DAB Decision 60
June 29, 1979 Chinle, Arizona School District No. 24; Docket No.
77-15; Decision No. 60 Mason, Malcolm S.; DeGeorge, Francis D. Yourman,
Edwin H.
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 four disallowances totaling $163,431 under an Indian
Education Act project grant for the financing of projects designed to
meet the special education needs of Indian children. Project funds were
to be used for hiring bilingual Navajo aides and for a career education
program.
The Board sustained all four disallowances and rejected arguments that
erroneous expenditures could be approved on the ground that they
benefited grantee's students and that the grantee has serious financial
and other problems resulting from its geographical and cultural
composition.
Grantees cited inability to locate records due to a series of mishaps
and the inefficiency of a former superintendent was rejected as defense.
Grantee had had an opportunity to provide the records at the time of the
audit and had failed to do so. The grant was moreover made to the
school district as an entity and it cannot escape responsibility by
blaming former administrators.
The grant forbade use of grant funds for construction but permitted
"minor remodeling." Building an addition on a gymnasium was held not
to
be minor remodeling.
Grantee contended that construction equipment was purchased for a
proposed course in equipment operation not implemented because of a lack
of qualified instructors. The Board held that it was unreasonable to to
purchase expensive equipment without reasonable assurance of being able
to provide instruction.
Incorrect indirect costs claimed were attributed by the local school
district to the County Superintendent. The Board held that Grantee was
nevertheless responsible.
DECISION
This is an appeal from the disallowance of $163,431 of a $281,006
project grant for the fiscal year ending June 30, 1974, made under Part
A of the Indian Education Act (20 U.S.C. 241aa) for financial assistance
for projects to meet the special education needs of Indian children.
The following is a brief statement of facts which are set out more fully
in the Chairman's Order to Clarify the Record, dated January 24, 1979:
As relevant here, project funds were to be used (1) for Navajo aides to
provide a bilingual and bicultural approach to education through the
third grade level and (2) for a career education program for secondary
school students. The disallowed costs are:
1. $30,731 for salaries of teachers engaged in activities not
related to project objectives; 2. $61,161 for construction costs;
3. $45,863 for purchase of construction equipment; 4. $24,472
for supplies related to a construction project and for general
education purposes; and 5. $1,204 for excess indirect costs.
I.
The expenditures shown in item 1 (salaries) and a portion of those shown
in item 4 (supplies) were disallowed as having been used for general
educational purposes rather than for the needs of the project. The
grantee contested that audit finding and was requested in the Order to
Clarify the Record to establish that the expenditures were for the
project. The grantee has been unable to do so, assigning as reasons
inefficient administration under a former superintendent, loss of
records in a move in January 1976, a break-in in the spring of 1977 and
flooding of offices caused by a broken water line in December 1978. The
grantee claims also that the audit report contains overly strict
interpretations of the regulations. As noted in the previous order, the
grant was made to the school district as an institutional entity and
that entity is responsible for accounting for the proper use of funds.
It cannot escape that responsibility by pointing to the shortcomings of
its own prior administrators.
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We might be able to view with more tolerance a situation where records
became unavailable through no fault of the grantee. Here, however, all
of the events which are stated to have affected the availability of
records occurred after 1975. The audit report was issued December 31,
1975. Prior to issuance of that report the audit agency furnished
proposed findings to the grantee and invited it to respond to them.
Those responses are included in the report as issued December 31, 1975.
None of the grantee s responses, however, offered documentation to
dispute the audit findings. There is reason, therefore, to assume that
the grantee has not been disadvantaged by the subsequent damage to its
records.
The grantee having shown no documentation to support inclusion of these
items as project expenditures, there is no basis for asserting that the
audit action was based on an overly strict application of the
regulations.
II.
The amount of $61,161 for construction costs and part of the $24,472 for
supplies were disallowed because of use for construction of a
combination gymnasium and vocational educational facility. The grant
funds were not available for construction except they could be used for
"minor remodeling of classroom or other space used for such programs
currently meeting the special educational needs of Indian children." 45
CFR 186.19(b). "Minor remodeling" was defined as minor alternations
in a
previously completed building and as excluding structural alterations to
buildings and building construction. 45 CFR 186.2. The grantee has not
shown that any of the following justifications assigned for the
disallowance were inaccurate: (1) the activity was not included in the
approved project (2) the expenditures were for construction which went
beyond permissible minor alterations because they were for the creation
of entirely new space, and (3) there was no previously completed
building to which alterations could be made. Instead these expenditures
represented part of the cost of expanding a building from a gymnasium
which was approved for construction in February 1973 and which was still
in process of construction at the time of the audit in December 1974.
The disallowed items apparently were for increasing the size of what was
started as a gymnasium, so it would include vocational education
classrooms. Perhaps that was a highly desirable action, but one for
which project funds were not properly available.
III.
The grantee purchased five units of heavy-duty construction equipment
for which it charged $45,863 to project expenditures on the basis that
the equipment was intended to be used for instruction in the vocational
education instruction component of the project. It explained that it was
not able to obtain instructors so it used the equipment in the
maintenance of school district property.
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The Order to Clarify (which, incidentally, through typographical error
gives the amount as $5,863) requested that the grantee submit evidence
of its planning for such a course, to show the efforts it has made to
obtain teachers, and to state whether such courses have been instituted
to this date. The grantee also was asked to justify charging large
expenditures to the project if it had no reasonable assurance that the
equipment could be use in project activities (i.e. for vocational
education)
The grantee's reply fails to provide any basis for a belief that there
was a reasonable need to purchase the equipment for vocational education
instruction. The reply is as follows:
"Evidence detailing the planning of the school for offering
courses in the operation of this equipment could not be found nor
was documentation of attempts to find and employ a teacher
available. The course was never instituted because of the
inability of the District to locate a qualified teacher. Due to
the location of the District it is extremely difficult to find
qualified teachers for regular school subject areas let alone for
a specialty subject. The District still sees a need for training
students in this area and is still attempting to put together such
a program."
The grantee ignored our request that it explain why it thought
acquisition of such expensive equipment could be justified when it had
no reasonable assurance of being able to provide the vocational
education instruction. In fact its response demonstrates the
unreasonableness of making large equipment expenditures when there were
obstacles to obtaining a qualified instructor, which obstacles have
continued over the several years following the purchase of the equipment
and continue to this date.
IV.
The final item of $1,204 included in the disallowance is made up of $818
far an incorrect computation of indirect costs by the Apache County
Superintendent and $386 representing the charge of indirect costs with
respect to disallowed expenditures for salaries and supplies. The only
ground the grantee gave for its appeal of this item was that the
overcharge by the office of the Apache County Superintendent should be
collected by the Federal Government from that office. The Order to
Clarify the Record stated that such an adjustment between the grantee
and the county is for local or local and state resolution.
Disposition
The conclusions expressed by the Chairman in the Order to Clarify the
Record are adopted for purpose of this decision. We note the grantee 's
continued assertion that the expenditures benefited its students and
that
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the school district has severe financial problems as well as other
difficult problems which result from its geographic and cultural
composition. These arguments, however, are not properly addressed to us
because we have no authority to base our decision on them. We can only
determine whether the grantee has expended the disallowed funds
consistently with the requirements applicable to the project for which
the grant was made. The grantee has failed to submit documentation or
any other proper basis for a determination that any item was improperly