Cocopah Indian Tribe

The Cocopah Indian Tribe (Cocopah Tribe) appealed three disallowances by the Administration on Aging (AoA) of supportive and nutrition services funds. The Cocopah Tribe claimed these funds during fiscal years 1991, 1992, and 1993 pursuant to Title VI, Part A of the Older Americans Act of 1965. AoA disallowed the funds on the ground that the Cocopah Tribe failed to document costs associated with its claims. The Cocopah Tribe appealed the following amounts: Docket No. A-98-96 -- $20,763; Docket No. A-98-97 -- $24,783; Docket No. A-98-98 -- $2,999.⁽¹⁾

As explained below, we uphold AoA's disallowances in full on the ground that the Cocopah Tribe failed to document these costs.

Applicable law, regulations, and policies

The allowability of charges to grants made under Title VI, Part A for supportive and nutrition services to older Indians is governed by 45 C.F.R. Part 74. 45 C.F.R. � 1326.5(b). Under Part 74, grantees are required to maintain records which "identify adequately the source and application of funds for grant . . . supported activities" and to support accounting records by source documentation such as canceled checks, paid bills, and contract documents. 45 C.F.R. � 74.61(b)and (g) (1993). (Comparable requirements are currently found at 45 C.F.R. � 74.21 (1998).) In prior decisions, the Board has held that, based on these financial management standards, costs charged to federal funds must be adequately documented in order to be allowable. Tuntuliak Traditional Council, DAB No. 1356 (1992); Lau-Fay-Ton Community Action Agency, DAB No. 1126 (1990). The Board has further repeatedly held that a grantee bears the burden of documenting the existence and allowability of its costs. Putnam-Clay-Flagler Economic Opportunity Council, Inc., DAB No. 1521 (1995); Inter-Tribal Council of California, DAB No. 1418 (1993); Lac Courte Oreilles Tribe, DAB No. 1132 (1990).

Background and arguments

On June 6, 1996, the Office of the Inspector General (OIG) of the Department of Health and Human Services (DHHS) issued three different letters to the Cocopah Tribe based on findings and recommendations in three audits. The audits were performed by Miller, Allen and Company, Certified Public Accountants, for the fiscal years 1991 and 1992 and calendar year 1993. In each of these audits, the auditors concluded that the audits were untimely; that the Cocopah Tribe's accounting system was inadequate and did not meet the requirements of federal regulations; that the Cocopah Tribe's accounting documentation was inadequate to support the questioned costs; and that the questioned costs should be repaid to the federal government. The OIG asked the Cocopah Tribe to submit comments and additional information to the

Director of the Division of Audit Resolution, who was to decide what actions DHHS should take in response to the audits.

The Cocopah Tribe did not submit any additional documentation in response to the OIG's letters. On April 30, 1997, AoA, the DHHS program component which made these grants, issued three disallowances based on the audits. AoA disallowed the following questioned costs identified by the auditors: Audit Report A-09-96-42022 $39,486 (Docket No. A-98-96); Audit Report A-09-96-42023 $36,997 (Docket No. A-98-97); Audit Report A-09-96-43775 $33,434 (Docket No. A-98-98).

In April 1998, in response to AoA's disallowances, the Cocopah Tribe submitted additional documentation concerning its expenditures during the years in question. AoA reviewed the documentation and issued revised disallowances in the following amounts: Audit Report A-09-96-42022 -- $33,192 (Docket No. A-98-96); Audit Report A-09-96-42023 -- $24,783 (Docket No. A-98-97); Audit Report A-09-96-43775 -- $4,519 (subsequently reduced to $2,999)(Docket No. A-98-98).

The Cocopah Tribe then appealed the revised disallowances to the Board. The Cocopah Tribe represented in its notice of appeal that it did not understand which portion of its April 1998 documentation had been accepted by AoA and requested clarification.

In its acknowledgment letter, the Board requested AoA to submit an explanation of what costs had been denied and the factual and legal bases for this denial. AoA responded by submitting copies of the initial disallowance letters of April 30, 1997; the June 6, 1996 letters from the OIG with relevant portions of the audits; the Cocopah Tribe's Financial Status Reports showing the amounts claimed during these years; the AoA revised disallowance letters; the Cocopah Tribe appeal letters; and some handwritten ledger sheets concerning its review of the Cocopah Tribe's April 1998 documentation. AoA stated that it had denied the costs because the Cocopah Tribe failed to document the claimed expenditures. AoA agreed that the Cocopah Tribe could contact the employee in Region VI who had reviewed the Cocopah Tribe's April 1998 documentation if it had further questions.

