DATE: January 15, 1998
SUBJECT: Rhode Island Substance Abuse Task Force Association
Docket Nos. A-97-117, A-97-118
Decision No. 1642
DECISION
The Rhode Island Substance Abuse Task Force Association (Association) appealed two determinations, dated March 10 and April 10, 1997, by the Center for Substance Abuse Prevention (CSAP) within the Substance Abuse and Mental Health Services Administration (SAMSHA) of the United States Public Health Service (PHS). Those determinations terminated two grants received by the Association under the Community Partnership and the Community Prevention Coalitions Demonstration Grant Programs. These grants were aimed at preventing substance abuse through the formation of community-based partnerships and coalitions. CSAP's decision to terminate was based on what it described as a pattern of violations of the Terms and Conditions of the Grant Awards as well as certain requirements found in the PHS Grants Policy Statement. See CSAP Brief (Br.) at 2. The Association argued that it had either complied with the terms and conditions of the grants or had satisfied all of CSAP's directives for bringing itself into compliance.
Although the Association appealed each termination individually, the parties agreed that the appeals involved common issues of law and fact which should be considered jointly. The record in this case consists of the parties' briefs and evidentiary submissions, a written summary of a July 10, 1997 conference call and the tapes of a November 5, 1997 Conference call (Conference call).
Grant "awards may be terminated in whole or in part [without the consent of the grant recipient] only if . . . a recipient materially fails to comply with the terms and conditions of an award." 45 C.F.R. .74.61(a)(1). The PHS Grants Policy Statement provides --
When a grantee has materially failed to comply with the terms and conditions of the grant, PHS may . . . terminate the grant for cause . . . PHS prefers that deficiencies be corrected whenever practicable. Therefore PHS will normally inform the grantee of the deficiency and provide sufficient opportunity for it to be corrected. A decision . . . to terminate . . . may be made if appropriate corrective action (or the acceptable promise of such action) is not taken during the period of suspension or if the deficiency is so serious as to warrant immediate termination. Immediate termination may also be taken if deemed to be in the best interest of the government.
PHS Grants Policy Statement (SUSPENSION, TERMINATION AND WITHHOLDING) at 8-22 (April 1, 1994).
On the basis of the analysis below, we conclude that CSAP has not demonstrated that the Association materially failed to comply with the terms and conditions of these grants. Therefore, we reverse CSAP's termination. This decision does not preclude CSAP from examining the Association's grant management in the future and taking appropriate action.
BACKGROUND
CSAP administers the Community Partnership Program (CPP) and the Community Prevention Coalitions Demonstration Grant Programs (CPCD). These are comprehensive, multifaceted federal initiatives designed to support communities in preventing substance abuse-related problems through the formation of community partnerships and coalitions. They are community-driven programs relying on local involvement to develop and implement programs addressing existing substance abuse problems. A grant applicant must be formally designated by community coalition members to act on behalf of the multiple partnerships formed under the CPCD grants. See Association Submission (July 16, 1997) CPCD Guidance for Applicants at 20.
The Association received a $917,175 CPP grant (a partnership grant known as the Consortium for Community Initiatives (CCI)) on August 1, 1995. The Association took over this program in the grant's fifth project year when it replaced the prior lead agency. The Association received a no-cost extension through July 31, 1997. This grant was designed to build the capacity of municipal task forces through the formation of a partnership that would increase the number and quality of local prevention programs.
The Association received a CPCD grant (a coalition grant known as Consortium United for Prevention or CUP) on September 30, 1995. This three-year grant was funded for $347,617 in the first year and $438,485 in the second year. The CUP grant was designed to build upon the earlier work of the CCI grant by expanding the geographic base of task forces and demonstrating an intensified programmatic component to be overseen by the program committee, the CUP coalition.
On August 8-9, 1996, CSAP conducted a management review site visit of the grants. The review was designed to evaluate the progress made in carrying out program activities, monitor overall grant management, and examine allegations of misuse of federal funds which had been reported to the Office of the Inspector General. The three-member review team was comprised of the CSAP Project Officer, a consultant familiar with the grant, and a representative from the Rhode Island Department of Health's Division of Substance Abuse.
