1999.03.05 DAB1681 Rhode Island Substance Abuse Prevention Task Force Association v. Substance Abuse and Mental Health Services Administration (SAMHSA)

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division

DATE: March 5, 1999

SUBJECT: Rhode Island Substance Abuse Prevention Task Force Association

Docket No. A-98-59
Decision No. 1681

DECISION

The Rhode Island Substance Abuse Task Force Association (Association) appealed a determination by the Center for Substance Abuse Prevention within the Substance Abuse and Mental Health Services Administration (SAMHSA) disallowing $96,064.75 claimed by the Association as expenditures for the period November 1996 through April 1997 for two grants awarded under the Community Partnership and the Community Prevention Coalitions Demonstration Programs. During the course of the proceedings before the Board, SAMHSA reduced the amount disallowed to $25,118.01. See SAMHSA letter dated 7/17/98. The remaining amount consists of numerous cost items which were disallowed as not allowable under the applicable cost principles, not allocable to the grants in question, or not properly documented. For the reasons discussed below, we reverse the disallowance of $13,600.02, uphold the disallowance of $2,794.15, and remand the disallowance of $8,723.84.

Factual Background

The Association is a non-profit organization that provides training and technical assistance on substance abuse prevention and education to local task forces from municipalities in Rhode Island. In 1995, the Association received two grants, one known as the Consortium for Community Initiatives (CCI) grant, awarded under the Community Partnership Program, and one known as the Consortium United for Prevention (CUP) grant, awarded under the Community Prevention Coalitions Demonstration Program. In August 1996, the Association was designated by SAMHSA as an "exceptional organization," and special conditions were imposed to monitor its fiscal management, including a requirement that the Association submit expenditure reports (on a "Form 270") in order to receive funds for grant costs.

On March 10 and April 10, 1997, SAMHSA issued determinations terminating the CCI and CUP grants based on its finding that the Association had violated the terms and conditions of the grant awards. On August 15, 1997, while the Association's appeal of the terminations was pending, SAMHSA issued the disallowance appealed here based on its review of the documentation submitted by the Association in support of costs claimed for the months of November and December 1996 and January, February, March and April 1997. Subsequently, in a decision dated January 15, 1998, the Board reversed the terminations, finding that SAMHSA had not demonstrated that the Association materially failed to comply with the terms and conditions of the grants. Rhode Island Substance Abuse Task Force Association, DAB No. 1642 (1998). Based on this decision, SAMHSA withdrew that part of the disallowance that pertained to costs incurred after the termination, as well as some additional amounts. SAMHSA letter dated 7/17/98.

Relevant Authorities

During the period in issue, OMB Circular A-122 was made applicable to the Association's grants by 45 C.F.R. . 74.27(a) (1994).

Generally, in order to be an allowable charge to federal grant funds, a cost must be reasonable for the performance of the grant and allocable thereto. See OMB Circular A-122, Attachment (Att.) A, .2.a. Among other factors, a cost is reasonable if it is the type generally recognized as ordinary and necessary for the operation of the organization or performance of the award. Id. at .3.a. Generally a cost is allocable to a grant in accordance with the relative benefits received. Id. at .4.a.

Under grant administration regulations at 45 C.F.R. Part 74, a grantee is required to document its costs. Specifically, accounting records must be "supported by source documentation." 45 C.F.R.. 74.21(a)(7). Based on these requirements, the Board has consistently held that a grantee bears the burden of documenting the allowability of all charges to grant funds. See, e.g., North Carolina Central University, DAB No. 1640 (1998); New York State Dept. of Health, DAB No. 1636 (1997).

Analysis

We note preliminarily that the Association argued generally that the costs determined to be either not allocable or not properly documented were nevertheless allowable because they were included in the Association's approved budget. The Association also argued that, even if this were not the case, the costs would be allowable because the PHS Grants Policy Statement (at p. 8-1 of the 1994 revision) gives grantees flexibility to shift costs from one budget category to another. SAMHSA acknowledged that all of the questioned costs were included in the Association's approved budget. See SAMHSA letter dated 7/17/98, at 2. However, as SAMHSA correctly pointed out, the costs must still meet the requirements of OMB Circular A-122 in order to be allowable. An approved budget satisfies any requirements for advance approval of costs within the general budget categories listed and assures the availability of funds for these costs. However, a grantee's obligation to document its costs is not extinguished by the inclusion of a cost in an approved budget. A grantee must always be able to document that a cost charged to a grant was actually incurred, is properly allocated to the grant, and is reasonable. See, e.g., Rio Bravo Association, DAB No. 1161 (1990). Similarly, when a grantee makes budget revisions, it must ensure "that all costs charged to the award are allowable, allocable, and reasonable." PHS Grants Policy Statement, at p. 8-1. Furthermore, contrary to what the Association argued, the fact that a grantee's financial systems and management capability have been deemed adequate prior to award of a grant (or upon later review) does not mean that a particular cost claimed as a charge to the grant is allowable. Indeed, those systems, if operating correctly, should generate the documentation needed to substantiate the allowability of such costs.

