GAB Decision 726
March 14, 1986
Community Health Foundation of Man, West Virginia, Inc.;
Docket No. 85-139
Ballard, Judith A.; Settle, Norval D. Teitz, Alexander G.
The Community Health Foundation of Man, West Virginia, Inc.
(Grantee) appealed determinations by the Public Health Service (Agency)
and the Secretary of Health and Human Services (HHS) requiring a refund
to the Agency of $67,902 advanced under a Rural Health Initiative Grant
and denying a waiver of the required refund. The requested refund arose
out of the Grantee's failure to return funds that were allegedly
unobligated on December 31, 1982, at the end of the final period of the
grant.
We have encouraged the Grantee, which has not been represented by
counsel,
to fully develop the record in its behalf throughout this
appeal. We
have issued two detailed requests for information directed
to the Grantee,
including an Order to Show Cause, and have requested
clarification of the
Grantee's position and evidence to support its
position in other
communications with the Grantee. Despite our efforts,
we conclude that
the Grantee has failed to provide sufficient
information to support a finding
in its favor. Therefore, we affirm the
Agency's determination that the
Grantee must repay $67,902 for funds
advanced under its grant but unobligated
at the end of the grant term.
Background
The Agency sent an initial request for repayment of the $67,902
on
December 5, 1983. Letter to Grantee from Director, Office of
Grants
Management. That request was based upon information reported by
the
Grantee itself in the Amended Financial Status Report covering
the
period from March 1, 1982 until December 31, 1982. The request did
not
inform the Grantee of any right of appeal.
The Grantee requested assistance from Senator Robert C. Byrd, who
aplied
on behalf of the Grantee directly to the Secretary of HHS for a
waiver.
This request stated that the Regional Office had already denied
a
waiver. The Secretary replied that she was unable to grant a
waiver
since repayment was clearly required by law. Letter from
Secretary of
HHS to Senator Robert C. Byrd, dated April 3, 1984.(2)
The Agency issued further requests for payment. The Grantee then
wrote
to the Secretary directly, again requesting a waiver. Letter
from
Grantee to Secretary of HHS, undated. That request was
denied. Letter
from the Director, Division of Accounting Systems and
Procedures to
Grantee, dated June 10, 1985. In the denial letter, the
Agency informed
the Grantee of a right to appeal to this Board, and the
Grantee
appealed. We noted jurisdictional problems in our
acknowledgement of
the appeal, but permitted the Grantee to present its case
pending a
determination of the Board's jurisdiction.
Jurisdiction
The Board's jurisdiction is specified by regulation.See 45 CFR Part
16,
App. A. It is not clear that we ordinarily could review all aspects
of
this case, particularly the question of whether a waiver should
be
given. In view of the Agency's specific instruction to the Grantee
that
it could appeal to us, however, we have reviewed the entire record
in
this case.
Substantive Issues
The disallowance in this case was based upon a submission by the
Grantee
to the Agency, the Amended Financial Status Report, covering the
period
from March 1, 1982 until December 31, 1982. That submission
listed a
$67,902 unobligated fund balance remaining at the close of the
grant
period on December 31, 1982. The regulations governing
the
administration of HHS grant awards require that at the close of
the
grant
(the) grantee shall immediately refund or otherwise dispose of,
in
accordance with instructions from HHS, any unobligated balance of
cash
advanced to the grantee.
45 CFR 74.111(b)(2).
In order to demonstrate that the request for payment was incorrect
under
this regulation, the Grantee must show one of the following: a)
that
the funds were never, in fact, advanced by the federal government
under
the grant or had already been repaid; b) that the funds involved
were
"obligated" before the end of the grant period; or c) that the
funds,
even though unobligated, had been ("disposed) of . . . in
accordance
with instructions from HHS." We address each of these possible
defenses
in turn.
With regard to the first possible defense, there is no dispute that
the
$67,902 was a part of the funds advanced by(3) the Agency under
the
grant. The Grantee reported receipt of these funds on its
Amended
Financial Status Report, and has not denied receipt, nor alleged
that
the funds have already been repaid.
With regard to the second possible defense, the Grantee did not
present
any evidence that the funds were obligated before the end of the
grant
period. The Grantee had to demonstrate that the money was
obligated
through a record of "orders placed, contracts and subgrants
awarded,
services received, and similar transactions during a given period
which
. . . require payment during the same or a future period." 45 CFR
74.71.
Merely showing that the Agency had approved use of the funds for
a
specific purpose is not enough; the Grantee must show that it
entered
into commitments for their expenditure. Although the Grantee
showed
that the Agency approved the use of the funds to repair a roof,
the
Grantee submitted no evidence that it had placed or entered into
any
orders, contracts or other commitments to spend the money for
that
purpose, even though the Board gave the Grantee every opportunity to
do
so. The Grantee also suggested, without offering any evidence
to
support its contention, that the Agency approved the use of those
funds
to aid the Grantee in taking over the Hanover Medical Center. But
the
Grantee did not prove that it had entered into this commitment
before
the end of the grant period. *
The third possible defense fails for similar reasons. To establish
this
defense, the Grantee must show two elements: that it
received
instructions from the Agency and that it disposed of the funds
in
accordance with those instructions. As described above, the
Grantee
presented two possible scenarios in which these elements could have
been
present. The first scenario involves the repair of a roof.
The Grantee
has shown that it received HHS instructions -- or approval -- for
the
repair of a roof at a January 21, 1982 meeting.See letter from
Program
Management Officer, HHS, to Grantee dated September 6, 1985.
The
evidence presented, however, gives no basis to find that the
approval
given at the January 21, 1982 meeting was intended to extend beyond
the
term of the grant. Furthermore the Grantee failed to show that
it
actually spent the money, in accordance with(4) those instructions, on
a
roof. The second scenario involves the operation of the Hanover
Medical
Center. Although the Grantee suggested that it spent the money
on the
Hanover Medical Center, the Grantee failed to show that it had any
HHS
instructions or approval to do so. See Letter from Grantee to
the
Board, dated November 27, 1985.
Having failed to demonstrate any circumstance which would permit the
Board
to find that the requirement to refund unobligated fund balances
should not
apply, we have no alternative but to uphold the Agency.
Regarding the question of whether a "waiver" should have been granted,
we
note that, in the context here, the determination essentially
concerned
whether the Department should allow the Grantee to use funds
outside and
after the scope of the grant award. If authority to do this
exists at
all - which is not clear - the determination clearly would be
a discretionary
decision analogous to the determination whether or not
to award a
discretionary grant. As such, this Board's review - which
arguably is
authorized only by the Agency's letter of June 10, 1985 - is
restricted to
determining only whether there has been an abuse of
discretion. We find
no evidence here to suggest that there was any
abuse of discretion in
refusing to allow the Grantee to fashion its own
use of funds which the
Grantee had received for a stated purpose and
failed to use for that
purpose.
Conclusion
Since the Grantee has failed to show that application of 45 CFR
74.111(
b)(2) was incorrect, we affirm the Agency's action. We find no
basis to
disagaree with the Agency's denial of a waiver to the Grantee.
We
conclude that, under 45 CFR 74.111(b)(2), the Grantee must refund
the
$67,902 to the Agency, as an unobligated balance remaining at the end
of
the grant period. * Although we do not need to reach this issue,
we
note that even if the Grantee proved that it entered into
obligations
with respect to the Hanover Medical Center before the end of the
grant
period, we would still need some evidence that this expenditure
was
within the approved scope of the grant before we reversed the
Agency's
disallowance.
MARCH 28, 1987