GAB Decision 584
October 26, 1984
Ohio Department of Health;
Ballard, Judith; Settle, Norval Garrett, Donald
The Ohio Department of Health (appellant) appealed a decision by the
Health Resources and Services Administration of the Public Health
Service (PHS, respondent) to disallow $89,269 of costs which the
appellant charged to its Maternal and Child Health (MCH) program for
Fiscal Year 1980 (October 1, 1979 through September 30, 1980). For the
reasons discussed below, we uphold the disallowance in part and remand
in part.
Background
The MCH program was established under Title V of the Social Security
Act. Title V was enacted to allow States to extend and improve services
for reducing infant mortality and otherwise promoting the health of
mothers and children.
In 1983, the Department of Health and Human Services, Office of
Inspector General, Office of Audit audited the appellant's MCH program.
The auditors recommended disallowances in a number of areas; at this
point, only two items remain at issue, Personnel and Related Costs
($80,527), and Other Costs ($8,742). *
Personnel and Related Costs
The auditors recommended the disallowance for Personnel and Related
Costs because the appellant could not present time and effort reports
prepared by employees to record time devoted to the MCH program.
This issue arises because state employees who worked on the MCH
program also worked on family planning projects. The employees provided
services and information under Title X of the Public Health Service Act
Family Planning program (2) pursuant to a fixed price contract with the
National Institutes of Health. The same employees also provided
services in support of the Title V, MCH program.
Although appellant's brief does not provide a statement of how
appellant computed the Title V costs at issue, appellant apparently
arrived at its claim by deducting the costs of the fixed price contract
from the total salary costs of the employees. The appellant alleged
that it was not possible, without added expense, to identify specific
personnel and services provided to particular programs (such as Title V)
by using the appellant's accounting system. Further, the appellant
argued that in claiming employee costs under Title V, it was not
charging both Title V and Title X for the same services and recovering
costs twice. Finally, the appellant argued that the issue of the
propriety of Title V charges was resolved by an audit of the fixed price
contract that occurred prior to the audit here.
The appellant's arguments are without merit. The cost principles
applicable to State grantees are found at 45 CFR Part 74. Specifically,
45 CFR Part 74, Appendix C, Part II, B. 10 states:
b. . . . Salaries and wages of employees chargeable to more than one
grant program or other cost objective will be supported by appropriate
time distribution records. The method used should produce an equitable
distribution of time and effort.
Based on this provision, the appellant was required to present time
distribution records which it admitted it did not have.
Although the appellant asserted in its brief that documentation of
MCH costs was resolved by the audit of the fixed price contract, it did
not indicate specifically why. Our own analysis of the letters
discussing the Title X contract, submitted by the appellant, leads us to
conclude that the letters have no relevance to employee time chargeable
to Title V. These letters address only matters relating to particular
provisions in the Title X contract. The letters in no way indicate, for
example, that when the appellant received permission to use the fixed
cost contract, it was relieved of its documentation responsibilities in
the MCH program.
Further, there is simply no evidence in the record to support
appellant's position that its claims were not duplicative. Appellant
failed to provide even a statement as to why that conclusion would be
justified under the facts here.
(3) Finally, appellant did not even allege that the employees in
question only worked on the Title V and Title X programs. For example,
the appellant in its brief stated that the same employees performed MCH
and State functions. If that was the case, appellant may be charging
Title V for these activities as well.
In view of the foregoing, we uphold the disallowance for Personnel
and Related Costs.
Other Costs
The appellant's items in the Other Costs category were disallowed
based on lack of documentation and of prior approval.
The appellant's brief noted that the appellant was not contesting a
$1,500 finding for professional meeting costs and will remit that amount
after this decision.
The appellant stated that costs totalling $1,142 were charged to the
MCH program for the travel of employees whose salaries were recommended
for disallowance by the auditors but subsequently allowed by the
respondent. Therefore, the appellant argued that the travel costs
should be allowed. Additionally, the appellant noted that it recalled
receiving authorization for the $6,100 equipment purchases, and stated
that it is currently attempting to locate verification of that
authorization. It indicated that if it does not find verification, it
will request retroactive approval. Consequently, the appellant said
that it believed that questions of travel and equipment costs could be
resolved informally.
The respondent stated, in response to the appellant's comments, that
a detailed analysis is required to evaluate the allowability of travel
costs, and that it has requested further information from the appellant
concerning the questioned equipment purchases.
In view of the respondent's willingness to further examine the
allowability of the travel costs and equipment purchases, we remand
these two parts of the disallowance to the respondent for further
consideration. If the respondent's ultimate decision is adverse to the
appellant, the appellant may return to the Board within 30 days of
receiving that decision.
(4) Conclusion
For the reasons discussed above, we uphold the disallowance of the
$80,527 in Personnel and Related Costs and the $1,500 in meeting costs,
and remand the remaining $7,242 for travel and equipment costs. * The
entire disallowance totalled $102,911; however, the appellant informed
the Board in its notice of appeal that it was only contesting $89,269 of
the disallowed amount.
MARCH 19, 1985