Pursuant to the Board's customary procedure, the Cocopah Tribe then submitted a brief, which in this instance took the form of a letter and material which the Cocopah Tribe said represented "itemize[d] documentation that was submitted to" AoA in April 1998. Cocopah Tribe letter of December 2, 1998. The Cocopah Tribe represented to the Board that it was submitting summaries of documentation which supported the following costs: Docket No. A-98-96 -- $27,057.20; Docket No. A-98-97 -- $40,747.23; Docket No. A-98-98 -- $34,133.⁽²⁾

After reviewing the submission, the Board informed the Cocopah Tribe that it was concerned that the submission was not "organized and developed so as to permit a meaningful response from AoA or to permit the Board to understand and evaluate the Tribe's position." Board letter of December 9, 1999. For example, a substantial portion of the documentation concerned payroll costs. The material the Cocopah Tribe submitted to the Board consisted of multiple pages of handwritten notes and figures and payroll journal sheets. The people, time periods, and nature of the costs (compensation, fringe benefits, taxes) involved were not organized in a manner which would allow the Board to correlate and verify the Cocopah Tribe's claims with the documentation it submitted for the periods at issue. The Board requested the Cocopah Tribe to resubmit its written arguments and appeal file and gave specific instructions as to how the information should be organized and supported. The letter specifically reminded the Cocopah Tribe that it, as the grantee, had the burden of documenting its expenditures. While the Cocopah Tribe did supply the Board with legible copies of previously illegible exhibits, it declined to submit any additional explanations as to its supporting documentation or to reorganize that documentation.

The Board then requested AoA to answer specific questions about how AoA had evaluated the documentation submitted to it by the Cocopah Tribe in April 1998. In response, AoA explained that portions of the documented costs were not related to the time periods at issue and it had therefore not credited those amounts against the disallowed costs. AoA also represented that it had credited the April 1998 documentation against the amounts claimed by the Cocopah Tribe rather than against the costs questioned by the auditors. AoA represented that it did this because it did not know what part, if any, of the April documentation had been already reviewed and accepted by the auditors. Specifically, AoA filed the following explanation of the amounts claimed, the amounts documented and the amounts disallowed.⁽³⁾

1. Board Docket No. A-98-96 (Audit Report A-09-96-42022)

The Cocopah Tribe claimed $25,377 for the time period October 1, 1990 through March 31, 1991. The auditors questioned $18,851 of this amount and AoA originally disallowed the questioned costs. In April 1998, the Cocopah Tribe submitted to AoA documentation in the amount of $7,606 for this time period. AoA credited the documented costs against the amount claimed and revised its disallowance to $17,771 ($25,377 - $7,606).

The Cocopah Tribe claimed $20,780 for the time period April 1, 1991 through September 30, 1991. The auditors questioned $20,635 of this amount and AoA originally disallowed the questioned costs. In April 1998, the Cocopah Tribe submitted to AoA documentation in the amount of $5,359 for this time period. AoA credited the documented costs against the amount claimed and revised its disallowance to $15,421 ($20,780 - $5,359).

The Cocopah Tribe represented to the Board that, in April 1998, it had submitted an additional $15,052 in documentation as to this disallowance. However, AoA explained that this $15,052 was actually related to the time period October 1, 1991 through March 31, 1992 (Board Docket No. A-98-97). Further, AoA explained that it erroneously treated this amount as $15,421 and that AoA had credited this larger amount to that subsequent time period. AoA does not seek to correct this error which was in the Cocopah Tribe's favor.

The total disallowance for these two time periods was $33,192. The Cocopah Tribe appealed $20,763 of this disallowance to the Board.

2. Board Docket No. A-98-97 (Audit Report A-09-96-42023)

The Cocopah Tribe claimed $24,038 for the time period October 1, 1991 through March 31, 1992. The auditors questioned $14,482 of this amount and AoA disallowed the questioned costs. In April 1998, the Cocopah Tribe submitted to AoA documentation in the amount of $15,052 (mistakenly treated by AoA as $15,421) for this time period. AoA credited the documented costs against the amount claimed and revised its disallowance to $8,617 ($24,038 - $15,421).

