DAB Decision 72
December 28, 1979 Columbia University; Docket No. 78-147; Decision No.
72 Dukes, David V.; Kelly, Bernard E. 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.)
Under a grant made by the Alcohol, Drug Abuse, and Mental Health
Administration (ADAMHA), the University paid a principal investigator
compensation in addition to her base salary. The additional
compensation was neither shown in the proposed budget nor approved by
the grantor agency as required by both University policy and 45 CPR Part
74, Appendix D, Part i, Subpart Q, J.7(i). The Board sustained an
ADAMHA informal Grant Appeals Committee affirmation of a disallowance of
the additional compensation.
DECISION
In a letter dated November 6, 1978, Columbia University, grantee,
appealed to the Departmental Grant Appeals Board pursuant to 45 CFR Part
16 the October 4, 1978 adverse determination by the Alcohol, Drug Abuse,
and Mental Health Administration (ADAMHA) informal Grant Appeals
Committee pursuant to 42 CFR Part 50. The October 4 determination
upheld the Nay 31, 1978 determination by the Financial Advisory Services
Officer of ADAMHA requiring the grantee to return $3,770 under Grant No.
5 T21 12967 to the Government.
Procedural Background
in a memorandum dated December 20, 1978, the Executive Secretary of the
Departmental Grant Appeals Board notified ADAMHA of the appeal and
requested a response within 30 days. The Agency filed a response on
January 10, 1979. By letter dated June 21, 1979, grantee was directed to
respond to an Order to Show Cause. The Order outlined the facts and
issues as they appeared in the file and indicated that the case would be
decided on the written record and argument. Grantee was directed to
show cause why the Board should not proceed to decision on the record
already made and to identify the respects, if any, in which the summary
of facts and issues was materially incomplete or inaccurate. Grantee
was invited to brief any issues which it considered might affect the
result of the case and directed to address the question: "What are the
reasons, if any, why the appeal should not be dismissed on the ground
that the expenses charged to the grant are inconsistent with the cost
principles in Section J.7(i), Appendix D, Part i, Subpart Q, of 45 CFR
Part 74..." The grantor agency was notified that it was not required to
respond although it could if it wished to, but would be afforded a
further opportunity to respond if new issues were raised. The grantor
agency in a memorandum dated July 12, 1979 stated that it did not wish
to respond to the Order.
'(Page 02 - 72 - 12/28/79)'
In a letter dated July 20, 1979, the grantee responded to the June 21,
1979 Order, correcting an obvious but significant typographical error in
the Order. Grantee also proposed a resolution of this matter to which
the Agency has not responded and evidently does not accept.
Facts
The following facts are taken from the file. in December, 1971, grantee
submitted a proposal to the National institute of Mental Health
entitled: Training Labor-Management Staff for Mental Health Care. The
proposed budget included the stipulated labor time and effort and cost
to the agency for the principal investigator of the project. The
stipulated time and effort was 207. requiring the principal investigator
to devote a full day a week. The grantee was awarded the grant
(MS-12967) in support of the project in May, 1972 for a four-year period
(July I, 1972 - June 30, 1976). The award for the initial budget year
and the three subsequent years included funding in support of the 207.
stipulated time and effort and the principal investigator received the
payments in excess of his salary which were never questioned upon audit.
During the budget year July 1, 1975 - June 30, 1976 another principal
investigator was named by the grantee but the stipulated time and effort
charged to the grant did not change. The payment made during this period
was questioned upon an audit review and recommended for disallowance
because the payment was characterized as additional compensation.
The new principal investigator's salary was set at $18,850 per year.
During the period July 1, 1975 - May 31, 1976 she received $26,808 which
included the base salary plus additional compensation of $3,770 and
summer compensation of $4,188.
