Gab Decision 136
December 1, 1980 The Neighborhood House Association Docket No. 80-81
Coster, Clarence; Ford, Cecilia Settle, Norval Panel Chairman
By letter dated April 3, 1980, from the Regional Administrator,
Office of Human Development Services (OHDS), Region IX, to the Executive
Director of the Neighborhood House Association (NHA or Grantee), the
OHDS Headstart Grantee for San Diego, OHDS upheld a disallowance of
$39,406, the amount of the shortage in Grantee's required non-federal
matching share. The Regional Administrator further informed NHA that an
"adjusting grant award reducing the current year's (PY "O") New
Obligation Authority (NOA) by the amount of the disallowance with a
commensurate increase in the non-Federal share requirement will be
initiated." By letter dated April 30, 1980, the Grantee filed an
incomplete application for review with this Board. On May 20, 1980, the
Board's Executive Secretary informed the Grantee that its application
did not comply with Board requirements and directed the Grantee to file
a copy of the Notice of Disallowance. That document was filed June 6,
1980. The Agency filed its response to the Grantee's Application for
Review on July 31, 1980. The Board invited the Grantee to reply to the
Agency's response. The Grantee did not file a response. We have
determined to proceed to decision based on the Grantee's application for
review and the Agency's response to that application /1./. For reasons
stated below, we conclude that that the disallowance should be upheld.
Statement of the Case
An audit report dated December 15, 1978 covering NHA's grant grant
year "L" ending February 28, 1978 was prepared by the NHA's own auditing
firm and identified certain questioned costs. On June 29, 1979, the HEW
Audit Agency (HEWAA) transmitted a copy of the audit report to NHA's
Board of Directors with a cover letter noting the report's disallowance
recommendations and requesting NHA to respond to the Regional
Administrator, OHDS, within 30 days of the HEWAA letter concerning these
recommendations.
On August 2, 1979, NHA requested and received on August 7, 1979 a
thirty day extension in order to reply to the HEWAA letter of June 19,
1979. Inasmuch as no response had been received from NHA by OHDS, OHDS
sent a notice dated January 9, 1980 disallowing the $40,060 of costs
recommended for disallowance in the audit report. The $40,060 included
the $39,406 shortfall in NHA's required 20 percent non-Federal share for
grant year "L" and a $654 disallowance for lack of supporting
documentation on certain payments for supplies. By letter dated January
18, 1980, NHA requested reconsideration by the Regional Administrator of
the OHDS disallowance determination. In its request for
reconsideration, NHA stated that documentation for the questioned
expenditure of $654 had been located and explained that the bulk of the
shortage of non-federal matching funds totalling $39,406 was due to
extreme weather conditions. NHA stated that because of weather
conditions, its North County based delegate agencies were unable to
comply with repeated requests for reports and documentation prior to the
closing of the books at the end of grant year "L" on February 28,
1978.
NHA, therefore, requested a "waiver" of its non-Federal share shortfall
because of the unusual circumstances and alternatively, suggested that
the shortage be charged against non-Federal contributions for Year "M"
which exceeded requirements. Attached to NHA's request for
reconsideration to OHDS were copies of San Diego County Board of
Supervisor Resolutions and local newspaper clippings indicating that the
county had suffered severe rainstorm and flood damage during the period
between January 14, 1978 and the end of February 1978.
On April 3, 1980, the Regional Administrator, OHDS, denied NHA's
request for "waiver" and upheld the $39,406 disallowance. The
Administrator pointed out that although NHA suggested that the shortage
was attributable to extreme weather conditions, its appeal did not
explain how the extreme weather conditions were responsible for the
delegate agencies being unable to comply with repeated requests for the
reports and documentation.
The Regional Administrator stated,
(once) the extreme weather conditions had subsided, the North County
based programs should have been able to produce the missing reports and
documentation.
In requesting further reconsideration from this Board and in support
of its appeal, the Grantee states that the disallowance will serve as a
hardship and will have a negative impact on the families served by this
program.
Discussion
The limits of financial assistance which may be provided by the
Federal government to a Headstart grantee for the period in question are
set forth at 42 U.S.C. Sec. 2928(b). /2/ That section states:
Financial assistance extended under this part for a Headstart program
shall not exceed 80 per centum of the approved costs of the assisted
program or activities, except that the Secretary may approve assistance
in excess of such percentage if he determines in accordance with
regulations establishing objective criteria, that such action is
required in furtherance of the purposes of this part. . . The Secretary
shall not require non-Federal contributions in excess of 20 per centum
of the approved costs of programs or activities assisted under this
part.
45 C.F.R. Sec. 1301.21 establishes the objective criteria by which
the Secretary may waive the the required 20% non-Federal share as
contemplated by the statute. That section states as follows:
Criteria for increase in Federal financial assistance.
The responsible HEW official, on the basis of written application and
any supporting evidence he or she may require, will approve financial
assistance in excess of 80 percent if he or she concludes that the Head
Start agency has made a reasonable effort to meet its required
non-Federal share but is unable to do so, and the Head Start agency is
located in a county: (a) that has personal per capital income of less
than $3,000 per year, or (b) that has been involved in a major disaster.
In order to meet the criteria, a Headstart agency must first
demonstrate that it "has made a reasonable effort to meet its required
non-Federal share but is unable to do so." It is not sufficient in and
of itself to allege, with nothing more, as NHA has done, that the
Grantee has been involved in a major disaster.Even if NHA had met the
"major disaster" test -- a questionable proposition itself -- its
submissions have not provided any proof that the Grantee made a
reasonable effort to meet its required non-Federal share. In fact, the
contrary is true. The extreme weather conditions complained of by NHA
occurred during the last month and a half (January 14, 1978 - February
28, 1978) of the grant year in question (March 1, 1977 - February 28,
1978) and should not have interfered with the Grantee's delegate
agencies being able to provide their non-Federal share for the other 10
months. Furthermore, NHA has never indicated why, as noted by the
Regional Administrator, the North County programs should not have been
able to produce the missing documentation once the extreme conditions
had subsided.
The Board agrees with the Agency that NHA has failed to show that it
made a reasonable effort to meet its required non-Federal share. NHA
has not produced any documentation to indicate that the Federal share
shortage was attributable to the extreme weather conditions. The Board
finds that the Agency's denial of the Grantee's request for waiver was
in accordance with provisions of 45 C.F.R. Sec. 1301.21 and was
reasonable. The Board has held that it will not substitute its
decretion for that of the Agency where the Agency's decision is in
accordance with the rules and the Agency's exercise of its discretion is
reasonable. (Oregon State-Wide Allocation Plan, DGAB Docket No. 75-7,
Decision No. 22, June 25, 1976).
Conclusion
For the reasons stated above, we uphold the disallowance of $39,406
for grant H-7015 "L" ending February 28, 1978. /1/ When the Board's
Invitation to Brief, dated September 25, 1980, illicited no
response, the designated representative for the Grantee was contacted by
telephone in order to determine if a reply would be filed. The
representative claimed no knowledge of the Invitation and stated his
belief that his client had settled the case with the Agency. The
representative then was given several opportunities to elicit
information from this client, but failed to respond to the Board by
telephone as promised. The representative had been notified repeatly
that the Board had no other choice but to proceed to decision on the
record compiled to that point if the Grantee failed to respond.
/2/ On November 2, 1978, 42 U.S.C. Sec. 2928(b) was recodified at 42
U.S.C. Sec. 2928b(c) by Public Law 95-568 and amended to eliminate "he"
and substitute "the Secretary."
OCTOBER 04, 1983