DAB Decision 48
September 26, 1978 LEGIS 50/The Center for Legislative Improvement;
Docket No. 76-17; Decision No. 48 DeGeorge, Francis D.; Hastings, Wilmot
R. Mason, Malcolm S.
SUMMARY
(The following summary is prepared on the responsibility of the
Executive Secretary of the Board as a convenience to the interested
public. It is not an official part of the decision and has not been
reviewed by the Panel. Similar official summaries of earlier cases
appear in 45 CFR Part 16 Appendix.)
Grantee, an organization influencing State legislatures to improve the
processes by which State laws are made, appealed the Deputy Regional
Director's determination rejecting indirect cost treatment for a portion
of grantee's claimed costs for Bidding and Proposal and all of those
costs called Citizens Participation. The Board held that grantee had
made no valid showing that it had Bidding and Proposal costs in excess
of the amount allowed by the Regional Office, an amount which was,
admittedly, a rough estimate, but which had been reached in good faith
by the Region in spite of the inadequacy of grantee's records. With
respect to Citizens Participation costs, the Board held that these costs
were related to fund raising and thus not allowable or to public
information services or to meetings and conferences not held to conduct
the general administration of the institution. The latter costs were
normal and necessary to the grantee's primary mission and, therefore,
were to be treated as direct costs of that mission and were not
includable as indirect cost elements.
DECISION
Legis 50, formerly the Citizens Conference on State Legislatures, is a
non-profit corporation organized to foster improvement of state
legislative processes. This case arises in connection with a grant made
to Legis 50 by NIAAA (National Institute on Alcohol Abuse and
Alcoholism), as lead agency for several other agencies, for a program of
assisting state legislatures to legislate more efficiently in the area
of alcoholism and drug abuse primarily by supplying committee staff. In
connection with this grant, Legis 50 received roughly $2 million of
government assistance over a four-year period.
Grantee was operating under a provisional indirect cost rate of 151% of
salaries and wages for headquarters activities for 1974, 100% for 1975,
and 33% for field activities for each year. Negotiations followed for
determination of a final rate between Legis 50 and the HEW Regional
Office. A disagreement developed between the parties with respect
primarily to two categories of expenses called by Legis SO Citizens
Participation and Bidding and Proposal costs. Legis 50, as it was
entitled to do, appealed these issues to the Regional Director. At its
request, normal written procedures were somewhat shortcutted in favor of
an extended, transcribed, informal meeting of the parties and subsequent
written submissions. The Deputy Regional Director ruled against Legis
50 on the Citizens Participation costs and, ruled in favor of Legis 50,
in part, on the Bidding and Proposal costs, June 25, 1976. Legis 50 then
appealed the unresolved issues to this Board, July 23, 1976.
The Board has received the appeal and the Regional Office's response to
the appeal. It twice requested the parties, once informally, once
formally, to respond to a number of questions and has received the
parties' answers. (Executive Secretary's letter, September 13, 1977;
Order to Show Cause, November 10, 1977; Grantee Response to Executive
Secretary's letter, October 3, 1977; Acting Principal Regional
Official's Response to Executive Secretary's letter, October 3, 1977.
Grantee Response to Order to Show Cause, November 30, 1977; Deputy
Principal Regional Official Response to Order to Show Cause, November
30, 1977). The Board found the responses on both sides inadequate to
permit a fully informed decision but recognized the possibility that the
parties have not fully understood what they were called upon to supply.
The Board therefore scheduled a meeting of the parties and supplied to
the parties in advance an extended and detailed analysis of certain
issues that had not been adequately met in the Board's view, and of the
Board's tentative interpretation of the facts before it. The parties
were directed to come prepared to discuss these specific issues as well
as any others they might wish to raise at the meeting. (Notice of
Informal Conference, March 7, 1978).
'(Page 02 - 48 - 09/26/78)'
It may be noted preliminarily that Legis 50, in view of its staffing and
performance, is a highly sophisticated grantee, its officers and staff
having a demonstrated record of experience in the Federal Government
grant system and the ways of government generally. It is not the kind
of grantee in whom one would readily attribute to simple ignorance and
confusion the failure to give a responsive answer to a direct inquiry.
A Threshold Question.
The Board was confronted at the threshold with a grant of an unusual
kind which raised on its face preliminary questions as to the authority
under which it was made. The grant appeared intended to provide federal
"capacity-building" support to improve state legislative processes
as
they related to alcoholism legislation, and was labeled as a grant for
research although it did not reflect any apparent research purposes.
