DAB Decision 58
June 19, 1979 University of Arizona; Docket No. 78-11; Decision No. 58
Malone, Thomas; Mason, Malcolm S. Hiller, Manuel B.
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 appealed from the determination of the Deputy Commissioner,
Bureau of Higher and Continuing Education, disallowing funds charged to
its Veterans' Cost-of-Instruction grants in two successive years.
Grantee expended $32,848 for general instructional expenses pursuant to
program regulations permitting the use of any balance remaining after
the basic program requirements were met for that purpose. 0E disallowed
these expenditures on the ground that grantee had not met a part of the
program requirement for special education programs, specifically, the
requirement for providing remedial classes. Although the basis of the
disallowance initially appeared to be that grantee had used its existing
remedial classes instead of establishing separate remedial classes for
veterans, 0E later clarified its position as being that grantee did not
perform an assessment of the remedial needs of its veteran students. The
Board sustained the appeal on this issue, holding that not only were
separate classes not required, but also there was no requirement in the
legislation or regulations for an assessment of veterans' needs in
connection with the special education programs.
0E also disallowed $550 charged by grantee for travel to activities
which 0E found were not directly related to providing services for
veterans. The Board upheld the disallowance of most of the costs,
observing that attendance at a professional association meeting did not
justify travel costs because some veteran's concern was discussed at the
meeting among other subjects. The Board, however, sustained the appeal
with respect to one item of travel costs which it found was reasonably
related to a grantee official's responsibilities and duties as Outreach
and Recruitment Officer.
DECISION
BACKGROUND
The University of Arizona ("grantee") appealed to the Board by letter
dated April 21, 1978 from the March 23, 1978 determination of the Deputy
Commissioner, Bureau of Higher and Continuing Education, Office of
Education, disallowing a total of $33,398 charged to grantee's Veterans'
Cost-of-Instruction Program grants for the years ending June 30, 1975
and 1976. This amount included $32,848 disallowed on the ground that
grantee had not implemented special education programs based on the
assessed needs of educationally disadvantaged veterans and $550
disallowed for travel to activities which OE found were not directly
related to providing services for veterans. 0E also stated in its
adverse determination that grantee should implement procedures to ensure
that veteran enrollment counts were adequately supported and made in
accordance with program regulations, but did not disallow any funds
although it found that grantee had overstated its veteran enrollment and
consequently received more funds than it was entitled to receive. OE's
response to the appeal states that this issue has been satisfactorily
negotiated by the Office of Education and the University, and is now
considered moot." (p. 4.)
JURISDICTION
The Veterans' Cost-of-Instruction Program was established by Section 420
of the Higher Education Act of 1965, as amended, 20 U.S.C. 1070e-l. It
was designed to encourage colleges and universities to serve the special
needs of Vietnam-era veterans by making payments to such institutions to
provide certain specified services for veterans. (118 CONG. REC. 5798
(1972) (Remarks of Senator Cranston).) The program is a mandatory grant
program (although an institution must apply to receive its entitlement),
and thus the Deputy Commissioner's adverse determination was not
automatically subject to the Board's jurisdiction. However, on July 31,
1977, the Secretary of HEW approved the designation of the program by
the Commissioner of Education as a program subject to the jurisdiction
of the Board, so that this appeal may be accepted pursuant to 45 CFR
16.2(a).
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DISCUSSION
A. Special Education Programs
Grantee received a grant award of $70,707 for the year ended June 30,
1975 and a grant award of $73,862 for the year ended June 30, 1976. (0E
response to appeal, dated 5-30-78, Tabs B and c.) It expended a total of
$32,848 of grant funds for instructional expenses pursuant to 45 CFR
Sec. 189.17(a) during the two-year period beginning July 1, 1974 and
ending June 30, 1976. However, this amount was disallowed by 0E on the
ground that special education programs based on the assessed needs of
educationally disadvantaged veterans had not been implemented, and that
therefore grantee was not free to spend any funds for general
instructional expenses.
The disallowance was based on the findings and recommendations of the
HEW Audit Agency in its report dated May 12, 1977 (Audit Control No.
71014-09). (Letter from Moye' to Schaeffer dated 3-23-78, 3rd
paragraph.) The auditors found that grantee had established motivational
and tutorial programs, but had not implemented a special remedial
program for veterans. (Audit report, p. 7, 1st paragraph.) In fact,
grantee offered remedial classes in English, Mathematics, Reading-Study
Skills, and Basic Social Studies and/or Humanities. (Audit report, p.