In a Report of Findings, dated August 20, 1996, CSAP notified the Association of its initial findings and that it had designated the Association an "exceptional organization," i.e., an organization which shows evidence of a poor program audit or of improper business practices. See PHS Grants Policy Statement, Section 4 (Preaward Policies and Considerations) at 4-16; see also 45 C.F.R. .74.14. CSAP placed Special Conditions on the grant which required the Association to -- submit a cash flow statement for the current budget period's projected and actual expenditures; receive prior approval for payments of funds from the Payment Management System; submit monthly expenditure reports with each request for payment; and submit monthly progress reports detailing all progress "through the current reporting format." See Association Exhibit (Ex.) 3.
CSAP then outlined the "corrective actions" it required the Association to take by September 20, 1996. The Association was required to provide the CSAP Project Officer with --
a detailed plan of action for implementing the governance structure in the approved grant application; documentation of all staff and consultants charged to the two grants; the Financial Statement (Balance Sheet and Income Statement) for the period ending June 30, 1996; the Trial Balance Detail Report for all asset, liability and fund balance accounts for the twelve-month period ending June 30, 1996 and the two-month period ending August 31, 1996; updated copies of the direct and indirect spread sheets for each grant for the period ending August 31, 1996; and justification for the Interim Program Director's employment with the Burrillville Task Force. Id. at 4.
Following the site visit, the Association advertised to fill its recently vacated Project and Program Directorships, as instructed by CSAP, but stated that it was impossible to fill the positions due to the concurrent exceptional organization designation. In a September 13 telephone conference between the parties, ultimately summarized in writing on October 22, CSAP refused to approve the Association's interim Program Director as permanent, opting instead to have the then interim Project Director serve in both capacities. See CSAP Ex. I-3. This individual resigned, however, within weeks of his appointment to the dual positions. Shortly thereafter, the Chair of the Coalition Committee was replaced after the Task Force which she represented withdrew from the Coalition. These individuals were integral to the Special Conditions because their signatures were required by CSAP on the financial status reports CSAP required before reimbursing the Association.
Although the Association filled these vacancies with new interim or duly elected individuals, CSAP refused to recognize these officials. Thus, it refused to accept the financial reports, which were essentially requests for reimbursement, or the progress reports. Consequently, beginning in September 1996, the Association received little or no funding for either day-to-day operation or long-term grant objectives.
On March 10, 1997, CSAP terminated the CUP grant. Generally, CSAP asserted that the Association had failed to make "a useable demonstration of community-based substance abuse prevention and to warrant continued federal funding." Association Ex. 22 at 1.
Specifically, CSAP contended that program "progress was lacking and/or absent." Id. CSAP indicated that its findings included, but were not limited to:
CSAP concluded that "continuing this program would not be in the best interest of the Federal government." Association Ex. 22 at 1.
On April 10, 1997, CSAP terminated the CCI Grant based on the same rationale used to terminate the CUP Grant. See Association Ex. 26.
Before this Board, CSAP asserted that it "recommended termination of the CCI and CUP grants . . . based upon a documented pattern of violating the . . . [PHS] Grants Policy Statement requirements and the Terms and Conditions of grant award." CSAP Br. at 2.
Generally, the Association asserted that -- it had recognized that its governing structure had varied from its original design and, although it considered its later design more efficient, it had returned to the original governance structure when CSAP identified its concerns; it had complied, to the best of its ability, with the several Special Conditions and Corrective Actions (e.g., submissions of by-laws and minutes) imposed by CSAP; and that the Association stood ready to work with CSAP to attain the grants' objectives following resolution of the issues before the Board.
ANALYSIS
Below we review the bases for termination alleged by CSAP. For each, we outline the applicable standard for grantee performance, then review the evidence provided by CSAP and the Association in order to determine whether it demonstrates that the Association materially failed to comply with specific terms and conditions of its grants.
1. CHANGE IN SCOPE OF THE PROJECT
The terms and conditions for the scope of these grants are established by the notices of the availability of funds issued by CSAP, the Association's accepted grant proposals, and any additional terms and conditions listed in the Notices of Grant Award. For the CUP grant, these documents required that a grantee be a partnership or coalition consisting of at least seven organizations or agencies (or their representatives), committed to preventing drug use and alcohol abuse. See Association Submission, (July 16, 1997) Requests for Application for CCI Grant at 5 and CUP Grant at 12 and 20.
In the approved CUP grant application, the Association described its organizational composition as follows --
The foundation . . . of the [CUP] are the 34 Municipal Task Forces representing 38 of the 39 Rhode Island municipalities (some Local Partnerships represent multiple municipalities). Each Municipal Task Force is a complete local partnership composed of representatives from a range of sectors within the community. . . Twenty-One of the municipal Task Forces have been members of the existing partnership [CCI], . . . and have received a variety of technical assistance services from Consortium support organizations . . .[CUP] adds 14 new Municipal Task Forces which have until now operated independently.
