GAB Decision 710
December 5, 1985
National Urban Indian Council;
Ballard, Judith A.; Settle, Norval D. Garrett, Donald F.
Docket No. 85-72
This appeal by the National Urban Indian Council (NUIC, Grantee) was
taken from a determination made by the Office of Human
Development
Services (OHDS, Agency) to terminate Grant No. 90NAO143 and to
suspend
payment of costs incurred under that grant on the ground that
Grantee
had materially failed to comply with the terms of the grant.
The grant
was awarded by the Administration for Native Americans (ANA) in
OHDS
pursuant to authority in the Native American Programs Act of 1974
(Pub.
L. 94-644) for the operation of a computerized "Job/Skills
Bank"
designed to place skilled American Indians and Alaska Natives in
public
and private sector jobs. An initial award was made to Grantee
for a
budget period of February 1, 1983 through April 30, 1984 with a
project
period extending through April 30, 1985. A second award was
made for
the budget period May 1, 1984 through April 30, 1985 based on
a
noncompetitive renewal application submitted by Grantee. On
February
27, 1985, the Agency terminated the grant and suspended payment
for
costs incurred under the grant from October 1, 1984 through the date
of
the termination. /1/ The Agency had not reimbursed Grantee for any
costs
incurred during the period of the suspension. Grantee received
notice
of this action in a letter from the Agency which set forth
separate
reasons for the termination and the suspension. Grantee
appealed
pursuant to ANA regulations at 45 CFR 1336.52 which provide for
Board
review of terminations as well as suspensions of more than 30
days. As
explained below, we conclude that Grantee materially failed to
comply
with the terms of the grant, and uphold the termination. As
also
explained below, however, we reverse the suspension since it was
not
taken in accordance with the applicable regulations. We discuss in
our
Conclusion the effect of this decision on Grantee's unpaid claims
for
costs incurred prior to termination.
Suspension of Grant
The determination appealed from stated that payment for costs
incurred
from October 1, 1984 through February 25, 1985 was suspended.
(See note
1 regarding correction of the latter date.) The purported
suspension
thus affected costs already incurred in prior months. The
"suspension"
of a grant is defined in the applicable regulations as
"temporary
withdrawal of the grantee's authority to obligate grant funds
pending
corrective action by the grantee or a decision to terminate the
grant."
(45 CFR 74.110) This definition clearly contemplates that a
suspension
will be imposed on a prospective basis only since the authority
to
obligate grant funds cannot logically be withdrawn retroactively. It
is
also clear from the procedures for suspension detailed at 45 CFR
74.114
that a grant may only be suspended for future and not prior
periods,
since that regulation states in part that " (the) suspension may be
made
effective at once if a delayed effective date would be unreasonable.
.
." Section 74.114 also provides that "(suspensions) shall remain
in
effect until the grantee has taken corrective action satisfactory to
the
granting agency . . . or until the granting agency terminates
the
grant." This opportunity to avoid termination by taking
corrective
action cannot be afforded, however, if a suspension is imposed on
a
retroactive basis concurrent with a termination. Section 74.114
further
provides that new obligations incurred during the period of
suspension
are not allowable without express authorization of the granting
agency
in the notice of suspension. This is yet another indication that
the
regulations do not contemplate a retroactive suspension since
the
grantee could not refrain from making expenditures if it does not
first
know that grant funding has been suspended. Thus, the Agency's
attempt
here to retroactively suspend grant funding is outside the scope of
the
action contemplated by the regulations and consequently cannot
be
upheld. Our finding that the Agency's action was not effective as
a
suspension does not require that the funds in question be
automatically
paid to Grantee, however, as discussed in the Conclusion of
this
decision.
Termination of Grant
Non-Performance of Grant Activities as a Basis for Termination
The Agency notified Grantee on February 27, 1985 that its grant was
being
terminated on two grounds, the first of which (3) was that "(no)
activity is
currently being undertaken on this project." The Agency
noted specifically as
follows:
On January 29, 1985 you notified this office in writing
that
effective January 18, 1985, NUIC was no longer providing services
as
specified in the Terms and Conditions of the Grant.
NUIC has set up a national "800" telephone number on or about
January
18, 1985 indicating to all callers, that the NIERC centers are no
longer
in operation.