The Cocopah Tribe claimed $22,841 for the time period April 1, 1992 through September 30, 1992. The auditors questioned $22,515 of this amount and AoA disallowed the questioned costs. In April 1998, the Cocopah Tribe submitted to AoA documentation in the amount of $6,675 for this time period. AoA credited the documented costs against the amount claimed and revised its disallowance to $16,166 ($22,841 - $6,675).

In its letter of April 1998, the Cocopah Tribe represented to AoA that it was submitting documentation for this audit period of $40,747.⁽⁴⁾ AoA represented to the Board that much of the documentation the Cocopah Tribe submitted for these time periods actually involved other time periods and was credited to those periods. AoA also represented that it rejected a small amount of the documentation because it was illegible or lacked receipts or payroll records but that "[t]he overwhelming percentage of documentation that fell within the pertinent period was accepted and credited." AoA Br. at 5.

The total disallowance for the two time periods was $24,783. The Cocopah Tribe appealed the entire disallowance to the Board.

3. Board Docket No. A-98-98 (Audit Report A-09-96-43775)

The Cocopah Tribe claimed $22,841 for the time period October 1, 1992 through March 31, 1993.⁽⁵⁾ The auditors questioned $6,914 of this amount and AoA disallowed the questioned costs. In April 1998, the Cocopah Tribe submitted to AoA documentation in the amount of $19,842 for this time period. AoA credited the majority of the documented costs against the amount claimed and issued a revised disallowance for $4,519. AoA subsequently credited the Cocopah Tribe with the entire $19,842 and disallowed $2,999 as owing for this period.

The auditors also questioned costs claimed during the period April 1, 1993 to September 30, 1993. AoA accepted the Cocopah Tribe's April 1998 documentation as to this period and, in its revised disallowance, did not disallow any funds for this period.

Under the Board's procedures, the Cocopah Tribe had an opportunity to reply to AoA's response to these three disallowances. The Cocopah Tribe was informed of this opportunity in the Board's acknowledgment letter; in 45 C.F.R. Part 16, the Board's regulations, which the Board included with its acknowledgment letter; and also in a telephone call after the receipt of AoA's response. The Cocopah Tribe failed to file a reply.

As we discussed previously, the Board has held repeatedly that a grantee has the burden of documenting its costs. In this case, the Board concludes that the Cocopah Tribe has failed to meet that burden for the following reasons.

During fiscal years 1991, 1992, and the first half of 1993, the Cocopah Tribe received $115,877 from AoA. Pursuant to three audits, AoA disallowed $83,397 of these funds because the Cocopah Tribe failed to document its costs during the audit process. The Cocopah Tribe does not dispute that it failed to document these costs at the point of the audits.

Subsequent to the disallowance, AoA gave the Cocopah Tribe an opportunity to submit documentation for these costs. In April 1998, the Cocopah Tribe represented to AoA that it was submitting $101,937 in documentation for the period October 1, 1990 through December 31, 1993. After reviewing the documentation, AoA concluded that portions of the Cocopah Tribe's documentation were not related to the time periods to which the Cocopah Tribe sought to have it credited. As to the periods in dispute in this case (October 1990 through March 1993), AoA accepted $54,903 of the documentation. AoA represented that it had "accepted virtually all of the documentation that was submitted, so long as it related to the pertinent period." AoA Br. at 7. AoA also explained that it applied the documented costs to the claimed costs rather than the costs questioned by the auditors because it did not know whether the documentation included material which had been previously reviewed by the auditors.

The amount in dispute before the Board is $48,545. The evidence before the Board is material which the Cocopah Tribe represented "itemizes documentation that was submitted to (AoA)" in April 1998. In order for the Board to find that any portion of this disputed amount is allowable, the Cocopah Tribe must show, with its evidence, the following: that AoA erroneously concluded that portions of the Cocopah Tribe's documentation did not apply to the time periods at issue; or that AoA erroneously treated portions of its documentation as duplicative of material previously reviewed by the auditors; or that the Cocopah Tribe had documentation with which it could document all claimed costs.

