GAB Decision 021
June 25, 1976 Sencland Community Action, Inc.; Docket No. 24; Audit
Control No. 04-46419; Head Start Program H-2510 DeGeorge, Francis;
Malone, Thomas Mason, Malcolm
The grantee conducted a Head Start Program initially under a grant
from OEO, later under a grant from HEW which employed OEO guidelines
except where specifically altered by HEW under the terms of the
delegation from OEO to HEW. In Program Year F, the Office of the
Regional Comptroller questioned $40,737.26 of costs. The Regional Audit
Appeal Board accepted part of these questioned costs, but disallowed
$14,151.00 of costs related to renovations on the following grounds:
1. Grantee did not secure bids as required nor did it produce
evidence of attempt to do so in accordance with the provisions of CAP
Management Guide 6801-1, Page 34, Paragraph 4.
2. Grantee violated the provisions of CAP Memo 64, Section B-2 when
it used program funds to defray the costs of renovation at a cost
greater than $2,000 per classroom.
3. Grantee violated the provisions of Sections B-4 and B-6 of CAP
Memo 64 when it failed to secure a lease of sufficient length to
amortize the expenditure.
4. The specific expenditure for renovation was not requested with
the grant application nor subsequently approved by the Regional Office.
In its letter to the Audit Appeal Board, dated January 29, 1974, to
which it refers in its appeal dated August 9, 1974, grantee attempts to
justify the amounts disallowed on the grounds that they were within the
limits of budget flexibility which permits transfer within the
nonpersonnel costs category if certain conditions are met including a
limitation on the amount transferred to 25% of the non-personnel amount
of a program account between $100,000 and $500,000. The program account
in question is stated to include approximately $91,000 of non-personnel
costs.
The Board does not find it necessary to reach the question whether
budget flexibility rules have been complied with, since the grantee has
violated explicit requirements of CAP Memo 64, which governs
independently. CAP Memo 64 requires advance approval for renovations
exceeding $2000 a room, leases of sufficient length to amortize the
expenditure, and the securing of competitive bids.In failing to secure
competitive bids, grantee did not violate CAP Management Guide 6801-1,
as suggested by the Audit Appeal Board, since its provisions are not
mandatory, but rather the parallel provision in CAP Memo 64.
Grantee argues that construction subcontractors declined to furnish
estimates because the buildings were old and actual costs might exceed
the estimates. This is not a satisfactory response because grantee has
furnished no evidence of attempts to obtain bids and because bids could
have been furnished in terms that allowed for additional costs if
additional work proved necessary.
Grantee has offered no defense to the specific charges of violation
of the rules governing renovation which require leases of adequate
length and advance approval for renovations at a cost greater than
$2,000 per classroom.
An Order to Show Cause issued by the Board stated that in the absence
of a factual challenge to these contentions, the disallowance appeared
justified. It directed grantee to identify the respects, if any, in
which its summary of the facts, substantially the same as appears
herein, was materially incomplete or inaccurate, and the reasons, if
any, why the appeal should not be rejected for violation of the
unambiguous terms of CAP Memo 64. Grantee's response offers no reason
why the appeal should not be rejected.
Grantee asks, however, whether the disallowed amount may be supplied
in In-kind/Volunteer Services during the current program year operation.
This is a question which it may appropriately address to the Regional
Office. Assuming that assurances of genuine services properly evaulated
are present, Section 243(c) of the Economic Opportunity Act of 1964, as
amended (Community Services Act of 1974, as amended) shows that under
appropriate circumstances such contributions may be regarded as a form
of recovery of disallowed amounts. It must be recognized however that a
Head Start program is directly governed by the statutory standards of
Title V rather than By Title II and by its own regulations. The
authorization requested is in any event a discretionary one for the
Regional Office to make.
CONCLUSION
Grantee has violated the requirements of CAP Memo 64 of advance
approval for renovations exceeding $2000 a room, for leases of
sufficient length to amortize the expenditure and for obtaining
competitive bids. The appeal is denied.
OCTOBER 04, 1983