The Agency provided as part of its appeal file a copy of the January
29,
1985 letter referred to above which stated in part:
(This) is to finally advise you that we have ceased
providing
services to American Indians and Alaska Natives under grant
#90NAO143/
02 effective January 18, 1985. Due to the fact that the
Administration
for Native Americans (ANA) has not reimbursed our company for
expenses
incurred, we have laid off all personnel. We will be reducing
or
limiting, to the greatest degree possible, all further liabilities
under
this project until further notice.
(Respondent's appeal file, exhibit 19) Grantee asserted that this
letter
merely put the Agency on notice that Grantee would soon be forced
to
curtail its operations absent the receipt of withheld
funds.
(Transcript of August 8, 1985 hearing, pp. 5-6) However, the
plain
wording of the letter fails to support this characterization.
For
example, the letter is dated January 29, but states that Grantee
"ceased
providing services" and "laid off all personnel" effective January
18.
The letter also purports to "finally advise" the Agency of
Grantee's
actions. Moreover, Grantee did not deny that it set up the
telephone
recording referred to above although the Board specifically
inquired
whether this was in fact done. (Letter to parties dated August
30,
1985, enclosed list of questions, p. 3) Thus, before terminating
the
grant, the Agency had been notified by Grantee that Grantee was
no
longer performing the primary activity called for by the grant. /2/
Grantee argued that, notwithstanding the January 29, 1985 letter,
it
continued to perform some services under the grant after January
18,
1985. Grantee asserted, through testimony of its Executive Director
and
its Technical Resource Specialist, that it continued to receive
and
process job listings, to receive and process client requests
for
placement, and to provide services to clients such as sending resumes
to
prospective employers. (Transcript of August 7, 1985 hearing,
p. 68;
transcript of August 8, 1985 hearing, p. 5) However, since
these
assertions contradict the information provided by Grantee in its
January
29, 1985 letter and in the telephone recording, and are unsupported
by
any independent evidence (such as the testimony of a recipient
of
Grantee's alleged services during the relevant period), we conclude
that
no services were in fact being provided when the grant was
terminated.
The applicable regulations provide that "(the) granting agency
may
terminate any grant in whole, or in part, at any time before the date
of
expiration, whenever it determines that the grantee has
materially
failed to comply with the terms of teh grant." (45 CFR 74.115)
The
failure to provide employment services under this grant would
clearly
constitute a material failure to comply with the terms of the
grant
justifying termination. Even if some services were provided as
alleged
by Grantee, it is clear that Grantee scaled down its performance to
such
a degree as to constitute a material failure to comply with the terms
of
the grant. /3/
Grantee argued nevertheless that its cessation of performance,
in
whatever degree, was excused because the Agency had withheld
funding
under the grant. Funding during the second budget period was
available
on a cost reimbursement basis, which meant that Grantee could
request
grant funds only for costs already incurred. (Respondent's
appeal file,
exhibit 12, Special Terms and Conditions) As of the date that
the grant
was terminated, Grantee had submitted requests for
reimbursement
covering the period May 1, 1984 (the beginning date (5) of the
second
budget period) through January 31, 1985, and had been paid for
costs
incurred from May 1, 1984 through September 30, 1984 totalling
$117,553.
Thus, no payment had been made for costs incurred for the four
months
ended January 31, 1985. Grantee alleged, and the Agency did
not
dispute, that claims totalling $109,750 were not paid.
(Respondent's
hearing exhibit B; transcript of August 7, 1985 hearing,
pp. 240-242;
transcript of August 8, 1985 hearing, p. 28)
However, payment of this entire amount was not in fact overdue at the
time
the grant was terminated. The applicable regulations provide
that
"(the) grantee will be paid as promptly as possible, ordinarily
within
30 days after receipt of a proper request for reimbursement." (45
CFR
74.96(b)) Grantee's request for reimbursement for costs incurred
during
January 1985 was submitted less than 30 days before the grant
was
terminated, so that Grantee could not reasonably have expected
payment
of that month's costs prior to termination. Moreover, the
30-day period
specified in section 74.96(b) applies only where a proper
request for
reimbursement is received. As discussed below, the request
submitted by
Grantee for the four months in question were riddled with
problems, so
that payment of the costs claimed was not technically overdue
even
though payment had not been made within 30 days of all requests.
Even if payment could be considered due under section 74.96(b), the
Agency
asserted, and we agree, that payment was properly withheld
pursuant to 45 CFR
74.95, which authorizes withholding where "the
grantee has failed to comply
with Federal reporting requirements. . .