We also note that, while the appeal of the disallowance was pending before the Board, the Association submitted an independent audit of its programs for the year ended June 30, 1997. Association Br. dated 8/24/98, Ex. 2. The Association asserted that the audit gave it a "'clean' record." Id. at 11-12. However, the audit in question contains no schedule of expenditures or any other indication that the auditor examined the allowability of individual cost items for which the Association claimed reimbursement under the grant. (We also note that SAMHSA stated, and the Association did not dispute, that the Office of the Inspector General's National External Audit Review Center determined that the audit was unacceptable. SAMHSA letter dated September 23, 1998, at 2-3.) Thus, the fact that the audit did not question the costs disallowed here is not evidence of their allowability.

Below, we discuss the disallowed costs using the three categories identified by SAMHSA: costs not allowable under the cost principles, costs not allocable to the grants in question, and costs not properly documented. Within each category, we discuss similar charges as a single cost item.

Unallowable Costs

1. Bank Late Fee and Finance Charges ($2,012.84)

SAMHSA disallowed a bank late fee of $5.00 claimed under the CCI grant for December 1996 and a total of $2,007.84 in finance charges for a leased copier ($45.69 claimed under the CCI grant for November 1996, $17.29 claimed under the CCI grant for February 1997, and $19.87 claimed under the CCI grant for March 1997); supplies ($8.25 and $31.70 claimed under the CCI grants for November and December 1996, respectively); office supplies ($28.73, $10.39, $25.57, and $26.00 claimed under the CUP grants for January - April, 1997, respectively); audit expenses ($17.09 and $140.88 claimed under the CCI grants for November 1996 and April 1997, respectively); rent ($1263.33 claimed under the CCI grant for February 1997); accounting expenses ($270.67 and $97.15 claimed under the CCI grants for January and March 1997, respectively), and telephone ($1.81 and $3.42 claimed under the CUP grants for January and April 1997, respectively).

As authority for the disallowance, SAMHSA's disallowance letter cited OMB Circular A-122, Attachment B, .14 and .19.a. Paragraph 14 states that "Costs of fines and penalties resulting from violations of, or failure of the organization to comply with, Federal, State and local laws and regulations are unallowable except when incurred as a result of compliance with specific provisions of an award or instructions in writing from the awarding agency." Paragraph 19.a states in relevant part that "Costs incurred for interest on borrowed capital . . . , however represented, are unallowable." SAMHSA later stated in support of the disallowance that --

these costs were caused by the Association not providing com plete documentation to support the costs claimed and not signing the 270 forms certifying that the expenditures were made in accordance with the grant conditions. For example, rent costs claimed were supported on the letterhead of the Association. We did not pay the rent costs until documentation was submitted to show the actual landlord was not related to the Association.

SAMHSA letter dated 12/15/98, at 1.

On appeal, the Association asserted that, notwithstanding the prohibitions on fines and penalties and interest costs in OMB Circular A-122, the costs in question should be allowed here because they were incurred as the result of SAMHSA's improper withholding of grant funds. In DAB No. 1642, the Board determined that SAMHSA did in fact improperly withhold funds from the Association. DAB No. 1642, at 15. The Association also took the position that it "submitted complete and signed 270 forms" for all of the costs in question, including rent, but that SAMHSA "simply chose not to recognize the authority of the people who signed the 270 forms on behalf of the Association." Association letter dated 12/29/98, at 1.