The Board, therefore, asked both parties to identify the authority under
which the grant was made and to specify the respects in which the grant
was to be recognized as a research grant.
The Regional Office in its final briefing has taken the position that
the grant was not a research grant and was, in fact, not valid.
Grantee's response, in part, challenged the authority of the Board to
raise the question of validity of the grant since it had not theretofore
been raised by the Regional Director or any other official of HEW. On
this issue we disagree: since the grantee is requesting the Board, in
effect, to award to grantee a payment of indirect costs denied by the
Regional Office, we would find it difficult to justify awarding such an
additional payment under a grant that was from the beginning without
authority.
If we had concluded, as at an earlier stage we tentatively thought
likely (cf. Order to Show Cause, pp. 4-5; cf. Notice of Informal
Conference, pp. 2-5), that grantee's claims should be sustained in part
or in whole on the indirect cost computation issues, we would have been
compelled to resolve the issue of the validity of the grant. Since,
however, we find on the merits of those issues against the grantee for
reasons indicated below, it is not necessary for the Board to determine
the validity of the grant. Accordingly, on this issue we make no
ruling.
Bidding and Proposal Costs.
The Bidding and Proposal costs are costs related to the immediate
preparation of proposed bids for grants or contracts. Although a
precise definition and discrimination is not easy, the parties have
reached what appears to be a workable, mutually acceptable definition
which appears to us substantially sound. That definition is as follows:
"Bid and Proposal cost are those related to preparing, submitting and
supporting bids and proposals on potential contracts or grants. The
costs of such activities are includable in this classification
regardless
'(Page 03 - 48 - 09/26/78)'
of whether or not the bids or proposals were solicited or unsolicited.
. Development ends and bid and proposal activity begins when: -- The
nature and scope of a potential project is sufficiently well identified
so that, with appropriate directorate authorization, a draft can be
prepared that describes the projects major components, the kinds of
talents required, the approximate man day needs, the approximate total
elapsed time and the approximate costs; or-- A funding source has been
identified...; or-- A request for proposal is received from a funding
source at their initiative (solicited)...; or-- A request for proposal
is received from a funding source at Legis 50 initiative
(unsolicited)..." (Region Response to Application for Review, October
15, 1976, Attachment I, page 2, Memo from Harry Hedges, Business
Manager, Legis 50, March 10, 1976).
Grantee's records were kept in such form that it was impossible for the
Regional Office to establish whether costs claimed were appropriate or
not under the applicable definition. (Transcript of Informal
Conference, April 12, 1978, page 64). In this state of the case we
believe the burden of proof was with the grantee and that the grantee
could not carry it because of the deficiency of its own recordkeeping.
Cf. Oregon Statewide Cost Allocation Plan, Docket No. 75-7, Decision No.
22, June 25, 1976, page 3 (Computer Rates). Nevertheless, the Regional
Office recognized that there was some amount of legitimate costs that
was properly allocated to Bidding and Proposal costs and sought to find
some way of estimating that amount or of reaching an agreed allowance by
negotiation. The parties apparently attributed to the auditors a test
which is, indeed, an inappropriate one, that is that no costs be allowed
unless an actual bid were submitted. That is not a correct
interpretation of the cost principles on this point, and the Regional
Office concedes that it is not. (Region Response to Order to Show Cause,
November 30, 1977, page 9, item 3. In fact, we believe, a more
attentive reading of the audit report shows that the attribution of this
position to the auditors may be a misunderstanding. The actual test
applied by the auditors seems to have been more carefully stated and to
have been correct. The audit report, moreover, gives the kind of
specific identification of the items of cost challenged which we later
criticized the Regional Office for not supplying. HEW Audit Report
07-61302, April 7, 1976, esp. pages 6-10, page 10, 2nd paragraph, Region
Response to Application for Review, October 15, 1976, Attachment D. Cf.
Transcript of Informal Conference, April 12, 1978, pages 58-9. The
grantee read the audit report less carefully than it deserved
(Application for Review, page 13-14) and the Panel Chairman apologizes
for having picked up and repeated the loose reading (Notice of Informal
Conference, March 7, 1978, page 4)).
In the course of negotiation, the Regional Office initially proposed to
allow one-third of the Bidding and Proposal costs claimed and ultimately
agreed to 65 percent of the costs claimed on the basis of a submission
made by the grantee. Grantee has explained that this submission was made
not to represent its own analysis but to represent what it understood to
be the analysis the Regional Office insisted upon even though grantee
considered it erroneous.