The grantee has a policy of permitting an officer of instruction
pursuing research interests on a sponsored project within the University
to receive up to an additional 207. of his base salary by pursuing
research interests on a sponsored project within the University. The
additional compensation must be approved by the sponsor (in this case
the government agency) and payment is made by the grantee when the
compensation is clearly indicated in the budget and when the award of
funding for the proposed project is received including the necessary
funding for the additional payment. Grantee admits that the additional
compensation was not specified in its budget and that in its request to
NIH to promote a new principal investigator, permission to pay
additional compensation was not requested. This was required both by its
own stated policy and by the Federal cost principles discussed below.
'(Page 03 - 72 - 12/28/79)'
Regulations and Cost Principles
Federal Management Circular (FMC) 73-8 contains the cost principles
followed by the Department of Health, Education, and Welfare (DHEW) in
determining the allowability of charges to grants made to institutions
of higher education. The Circular was implemented by OASC-1, A Guide for
Colleges and Universities and by 45 CFR Part 74. The language in the
principles is substantially the same as Appendix D, Part I, Subpart Q of
45 CFR Part 74 which covers grants to such institutions. Part 74 of 45
CFR was published in the Federal Register on September 19, 1973.
45 CFR Part 74, Subpart Q, Appendix D, Part I, J.7(i) states in
pertinent part:
"Charges for work performed on Government research by faculty
members during the academic year will be based on the individual
faculty member' s regular compensation for the continuous period
which, under the practice of the institution concerned,
constitutes the basis of his salary... in no event will the charge
to research agreements, irrespective of the basis of computation,
exceed the proportionate share of the base salary for that period,
and any extra compensation above the base salary for work on
Government research during such period would be unallowable...
however, in unusual cases where consultation is across
departmental lines or involves a separate or remote operation, and
the work performed by the consultant is in addition to his regular
departmental load, any charges for such work representing extra
compensation above the base salary are allowable provided such
consulting arrangement is specifically provided for in the
research agreement or approved in writing by the sponsoring
agency." (emphasis added)
Discussion
The ADAMHA informal Grant Appeals Committee concluded that the payment
of additional compensation conflicted with FMC 73-8 and sustained the
audit recommendation because, contrary to University policy, sponsor
approval was not obtained and because grantee did not contest the
finding that the salary payment was in excess of the academic base
salary. Further, regarding the fact that the payment had been made
without question in previous years the committee indicated that it found
no evidence to indicate that the NIH was aware that the salary requested
and awarded in the previous years was to be in excess of the faculty
member's salary.
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Grantee contends that the Agency is not distinguishing between the form
of the payment and the actual expenditure. Grantee also asserts that
the disallowance is based on procedural grounds and that the
disallowance can therefore only be substantiated by showing that its
procedural failure contributed to or led to a different set of outcomes
than those which would have occurred had the procedure been strictly
observed. Since the payment was not in excess of that permitted by
university policy or that stipulated in the budget, grantee contends
that there is no difference in the outcomes. This contention is without
merit. Prior approval is a prerequisite to the receipt of additional
compensation.
The grantee contends that the consequence and effect of the decision to
disallow the expenditure violates the terms of the agreement between the
NIMH and the University since the disallowance is tantamount to
declaring that the principal investigator of the grant made no
stipulated contribution to the project in terms of labor, time and
effort or to declare that the faculty member's time and effort should be
at no cost to the government. This contention is also without merit.
Grantee's June 28, 1978 letter appealing the determination to disallow
the expenditure, concedes that contrary to proper procedure, in its
request to promote a new principal investigator, grantee failed to
request to pay additional compensation. Moreover, grantee concedes that
it failed to follow its own customary practice of specifically
indicating in the proposed budget that the stipulated 207. time and
effort represented 207. additional compensation permitted under the
university faculty compensation policy.
Conclusion
Accordingly, the appeal is denied and the determination by the ADAMHA
informal Grant Appeals Committee is affirmed on the grounds that the
expenses charged to the grant are inconsistent with the cost principles
in J.7(i), Appendix D, Part I, Subpart a, 45 CFR Part 74. D11 May 15,
1992