." /4/ Since the Agency had a
reasonable basis for withholding the
funds, Grantee must bear the
consequences of its failure to recieve
fundings.
At issue here are the financial reporting requirements imposed by 45
CFR
Part 74, Subpart I, and the OHD Grants Administration Manual for
the
monthly submission of a request for reimbursement, the
quarterly
submission of a financial status (6) report, and the
quarterly
submission of a federal cash transactions report. /5/ The request
for
reimbursement is used to claim reimbursement for costs incurred under
a
grant. The financial status report is used to report on the status
of
funds under a grant project. The federal cash transactions report
is
used to monitor cash paid to grantees and to obtain disbursement
or
outlay information for a grant. (OHD Grants Administration
Manual,
Chapter 4, p. 1-4-1) Although Grantee did submit the required
reports,
it submitted multiple reports for each period which
contained
inconsistent information. From the beginning of the second
budget
period through the termination date, Grantee submitted 8
separate
financial status reports where only 4 were called for, and 25
separate
requests for reimbursement where only 10 were called for.
(During that
period, Grantee also submitted numerous revisions of reports
filed for
the first budget period.) Some of the reports were identical to
reports
submitted earlier for the same period. More commonly,
however,
different figures appeared on reports for the same period.
In
particular, the "total outlays" reported were different on
various
requests for reimbursement as well as on various financial
status
reports covering the same periods. In addition, the outlays
reported on
requests for reimbursement often did not correspond to the
outlays
reported on financial status reports. Moreover, the amount
of
non-federal share reported on successive financial status
reports
fluctuated despite the fact that non-federal share was required to
be
reported on a cumulative basis. /6/ (Transcript of August 8,
1985
hearing, pp. 148-154, 173; respondent's hearing exhibits A, B, and
C)
We conclude that these problems were sufficient on their face to
justify
the Agency's withholding the funds claimed or to extend the
30-day
period within which payments must ordinarily be made. Although
not all
of the problems involved the four months for which payment was
withheld,
the reporting problems experienced from the beginning of the
grant
called into question the accuracy of the claims for those four
months.
Grantee was unable to adequately explain each of the reporting
problems
identified here. In response to an October 1, 1984 request by
the
Agency's Grants and Contracts Management Division that Grantee
revise
its reports to show the nonfederal share of outlays, (since none
had
been reported), and to properly reflect program income, (since
federal
cash advances (7) appeared to have been reported as program
income),
Grantee stated that it would submit revised forms by December 1,
1984.
(Appellant's appeal file, exhibit 49) However, the submission of
revised
forms pursuant to this request would not entirely account for
the
excessive number of reports. It also fails to explain the
varying
amounts reported as total outlays and as non-federal share since
neither
of these figures would necessarily have been affected by the
revisions
requested. Grantee did not respond to the Board's direction
to explain
in detail its failure to properly complete the financial reports,
making
reference to specific reports. (Letter to parties dated August
30,
1985, attached list of questions)
Grantee did present testimony that it received conflicting advice
from
Agency personnel regarding how to fill out the forms. (Transcript
of
August 8, 1985 hearing, pp. 67, 71-72) This testimony was very
general
and was not further substantiated by Grantee, however. In any
event,
Grantee's reporting errors cannot reasonably be attributed to
poor
advice alone in view of Grantee's substantial experience
in
administering federal grants. The reporting forms were all
standard
federal forms which were accompanied by detailed instructions
regarding
their completion. All of the information required is
described in terms
that should be familiar to anyone with an understanding of
basis
accounting. Grantee and not the Agency had access to the
financial data
necessary to complete the forms. Thus, Grantee cannot
legitimately
shift the blame for its reporting problems to the Agency.
Moreover,
since Grantee did not relate the "conflicting advice" to
specific
reporting problems, we cannot conclude that there was any
casual
relationship between the two.
Grantee also attempted to minimize the significance of its
reporting
problems through the testimony of the certified public accountant
(CPA)
who conducted an audit of Grantee's programs for the year ended
December
31, 1984. The CPA testified that Grantee's system of financial
controls
was better than most he had seen and that his audit disclosed no
major
problems. (Transcript of August 7, 1985 hearing, p. 123)
Grantee
argued that it was thus simply speculation on the part of the
Agency
that reports were materially inaccurate or were not supported
by
documentary evidence. (Appellant's post-hearing brief, p.