'(Page 04 - 48 - 09/26/78)'
We were concerned in our consideration of this case by the fact that the
Regional Office had never explained with appropriate clarity the
position it was taking on this issue. We called this to the attention
of the parties and asked the Region for a clearer statement. We
believe, after hearing the parties and reading the briefs, that the
Region's lack of clarity represented its effort to be as favorable to
the grantee as was possible under the circumstances and to reach a
negotiated settlement, which apparently it thought, in good faith but
mistakenly, it had accomplished.
The Region could have taken the position that the burden was on the
grantee and that for lack of adequate records it would reject any
allowance. It could also have taken the position that since an indirect
cost rate must of necessity have elements of rough approximation, it
would recognize that there was some amount of allowable costs and reach
a rough approximation. This, in substance, is what it did. It concluded
that a 65 percent allowance was roughly in the area of what was fair.
It recognizes that 65 percent (rather than, say, 60 percent or 70
percent) coincides with the percentage of costs related to proposals
actually submitted, which it correctly concedes is in itself an improper
test, but it takes the view that this rough test contains
counterbalancing errors. That is, some costs of proposals never
submitted should perhaps be allowed but, on the other hand, some costs
of proposals that were submitted are not allowable, and these two
adjustments, it believes, are very roughly equivalent. (Transcript of
Informal Conference, April 12, 1978, page 75; Supplemental Brief of
HEW, May 23, 1978, pages 4-6: "the ultimate determination...probably
provided a reasonably accurate assessment (perhaps tilted somewhat in
favor of the grantee)." The distinction between costs of specific bids
prepared and costs of bids submitted does not indeed appear to be very
realistic. It can only make a difference if there are actual instances
of costs of the immediate preparation of bids and proposals which were
thereafter not submitted. No such incident has been brought to our
attention or seems likely to have occurred.) It is recognized of course
that the Region's estimates are extremely rough but they appear to be
made in good faith, and since the Regional Office could quite properly
have taken a much harsher position, we believe that, absent a clearer
showing which grantee has not made, the Region's position here should be
sustained. (University of California, Indirect Cost Rate, Docket No.
76-6, Decision No. 40, October 11, 1977, page 11; Oregon State-wide
Cost Allocation Plan, supra, page 5). We do not accept grantee's
contention that the statistics it developed for a later period after
adoption of a better accounting system should now be read back into the
earlier period. (Grantee Brief in Response to Informal Conference, May
23, 1978, pages 32 and 33).
The appeal is therefore denied with respect to Bidding and Proposal
costs.
Citizens Participation Costs.
Citizens Participation costs are grantee's name for a class of costs
originally classified as fund raising. Approximately 90 percent of the
costs in dispute
'(Page 05 - 48 - 09/26/78)'
relate to the holding of three meetings or conferences (the Williamsburg
Conference, the PepsiCo Meeting, and the Dupont Plaza Conference),
several times described in the materials submitted.
The Region asserts that these costs in their entirety must be disallowed
under the provisions of A Guide for Non-Profit Institutions: Costs
Principles and Procedures for Establishing Indirect Costs and other
Rates for Grants and Contracts with the Department of Health, Education,
and Welfare (OASC-5), in particular paragraphs C.1, 2 and 3, Direct
Costs, and paragraph G.33, Public Information Services Costs. (The
August 1970 and August 1974 revisions of the Guide (OASC-5) are
identical so far as material here. Page references throughout are to
the August 1974 edition.) Grantee takes the position that these costs
were necessary to its ability to perform its tasks and that it has no
other source of revenue at present and therefore these costs must be
paid by HEW. (Grantee Application for Review, July 23, 1976, pages 3-4,
10; Grantee Response to Executive Secretary's letter, October 3, 1977,
pages 12-14; Grantee Response to Order to Show Cause, November 30, 1977,
pages 3 and 4).
Certain costs of a non-profit organization however are not reimbursable
at all, and the issue to be determined is whether these are in that
category.