Association Submission (July 16, 1997), CUP Grant Application at 12.
To a degree, both parties agree that as of the August 1996 site visit, the grants were not being administered as envisioned in the grant application. The CUP Coalition was not governing the grant, but was acting more as an advisory committee to the Association. In response to CSAP's findings, the Association changed the governing structure to give the CUP Coalition decision-making authority over the grant. There is no dispute that, following the Association's designation as an "exceptional organization," approximately 12 townships disaffiliated from the Coalition, but not the grant itself. Thus, while they no longer had a role in the governance, they were still eligible to receive grant funds as approved by the Coalition. Even with the withdrawal of these 12 townships, however, there remained far more participating partnerships than required by the request for grant applications.
The specific provisions that CSAP alleged that the Association had violated were the governing structure and the assurance that at least seven municipalities were participating in the Coalition. The Association provided evidence of compliance with both these conditions. See Association Ex. 14. CSAP did not point to any other evidence of scope provisions (from grant terms and conditions, applicable regulations or PHS Policy issuances) that were violated by this grantee.
Before the Board, CSAP alleged that the Association --
created a "new" CUP coalition outside of the adopted bylaws. Although the "new" coalition contained several members from the "old" coalition, it was a deceptive way for the . . . [Association] to try to regain control. The . . . [Association] went so far as to threaten the "old" chairperson, who had one more year to serve, with a lawsuit for misrepresentation. The fact is that the . . . [Association] changed the scope of the grant without prior approval through this move. No longer were . . . [four partnerships named] serving on the CUP coalition.
The lack of collaboration demonstrated by the . . . [Association] was clearly not in keeping with the intent of the . . . [CUP] program or the funded demonstration. In addition to changing the coalition structure, fourteen of the thirty three municipal task forces approved in the program design disaffiliated with the . . . [Association]. Both of these actions significantly changed the scope of the approved program. CSAP Br. at 2.
CSAP's allegations are unsubstantiated and without merit. As noted above, the Association responded to CSAP's concerns about its internal governing structure by returning to CSAP's preferred structure. Moreover, the decision by certain municipal task forces to leave the Coalition did not bring the Association below the total number of partnership groups required for participation in the grant.
Regarding CSAP's allegations of threats to "the old chairperson," the record shows that this Chairperson's township left the Coalition, but remained in the grant (i.e., continued its eligibility to receive the benefits, but declined to participate in grant governance). Apparently, the Chairperson did not wish to give up her position in spite of her municipality's withdrawal from the governing aspect of the grant. CSAP did not explain why it took the position that the Association should not have followed its by-laws, declaring the position vacant and conducting an election for chairperson among the still participating townships. Consequently, we reject CSAP's assertion that this action changed the scope of the grant.
In connection with its concerns about the Association's deviation from the scope of the approved grant, CSAP established several Special Conditions and Corrective Actions. These conditions were apparently intended to guide the Association through a process of bringing itself into compliance and to document that compliance. Below we examine whether the record shows that the Association met these Special Conditions and Corrective Actions.
A. Letters of Commitment CSAP required Letters of Commitment from local grant participants to demonstrate their willingness to work with the Association in this program. In the Report of Findings CSAP indicated that it "was not able to confirm that seven (7) member organizations existed for either [the CUP or the CCI] . . . grant." Association Ex. 3 at 1.
During the Conference call, CSAP first said that seven letters of commitment were required to meet this condition. When the Presiding Board Member pointed out that Association Exhibit 14 contained at least nine such letters, CSAP then contended that fourteen were necessary (seven from the preexisting partnership group and seven from the current one). CSAP indicated that the letters of commitment requirement was clear from the Report of Findings.
The only clear indication that CSAP was looking for fourteen letters of commitment is found at the third bullet of Item 2 on page 3 of CSAP's brief, filed with this Board on August 11, 1997. That "requirement" is clearly after the fact. The Report of Findings mentions letters of commitment in two places, the above quoted finding, from page 1, and later at page 4 where it states generally that the Association's plan of action for implementing a governance structure must "contain letters of commitment." No number was specified in this later reference. We therefore conclude that this Corrective Action required that the Association provide seven letters of commitment.