24)
The question presented here, however, is whether the Agency was
justified
in witholding payments on the basis of the reports submitted
by Grantee when
the Agency had no knowledge of the underlying
documentation. The CPA's
testimony was based on his review of such
documentation; thus, his
testimony is not responsive to the issue of
the adequacy of Grantee's
reports. (8)
We think that there was clearly ample justification for the
witholding.
The multiplicity of reports presented the risk that duplicate
payments
might be made to Grantee. Although this apparently had not
previously
occurred, the Agency could have justifiably viewed the flood of
reports
as improper on this basis. In addition, the reporting of
different
outlays for the same period could reasonably have led the Agency
to
question whether costs were actually incurred in the amount claimed
by
Grantee. Furthermore, since the amount of funds awarded under a
grant
may in effect be decreased if there is a short-fall in the amount of
the
required non-federal share, the failure to report non-federal
share
accurately is significant. Unless reports are accurate as well
as
timely, they do not serve the intended purpose of permitting the
Agency
to determine if federal funds are being used and requested
properly.
This does not mean that an isolated error in a report should render
a
grantee out of compliance with the financial reporting requirements.
/7/
The magnitude of the errors in this case, however, was such that the
reports
were in critical respects worthless to the Agency.
Grantee argued, nevertheless, that there was no evidence that the
Agency
in fact based its decision to withhold the funds on the
reporting
problems identified above. Grantee asserted specifically that
there was
no "competent evidence that the forms submitted by the NUIC
were
reviewed by ANA contemporaneous with their submission or that
ANA
personnel reviewing the forms deemed the forms materially defective
at
the time of review." (Appellant's post-hearing bried, p. 23)
Grantee
also asserted that if the withholding had been based on these
problems,
the Agency would have included them on its list of reasons
for
suspending the grant, since the "suspension" was tantamount to
a
withholding. (Id., pp. 15-16) The Agency in its February 27,
1985
letter to Grantee did not state that inconsistencies in and
multiple
submissions of the financial reporting forms were bases for
the
suspension. Grantee also asserted that since Agency hearing
exhibits A,
B and C, which chart the reporting problems, were not prepared
until
shortly before the hearing before the Board in this case, the
Agency
could not have relied on the problems identified in these exhibits
in
withholding payment. (Id.)
Grantee's position that the Agency did not withhold payment on the
basis
claimed is totally without merit. The regulations require payment
only
when properly requested and expressly (9) authorize withholding
for
failure to comply with reporting requirements. As indicated below,
the
Agency notified Grantee of reporting problems on a timely basis.
Thus,
the Agency's failure to include the reporting problems noted above
in
the reasons it gave for suspension would not preclude it from
continuing
to withhold payment. (We also note that the Agency's
February 27, 1985
letter detailing the reasons for suspension could not have
given prior
notice of the withholding, which began several months
earlier.)
Moreover, suspension, while inappropriately applied to Grantee
here, is
substantively different from withholding, so that the reasons given
for
the suspension were not necessarily the same as the Agency might
have
advanced had it intended to justify a withholding instead.
Furthermore, Grantee admitted, and the record shows, that there
were
frequent discussions between the Agency and Grantee about the
reports.
(Appellant's brief dated June 3, 1985, p. 4; Appellant's
appeal file,
exhibits 6, 7, 10, 11, 14, 15, 16, 19, 20, 22, 23, 24, 29, 30)
Thus,
Grantee's suggestion that the reports were not reviewed on a
current
basis is disingenuous. In addition, the fact that Agency
hearing
exhibits A, B and C were not prepared prior to the withholding does
not
show that the Agency was not aware of the reporting problems prior
to
the withholding. On the contrary, the witness who prepared
these
exhibits stated that prior to October 1984, he had reviewed
reports
submitted by Grantee. (Transcript of August 8, 1985 hearing, p.
187)
Finally, given the nature of the reporting problems, it is reasonable
to
conclude that they would have been apparent to Agency personnel in
the
course of reviewing the reporting forms as they were submitted
by
Grantee.