OASC-5 provides, paragraph C.2. at pages 16 and 17, that certain types
of costs, or costs associated with certain activities are not
reimbursable as a charge to a DHEW grant or contract. These unallowable
costs are identified in Section G, which contains general standards for
selected items of costs. Paragraph G.33. defines public services
information costs to include costs of promotion, public relations, and
other forms of information services incurred to:
"(a) Inform or instruct individuals, groups, or the general
public about health or social problems. (b) Interest individuals
or groups in participating in a service program of the
institution. . . . . . . (d) Appeal for funds. (e)
Disseminate the results of sponsored and non-sponsored research
or other activity to the scientific community."
Of these costs, fund raising costs are unallowable as either a direct or
indirect charge to a DHEW grant or contract. (Cf.G.18(b)). Other public
information services costs are unallowable as direct costs of DHEW
grants or contracts unless formally approved and are unallowable as
indirect costs if "identifiable with a particular cost objective."
'(Page 06 - 48 - 09/26/78)'
c Identification with a particular cost
objective, i.e. treatment as a direct cost, may result in a particular
cost being non-reimbursable as a charge to a DHEW grant or contract
regardless of its type or the activity with which it is associated.
Paragraph C.1. of OASC-5, at p. 16, provides that "(c)osts identified
specifically with other work of the institution are direct costs of that
work and are not to be charged to the grant/contract either directly or
indirectly."
Moreover, like costs must be treated alike--either as direct costs or as
indirect costs. A grantee may not charge conferences, for example, as
direct costs when they can be advantageously so charged and as indirect
costs when direct cost treatment is disadvantageous. (OASC-5, Section
IV C.1. and page 57 Section II.A). This, in part, is what grantee seeks
to do.
Paragraph C.2. of OASC-5 specifies when unallowable costs or activities
must be treated as direct costs or activities for the purpose of
allocating indirect costs to them. According to this paragraph,
treatment of a function as direct is indicated when it (1) includes
salaries of personnel, (2) occupies space, and (3) is serviced by an
indirect cost grouping. Further, the paragraph identifies certain types
of activities which generate costs which must be treated as direct "when
normal or necessary to an institution's primary mission," including the
following:
"(b) Providing services and information to members, legislative
or administrative bodies or the public. (c) Promotion, lobbying
and other forms of public relations. (d) Meetings and
conferences except those held to conduct the general
administration of the institution. (e) Fund raising. .
This provision reflects the intention that an institution's primary
mission may be a particular cost objective. When the listed activities
are normal and necessary to a primary mission, the associated costs are
costs of "other work of the institution" which cannot be charged to
DHEW
grants or contracts and, therefore, must be excluded as indirect costs.
Relating the specific cost principles of Section G and the criteria for
identifying direct costs in Section C thus leads to the following
conclusions with respect to reimbursement from DHEW grants or contracts:
(1) Fundraising activities are excluded as direct and as
indirect costs.
'(Page 07 - 48 - 09/26/78)'
(2) Public information services costs are excluded as indirect
costs if normal or necessary to an institution's primary mission
or otherwise identifiable with a particular cost objective. (3)
Meetings and conferences are excluded as indirect costs if they
are normal and necessary to an institution's primary mission and
not held to conduct the general administration of the institution
or if they are a form of information service and are identifiable
with a particular cost objective.
That certain activities may be associated with the "primary mission"
of
a non-profit institution flows from the basic principle that a
non-profit grantee such as Legis 50 is normally expected to have an
autonomous mission of its own and not merely to serve as an instrument
for the performance of federal activities under grant or otherwise. It
is expected to have, to the extent necessary, independent funding
volunteered by an interested community to serve its autonomous goals and
to pay at least the costs of these categories of activities in support
of the institution's primary goals. These expenses will not be
reimbursed as an indirect cost by the federal government and will be
reimbursed as a direct cost only when they are shown to be direct costs
of a specific federal grant or contract-supported activity and otherwise
meet the applicable requirements.
Grantee argues that because it only operates at present under federal
grants and contracts, all of its costs must be paid for by those grants
and contracts. Grantee's submission shows a substantial and growing and
energetically pursued amount of funding from corporate sources. (Region
Response to Application for Review, October 15, 1976, Attachment G, 1973
Annual Report, page 25). But assuming that these sources have dried up
or are inadequate, grantee's conclusion completely misconstrues the
basic grant process. Grants do not in general pay all costs. They are
in basic principle assistance to an autonomous grantee, and if the
grantee is unable to meet the costs which the grant system expects it to
shoulder, it does not thereby acquire a claim on the federal government.
Action for Boston Community Development, Inc. (ABCD), Docket No. 76-4,
Decision No. 32, January 31, 1977, page 3.