Contrary to CSAP allegations, we find that the Association provided 41 letters of commitment from 1995 CUP Grant participants, as well as nine letters of commitment from 1996 CUP Grant participants. See Association Ex. 14. Therefore, we conclude that the record shows that the Association complied with this requirement.
B. Organizational Chart CSAP required the Association to produce an organizational chart in order to get a clear understanding, both for itself and, ostensibly, Coalition members, on the breakdown of roles and responsibilities within the Association.
CSAP stated that "[n]ine different organizational charts were submitted." CSAP Br. at 3. In the Conference call, CSAP asserted that it was unable to determine which chart, if any, accurately reflected the reality of the Association. CSAP did not include any of these charts in its submission.
Appendices 3 and 4 to Association Exhibit 10 are titled, respectively, "Proposed Coalition Organizational Structure/Grant Chart" and "Communication Flow Chart." These were provided to CSAP by the Association on November 26, 1996. These submissions were in this record prior to CSAP's Brief and appear to provide the structural overview sought by CSAP. The Association Director submitted an affirmation with the Association Reply Brief attesting that this structure was followed. See Association Reply Br. at 9 and 22.
Asked to substantiate its assertion that the Association had not submitted a definitive organizational chart, CSAP asserted that it had provided the Association with an exemplar of an Organizational Chart and that the Association had merely filled in the blanks and resubmitted the exemplar. CSAP indicated that its representatives had spoken with members of the Association at the site visit and observed representatives from the Association Board of Directors and the CUP Coalition in an October 1996 reverse site visit. Based on those discussions and observations, CSAP concluded that the organizational chart was not applied in practice.
CSAP's observations from the August 1996 site visit are irrelevant, since the Association agreed that the structure at that time was inappropriate and changed it by amending its by-laws in September. When asked for substantial evidence to support its conclusion that the Association was not following the new by-laws, CSAP stated that it had relied on "letters and communications" received from a former Chair of the CUP Coalition and selected Minutes from Coalition meetings. CSAP alleged that these Minutes showed votes taken by the Coalition and the Coalition Chair being told by the Association that the votes were invalid. CSAP admitted, however, that none of this allegedly supporting documentation was in the record and it did not seek to add it. CSAP also could not point to any evidence in the minutes otherwise submitted in this record to support its assertion that the by-laws were not followed, nor did it offer affidavits from the individuals who said that the new structure was not implemented. Thus, the record does not support CSAP's finding that the Association did not satisfy this Corrective Action.
We find that the Association's documents provide for an organizational structure that complies with the terms and conditions of the grant and that CSAP's assertion that the structure was not followed is unsupported. Therefore, we conclude that the record shows that the Association complied with this requirement.
C. Action Plan for Governance CSAP required the Association to submit a detailed plan of action for implementing the governance structure in the approved grant application. CSAP asserted that it never received an action plan for governance from the Association.
Association Exhibit 10 is a November 26, 1996 Response to the August site visit. The Association indicated that it was including, as part of that document, an Action Plan for tasks to be addressed in the future. See Association Ex. 10 at 15. In the Conference call, the Association noted that it had received subsequent letters from CSAP regarding items that CSAP believed were missing and that the Action Plan was never listed. The record contains at least one example of such a communication. A December 23, 1996 letter cosigned by the CSAP Grants Management Officer and Branch Chief, which was, in fact, a response to the Association's November 26th letter, sets out further deadlines for the submission of certain items. An Action Plan is not among the items "due." See Association Ex. 12.
During the Conference call, the Association indicated that it understood the Action Plan to be an on-going concept under the guidance of the Project Director -- that is, a plan that, even while in place, was subject to change and improvement. However, the Association noted that the Project Director's resignation in November 1996 and its inability to fill key positions due to its designation as an exceptional organization effectively sidetracked its ability to more fully develop its Action Plan.
We could find no evidence that CSAP provided specific detail as to what it expected the Action Plan to contain. Although largely devoid of specific dates, Association Exhibit 10 sets out steps it had taken or intended to take in order to correct deficiencies. For example, the Association indicated that new by-laws had been approved in September 1996 and that it was awaiting CSAP review of them. Association Ex. 10 at 21.
Based on the evidence before us, we conclude that the Association did file and begin implementation of an Action Plan. We therefore conclude that the record shows that the Association complied with this requirement.
D. Coalition Minutes CSAP required the Association to produce all Coalition Minutes to corroborate the Coalition Committee's decision making capacity.