35.) These courses were open to all university students. All of the
courses were established before grantee began participating in the
Veterans' Cost-of-Instruction Program, with the exception of the
Mathematics course. (Audit report, p. 29, 2nd paragraph.) Approximately
15 veterans per year enrolled in these remedial classes in each of
academic years 1974-75 and 1975-76. (It is not clear whether this is a
total for each class or for the program as a whole, however.) (Audit
report, p. 35.)
However, the auditors took the position that separate remedial classes
open only to veterans were required. (Audit report, p. 5, 2nd
paragraph, 2nd sentence.) They also found grantee's course offerings
inadequate on the ground that program regulations required that the
special education programs be established in response to an assessment
of veterans needs, problems and interests, and that no such assessment
was made. (Audit report, p. 9, 1st paragraph.) Grantee, however,
contended that the head of its Division of Continuing Education, who was
responsible for coordinating remedial course offerings for the entire
university, had made extensive efforts to assess the educational needs
of veterans as well as other students and had determined that the
university-wide remedial courses met the veterans' needs. (Audit report,
p. 24, item a.) Grantee also stated that it wished "to offer a
comprehensive program without making specific groups eligible for
preferential treatment" and that it "must continue to avoid any form
of
discrimination." (Audit report, p. 23.)
Several statutory and regulatory provisions are relevant to a
consideration of this item. (At the outset, it should be noted that
regulations for the Veterans' Cost-of-Instruction Program underwent a
number of changes. The version published in the Federal Register on May
3, 1974 (39 FR 15481) was
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applicable to the first grant under which funds were disallowed, which
began on July 1, 1974. Amendments were next published in the Federal
Register on May 23, 1975 (40 FR 23301) in time to apply to the second
grant involved in this case; however, the sections pertaining to this
item of the disallowance remained unchanged.)
The basic program requirements are found in two sections of the
regulations: 45 CFR 189.12, captioned "Office of veterans' affairs,"
and
45 CFR 189.12, captioned "Related veterans' services." Section 189.2
requires that the institution maintain "a full-time office of veterans'
affairs with adequate services...in the areas of outreach, recruitment,
special education programs, and counseling." This provision essentially
repeats the language of the program legislation, which requires that the
institution "maintain a full-time office of veterans' affairs which has
the responsibility for veterans' outreach, recruitment, and special
education programs, including the provision of educational, vocational,
and personal counseling for veterans...." 20 U.S.C. Sec.
1070e-1(c)(l)(B)(i).
Section 189.13 contains requirements for actually providing the services
for which the office of veterans' affairs is given responsibility in
Section 189.12. It should be noted that the term "special education
programs" in Section 189.12 is defined in Section 189.11(d) as
"specially designed remedial, tutorial, and motivational programs
designed to promote success in the postsecondary experience," and thus
relates to more than one paragraph of Section 189.13. Paragraph (a) of
Section 189.13 requires the institution to carry out "(p)rograms
designed to prepare educationally disadvantaged veterans for
postsecondary education...." Paragraph (b) requires "(a)ctive outreach,
recruiting and counseling activities." Paragraph (c) requires "(a)n
active tutorial assistance program." (These requirements parallel the
provisions of 20 U.S.C. Sec. 1070e-l(c)(l)(B)(ii), (iii) and (iv).)
More detailed requirements for these activities are found in Section
189.16. Paragraph (d) of that section states that the criterion by which
the adequacy of the special education programs will be evaluated shall
be the establishment and maintenance of:
"(1) Support from appropriate departments of the institution
for launching special education programs for the veteran student
of a remedial, motivational, and tutorial nature; (2) Support
throughout the institution for appropriate changes in rules,
policies, and procedures that will accommodate the special needs
and problems of the veteran student; and (3) Adequate guidance
for individual veteran students that will insure the highest
possible rate of their retention in educational programs."
Finally, the regulations provide that at least 50 percent of grant funds
must be used for the office of veterans' affairs and related veterans'
services,
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but that any balance remaining after defraying such expenses may be used
for instructional expenses in academically related programs of the
institution. 45 CFR Sec. 189.17(a).