Grantee also argues that the federal government is obliged to pay the
costs for those activities by which grantee acquires credibility.
(Transcript of Informal Conference, April 12, 1978, pages 18-20). That
will not do. What grantee calls its credibility is something that it
must bring to the grant and not expect the grant to purchase for it.
The Citizens Participation costs appear to be associated with the
categories of activities referred to in paragraph C.2. of OASC-5. As
described by grantee they were clearly normal and necessary to the
institution's primary purpose. They reflected headquarters activity that
included salaries, occupied space and was serviced by indirect cost
activities. They involved the providing of services and information to
legislative bodies and the public that appeared to
'(Page 08 - 48 - 09/26/78)'
be promotional and public relations activities. They were primarily
costs of meetings and conferences other than the institution's general
administration meetings. They were in part fund raising.
Grantee has been several times invited to comment specifically on the
eligibility of these costs for inclusion in the indirect cost rate
computation in view of these exclusions and certain more specific
provisions contained in the preamble of paragraph G., General Standards
for Selected Items of Cost, G.12, Entertainment Costs, and G.33 Public
Information Services Costs.
Grantee s responses were unsatisfactory. They appeared to avoid
responding to specific inquiry. For example when asked to comment on
whether these costs were not promotion, lobbying or other forms of
public relations, grantee responded by denying that these costs were
lobbying costs but made no comment on promotion and other forms of
public relations other than a general denial. (Order to Show Cause,
November 10, 1977, page 3 and page 5, item I; Grantee Response to Order
to Show Cause, November 30, 1977, page 4, last paragraph). When asked to
comment on whether these costs did not relate to providing services and
information to members, legislative or administrative bodies or the
public, grantee denied that it had members or provided services or
information to the public, but acknowledged providing services and
information to legislative or administrative bodies as part of specific
grants and contracts. (Order to Show Cause, November 10, 1977, page 3
and page 5, item 1; Grantee Response to Order to Show Cause, November
30, 1977, page 4).
In addition, the responses appeared to be contradicted by information
contained in annual reports and other publications of the grantee
contained in the file and statements contained in file memoranda and
reports of conferences.
Although it does not wish to acknowledge participation in promotional
and public relations and public information activities, Legis 50 has put
out a pamphlet which describes Legis 50 as follows: "Legis 50 is a
national organization working to improve the fifty state legislatures
through non-partisan research, publications, technical assistance and
operating programs." (Response to Order to Show Cause, November 30,
1977, Exhibit B, page 18).
In a newsletter entitled Insight, February 20, 1976, Legis 50 refers to
its change of name and comments that Legis 50 is a focal point from
which programs for legislative improvement are generated and
implemented, a center for research, education, resource development,
information-gathering and analysis, and publishing. (Response to Order
to Show Cause, November 30, 1977, Exhibit G, page 3).
In the annual report for 1973 at page 14, Legis 50 states that it
maintains an active research and publications program answering
individual research requests, issuing publications such as the research
memorandum and information bulletin to keep the organization's contacts
up to date on changes in the legislative reform field, and conducts an
active public information effort
'(Page 09 - 48 - 09/26/78)'
with the publication of general brochures on state legislatures.
(Region Response to Application for Review, October 15, 1976, Attachment
G).
In the face of statements such as these, especially in the absence of a
pointed effort at explanation, it is impossible to accept Legis 50's
general denials that it has engaged in providing informational services,
promotion and public relations, meetings and conferences, and fund
raising or its general denial that the Citizens Participation costs
represent in whole or in major part (and, if in part, there is no
attempt on Legis 50's behalf to show what portion may be defensible)
such activities, and the costs of meetings and conferences other than
those held to conduct the general administration of the institution.
Partly in view of the inadequate responses to the Order to Show Cause,
the Panel conducted an informal conference in the hope that face-to-face
confrontation would give grantee an opportunity to clarify what it had
failed to clarify in writing. In the Notice of this conference, the
apparent contradiction and non-responsiveness were called to grantee's
attention. Grantee was again pointedly requested to comment.