In our view, moreover, the timing of the withholding with respect to
the
reports in question is evidence that the withholding was based on
the
reporting problems. The first claim for which payment was
withheld
covered the period October 1 - 31, 1984. This claim was signed
by
Grantee on November 15, 1984. On November 27, 1984, Grantee
submitted
four revised requests for reimbursement and six revised financial
status
reports for prior periods, (some for reporting periods in the
first
budget period). (Respondent's hearing exhibits A and B) Since
the
applicable regulations provide that payment should ordinarily be
made
within 30 days after receipt of a request for reimbursement,
Grantee
would ordinarily have been paid for its November 15, 1984 claim
by
December 15, 1984. By that date, however, the Agency had had ample
time
to become aware of significant reporting problems. Thus, it
can
reasonably be inferred that the withholding was in fact based on
the
reporting problems. (10)$% Accordingly, we conclude that the lack
of
funding did not excuse Grantee from its failure to perform
grant
activities after January 18, 1985. Payment of the funds in
question was
not due since the requests for reimbursement and other reports
filed by
Grantee were contradictory and therefore not "proper requests"
within
the meaning of 45 CFR 74.96(b). Even if payment was due, the
funds were
subject to withholding under 45 CFR 74.95 since Grantee had not
complied
with the reporting requirements. Grantee's unexcused cessation
of
performance constituted a material failure to comply with the terms
of
the grant which by itself was sufficient to justify termination.
Thus,
in spite of our finding below that termination was not justified on
the
second ground articulated by the Agency, we uphold the termination
on
this basis alone.
Failure to Submit Requested Documentation as a Basis for Termination
The second reason articulated by the Agency for the termination was
that
Grantee "failed to submit documentation to support activities of
the
project." (Letter dated February 27, 1985, p. 2) The
Agency's
termination letter referred to a letter from the Commissioner of
the
Administration for Native Americans dated October 12, 1985 to
Grantee
requesting certain information not included in Grantee's "Final 15
Month
Project Report," which covered the first grant (for the period
February
1, 1983 through April 30, 1984). According to the termination
letter,
Grantee had not provided the information requested in the October
12
letter as of the date of the termination. Since the second grant was
an
extension of the first, it may not have been inappropriate for
the
Agency to have based the termination of the second grant on
deficiencies
relating to the first grant.
Nevertheless, we find that Grantee did in fact provide the
information
requested by the Agency on October 12, 1984, and that termination
was
thus not justified on this basis.
The Agency's October 12, 1984 letter stated in pertinent part:
Please, submit in a quantitative and qualitative manner
information
that was not included in the NIERC "Final 15 Month Project
Report."
The requested data should clearly identify the type of contact
(NUIC)
made, name of (NUIC) staff that made the contact, name, addresses,
and
telephone numbers of contact persons including dates:
* Tribal representatives
* Urban Indian Organizations
* Educational Institutions
* * * * * (11)
(Appellant's appeal file, exhibit 45) Grantee responded to this request
in
a letter dated November 28, 1985. There, Grantee stated that most
of
its contacts had been made through mass mailings to the types of
groups
indicated above, which in turn prompted inquiries from those groups
as
well as from individuals served by the groups. Grantee provided
the
Agency with a copy of its mailing list as well as of letters sent to
the
various groups, indicating that it did not in most cases
maintain
telephone numbers for the groups. Some letters solicited job
openings,
other letters advertised the availability of job listings, and in
some
cases, the letters did both. Grantee also named 11 of its
employees who
were "responsible for these contracts." (Appellant's appeal
file,
exhibit 51)
In our view, Grantee's letter was reasonably responsive to the
Agency's
request. It provided the information requested to the extent
that it
was available and explained why the remaining information was
not
available. Although this information was provided by letter
dated
November 28, 1984, the Agency did not advise Grantee prior to
the
termination that it did not consider Grantee's response
satisfactory.
/8/
The Agency's termination letter characterized the October 12,
1984
letter as having requested information regarding contacts
with
"prospective placements," or employees. Grantee provided
information
regarding initial contacts with prospective employers as well as
with
groups that might be interested in helping members of
their
constituencies find employment. Nothing on the face of the
October 12,
1984 letter clearly indicates that the Agency was seeking
information
regarding direct contacts with prospective employees, as the
Agency
later asserted. Given the specific reference in that letter to
tribal
representatives, urban Indian organizations, educational
institutions,
and tribal employment rights offices, we think that Grantee
reasonably
interpreted this as a request for information regarding contacts
with
these types of organizations only.
We are thus unwilling to conclude that Grantee's literal compliance
with
the terms of the Agency's October 12, 1984 request constituted
a
material failure to comply with the terms of the grant.
Nevertheless,
since, as discussed(12) previously, we find that the
termination was
clearly justified based soley on the first ground stated by
the Agency,
the fact that the Agency's second ground for termination was
inadequate
does not entitle Grantee to reversal of termination.