The Association asserted that it produced "responsive documentation" on January 10th and that CSAP did not inform it "that this documentation was deficient in any way." Association Br. at 6. CSAP alleged that the Association had submitted only "select meeting minutes." CSAP Br. at 3. The Association maintained that it sent CSAP all the Minutes, and it contended that the responsibility for any missing Minutes could be attributed to CSAP's "disorganization and mismanagement." Moreover, the Association asserted that on "at least five (5) occasions, . . . it had to fax courier receipts to CSAP/SAMSHA in order to prove that delivery had already been made . . . and signed for by a person there." Association Reply Br. at 10.
Production of these Minutes was not a Term and Condition of the grant, but was required to show implementation of the governance structure pursuant to the by-laws. Specifically, they were requested to allay CSAP's concerns that the Association had usurped the Coalition Committee's decision-making authority. We find that the record substantiates the Association's claim that all Minutes were submitted as required -- CSAP admitted in the Conference call to using them in constructing its case. Moreover, CSAP did not produce or cite any Minutes demonstrating that the Association had usurped the Committee's authority. Thus, the purpose of this requirement has been served.
We therefore conclude that the Association complied with this requirement.
E. By-laws CSAP required the Association to produce by-laws accurately reflecting the roles of the various participants in the governing structure, most importantly, the Coalition's authority in all decisions concerning grant funds. See Association Ex. 12 at 2. CSAP asserted that the Association never submitted the draft of the by-laws. CSAP Br. at 4. The Association asserted that it had revised its by-laws, submitted them to CSAP for approval and had sought, but not received, technical assistance to satisfy CSAP's concerns.
Although CSAP alleged non-receipt, CSAP's Exhibit G-1 is a document titled "[CUP] Coalition By-Laws Adopted September 23, 1996." CSAP indicated that "the Coalition had created and adopted the bylaws . . . Additional technical assistance was provided off site in November 1996 . . . ." CSAP Br. at 5. Association Exhibit 11 is a November 26, 1996 letter from the CUP Committee Chair alerting CSAP to the fact that the Association was awaiting CSAP's response to an earlier submission of documents, including the by-laws. CSAP finally responded by letter dated December 23, 1996 and directed the Association to submit revised by-laws by January 10, 1997. See Association Ex. 12.
In the Conference call, the Presiding Board Member questioned CSAP's initial position, that it did not receive adopted by-laws, in view of the fact that CSAP's Exhibit G-1 is a document entitled "By-Laws Adopted September 23, 1996." In response, CSAP stated that "it received adopted by-laws and there were a couple legal pieces that needed to be changed and they were communicated at the off-site visit." CSAP did not explain the nature of these "legal pieces."
The only evidence in the record explaining what CSAP found wrong with the by-laws was CSAP's December 23, 1996 recommendations. CSAP Ex. G-2 at 1. The recommendations contain numerous suggestions for improvements to the by-laws but do not refer to any grant provisions, applicable regulations, PHS Grants Policy Statement or any other program requirement that the by-laws violated or failed to implement. Thus, these recommendations do not establish a context in which the Association could reasonably understand that failure to revise the by-laws immediately as suggested would constitute a violation of a material term and condition of the grant. Moreover, whatever CSAP wished the by-laws to provide, it is clear from the wording of the recommendations that the author expected a committee to make these revisions. CSAP's recommendations were dated December 23, 1996; when the Association received them is not known. The expectation that, during the December holiday season, the Association could form or reconvene a committee with State-wide membership, which could complete the requested revisions by January 10 was certainly unrealistic.
Consequently, we conclude that the Association met this requirement for Corrective Action.
F. Memorandum of Understanding CSAP required a Memorandum of Understanding (MOU) between the Coalition and the Association "to ensure that the governance structure that was described in the approved and funded application was being implemented." CSAP contended that the MOU was never submitted. CSAP Statement of Position at 1 (December 10, 1997).
