GAB Decision 232
November 30, 1981 Washington County Opportunities, Inc.; Docket No.
81-108 Settle, Norval; Ford, Cecilia Garrett, Donald
Introduction
Washington County Opportunities, Inc. (Appellant) has appealed from a
decision of the Office of Human Development Services, Region IV
(Respondent) to disallow a $310 charge to Appellant's grant. For the
reasons set out below, we uphold the disallowance of this amount.
By agreement of both parties, this appeal is being decided under the
Board's expedited process as outlined at 45 CFR Sec. 16.12, which became
effective September 30, 1981 (46 Fed. Reg. 43816). This decision is
based upon Appellant's notice of appeal, relevant submissions by both
parties and a telephone conference between the parties and the Presiding
Board Member on November 20, 1981.
Background
Appellant, a Head Start Agency located in Greenville, Mississippi,
was forced to temporarily suspend its operations from July 1979 until
September 1979 due to the fact that it had expended its funds for the
relevant program year. As a result of the shutdown, Appellant failed to
pay its payroll tax for the quarter ending June 1979. When Appellant
resumed operations in September 1979 it paid the overdue tax and
resultant penalty.
As the result of an August 1980 audit, Respondent became aware of the
fact that Appellant had paid the penalty with program funds. Respondent
issued a Notice of Disallowance (June 19, 1981) which informed Appellant
that payment of the penalty, in this instance, could not be justified
under applicable cost principles and must be disallowed.
Analysis
The disallowance was based upon 45 CFR Part 74, Appendix F, G.14
which provides:
Costs of fines and penalties resulting from violations of, or failure
of the institution to comply with, Federal, State, and local laws and
regulations are unallowable except when incurred as the result of
compliance with specific $2) provisions of the grant or contract
instructions in writing from the awarding agency.
Appellant admits the facts as outlined above and has not claimed that
the penalty was incurred as the result of "compliance with specific
provisions of the grant." Instead, Appellant concedes that it failed to
pay the tax, thus incurring the penalty, due to fiscal problems
encountered during the period in question. Appellant adds that it has
upgraded its accounting system so that it will, hopefully, avoid running
short of funds during future program years. However, this expenditure
is not allowable under applicable cost principles and the Appellant has
not presented any legal basis for an exception. Therefore, we must
uphold the disallowance.
Decision
For the reasons stated above, the disallowance of $310 is upheld.
OCTOBER 22, 1983