In its initial response to grantee's appeal, OE supported the
disallowance by contending that the veterans' special educational needs
had not been met because, in part, the remedial programs provided by the
University had already been established for all students (Moye' letter,
May 30, 1978). However, in its response (January IS, 1979) to this
Board's Order to Develop Record, 0E appears to have retreated from this'
position by stating: "It has not been the position of the program that
statute and regulation mandate separate classes for veteran students
only." Rather, 0E now appears to rely exclusively for its disallowance
on the program's "operational belief that assessment of need is implicit
in providing a program of remedial services and therefore affirmed the
audit finding that such assessment had not formally occurred." (p. 1.)
This reading of 0E's current position finds additional support in that
same response which argues: "It is evident from our reading of the
legislation that the Congress intended specialized consideration of
Veterans needs which cannot be satisfied by providing access to programs
that are designed for regular students without an accompanying
additional individualized assessment that could determine whether or not
such access did resolve the remedial needs of the student." Thus in our
view, assignment to existing remedial courses without a proper and
accurate assessment of the educational deficiencies of the individual
veteran did not fulfill program requirements as determined by the
auditors and as affirmed by this office on the basis of the audit
report." (p. 3, emphasis in the original).
We cannot help but take note of the unusual circumstance, reflected in
the quoted statement, of "program requirements as determined by the
auditors and as affirmed by this office on the basis of the audit
report." (Emphasis ours). So far as the record discloses, the
interpretation of the program regulations to such effect was first
expressed by the auditors. Nowhere can be found any indication in the
regulation or responses of OE to this appeal that that interpretation
did not originate with the auditors, an undertaking which would seem to
be beyond their jurisdiction or responsibility. 0E appears to
acknowledge the absence of any explicit articulation of such a
requirement in stating its "operational belief that assessment of need
is implicit in providing a program of remedial services...."
Be that as it may, we, nevertheless, address the merits of such
interpretation as well as the question whether separate veterans'
remedial classes are required.
Although the disallowance was based in part on the lack of any
assessment of veterans' needs in connection with the special education
programs, it appears that there is no requirement for such an
assessment. 45 CFR Sec. 189.16(b)(2) requires the establishment and
maintenance of "(a) procedure for assessing veterans' needs, problems,
and interests," but specifically states that this is "(w)ith respect
to
outreach...." The term "outreach" is defined in 45 CFR Sec. 189.11(b)
as
"an extensive, coordinated, community-wide program of reaching veterans
within the institutions' normal service area, determining their needs,
and making appropriate referral and follow-up arrangement with relevant
service agencies." It thus appears that the required assessment is of
the needs of
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veterans in the community for various social services rather than of the
needs of student veterans for remedial courses. Thus, even assuming that
the assessment by the Division of Continuing Education was inadequate
(and there is no showing that it was), reliance on this alleged
particular program requirement as a basis for disallowance is not, in
our view, justified.
On the question of whether separate veterans' remedial classes are
required, the statute and program regulations are ambiguous in that they
neither specifically prohibit nor specifically permit the use of
existing remedial classes open to all veterans. The legislative history
of the Veterans' Cost-of-Instruction Program offers no definitive
answer, but seems to support the reading that separate classes are not
required. The purpose of the program (as explained by Senator Cranston
when he introduced it as an amendment to the pending bill) was to
encourage the fuller use of educational benefits under the G.I. bill.
New provisions of that bill had been enacted some two years earlier
providing, among other things, for payments to veterans enrolled in
"refresher courses, deficiency courses, or other preparatory or special
educational assistance..." (38 U.S.C. 1691) and for payments to veterans
receiving "individualized tutorial assistance, (38 U.S.C. 1691).
However, Senator Cranston stated that because G.I. bill benefits go
directly to the veteran, "institutions of higher learning have had
neither the resources nor the incentive to actively recruit veterans,"
and consequently the number of veterans who had availed themselves of
these benefits was very low. The Veterans' Cost-of-Instruction Program
was intended "to provide institutions of higher education with the
motivation and the money to recruit and to prepare veterans for
post-discharge education, and to realize more fully the potential of
existing programs which have been established, funded, and intended by
Congress to facilitate this readjustment process." 118 CONG. REC. 5799
(1972).
Thus, the special education programs required to be carried out by an
institution receiving a Veterans' Cost-of-Instruction grant are
apparently the same programs as those in 38 U.S.C. 1691 and 1692, and
other, similar provisions of the G.I. bill. Since there appears to be
no requirement in the G.I. bill for separate classes, it may be
concluded that no such requirement was intended by the Veterans'
Cost-of-Instruction provisions.