In its Reply Brief, the Association contended that it had attempted to give such an MOU to CSAP at the August site visit, but that CSAP refused to accept it. The Association indicated that the same MOU was later submitted with other documentation on January 17, 1997. Association Reply Br. at 10. However, Association Exhibit 20 is a February 5, 1997 letter from CSAP informing the Association that CSAP had not received an MOU. At the Conference call, it was discovered that, although the January 17, 1997 letter referred to the MOU as attached, the submitted copy of that letter (Association Exhibit 17) did not include an attached MOU. The Board permitted the Association to supplement the record to correct this inadvertent omission, and the Association offered its Exhibit 33 as the missing MOU. However, Association Exhibit 33 is obviously not the August 1996 MOU, as it contains a page titled "CUP Grant Memorandum of Understanding January 15, 1997" followed by 22 signature pages (each numbered 3). See Association Letter to the Departmental Appeals Board (November 10, 1997); see also Association Exs. 12 and 17. Moreover, the signatures on the attachments are even later in time. Finally, to the extent we can discern the nature of the subject matter of the MOUs, they appear to be addressing $4,000 mini-grant awards to Coalition participants, rather than memorializing an agreement about the governance of the grant, as required by CSAP. Thus, there is no evidence in the record supporting the Association's position that it had submitted the MOU as required.
While we have no evidence that the Association submitted a MOU, it is clear that this requirement is duplicative of other Corrective Actions imposed by CSAP that we have found were satisfied by the Association. Specifically, the purpose of this condition was to document that the Association had changed the operation of the grant to comply with the required governance structure. We have concluded above that the record contains extensive, unrebutted evidence that the Association did make the required changes. Thus, we conclude that, by itself, the Association's failure to prove that it did submit additional, duplicative documentation was not material and does not support a decision to terminate.
Conclusion
CSAP alleged that the Association violated the terms and conditions of the grant by the governing structure that was in place in August 1996, and it therefore required the Association to change that structure and to provide documentation to show that it had changed. The record shows that the Association did change and did meet every reasonable CSAP requirement to document those changes. Therefore, the evidence does not support CSAP's assertion of a material breach by the Association of the terms and conditions of these grants.
2. PROGRAM AND PROJECT OFFICER VACANCIES According to the governing provisions for this grant, the Project Director is to oversee the day-to-day grant administration. The Program Director supervises overall grant operation in terms of attaining the grant objectives. There is no dispute that the grants required CSAP approval of all appointments to those positions.
Before this Board, CSAP asserted that the absence of Program or Project Directors justified termination of the grants. Specifically --
As stated in the Terms and Conditions of the grant award, "Change of Program Director or Project Director, including any and all interim appointments, requires the written approval of the CSAP Grants Management Officer." The coalitionprogram director and project director positions were vacant since 11/5/96. In addition, the . . . [Association] did not name an interim program director or project director to either grant as requested. Without key personnel, whose expertise is critical to the project, it was impossible to carry out the objectives of either grant. CSAP Br. at 2.
At the August 1996 site visit, both positions were technically vacant. An interim Program Director had been in place since March 1996, when the Association had sought approval of that person as permanent. The Association's Project Director had resigned in mid-July 1996 and an interim Project Director was named, also pending CSAP approval. Thus, the record shows that the Association acted promptly to fill vacant key positions and had sought CSAP approval as required by the grants' Terms and Conditions. After the site visit, the Association was instructed to, and did, advertise to fill these positions. Shortly after these ads began to run, CSAP designated the Association as an "exceptional organization." This action placed the Association on a reimbursement basis and subjected its expenditures to immediate CSAP scrutiny and approval before funds were released to cover costs, including salaries.
In October 1996, CSAP responded to the Association's request, "dated March 6," for appointment of the interim Program Director as permanent. CSAP indicated that the interim Director (with whom CSAP had been dealing for at least that six month period) was not qualified to hold the position. In that same letter, apparently summarizing a September 1996 conference call between the parties, CSAP approved the appointment of the interim Project Director in the additional role of interim Program Director. CSAP Ex. I-3. Ultimately, this individual resigned both positions effective mid-November 1996.
The Association contended that the funding interruption caused by its "exceptional organization" designation made it impossible to fill these key personnel positions. The Association argued that CSAP severely limited, if not effectively cut off, the Association's funding and made it virtually impossible to attract credible candidates to the vacant positions because there was no assurance of compensation or continued grant funding.
Based on the evidence in the record, we are convinced that the Association complied with the terms and conditions for prior approval of these appointments. CSAP's exhibits demonstrate that the Association consistently sought prior approval. See CSAP Exs. A-1 and I-3. However, it took CSAP at least six months to respond to Association's request for appointment of its candidate for Program Director; why it took so long for CSAP to reject him as "unqualified" is unclear.
