The Agency stated that it also
considered these fares unreasonable but did not provide a basis for this
position. Grantee (1) provided information as to the necessity of the
use of taxis for safety in certain circumstances, and (2) apparently did
not violate its travel guidelines. The Agency did not give even the
most minimal explanation of the basis for the characterization of these
particular costs item as unallowable. For these reasons, we reverse
this portion of the disallowance.
$587 - Taxis fares over $4 for which no receipt was available
The Audit Report recommended the disallowance of $587 in taxi fares
over $4 without receipt. The Agency's disallowance letter characterized
these fares as "travel costs overstated," while the Agency's brief
stated that all appealed items had been disallowed for not being
allocable to the grant. The allocability question is discussed on p. 4.
Although Grantee's travel guidelines required receipts for only those
taxi fares over $4, the Agency's position was to disallow the entire
fare rather than just that portion of the fare in excess of $4.
Grantee argued that, at the least, it should be allowed to recover
the $4 maximum referenced in Grantee's travel guidelines for which a
receipt is not required. Grantee further argued that some of the
receipts could not be obtained despite effort but provided no specific
documentation (other than receipts) for its assertion.
The Agency's attorney, when questioned about the Agency's position on
these taxi fares at the telephone conference, was unable to state a
definite position for the Agency or articulate any policy
considerations.(see, Transcript, pp. 11-13).
(6) We find that the Agency failed to state a reasonable basis for
its decision. The Agency did not argue that it would have disallowed a
claim for a taxi fare of less than $4 submitted without a receipt. The
Agency has not justified disallowing the entire amount of a taxi fare
when Grantee's guidelines call for a receipt only when a fare is over
$4. On the other hand, Grantee has provided no specific justification
for allowing the portion of each fare over $4. Therefore, we reverse
the disallowance to the extent of the first $4 of each fare when the
receipt is not submitted. We sustain the remainder of this portion of
the disallowance.
$2,264 - Costs in excess of Grantee's meal and lodging allowances
The Audit Report stated that $2,264 of travel costs in excess of meal
and lodging allowances had not been approved nor had Grantee submitted
any documentation as to why higher lodging costs had to be incurred.
The travel guidelines state that the "travel allowances for all staff"
appear in the schedule contained in the guidelines. The Agency's
disallowance letter stated that all costs (including these) were "travel
costs overstated."
Grantee stated that the individual who expended funds in excess of
the meal and lodging guidelines was the executive director of the
program, and as such, was not subject to the travel guidelines to which
other employees were subject. Grantee stated that because Grantee was,
by statute, a state-related organization, its executive director is
right-fully exempt from the guidelines as is the highest executive
officer of a state government department.
The Agency's brief stated that these costs had been disallowed
because Grantee had not provided documentation that these costs were
properly allocable to the grant program. The allocability issue is
discussed on p. 4.
The Agency stated that, with regard to Grantee's position that it was
a quasi-state agency, "... no notice of this position was ever provided
by any of the submitted travel guidelines which were approved by OHDS
and incorporated as terms of the grant award. In the absence of any
such notice, the Agency ought to be entitled to rely on the granteee's
strict compliance with the submitted travel guidelines." (Agency's
response to the telephone conference, p. 5)
(7) We find this portion of the disallowance reasonable. Items such
as travel guidelines are submitted and incorporated into the grant award
to provide the Agency with a maximum amount of information and so that
the parties have a common understanding of the rules for travel. The
language of the document does not on its face exempt the executive
director from the travel guidelines.
Also, despite the assertions contained in a self-serving affidavit
from the executive director of Grantee submitted to the Board, Grantee
has not documented that it was a quasi-state organization or that the
head of a state agency in the State of New York would be exempt from
travel guidelines for all employees. Therefore, we find that Grantee
has not conclusively demonstrated that Grantee's executive director
should not be held to the standards contained in the travel guidelines.
Therefore, we uphold the disallowance of $2,264 in costs spent in
excess of Grantee's meal and lodging allowance.
$1067 - miscellaneous
The Audit Report recommended the disallowance of a total of $5,560.
However, only $4,493 was identified with any basis for disallowance (see
discussion above). No specific reasons for the remainder of $1,067
($5,560-$4,493) was stated. Personal long distance phone calls were
mentioned in the audit report but no specific amount was mentioned as
being disallowed for unallowable phone calls.
