Gab Decision 005
August 14, 1974 University of Illinois at the Medical Center -- Chicago,
Abraham Lincoln School of Medicine; Docket No 7; Grant No. PHS 5R01 AM
13253-03 Bernstein, Bernice; Dukes, David Van Orman, William Panel
Chairman
This is an appeal pursuant to 45 CFR Part 16 from the action of the
National Institutes of Health, PHS on July 26, 1973 in disallowing the
carryover of funds from a grant to appellant for use as additional
direct cost expenditure in a new grant year. The decision set out
herein is based upon the documents submitted to the Departmental Grant
Appeals Board.The undersigned members of the Board have been designated
as a panel of three for the disposition of the instant case.
BACKGROUND
On August 21, 1973, the Abraham Lincoln School of Medicine, of the
University of Illinois at the Medical Center, Chicago, through
appropriate officials, requested that NIH approve its expenditure in the
third year of a continuing grant of an unexpended balance from the
second year of such grant. (Appendix #1). Under grant #5 R01 AM
13253-02, there had been an unexpended balance of $7,351.58 from the
budget for the fiscal year ending May 31, 1971. After having expended
the amount in question, the grantee requested that it be allowed to
carry over the funds to the next fiscal year, grant #5 R01 AM 13253-03.
The request was based on the grantee's assertion that through the
University's internal error the Department of Surgery which was carrying
on the project was not notified of the fact that the money not expended
prior to May 31, 1971 was not available as an addition to the amount
awarded in the subsequent year, and that amounts exceeding this
unexpended balance were in fact spent by the grantee on the project.
FACTS
On June 30, 1969, the National Institute of Arthritis and Metabolic
Diseases (now Arthritis, Metabolism and Digestive Diseases) issued grant
number 1 R01 AM 13253-01 to the University of Illinois, College of
Medicine for a project entitled "Studies of halogenated Hydrocarbon
Anesthetics." (Appendix #2). The project period was to be from June 1,
1969 through May 31, 1972 and the grant was to cover the same period
with three annual budgets (fiscal years from June 1 through the
following May 31). Lloyd M. Nyhus, M.D. of the Department of Surgery of
the College was the head of the project. The project continued
uninterrupted through its completion date, and Dr. Nyhus has asserted in
a letter dated August 21, 1973 (Appendix #1) that it has continued
beyond the expiration of the grant despite the termination of federal
assistance.
The funding for the project was as follows:
F/Y 6/1/69 through 5/31/70 $49,610 F/Y 6/1/70
through 5/31/71 $56,376 Supplemental 3/1/71
trough 5/31/71 $5,275 F/Y 6/1/71
through 5/31/72 $57,000 *(app. 3,4,5)
Sometime after May 31, 1971, the grantee notified NIH that of the
funds allotted for the fiscal year June 1, 1970 through May 31, 1971 it
had an unexpected balance of $7,351.09. On February 2, 1972, the NIH
Office of Financial Management issued a "Notice of Disposition of Grant
Unexpended Balance" which was forwarded, as with all correspondence
concerning the grant, to the Business Office of the Univesity of
Illinois at the Medical Center. Such notice stated that the unexpended
balance was "transferred to the continuation grant period" for the
third
year of the project, and contained the following caution:
"Grantees are reminded that expenditures for the continuation grant
periods are limited to the sum total of:
(1) the approved budget (direct costs)
(2) liquidation of reported prior year obligations, and
(3) applicable direct costs
"When the amount transferred together with the amount awarded for a
continuation grant period, results in overfunding THE EXCESS IS NOT
AVAILABLE FOR EXPENDITURES during the current budget period and will
either be withdrawn by means of a revised award or used to support a
future grant budget."
(Appendix #6, Emphasis in original)
In his August 21, 1973 letter, Dr. Nyhus alleges that this warning
was never transmitted to the Department of Surgery.
Subsequently, the grantee expended the entire amount awarded for the
fiscal year ending May 31, 1972, and overexpended the amount of
$7,351.58. In a letter dated May 15, 1973, Dr. Nyhus requested that the
granting agency forgive this overexpenditure stating that "it would be
an extreme hardship" for his unit to recover the money, and "it appears
that PHS policy was misinterpreted when the authorization was made."
(Appendix #7).
On July 26, 1973, the Grants Management Officer, External Programs,
National Institute of Arthritis, Metabolism and Digestive Diseases
advised Dr. Nyhus by letter (Appendix #8) that "in the absence of any
justification other than the fact that the funds have already been
erroneously expended, we must deny permission to use any part of the
$7,351 for direct cost expenditure in the 03 budget period." The Grant
Management Officer's letter advised the grantee of its right to appeal
this decision. The instant appeal resulted.
The grantee submitted a statement to the Board (Appendix #9) dated
April 4, 1974, in which it advised that the area in which it overspent
was animal purchases and boarding, particularly with respect to the
purchase on the advice of a veterinarian of a more expensive type of
monkey for its experiments. The letter relates that "the total (cost)
is of course, much higher than our prediction and was not noticed
because of the intensity of our experiments."
DISCUSSION
The grantee has based its appeal for authorization of the expenditure
of the funds in question on the following arguments. First, that the
Department of Surgery, which operated the project, was not advised by
the Business Office of the PHS policy requiring that when unexpended
balances from the prior fiscal year are transferred to the continuation
grant period for the new fiscal year, resulting in overfunding, the
excess is not available for expenditure in the new fiscal year. Second,
the grantee urges that it was faced with rising direct costs for medical
reasons connected with the project (substitution of more expensive
monkeys) and was not aware of the overfunding due to the intensity of
the experiments. Third, the grantee claims that it has expended the
funds in question, and supplemented them with University funds after the
expiration of Federal assistance to the project, and that requiring
return of the funds in question would work a hardship on the grantee.
We find these arguments unpersuasive, and uphold the determination of
NIH denying permission to use the unexpended funds from the fiscal year
ending May 31, 1971 for direct cost expenditures in the fiscal year
ending May 31, 1972.
Initially, we note that there is no contention that NIH did not
properly notify the grantee of the policy against carry over of
unexpended balances as an addition to the grant amount for the next
fiscal year. It is clear that the business office was so notified, and
the grantee admits that the failure of the Department of Surgery to be
aware of the policy is solely the fault of the University. With regard
to the allegations of the requirement of more expensive laboratory
animals and increased procurement costs connected with such animals, it
is our decision that the proper administration of the grant would have
called for the grantee to submit to NIH a request for supplemental
funding to cover these expenses. The grantee cannot increase direct
costs unilaterally and then attempt to require Federal funding of such
increased costs by expenditure of other monies which were not properly
available for the direct costs. "Intensity of the experiments" is
no
excuse for failure to follow proper procedures in this regard. Finally,
while the panel appreciates the additional cost to the University
incurred by its decision, there, has not been a showing of sufficient
hardship to require forgiving of the overexpenditure and waiver of the
recovery of the monies in question.
FINDINGS OF FACT
1. Under grant #1 R01 AM 13253-02 (Fiscal year ending May 31, 1971)
the grantee had an unexpended balance of $7,351.58.
2. NIH properly notified the grantee by a notice which indicated
that the unexpended balance was transferred to the continuation grant
period and warned that when the amount transferred together with the
amount awarded for a continuation grant period results in overfunding,
the excess is not available for expenditures during the current budget
period.
3. The grantee overexpended the amount of $7,351.58 in the fiscal
year ending May 31, 1972.
4. Federal funding for the project has terminated.
DECISION
The action of NIH is affirmed, and the Appeal is denied in all