After the individual serving as both Project and Program Director resigned in November 1996, the problem became filling those positions. There was no failure by the Association to obtain prior approval at that point since the Association was unable to even locate acceptable candidates. CSAP has not explained how it expected the Association to fill these positions in a normal manner, that is, as a grantee not designated an "exceptional organization" would. It has also never satisfactorily explained its complete cut-off of funding, which led to the Association's inability to fill these positions. The evidence before us indicates that CSAP did in fact refuse to release funds without the signatures of specific individuals on fiscal reporting forms. CSAP did not vary from this requirement even when these individuals were no longer in a position to act in the capacities necessary for validation of those forms. Specifically, CSAP would not recognize the authority of interim or newly elected officials to sign those reporting forms. In addition, CSAP did not deny the assertion by the Association's accountants (see Association Exhibit 24) that the Association gave CSAP every accounting document needed to process its requests for reimbursement, but CSAP failed to either release the funds or explain what missing document prevented their release.
Based on our analysis of the record on this issue, we hold that the Association complied with the Terms and Conditions of the grant by seeking the required approvals for its interim appointments. Moreover, we find that the Association's inability to hire key personnel was directly attributable to CSAP -- it unreasonably withheld funding based on the absence of documentation that it refused to specify and on the absence of signatures of specific individuals who were no longer duly appointed, responsible Association officials.
3. LACK OF SATISFACTORY PROGRAM PROGRESS Explaining this basis for termination, CSAP stated that --
Numerous discrepancies between the stated intention of the approved and funded application and the actual implementation of the grant were identified. CSAP was not able to confirm that seven (7) member organizations existed for either the partnership grant or the coalition grant, as required . . . . It was clear that the governing structure described in the funded application was not functioning as approved. Furthermore, the lack of involvement of the CUP coalition in key decision-making, policy-setting, and financial oversight capacities was not in keeping with the specific aims of the CPP and CPCD grant programs. CSAP Br. at 5.
CSAP also asserted that a progress report produced by the grant's evaluation team, "Communities United for Prevention Project A Special Report on Coalition Development and Program Progress" (Brown University Report) (Association Exhibit 18), was not produced using the standard reporting format required by CSAP, "making it impossible to ascertain what activities had been completed to date." CSAP Br. at 5. In the Conference call, CSAP stated that it expected the quarterly or monthly reports to be prepared by Association personnel, rather than professional evaluators.
We have already concluded that the record shows that the Association met the grant requirements concerning governance and number of participants contained in the passage quoted above, and will not repeat our analysis. Thus, the sole remaining support for this ground for termination is CSAP's allegation that the Association did not satisfy the grant requirements for reporting progress.
The Association asserted, and CSAP did not deny, that, up until the August 1996 site visit, it was current with the quarterly reporting requirements established by the grant award. Following the site visit, CSAP required the Association to file monthly progress reports in a particular format. Specifically --
Program progress reports are to be submitted monthly, detailing all progress through the current reporting format that includes a narrative section, goals, objectives, activities and measurements (GOAMS) and Coalition Management Information (CMIF).
Association Ex. 3 at 3.
The Association asserted that, even with restricted funding, reports were filed in a timely fashion until the resignation of the interim Program Director in November 1996. CSAP did not deny this point. The Association blamed any improper format problems for subsequent reports on the lack of personnel needed to produce them. The Association noted that by the time of the interim Program Director's resignation, it simply did not have the resources to hire the personnel, upper level or administrative, necessary to produce the reports. While admitting that it stopped submitting monthly reports, however, the Association cited the Brown University Report, submitted in January 1997, as the equivalent of the reports required by CSAP. See Association Ex. 18
We have examined the Brown University Report, which reviews the CUP grant "progress to date," and find that it satisfies the grant requirements for periodic progress reports. CSAP never explained its reasoning for requiring preparation of the quarterly or monthly reports by grantee personnel or its insistence on a particular format. Moreover, CSAP failed to explain why the professional evaluation submitted by the Association was substantively unsatisfactory or its position that an evaluation prepared by an independent, professional evaluator -- the Brown University Research Team, a CSAP-approved Coalition member -- was inferior to an evaluation prepared by individuals more closely connected to the grant. That evaluation shows that the Association was providing training and funding for Coalition members in furtherance of grant goals, at least until its designation as an "exceptional organization," and that it took steps to continue meeting grant goals, as defined by CSAP, subsequent to that. We therefore conclude that CSAP has not shown that the Association materially failed to meet this specific grant requirement.