In the proceeding before the Board, the Cocopah Tribe failed to address either of AoA's conclusions. First, it did not file a reply disputing AoA's representation that a substantial portion of the documented costs did not relate to the grant periods at issue nor did it attempt to demonstrate how any portion of the evidence it had submitted to the Board was contrary to AoA's representations. Therefore, the Board had no basis to conclude that AoA's evaluation of the documentation in relation to the grant periods was incorrect. Second, the Cocopah Tribe did not file a reply disputing AoA's conclusion that the documentation was properly credited against the claimed costs rather than the questioned costs. Since a grantee must document expenditures for all claimed costs, it was necessary for the Cocopah Tribe to document all claimed costs or to demonstrate that the April 1998 documentation was exclusive of documentation previously reviewed by the auditors.

Finally, the summary material filed by the Cocopah Tribe prior to AoA's reply was inadequate to allow the Board to independently evaluate AoA's conclusions about the Cocopah Tribe's documentation. For example, the summary material was not broken down to relate to the budget periods used by AoA to calculate the disallowances; it contained inconsistencies such as handwritten notations of expenditures which did not correspond to the printed ledger entries; and it was not organized in a clear manner. The Board informed the Cocopah Tribe that its material was not adequately organized and requested it to file a revised brief and appeal file. As to this submission, the Board explained --

Your explanations for incurred costs should be broken down by the time periods of the disallowances. . . . For each of the years, explain what types of costs you incurred, the amount of each type of cost, and how you arrived at the amount. For each amount, please cite to the specific documentation which supports your representations of your expenditures. Be sure you explain specifically how that documentation supports your representations.

The Cocopah Tribe declined the Board's request to clarify its initial submission and then declined to file a reply. Therefore, the Board necessarily accepts AoA's representations as to the proper crediting of the Cocopah Tribe's documentation.

The Cocopah Tribe failed to document the disallowed costs and therefore these costs are not allowable.

For the reasons stated above, we uphold the appealed portions of these disallowances: Docket No. A-98-96 -- $20,763 (Audit Report A-09-96-42022); Docket No. A-98-97 -- $24,783 (Audit Report A-09-96-420023); Docket No. A-98-98 -- $2,999 (Audit Report A-09-96-43775).

1. The disallowance in Docket No. A-98-96 was $33,192, of which the Cocopah Tribe appealed $20,763 and did not dispute the remaining $12,429. Originally, the disallowance in Docket No. A-98-98 was $4,519. In the course of this proceeding, AoA reduced that disallowance to $2,999, so we treat this lower figure as the appealed amount.

2. The Cocopah Tribe represented that the support exceeded the questioned amount of costs for two of the three years because of the way it recorded fringe benefits prior to 1996. Cocopah Tribe letter dated April 29, 1998.

3. There are discrepancies in the record concerning the periods of time covered by the audits and disallowances. For example, the last audit covers the period January 1993 through December 1993 while AoA based its disallowance on the period October 1992 through September 1993. In its briefing before the Board, AoA based its explanation of the disallowances on the time periods of the Cocopah Tribe's Financial Status Reports. These reports set forth the amounts the Cocopah Tribe claimed for specific six-month periods: October through March and April through September. (AoA Exs. C-1a through C-3.) We accept AoA's description of the time periods for the disallowances for two reasons. First, relating expenditures to the relevant grant periods would seem to be necessary in order to determine whether funds paid for a specific period were used in that period. Second, the Cocopah Tribe did not offer any explanation as to why looking at the disallowances in these six-month increments was incorrect or prejudicial.

4. While the Cocopah Tribe also represented to the Board it was documenting $40,747.23 in costs for this time period, it appeared to the Board that the Cocopah Tribe had only submitted documentation as to $23,926. The Board noted this in its February letter to AoA. Though given an opportunity, the Cocopah Tribe never responded to the Board's reading of the record or to AoA's representation that significant portions of the documentation actually concerned other time periods.

5. While the audit covered the period January 1, 1993 through December 1993, AoA calculated its disallowance based on the AoA grants cycle -- the six month increments of October through March and April through September. Specifically, it related its disallowance to the Cocopah's Financial Status Report for the period October 1992 through March 1993.