It should be noted that allowing grantee to meet the needs of veterans
for remedial courses by encouraging them to enroll in already
established courses open to all students does not run afoul of any "no
supplant" or maintenance of effort provision such as is applicable to
many grant programs. As previously noted, under the Veterans'
Cost-of-Instruction Program, an institution which meets the grant
requirements is allowed to use any remaining funds for the instructional
costs of related academic activities. Thus, the idea is not for a
grantee to use the full amount of the grant to build up its services to
veterans, but rather to use whatever amount is needed to provide the
necessary services, applying the rest to improve the overall quality of
instruction at the institution.
Grantee contends in support of its position that the Region IX Veterans'
Program Coordinator, Dr. Albert Piltz, approved its use of regular
remedial classes. According to the director of grantee's Office of
Scholarships and Financial
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Aid, Dr. Piltz had discussed the role of the Division of Continuing
Education in providing remedial courses for veterans with several
grantee officials during a site visit on October I, 1975 and agreed that
the funds budgeted for this purpose ($1,000) would not be needed unless
the head of that division found that courses other than those already
provided by his division would be needed. (Audit report, p. 71.) Dr.
Piltz's approval, if given, might be further reason to construe the
statute and program regulations in grantee's favor.
Although DE has denied that Dr. Piltz provided either written "approval"
or "disapproval" of specific activities, it has acknowledged that
"(h)is
role as site visitor was to assist university personnel in interpreting
rules and regulations governing the program so that Federal funds would
be expended in accordance with established policies and procedures."
(Item 3, p. 2, 0E's response dated January 15, 1979.) He was also "fully
authorized to assess the performance of participating institutions and
to judge compliance or non-compliance with program rules and
regulations."
It would be unreasonable to hold this grantee--after a site visit by a
duly authorized DE program coordinator and his review of the grantee's
conduct of the program and report thereon--to established policies and
procedures or interpretations of regulatory requirements expressed to it
for the first time in an after-the-fact audit by auditors, rather than
by a program official. Even if their reading of the regulations does in
fact reflect DE policy--on the soundness of which interpretation we
entertain substantial doubt--the reports by Dr. Piltz both to grantee
(November 28, 1975) and to the Regional Commissioner (December 4, 1975),
made after the site visit in October 1975, discuss pointedly the
excellent performance of the program and certain specific deficiencies.
The significant omission in this context of criticism of the program for
lack of a separate remedial program surely implied that grantee's
administration of the VCIP program was in conformance with the
legislative and regulatory requirements.
In view of the foregoing, this portion of grantee's appeal is sustained.
B. Travel Costs
The second item disallowed was $550 in travel costs. $478 was charged
to the grant in fiscal year 1975 and $72 in fiscal year 1976. According
to grantee, there were a total of fourteen trips taken by four
individuals. Grantee identified three of the individuals as the
Assistant Director, the Associate Director and the Director of the
Office of Scholarships and Financial Aid. This was the office to which
the coordinator of veterans' affairs reported. Eight of the trips were
to meetings of the Arizona Association of Financial Aid Administrators.
Four of the trips were to "counselors workshops" at Northern Arizona
University and Arizona State University, apparently to acquaint the
counselors at those institutions with how grantee's Office of
Scholarships and Financial Aid operated. Another trip was to a meeting
and workshop held at Arizona State University by HEW, the purpose of
which is not identified. The last trip was for the purpose of getting
acquainted with a number of Indian leaders, who were meeting in Phoenix,
a week before a recruiting trip to Indian reservations. (Audit report,
pp. 88-91, 91.)
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The auditors' description of the travel costs indicates that in addition
to "financial aid counselors workshops" and "association meetings
for
financial aid officers," there were "meetings with scholarship donors."
(Audit report, p. 18.) According to grantee, however, one such meeting
was combined with a meeting of the Arizona Association of Financial Aid
Officers, while the "expense claim" for another trip to a meeting
of
that association incorrectly described it as a meeting of scholarship
donors. (Audit report, pp. 90-91.)
The auditors recommended that the travel costs be disallowed because the
workshops and meetings did not directly benefit the Veterans'
Cost-of-Instruction Program, as required by 45 CFR Sec. 189.17. (Audit
report, p. 18.) 45 CfR Sec. 189.17(b) (effective May 3, 1974) provides
that "(a)ll assistance received under this part must be expended or
obligated for the foregoing purposes...." Of disallowed the costs based
on the audit report.