We conclude that the alleged lack of documentation is not a valid basis for disallowing the costs in question. SAMHSA did not identify this as a basis for the disallowance until its last submission before the Board, quoted above. That submission did not specify any missing documentation other than signatures on the Association's 270 forms. (SAMHSA did indicate that the documentation submitted in support of the rent costs raised a question as to whether the landlord was related to the Association; however, SAMHSA further indicated that documentation was ultimately submitted to show that this was not the case.) The Board addressed the issue of the absence of signatures on the Association's fiscal reporting forms in DAB No. 1642 (in the context of determining whether the Association's failure to hire key personnel was attributable to SAMHSA's withholding of funding based on the absence of such signatures). The Board found that SAMHSA "would not recognize the authority of interim or newly elected officials to sign [fiscal] reporting forms" and unreasonably withheld funding based "on the absence of signatures of specific individuals who were no longer duly appointed, responsible Association individuals." DAB No. 1642, at 15. Thus, to the extent that SAMHSA is relying on the absence of the latter signatures as the basis for finding the costs in question here inadequately documented, this reliance is unjustified.

The question remains, however, whether the original basis for SAMHSA's disallowance of these costs--that fines, penalties and interest costs are unallowable under the cost principles--is valid. SAMHSA did not deny that the costs in question were incurred due to its withholding of funds, which the Board found in DAB No. 1642 to be unreasonable. Thus, the issue before us is whether, under these circumstances, the costs are allowable notwithstanding that they are of a type ordinarily deemed unallowable under the cost principles.

We note at the outset that none of the costs in question are fines and penalties within the meaning of paragraph 14 of OMB Circular A-122 because they did not result from the Association's failure to comply with federal, state or local laws and regulations but rather were assessed for late payment. The Board has held that late payment charges constitute a form of interest rather than fines and penalties. Sumter County Opportunity, Inc., DAB No. 1200 at 2-3 (1990), citing Economic Opportunity Council of Suffolk, Inc., DAB No. 714 (1985), and Marshalls Community Action Agency, DAB No. 328 (1982). Thus, the only relevant provision here is the prohibition on interest costs.

Interest costs are costs assessed for the use of borrowed funds. A prudent businessperson could normally manage a grant project in a way that would not result in the imposition of interest--whether on funds borrowed in advance or on missed payments. The cost principles likely reflect a judgment that the federal government should not pay for these avoidable costs. In this case, however, due to SAMHSA's wrongful withholding of funds, the Association had no choice but to incur these costs in order to keep operating. Thus, the general purpose of the prohibition on interest is not furthered by disallowing the costs in question here.

This case is distinguishable on its facts from the Board decisions cited above, which sustained the disallowance of interest costs. In all three decisions, the Board found not only that the costs were interest costs within the meaning of OMB Circular A-122 but also that the costs were not reasonable costs. There is no dispute that the costs in question here were reasonable.

In addition, the result here is not controlled by the Board's holding in California Dept. of Health Services, DAB No. 1670 (1998). That decision upheld a disallowance of interest costs incurred when California issued warrants to raise money to pay for medical services under title XIX of the Social Security Act pending the receipt of federal funding. The Board found that these interest costs were incurred as a direct result of California's own untimely budget process. Moreover, the factor to which California attributed its need to issue the warrants was simply the federal agency's failure to adhere to the regulatory timelines for making a decision on the allowability of a claim after deferring it, not a wrongful withholding of funds to which the grantee was clearly entitled, as in this case.

While we conclude that the disallowance cannot be sustained, we recognize that it may be advisable for SAMHSA to seek a formal exception for this item from the Office of Management and Budget. See OMB Circular A-122, .8. Accordingly, we remand this portion of the disallowance to SAMHSA in order to permit it to request such an exception should it determine that is necessary. In the event that OMB denies any request by SAMHSA for an exception, SAMHSA may reinstate the disallowance for this cost item. Costs Not Allocable to the Grants

2. AT&T 800 Telephone Line ($874.87)

SAMHSA disallowed four charges totalling $874.87 ($538.03 claimed under the CCI grant for November 1996, and $179.48, $86.12 and $71.24 claimed under the CUP grant for January, February and March 1997, respectively) for the cost of an AT&T 800 telephone line. SAMHSA stated in its disallowance letter that, "[w]hile the Association contended [that the] 800 line allowed the community coalitions to contact the Association at no cost to its coalition members, we have determined that the 800 line was neither reasonable nor necessary for the program." SAMHSA letter dated 8/15/97, at 2. In response to the Board's request for clarification of the basis for this determination, SAMHSA stated that it was not "prudent" for the Association to have an 800 telephone line because "SAMHSA was already paying monthly charges for internet site connections for 7 coalition members and regular and long distance charges of $200-$400 per month . . . for five employees." SAMHSA letter dated 12/15/98, at 1. The Association challenged this determination on the ground that the Association "inherited" the 800 line from the prior lead agency, which had it in place for five years with no questions raised by SAMHSA. Association letter dated 12/29/98, at 2.