At this meeting grantee again in its voluminous written material and
oral presentation failed to meet the specific issues raised, and in
directing the filing of final briefs in this matter, the Chairman
expressly called attention once again to this deficiency and invited a
better response:
"I will, however, make a personal observation in connection
with the brief that we invite you to submit and that is that I for
one was rather disappointed that some narrowly focused questions
that rested on very specific references to material in the
record--for example, at the bottom of page six and at the top of
page seven, we asked you to address yourself to a question that we
thought was highlighted by pages five, six and 15 of exhibit B to
your response to the order to show cause, and so on. There are
quite a number of very specific references that we asked you to
address yourself to. And I found it disappointing that in your
response you have given us, it seemed to me a great deal of
general response but no specific response to those provisions. "I
would recommend to you that you at least think about whether
you want to make a more specific response on those points."
(Transcript of Informal Conference, April 12, 1978, p. 124-5;
cf. Panel Member Mr. Hastings p. 125-6; cf. also pages 20-22).
In spite of this, grantee once again in its brief made assertions of
generalities but did not meet at all the very specific concerns of the
Panel. In any event we are persuaded by the record that these costs
cannot be justified.
Grantee exists to influence legislatures to improve the legislative
process. This is its primary mission as stated in its bylaws and in
various forms in its publications. (Grantee Response to Executive
Secretary's letter, October 3,
'(Page 10 - 48 - 09/26/78)'
1977, Exhibit C, Articles of Incorporation and By-Laws; Region Response
to Application for Review, October 15, 1976, Attachment G (1973 Annual
Report); Grantee Response to Order to Show Cause, November 30, 1977,
Exhibits B through I (brochure and newsletters)). In order to
accomplish this mission, it provides services and information if not to
members then to legislative or administrative bodies and to the public.
Legis 50 stresses the special character and peculiar nature of the work
that Legis 50 does. It states that it is not engaged in influencing
legislation at the State legislative level. "What it does do is that it
works to implement the development, the improvement and the development
of policy and the inter-connection between State governmental policy and
federal policy." Citizens Participation activity is described by Legis
50 as the work of identifying influential community leaders, of
establishing contacts and relations with them, and marshalling their
efforts on behalf of legislative improvement programs. (Transcript of
Informal Conference, April 12, 1978, page 8, 10-11). The primary mission
of Legis 50 is described as follows in its bylaws:
"To achieve its purposes THE CENTER FOR LEGISLATIVE IMPROVEMENT
will devote its principal attention to 1) providing information on
the state legislatures to interested organizations and to the
general public, 2) encouraging, assisting and providing a medium
for communication among state citizen groups working to support
and improve the effectiveness of their legislatures, and 3)
bringing together pertinent existing research and conducting or
encouraging new research where needed." (Grantee Response to
Executive Secretary's letter, October 3, 1977, Exhibit C, By-laws,
Article II, last paragraph).
Legis 50 objects that this description no longer fits its current
activities and that although it has made other amendments to its bylaws,
its failure to amend these provisions should not be interpreted as
confirming their accuracy. (Grantee Response to Order to Show Cause,
November 30, 1977, pages 3 and 4). We are unable to understand in what
respect Legis 50 wishes to repudiate this definition of its primary
purpose, but the problem does not appear to be an important one because
any of the many statements that Legis 50 has made of its primary
function in annual report, newsletters, applications for grants,
documents filed with the Board and orally at the informal conference
lead to the same conclusion. The primary mission of Legis 50 in broad
terms is to influence State legislatures, to improve the processes by
which State legislation is made. There appears to be no room for
reasonable doubt that the Citizens Participation activity is normal or
necessary to the institution's primary mission so described, and the
costs of that objective should be directly attributed to it.
We now turn to consider specifically whether the three major items which
constitute the bulk of the Citizens Participation costs are in the
categories of costs excluded from an indirect cost rate by OASC-5.
'(Page 11 - 48 - 09/26/78)'
The PepsiCo Meeting.
This meeting is clearly excluded from allowability in the indirect cost
rate as a fund raising meeting. It was expressly so called in Legis
50's own internal records of the meeting and the expression was not used
in a Pickwickian sense. The purpose of the meeting was to get underway
a concentrated drive for corporate contributions of unrestricted
funding.