Grounds for Suspension as Grounds for Termination
The Agency's February 27, 1985 letter gave two reasons for the
termination
and five additional reasons for the suspension. The Agency
argued in
proceedings before this Board that all seven reasons supported
the
termination since the applicable regulations permit suspension or
termination
of a grant on identical grounds, i.e., the material failure
to comply with
the terms of the grant. (See 45 CFR 74.114 and 74.115)
(Respondent's
post-hearing brief, p. 4) Grantee objected to the Board's
considering the
five additional reasons as grounds for termination,
arguing that the Agency
could not properly introduce new reasons for its
action after the fact.
(Transcript of August 7, 1985 hearing, pp.
29-30)
It is clear from the structure of the Agency's February 27, 1985
letter
that the Agency did not intend any overlap between the reasons
for
termination and the reasons for suspension. The Agency could
have
cross-referenced the reasons for suspension under the letter's
section
on termination, but did not. We note, moreover, that four of
the five
reasons for suspension concerned the failure to supply
certain
documentation. The Agency's February 27, 1985 letter indicated
that
Grantee could cause the suspension to be lifted by providing
this
documentation. Since a termination, unlike a suspension,
permanently
withdraws a grantee's authority to obligate federal funds for
the
duration of the grant, it would not have been appropriate to base
the
termination on alleged failings which were amendable to correction.
In
any event, the cessation of grant activities which the Agency
advanced
directly as a reason for termination constitutes such a
serious
violation of the grant terms as to make our consideration of
additional
reasons unnecessary.
Notice of Termination
Grantee also argued that the termination should be reversed because
the
Agency did not give prior notice of the termination. Prior notice
is
required by 45 CFR 1336.52(c)(1) which provides:
A recipient shall be given an initial written notice at least
thirty
(30) days prior to the suspension or termination of financial
assistance
except in emergency situations, which occur when Federal property
is in
imminent danger of dissipation, or when life, health, or(13) safety
is
endangered. During this period of time, the recipient has
the
opportunity to show cause to ANA why such action should not be
taken.
/9/
In this case, Grantee was advised by letter dated February 27, 1985
that
its grant was terminated effective February 25, 1985. (See note 1
for
correction of the latter date.)
The Agency argued that prior notice was not required on the ground
that
Federal property was in imminent danger of dissipation.
More
specifically, the Agency asserted that it was reasonable under
the
circumstances "for ANA to conclude that the further disbursement
of
Federal funds, and further allowing NUIC to incur additional
claims
against those funds, would result in the dissipation of
them."
(Respondent's post-hearing brief, p. 3)
We agree that this exception was applicable here. Although the
Agency
conceded that Grantee was not at the time of the termination
in
possession of any grant funds, (transcript of August 8, 1985
hearing,
pp. 201-202), Grantee could have incurred costs under the grant
during a
30-day notice period for which it could properly have
claimed
reimbursment. Thus, although Grantee had no federal cash on
hand,
Grantee in incurring additional costs following notice of an
intended
termination might in effect have placed federal funds in imminent
danger
of dissipation. In view of Grantee's cessation of grant
activities and
the questions raised by the reporting problems discussed
previously, the
Agency could reasonably have concluded that it should not
risk the
further dissipation of federal funds by giving 30 days' notice
of
termination.
We note in any event that Grantee did not show that it was prejudiced
by
the lack of notice. As discussed above, the termination was
justified
on the ground that Grantee had ceased performance of grant
activities on
or about January 18, 1985. The stated purpose of the 30-day
notice
period is to allow the grantee to correct the deficiency which is
the
basis for the proposed termination. (OHD Grants Administration
Manual,
Chapter 9, Section B) In this case, however, Grantee(14) had
already
notified the Agency that it would not resume performance of the
grant
activities without the funds being withheld by the Agency. Thus,
there
is no evidence that Grantee would have averted the termination if it
had
been given notice.
Conclusion
For the foregoing reasons, we uphold the Agency's decision to
terminate
Grant No. 90NA0143, but reverse the purported suspension of that
grant.
This means that Grantee had no authority to obligate federal funds
from
February 27, 1985 through April 30, 1985, the end of the project
period
stated in the Notice of Financial Assistance Awarded. (Seedefinition
of
"termination" at 45 CFR 74.110) Thus, any costs incurred during
that
period would not be allowable.