4. INADEQUATE STEWARDSHIP OF FEDERAL FUNDS CSAP asserted that its review of the Association's financial records showed a range of issues relating to proper expenditure of grant funds. See generally CSAP Br. at 6.
In the Conference call, CSAP insisted that its brief and evidence in this case were not the "final word" on this issue; rather they comprised a mere a "snapshot" or "base example" of the Association's financial problems. CSAP indicated that it would take a full audit to uncover the entire scope of these problems. In response to the Presiding Board Member's request that CSAP specify what in the record CSAP was relying upon in support of its position on this issue, CSAP responded that Exhibits I-1 and I-2 constituted its only evidence on this issue.
CSAP Exhibit I-1 is a two-page summary of costs questioned in connection with the CCI grant ($73,080.74) and a one-page summary of costs questioned in connection with the CUP grant ($29,088.63). Both summaries are for the period ending June 30, 1996. CSAP identified this exhibit as part of a certified public accountant's (CPA's) off-site review of Association financial records which took place after the August 1996 site visit.
The questioned CCI costs involved salaries (an Administrator, Program Consultant, Receptionist and an Office Manager); equipment; rent; insurance; Board expenses and accounting. The questioned CUP costs were salaries for an Administrator, Project Director and Receptionist.
The Association insisted that, at the time of his initial review, the CPA was not aware of a $169,678 supplemental grant which the Association had received to cover certain administrative expenses. This award was comprised of carry-over funds from the CCI grant which the Association sought to use for administrative expenses in the final year of the CCI grant. Association Exhibit 29 is an October 8, 1997 letter from a CPA Firm, experienced in dealing with nonprofit grantees and familiar with the Association's financial operation. The Firm challenged the overall accuracy of the CPA's review. The Firm noted that the CPA's initial review was based on nothing more than papers supplied by the Association to CSAP and that many of the CPA's findings which could have been viewed as favorable to the Association were ignored by CSAP. The Firm indicated that, after the CPA's initial review, it had sought an explanation on behalf of the Association for the basis of the CPA's findings but had received none. Thus, the Association attempts to respond were hampered significantly. The Firm also noted that CSAP initially did not alert the CPA to the existence of the $169,678 award, and then CSAP refused to give it full retroactive effect to August 1, 1995, choosing instead to apply it only as of the award date (November 8, 1995).
CSAP Exhibit I-2 reflects the CPA's review after receiving notice of the $169,678 award. There, with regard to the Administrator and Program Consultant positions in the CCI grant, the CPA noted his concerns but stated that the adjustments "may need further discussion, by the Project Office and Grants Management." According to the CPA, no further adjustments were needed for the positions of receptionist and office manager or in the equipment category. CSAP Ex. I-2 at 1-2 (unnumbered). Significant adjustments were made, however, in the following expense categories -- rent, insurance, Board, accounting and legal. According to the CPA's worksheets, following application of the supplemental funding, these questioned costs were reduced to $17,365.71 with the "legal expense" category eliminated altogether. CSAP Ex. I-2 (Schedules A and A-1) at 3-4 (unnumbered).
Although CSAP Exhibit I-2 was produced after the Association had provided a lengthy response to the questioned costs (Association Exhibit 10), it only nominally responded to the Association's assertions that most of the questioned costs were allowable and properly charged to the $169,678 supplemental grant award. Moreover, it did not respond at all to the Association's contention that the CPA's premise, that a grantee could only charge to a grant costs that were specifically included in its budget, was contrary to Section 8 of the PHS Grants Policy Statement. In addition, CSAP did not deny the Association's contention that its requests for an explanation of the proposed disallowance were never answered prior to the termination.
We have reviewed the documents and find that CSAP has not produced credible evidence here showing that the Association failed to provide adequate stewardship of federal funds. Unsubstantiated allegations of questioned costs are not evidence of poor stewardship. Moreover, the cited section of the Policy Statement appears to be applicable to many of the questioned costs; CSAP has yet to explain how it is not. In addition, CSAP has never explained why, since all of the questioned costs are administrative in nature, they are not properly charged to the $169,678 supplemental grant award. Accordingly, we conclude that CSAP has failed to provide evidence that the Association provided inadequate stewardship of federal funds.
CONCLUSION
Based on the preceding analysis, we conclude that CSAP has not demonstrated that the Association materially failed to comply with the terms and conditions of these grants. Consequently, we reverse CSAP's decision to terminate these grants.
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Cecilia Sparks Ford
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Donald F. Garrett
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M. Terry Johnson
Presiding Board Member