GAB Decision 600
December 10, 1984
Eastern Connecticut PSRO, Inc.;
Settle, Norval; Teitz, Alexander Ford, Cecilia
Docket No. 84-156
The Eastern Connecticut PSRO, Inc. (Appellant) appealed a
disallowance of $4,356 by the Health Care Financing Administration
(Agency) for Grant No. 97-P-99684/1-02. The disallowance was based on
an audit issued by the Office of Inspector General, ACN 01-41650.
The disallowance is based on four separate expenditure items
identified in the audit that were related to the organization's
dissolution in 1981. Appellant's representative, the past president of
the PSRO, had no recollection of three of the items and provided a
specific basis for contesting only the disallowance of $2,875 of the
severance pay for the former executive director of the PSRO. *
(2) We conclude that each of the four items of disallowance was
properly taken by the Agency. This decision first addresses the issue
of severance pay to the former executive director and then addresses the
remaining three items.
The auditors found an overpayment of $2,875 because of severance pay
to the last executive director of the PSRO in excess of the amount
authorized in the grant award. Exhibit 2 to the Agency's October 30,
1984 submission. Amendment No. 5 to the grant adjusted the funds
awarded due to the close-out of the grant and specifically authorized
severance pay to the executive director in the amount of $2,235.80.
Appellant contended that the former executive director deserved the
additional sum because of an earlier term of employment with the
Connecticut Area II PSRO before joining the Eastern Connecticut PSRO in
1979. Appellant argued that the accumulated time of the executive
director's employment should have been considered in determining the
amount of authorized severance pay.
The Board finds no basis in the record for overturning this portion
of the disallowance. The record shows that, when the Agency first
questioned the severance pay award in 1981, the Appellant's
representative argued that the severance pay for the former executive
director should be calculated to include his years of prior, continuous
employment with the other PSRO. When the Agency asked for
"documentation" to support grantee's severance pay award, the record
shows only that Appellant submitted confirmation of the employment with
the other PSRO. Correspondence and memoranda in Exhibit 5 to Agency's
October 30, 1984 submission. Appellant has not submitted any analysis
of the two PSRO's personnel policies or of reasonable business practices
to support its view. In addition, there is no support for the
calculation of the amount paid as proper, even including the earlier
employment. We can conclude no more from this record than that
Appellant preferred to pay more severance pay than its grant award
authorized. We thus uphold the Agency's disallowance of the amount of
excess severance pay as determined by the auditors.
(3) We also sustain the Agency's findings with regard to the other
three expenditures. Appellant characterized each of these expenditures
as "day to day nuts and bolts" items about which neither Appellant's
representative nor the other Board of Director's member would have any
specific recollection. A description of these items follows.
1) The PSRO paid three weeks severance pay ($772) to an employee five
months prior to the PSRO's termination. The PSRO's termination benefit
policy provides that employees must remain with the organization until
its closing to be eligible for severance pay. Since the employee left
the PSRO five months before its dissolution, we agree with the Agency
that this severance pay was improper.
2) One hundred and forty dollars was paid to an employee's pension
plan to cover a time period after the employee left the PSRO in April
1981. It was clearly improper for Appellant to contribute to a pension
when the employee was no longer in the PSRO's employ.
3) The PSRO paid four employees a total of $569 for unused vacation
time. Since the audit report found that these employees had in fact
used their vacation time during the last month of the PSRO's operation,
we find this additional expenditure to be improper.
CONCLUSION
Based on the foregoing, we uphold the Agency's determination to
disallow the $4,356 in costs incurred by the Eastern Connecticut PSRO.
* Appellant's past president was designated as the individual to be
contacted, if necessary, after the PSRO's grant was closed in 1981.
Exhibit 4 to the Agency's October 30, 1984 submission. The notice of
appeal specifically addressed only the severance pay issue,
characterized the Board of Directors of the grantee organization as a
"disbanded, defunct group," and stated that while collection of the
amount disallowed, "although possibly technically correct," would
be a
monumental task. The Grant Appeals Board acknowledged the appeal and
asked for clarification concerning whether appellant sought substantive
Board review of all the disallowed expenditure items. Appellant
responded that it "unequivocally" sought Board review of the entire
$4,356 disallowed. Appellant's representative also stated that he did
not know where the PSRO's records were and, although he specifically
remembered the severance pay to the former executive director, he was
unable to confirm or deny the other three items because of the lack of
records. (We note, however, that the letter designating the past
president as the future contact point also identified by name and
address the PSRO where Appellant's "financial and programmatic records"
were to be retained after close-out.)
MARCH 19, 1985