Our ruling on the suspension does not require automatic payment of
the
costs incurred prior to February 27, 1985 for which Grantee has not
been
reimbursed. Although the Agency's action was not effective as
a
suspension, this does not imply that the Agency lacked authority
to
withhold the funds. On the other hand, the continued withholding of
the
funds is not justified merely because we reject Grantee's argument
that
the withholding excused its non-performance. The regulations
require
the Agency to take action to close out a grant which has been
terminated
by paying the grantee "for any allowable reimbursable costs not
covered
by previous payments." (45 CFR 74.111) Thus, the Agency must now make
a
determination regarding the allowability of the costs in
question.
Grantee should expect the Agency to consider in this respect
whether
Grantee has provided information which the Agency stated in its
February
27, 1985 letter was required before payment could be made. A
decision
by the Agency to disallow some or all of the costs in question on
the
basis that Grantee did not provide this information (or on some
other
basis) would be appealable to this Board pursuant to 45 CFR Part
16.
/1/ The determination appealed
from is dated February 27, 1985
and states that the termination and
suspension are effective February
25, 1985. However, the Agency later
stated that the effective date
given for both the termination and the
suspension was incorrect and
should instead be February 27, 1985.
(Agency's post-hearing brief,
p.
66) /2/ Other activities
for which grant funds were allocated
included (1) obtaining additional
subscribers to the computerized
listing of job openings maintained by Grantee
and (2) developing and
submitting proposals for funding beyond the period of
grant support.
(Respondent's appeal file, exhibit 8a, Applicant Objectives
84-3-A and
84-4-A) Grantee later admitted that it did not conduct these
activities.
(Transcript of August 7, 1985 hearing, p. 237; transcript
of August 8,
1985 hearing, pp. 18,
74) /3/ Grantee argued, citing a
Board of
Contract Appeals decision, that the burden was on the Agency to
prove
the default on which the termination rested by convincing
evidence.
(Appellant's post-hearing breif, pp. 2-3) We agree that the Agency
must
come forward with evidence in support of a decision to terminate
a
grant. The burden then shifts to the grantee to rebut the
Agency's
case, however. Thus, even if we apply the standard of review
argued for
by Grantee, the termination would stand since the Agency provided
clear
evidence of non-performance which Grantee did not successfully
rebut.
/4/ Grantee suggested that the Agency may not have had authority
to
withhold funds under 45 CFR 74.95 since the OHD Grants
Administration
Manual forbids withholding for "proper charges" unless (1) the
grant has
been suspended or (2) the grantee is indebted to the United States.
(OHD
Grants Administration Manual, Chapter 2, Section B.3)
(Appellant's
post-hearing brief, p. 13) The Manual provision implicitly
authorizes
withholding if the costs claimed were not properly charged to the
grant,
however, and is therefore consistent with the cited regulation.
In any
event, the OHD Grants Administration Manual provides that
the
regulations in 45 CFR Part 74 take precedence over the Manual
where
there are conflicting provisions. (Manual,
Introduction) /5/
The Agency
initially identified deficiencies in the substance of
Grantee's program
progress report as a basis for "suspension" of the
grant
only. /6/ Grantee was required
to provide a matching share
of 20 percent of the approved cost of the grant
project. (45 CFR
1336.50(b) (1983)) /7/ For example, Grantee showed the
amount of federal
funds advanced as program income on several reports of
federal cash
transactions. The Agency recognized what Grantee's error
had been and
directed Grantee to correct it. (Appellant's appeal file,
exhibit 41) A
finding of non-compliance would not be warranted on this basis
alone.
/8/ One of the Agency's witnesses testified that the program
specialist
assigned to the grant in question had contacted Grantee regarding
its
response to the Agency's October 12, 1984 letter. (Transcript of
August
7, 1985 hearing, pp. 211-212) However, the program specialist made
no
such statement in the course of her extensive testimony. (Transcript
of
August 8, 1985 hearing, pp.
80-141) /9/ Grantee relied on
a
provision in the OHD Grants Administration Manual, Chapter 9, Section
B,
which provides for 30-day notice of a termination action but does
not
contain the exception for emergency situations described in 45 CFR
1336.
Following the order of precedence established by the OHD
Grants
Administration Manual for conflicting requirements (See Introduction
to
Manual), we conclude that 45 CFR 1336.52(c)(1) governed and that
the
exception was available to the Agency here if circumstances
warranted.
MARCH 28, 1987