The disallowance letter dealt very generally with the entire
disallowance being appealed (including "miscellaneous") as "travel
costs
overstated". The Agency's brief, like the disallowance letter, lumped
together the entire disallowance, stating that the disallowed funds were
not properly allocable to the grant. That question was dealt with on
page 4.
Without any guidance from the audit report or disallowance letter,
Grantee was able to identify car rental costs disallowed included in the
$1,067 when submitting its brief. Grantee stated that the Agency
routinely disallowed car rentals and said that staff members used car
rentals only under circumstances of problematic accessibility or cost
saving and provided some specific examples in its appeal (8) file.
Nowhere in the record does the Agency respond to Grantee's arguments
about car rentals or offer any reason why car rentals should not be
allowed.
During the telephone conference, which took place after briefing by
both parties, the Board was still trying to obtain from the Agency an
identification of the items in this category and the bases for the
disallowances.
In response to the telephone conference the Agency was able to break
down the $1,067 into its component parts as follows:
Charges for meals while not in travel status $57 Unallowable
dining service costs 34 Unallowable car rentals
303 Unallowable long distance telephone calls 115 Lodging
costs for non-employees of WRI 61 Travel costs not
applicable to Grant 369 Calculation errors by WRI
34 Expenses charged without proper receipts 94 $1,067
(Agency's response to telephone conference, exhibit I)
Grantee responded to this miscellaneous disallowance section in the
same part of its brief as the section of the disallowance dealing with
meals and lodging in excess of guidelines. This demonstrated the extent
of Grantee's confusion about the Agency's arguments and justifications
for the disallowance in this miscellaneous category.
We cannot uphold this portion of the disallowance. The Agency, at
first, gave no description at all of the items contained in this
category. Then, the Agency gave a very general explanation for the
disallowance. Finally, the Agency gave a description of a number of
items but not even the most minimal explanation of the reason for each
portion of the disallowance. Even if we were to interpret the Agency's
argument that the costs were not allocable to mean that the Agency was
not using the word in a narrow sense but rather in a more broad sense
meaning necessary or reasonable, the Agency has not provided sufficient
detail for its determination to enable either Grantee to respond in
sufficient detail or for us to uphold this portion of the disallowance
on such a basis.
(9) The Agency has a responsibility to explain the basis for its
disallowance. See, Upstate Medical Center of the State of New York,
Decision No. 279, April 20, 1982. The Agency's disallowance letter was
clearly inadequate as far as providing Grantee with information as to
the basis of the disallowance (see p. 1 of this decision for a
description of the disallowance letter). Grantee, in its appeal brief,
attempted to identify the items involved in this portion of the
disallowance and to support its position on these items with
explanations and descriptions. In its response, the Agency again failed
to identify the items contained in this portion of the disallowance. In
addition, the Agency failed to respond to Grantee's arguments or to the
documentation in the appeal file. During the telephone conference, the
Agency was once again unable to identify these items and agreed that the
earlier characterizations of the reason for disallowing were inadequate
(Transcript, pp. 9-10). In response to the Board's direction to further
identify and explain the items, the Agency was able only to provide the
list of one-line characterizations quoted on page 8, with no further
explanation. The Agency has given information which is conclusory,
misleading, and insufficient. As a result, we are unable to understand
and agree with the Agency's determinations.
For the reasons discussed above, we conclude that we must reverse the
disallowance of $1,067.
Conclusion
For the reasons described above we uphold the disallowance in the
amount of $2,264 and reverse the disallowance in the amount of $1,579.
We remand the remaining $587 to the parties so they can determine the
correct disposition of this portion of the disallowance in accordance
with our decision.
Grantee made an application for legal fees and disbursements "related
to attempts to settle and discontinue this matter." The request was for
legal fees "amounting to a minimum of $2,000" together with travel
costs
of $270. The request speaks also of "exemplary and punitive damages."
(10) Grantee has furnished no authority for this Board to award costs
or legal fees, let alone punitive damages. In addition, we know of no
such authority. In the absence of evidence of such authority, the
request is denied. /1/ The Agency disallowed the entire amount of each
taxi fare. /2/ The Agency later identified a total of $303 in
disallowed car rentals in the $1,067 miscellaneous category.
(Agency's response to the telephone conference, exhibit 1) /3/
The term was used by the Agency to mean that there was a question
whether the costs were "incurred specifically for the grant." 45 CFR
Part 74, Appendix F, B.4. For a discussion of the concept of
allocability, see, e.g., Florida Farmworkers Council, Inc., Decision No.
202, July 31, 1981, pp. 5-6.
JULY 07, 1984