GAB Decision 680
August 12, 1985
Oglala Sioux Early Childhood Component;
Ballard, Judith A.; Settle, Norval D. (John) Teitz, Alexander G.
Docket No. 85-86; ACN 08-55030
DECISION
The Oglala Sioux Early Childhood Component (Grantee) appealed a
disallowance of $16,185 by the Office of Human Development Services
(Agency). The Agency disallowed two cost items incurred in Grantee's
Head Start program for the budget period ending November 30, 1983.
Grantee contested only one part of the disallowance so that the amount
in dispute is now $15,985.
Based on the record in this appeal, /1/ we uphold the disallowance.
Playground Equipment
Grantee ordered playground equipment from the Miracle Playground
Equipment Company. When payment was required prior to delivery, Grantee
executed a check for $15,985 made payable to the salesman representing
the vendor. The salesman endorsed and cashed the check and did not
remit the money to the vendor. The vendor refused to deliver the
equipment because the equipment order form said that payments were not
to be made to salesmen or agents. Grantee is suing the Company and has
stated that any money received from the salesman (who is being
criminally prosecuted) would be returned to the Head Start program.
According to cost principles of the Department of Health and Human
Services, bad debts are not an allowable cost. /2/ Here Grantee(2) paid
money to a representative of the contractor (and charged the cost to
federal funds) in return for expected equipment from the contractor.
The equipment has not been provided, and the contractor refuses to
provide it. The program has not received any benefit from the money
spent, and the cost is unallowable. We know of no requirement that the
Agency wait for an indefinite period of time while the Grantee tries to
recover the misspent funds.
See Oglala Sioux Tribe, Decision No. 498, January 18, 1984, p. 2, in
which the Board upheld a disallowance of funds misappropriated by a
Grantee employee.
Conclusion
For the reasons stated above, we uphold the disallowance. /1/ The
substantive record in this appeal consists of only Grantee's
notice of appeal and the Agency's appeal brief and file. See Board's
letter dated August 6, 1985 to Grantee. /2/ The Agency cited
section D.1. of Attachment B of Office of Management and Budget Circular
A-87 as the controlling provision. Circular A-87 is applicable to
federally recognized Indian tribal governments under federal grants.
(Attachment A, section A.3.) Even if the Early Childhood Component is
not a function of the tribal government, OMB Circular A-122, which sets
out the cost principles for nonprofit organizations generally, has a
similar provision. (Attachment B, P2) OMB Circulars A-87 and A-122 are
both made applicable to HHS grants by reference in Part 74 of 45 CFR.
JANUARY 14, 1986