It is described in a Legis 50 memorandum from Thomas L. Budd, Project
Manager, to all Directors dated June 7, 1974, as follows:
"Jerris Leonard, Jim McNeely and I will be attending a
fund-raising meeting at 12:00 o'clock noon on June 13, 1974, at
PepsiCo, Incorporated, in Purchase, New York. The purpose of this
meeting is to ascertain whether or not a select group of corporate
executives representing major corporations within the greater New
York City area can assist the Citizens Conference in identifying
and soliciting other major corporations, particularly within that
same geographical area. "The concept of a Task Force on Corporate
Funding for the Citizens Conference was originally drafted by
Dick Edwards, and improved upon by Jim McNeely. a meeting took
place. . .on April 19, 1974. In this initial meeting, the crucial
need for unrestricted funding by the corporate community was
stressed. In fact, a statement was made that the Citizens
Conference must receive substantial unrestricted funds in order to
provide it -with flexibility needed to meet the needs for
legislative improvement. Those present agreed to assist the
Citizens Conference in identifying the problems of enlisting the
support of other key corporations for the work of the Citizens
Conference, and to form the nucleus for a forthcoming Task Force
that would move this effort from a point of discussion to a point
of action. It was further agreed that a pilot project should be
attempted before utilizing this approach on a national basis."
(R-9, Grantee Memorandum, June 7, 1974, re PepsiCo Meeting,
presented by Region at Informal Conference, April 12, 1978; cf.
also Transcript of Informal Conference, page 46).
The memorandum continues to refer to "identifying and soliciting other
major corporations," to moving in the direction of "developmental
fund-raising," and adds,
"Furthermore, in preparation for this meeting and as a tool of
solicitation, Dick Edwards drafted an outstanding forty-four page
document entitled, 'A Suggested Rationale for Corporate Support of
the Citizens Conference on State Legislatures'. . .for the purpose
of creating a strong solicitation statement that would hopefully
demonstrate the correlation among corporate well-being,
legislative improv ement, and
'(Page 12 - 48 - 09/26/78)'
the activities and progress of the Citizens Conference." (R-9
Grantee Memorandum, June 7, 1974, re PepsiCo Meeting, presented by
Region at the Informal Conference, April 12, 1978).
As a fund raising meeting it is excluded both from indirect costs and
from direct cost allowability. The meeting is also excluded as an
indirect cost element as a promotional activity, as a form of public
relations, and as a meeting not held to conduct the general
administration of the institution.
The Williamsburg Meeting.
This meeting in its formal content focused on campaign funding and on
openness in government. It is clearly not allowable as a direct cost to
the grant and, if allowable at all, it must be as an indirect cost. The
meeting is described at length and repeatedly in the file. It was
designed to bring persons of influence, in the corporate world
particularly, and State legislators together in what is described as an
unthreatening atmosphere and an atmosphere of candor and to impress the
legislators by the presence of the businessmen and the businessmen by
the presence of the legislators. (Grantee Response to Order to Show
Cause, November 30, 1977, page 8). It is described by Legis 50
spokesman as a form of "developmental fund-raising" (R-11 Transcript
of
May 18, 1976 Meeting, page 32, presented by Region at the Informal
Conference, April 12, 1978), and, although there is some quibbling about
the meaning of this expression, it seems likely that in significant part
the meeting was envisioned as part of grantee's fundraising activities.
It also appears likely, although this is not unmistakably clear, that
the general tenor of the meeting was that of a social activity and the
costs related there to would be unallowable under G.12. To the extent
that these costs were public information services costs as they appear
to be under G.33, they are identifiable with a particular cost
objective, namely the carrying out of grantee's primary mission, and as
such would require direct cost treatment.
The Dupont Plaza Meeting.
This meeting was apparently thought of as an attempt to involve
non-establishment groups. (Grantee Brief in Response to Informal
Conference, May 23, 1978, pages 15 and 16; Transcript of Informal
Conference, April 12, 1978, pages 16-18). It appears clearly excluded
from indirect cost treatment as an activity providing services and
information to the public, as promotional activity, and as a form of
public relations, and in any event as a meeting or conference not held
to conduct the general administration of the institution, identifiable
with a particular cost objective, the institution's primary mission.
The remaining minor costs in this category must be stricken because
grantee has failed to carry the burden of identifying and justifying
them and because its general assertions with relation to them appear to
be contradicted repeatedly by documents issued by it or contained in its
files which grantee has, after repeated invitations, made no pointed
effort to explain away.
'(Page 13 - 48 - 09/26/78)'
The appeal is therefore denied with respect to Citizens Participation
costs.
CONCLUSION
We therefore conclude that the appeal must be denied because Legis 50
has made no valid showing of grounds to overturn the Regional Office
rejection of Citizens Participation costs and no valid showing that it
has Bidding and Proposal costs in an amount in excess of the rough
figure reached by the Regional Office even though we do not altogether
approve the process by which the Regional Office reached that rough
figure.
May 7, 1992