We conclude that the disallowance is not warranted. SAMHSA did not take the position that an 800 telephone line could never be necessary for the grant programs in question or that the amount paid by the Association for the 800 line was excessive. Instead, SAMHSA took the position that this was in effect an unnecessary expense since the Association also had Internet connections as well as regular and long-distance telephone service. Clearly, however, these other communications services were not a substitute for the 800 telephone line. SAMHSA appeared to argue that the task forces could use the Internet to communicate with the Association via electronic mail. However, only seven task forces had Internet access, according to SAMHSA, although over 20 task forces were members of the Association. In addition, an 800 line provides unlimited access, whereas Internet access is often time-limited. Moreover, SAMHSA indicated that the long-distance telephone charges were incurred by the Association's employees for outgoing calls, while an 800 telephone line is for incoming calls. Thus, there is no basis for finding that the 800 telephone line constituted a duplicative service, as SAMHSA suggested. Moreover, the fact that SAMHSA paid for the Association's predecessor's 800 telephone line over an extended period is certainly some evidence that SAMHSA regarded the cost as an appropriate expenditure necessary for grant activities. In finding now that the cost is unnecessary, SAMHSA is simply substituting its judgment for that of the Association as to a programmatic matter which is best left to the Association's discretion.

Accordingly, we reverse the disallowance for this cost item.

3. Flowers ($49)

SAMHSA disallowed $49 claimed under the CCI grant for November 1996 for flowers for an employee on the ground that they were not a necessary program expenditure. The Association's appeal contained no explanation of why these costs were necessary.

Accordingly, we uphold the disallowance for this cost item.

4. Rent ($300.21), Utilities ($38.16) and Janitorial Services ($11.54)

SAMHSA disallowed six charges for rent totalling $300.21 ($98.96, $65.65, $32.82, $32.82, $32.82, $37.14 claimed under the CCI grants for November 1996 through April 1997, respectively); five charges for utilities totalling $38.16 ($15.43, $7.96, $4.88, $5.32, $4.57 claimed under the CCI grants for November 1996 through March 1997, respectively); and three charges for janitorial services totalling $11.54 ($2.67, $5.34, and $3.53 claimed under the CCI grants for November and December 1996 and February 1997, respectively). The disallowance represented the amount that SAMHSA determined was allocable to space occupied by a non-federal program. SAMHSA originally disallowed 20.39% of the total rent, utilities and janitorial services costs and later reduced the disallowance to 1.26% of these costs. SAMHSA letter dated 9/23/98. The 1.26% figure was apparently based on a finding by the certified public accountant who audited the Association's programs for the year ended June 30, 1998 that the CCI and CUP grants comprised 98.74% of the Association's revenues for the fiscal year ended June 30, 1997. Association Response to Board's Request for Further Information, dated 12/17/98, Ex. B-11.

The Association asserted that its only source of funding other than the CCI and CUP grants was the Rhode Island Project ASSIST contract and argued that none of the space-related costs should be allocated to this contract because the contract, which the Association asserted was not funded for indirect costs, was used to "extend the work of the grant/coalition" and was considered as "grant income" by the Association. Association Br. dated 8/24/98, at 9.

SAMHSA did not dispute that the non-federal funds related to the contract identified by the Association and that the contract furthered the purposes of the grant. Thus, we see no reason why grant funds should not be used to pay for the space-related costs attributable to the contract. Under the applicable cost principles, a cost is allocable to a grant in accordance with the relative benefits received by the grant. OMB Circular A-122, Attachment A, .4.a. Clearly, the grant benefitted from the costs incurred for a contract that in turn was used to further grant purposes.

Accordingly, we reverse the disallowance for this cost item.

5. Newspaper ($52)

SAMHSA disallowed $52 claimed under the CCI grant for December 1996 for the delivery of the local newspaper on the ground that it was not a necessary program expenditure. The Association's appeal contained no explanation of why these costs were necessary.

Accordingly, we uphold the disallowance for this cost item.

