GAB Decision 460
Docket No. 83-60
August 31, 1983
The Agricultural and Labor Program, Inc.;
Garrett, Donald; Teitz, Alexander Settle, Norvel
The Agricultural and Labor Program, Inc. (ALPI), of Winter Haven,
Florida, appealed a decision of the Office of Human Development Services
(OHDS) disallowing a $25,600 cost charged to a Head Start grant for
ALPI's budget year starting March 1, 1981.
ALPI paid $25,600 for a modular classroom, but the purchase became
beset with controversy; the manufacturer did not deliver the classroom
and the matter is still in litigation.
OHDS considered the payment premature and disallowed the $25,600 on
the basis of cost principles that can be read as proscribing imprudent
or nonbeneficial costs. Letter from OHDS to ALPI dated March 2, 1983;
Transcript of telephone conference, May 5, 1983 (Transcript), pp. 3-5;
Office of Management and Budget Circular No. A-122 (OMB Circular A-122),
Attachment A, section A.2.a, A.3. See, also, Response of the Secretary
of Health and Human Services (OHDS brief), pp. 2-4; OMB Circular A-122,
Attachment A, section A.4.a. ALPI conceded that the payment involved a
lack of good judgment and did not contest the applicability of the cost
principles as basis for disallowance. Statement of Appeal (ALPI brief),
p. 4. The parties' disagreement in this appeal was about the
consequences of the $25,600 disallowance determination.
OHDS, envisioning that if the classroom is ever delivered it may be
too late to be of use, took the position that it would be for OHDS to
decide if it should pay the $25,600 to ALPI if the classroom was ever
delivered. OHDS brief, p. 4, n. 2. OHDS' position was tantamount to
saying that the present disallowance was and should be the final
disposition as far as ALPI's rights under the existing grant are
concerned.
ALPI, averring continuing need for the classroom, envisioning an
early and favorable end to ALPI's litigation with the manufacturer, and
pointing to some arguable involvement or acquiescence of OHDS personnel
in ALPI's handling of the situation, took the position that the
disallowance should be postponed pending the outcome of (2) the
litigation. ALPI brief, p. 4. ALPI said in effect that if the
classroom is delivered within some reasonable time there should be no
disallowance.
We agree with OHDS that the present disallowance is correct. The
$25,600 payment was imprudent in the light of the facts to date. ALPI
made it on the basis of a sketchy purchase order and ambiguous letters
from the manufacturer (Tabs 4, 5 and 6 attached to ALPI brief),
apparently without regard to usual business practice. As noted,
appellant conceded that its transaction involved a lack of good
judgment. Moreover, the Head Start grant has not yet benefited, and may
never benefit, from the expenditure.
Regarding implementation of the disallowance, the OHDS brief states,
"If the court orders that the vendor specifically perform the contract,
and the Agricultural and Labor Program, Inc. is still a Head Start
grantee, and uses the modular unit for grant purposes and if all other
requirements are met, the Secretary may reissue the grant funds." Id.,
p. 4, n. 2. We think this is fair, particularly since one may infer
from the circumstances in the record that if the classroom had been
delivered on schedule no one would have disallowed the premature payment
on the ground of imprudence. We also note, however, that payment might
be appropriate if the classroom is delivered even without a court order.
The disallowance is affirmed.
NOVEMBER 14, 1984