Grantee contended, however, that the $478 in travel costs charged to the
grant in fiscal year 1975 (which included all trips except the one to
Phoenix to meet with Indian leaders), was reviewed and approved by the
program officer, Dr. Piltz, during his site visit in October 1975.
(Audit report, pp. 26 and 88.) It also contended that it had incurred an
additional $3,733 in travel costs directly related to the Veterans'
Cost-of-Instruction Program but not charged to the grant funds which
were determined to be unallowable. (Audit report, pp. 27, 92-95.)
The auditors stated, however, that their review of the additional $3,733
in travel costs disclosed that these costs also were incurred "while
conducting activities that did not directly relate to providing required
program services." In addition, they stated that the program officer had
advised them that he had not approved any specific travel costs. (Audit
report, p. 20.) Of in its response to the appeal also contends that no
such approval was given, and includes as evidence a memo dated December
4, 1975, about two months after Dr. Piltz's site visit, from him to the
Regional Commissioner which mentions "travel by an administrator to
events of dubious veterans business," but does not otherwise refer to
travel costs. (Of response to appeal, Tab E.)
Even assuming that grantee could show that Dr. Piltz approved the travel
costs, this would not resolve the issue, since he did not have authority
to approve an unallowable cost. Thus, this Board must reach the
question whether the costs were allowable under the applicable
regulations. Regulations dealing specifically with travel costs were in
effect in fiscal years 1975 and 1976. 45 CFR Part 100, Appendix C, Part
I, para. J.44, made applicable to training and other educational
services under grants and contracts with educational institutions by 45
CFR Part 100, Appendix C, Part II, para. J., provides that travel costs
are allowable "when they are directly attributable to specific work
under
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a research agreement or are incurred in the normal course of
administration of the institution or a department or research program
thereof." However, it appears that current knowledge of the availability
of financial aid for veteran students would be essential in order to
successfully carry out the recruitment, counseling and outreach
activities under the grant, and that if the meetings of the Arizona
Association of Financial Aid Administrators contributed to this
knowledge, the cost of attending these meetings should have been
allowable. It is less apparent how the counselors' workshops may have
benefitted the grant program if members of grantee's staff were the
instructors rather than the students. The trip to the HEW-sponsored
meeting should clearly be allowable if it was related to the grant
program. In this connection, it is noted that the 1976 budget submitted
by grantee included allocations of $1500 for workshop/ conference
professional travel and $2500 for recruitment/outreach travel. This
suggests that travel for either of the purposes was considered
appropriate and allowable. However, we think a reasonable interpretation
of the purposes for which travel costs were budgeted requires that the
travel be directly related to the VCIP.
In its response to the Board's Order to Develop Record, grantee
undertook to justify travel costs which had been disallowed. As to the
travel during FY 1975, the costs claimed for Mr. Warden and Mr. Hill
were detailed. Two of these trips involved workshops for courses at
which Mr. Warden made presentations. The direct relationship between
those presentations and the VCIP has not, however, been demonstrated to
our satisfaction. The other two meetings are similarly lacking in
relating their purpose to this program, even though incident to the
February 2, 1975 meeting, Mr. Warden called on the Dougherty Foundation
to discuss veteran loans.
What we have said above concerning the two September 1974 workshops is
equally applicable to the claim for Mr. Hall's costs for attendance
there. Even less of a case is made by grantee to relate the other
travel of Mr. Hall to the program.
We would observe that attendance at a professional association meeting,
such as the State Association of Financial Aid Administrators, does not
justify travel costs because some veteran's concern was discussed at the
meeting among other subjects. More direct relationship to the program
would have to be demonstrated to support charging the costs to the VCIP.
Under the circumstances we sustain the disallowance of the claimed
travel costs for fiscal 1975.
In fiscal year 1976, a different, more restrictive standard was
applicable, as the program regulations were amended effective May 29,
1975, to provide that "travel expenditures shall be restricted to
recruitment and outreach
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activities, attendance at DE sponsored meetings providing technical
assistance for this part, and attendance at 0E approved professional
meetings." 45 CFR Sec. 189.17(c). This regulation was applicable only
to the travel costs incurred in that year to visit the Indian leaders in
Phoenix in preparation for the next week's recruiting trip to some
reservations. The explanation of the nature and purpose of Mr. Jae's
trip to the Phoenix meeting in March, 1976, appears to us to be
reasonably related to his responsibilities and duties as Outreach and
Recruitment Officer. As to this item of travel, the appeal of grantee
is sustained. D11 May 15, 1992