6. Fringe Benefits ($263.45)

SAMHSA disallowed three charges totalling $263.45 ($69.45, $97.00 and $97.00 claimed under the CCI grants for December 1996 and January and March 1997, respectively) for fringe benefits payments for nine employees. According to SAMHSA, only two to four of these employees were working on the grant, depending on the month. The amount disallowed represented that part of the total fringe benefits payments that SAMHSA determined was attributable to employees who were not working on the grant. The Association argued that these costs were covered by a supplemental grant for administrative expenses. To the extent that this constitutes an argument that the costs were included in an approved budget, that argument has no merit, as discussed above. The Association also argued that reviews performed by SAMHSA contractors supported its contention that these costs were properly charged to the grants. Response to Board's Request for Additional Information, dated 12/17/98, at 2, citing Ex. B-4 - B-7, and at 3, citing Ex. B-8 - B-21. However, our analysis of these documents revealed that the costs at issue were not the subject of either contractor's review. The Association did not provide any other documentation purporting to show that the challenged fringe benefits pertained to individuals who were working on the grants, so that there is no evidence that these expenditures benefitted the grants.

Accordingly, we uphold the disallowance for this cost item.

7. Telephone Alarm System ($197)

The Association conceded that $197 claimed under the CCI grant for April 1997 for a telephone alarm system was properly disallowed. Association submission dated 8/24/98, Ex. A at 9.

Accordingly, we uphold the disallowance for this cost item.

8. Travel ($1,390.19)

SAMHSA disallowed three charges for travel totalling $1390.19 ($1,147.80 for airfare, $204.90 for hotel, and $37.49 for telephone) claimed under the CUP grant for January 1997. The travel costs were for certain individuals from the Association who attended a "reverse site visit" on October 27 and 28, 1996, at SAMHSA's offices in Rockville, Maryland. SAMHSA stated that it disallowed the costs because it did not authorize these individuals to attend the site visit. The Association identified the individuals in question as members of its board of directors. The Association argued that these individuals should have been authorized to attend the site visit, and that they not only participated in the site visit but were also acknowledged for their contributions.

We conclude that the disallowance was unwarranted. SAMHSA did not point to any requirement that it approve the individuals to be sent by a grantee to a reverse site visit in order for their travel costs to be allowable. Moreover, the site visit report (at Association Ex. 7 in the record for DAB No. 1642) confirms that the Association board members were major participants in the site visit.

Accordingly, we reverse the disallowance for this cost item.

Costs Not Properly Documented

9. Payroll ($11,422.23) and Payroll Taxes ($1,353.53)

SAMHSA disallowed four charges for payroll costs totalling $11,422.23 ($168.27 claimed under the CCI grant for November 1996, $3,069.32 claimed under the CCI grant for January 1997, $2,184.64 claimed under the CUP grant for January 1997, and $6,000 claimed under the CCI grant for April 1997) and four charges for related payroll taxes totalling $1,353.53 ($19.94, $363.71, $258.88, and $711.00, respectively). SAMHSA disallowed the first three charges and their related payroll taxes on the ground that "documentation was not sufficient to show the amount of the retroactive pay raises or that they were paid." SAMHSA letter dated 8/15/97, at 3. SAMHSA identified the fourth charge as a retroactive pay raise of 37% for 13 pay periods for a community liaison. SAMHSA disallowed this charge and its related payroll taxes on the ground that there was no documentation to explain why the pay raise "was requested in the last month of the grant and whether it was actually paid." SAMHSA letter dated 8/15/97, at 3.

On appeal, the Association contended that the fourth payroll charge, for the retroactive pay increase for a community liaison, was necessary "to pay her at an equal rate to her male counterparts for the period" in question. Association Br. dated 8/21/98, at 12.

SAMHSA did not dispute that a retroactive pay raise would be appropriate to achieve such parity. SAMHSA asserted, however, that the Association's Form 270s showed that the employee in question was a program planner rather than a community liaison during the period in question (September 23, 1996 through March 31, 1997). The Association contended that this employee was promoted to community liaison in September 1996, when her predecessor resigned "because of SAMHSA's suspension of funding to the Association." Association letter dated 12/29/98, at 3. <3> The allowability of the retroactive pay increase for the community liaison thus turns on the date on which the individual in question was promoted to that position. The circumstances under which the Association said the community liaison assumed her position support the Association's contention about the date of her promotion, and call into question whether the Form 270s on which SAMHSA relied (which are not included in the record) correctly reflected the status of the employee in question. Accordingly, we remand this portion of the disallowance to SAMHSA to reconsider its determination regarding when the employee in question was promoted, and hence the allowability of the retroactive pay increase, based on any additional documentation to be provided by the Association.

With respect to the first three charges, the Association explained that, in reviewing its books dating back to August 1995, it had discovered that it had erroneously failed to pay certain staff members a budgeted annual 4% pay increase. The Association stated that, after a thorough audit, it made payroll adjustments to pay these increases on a retroactive basis. Association Response to Board's Request for Further Information, dated 12/17/98, at 6. The Association provided payroll records and worksheets (apparently submitted as attachments to the Form 270s) that it said reflected the amounts charged to the grants for these retroactive increases. Id., citing Ex. D-1 - D-8. The payroll records (Ex. D-1 - D-6) are for payments made in 1998 and are thus not relevant here. In addition, there is nothing on the worksheets that corresponds to the amount disallowed as a charge to the CCI grant for November 1996. However, the worksheets (Ex. D-7 and D-8) show lump sum 4% pay increases for five individuals, for two to six pay periods each, that equal the total amount disallowed as charges to the CCI and CUP grants for January 1997.

We conclude that reversal of the disallowance of the amounts charged to the CCI and CUP grants for January 1997 is warranted based on the documentation provided by the Association. The worksheets establish the amounts of the pay increases and SAMHSA did not point to any basis for questioning that the worksheets reflect payments actually made. There is no documentation in support of the amount charged to the CCI grant for November 1996, however; thus, reversal of that portion of the disallowance is not warranted.

In summary, we dispose of the disallowance for this cost item as follows: we uphold the disallowance with respect to the $168.27 claimed under the CCI grant for November 1996 and the related payroll taxes of $19.94; we reverse the disallowance with respect to the $3,069.32 claimed under the CCI grant and the $2,184.64 claimed under the CUP grant for January 1997, and the related payroll taxes of $363.71 and $258.88, respectively; and we remand the disallowance to SAMHSA with respect to the $6,000 claimed under the CCI grant for April 1996 and the related payroll taxes of $711. If the Association disputes SAMHSA's determination with respect to the remanded costs, it may appeal that determination to the Board within 30 days of receipt of that determination, pursuant to 45 C.F.R. Part 16.

10. Parking ($240)

SAMHSA disallowed $240 claimed under the CCI grant for November 1996 for employee parking on the ground that a vendor invoice was not provided as requested. During the proceedings before the Board, the Association provided an invoice dated 11/30/96 for monthly parking, in the amount in question, for four cars for October and November 1996. Association Response to Board's Request for Further Information, dated 12/17/9, Ex. D-16.

Accordingly, we reverse the disallowance for this cost item

11. Mini-grant ($4,000)

SAMHSA disallowed $4,000 charged to the November 1996 CUP grant for a mini-grant to the Burrillville Task Force on the ground that the Association "did not provide the expenditure reports as required by the mini grant requirements." SAMHSA disallowance letter dated 8/15/97, at 3. SAMHSA originally disallowed the cost of mini-grants to the other task forces on the same ground, but later stated that it was allowing these mini-grants as charges to the grant based "on the approval page of the mini-grant application provided by the Association." SAMHSA letter dated 7/17/98, at 1; SAMHSA letter dated 12/15/98, at 1. Thus, it appears that SAMHSA paid the cost of the other mini-grants based on documentation showing that the mini-grants were approved without requiring documentation establishing that the Association actually paid the task forces for the mini-grants. SAMHSA maintained, however, that the Association "did not provide the same approval document" for the mini-grant to the Burrillville Task Force. SAMHSA letter dated 12/15/98, at 1.

The Association responded that it had "submitted absolutely identical paperwork for the Burrillville Task Force." Association letter dated 12/29/98, at 2. In fact, a copy of the approval page for the Burrillville mini-grant was submitted by the Association as part of Exhibit 33 in the record for DAB No. 1642.

Accordingly, we reverse the disallowance for this item.

12. Regional Meeting ($750)

SAMHSA disallowed $750 claimed under the CUP grant for April 1997 for food and beverages for an October 1996 regional meeting. The costs were disallowed on the ground that no documentation, including the agenda of the meeting or attendees, was provided. On appeal, the Association provided the following documents in support of the charge: (1) a brief description of a two-day training program in the implementation of "Project ALERT" identifying the "Target Audience" (7th grade health teachers) and "Workshop Objectives" (ultimately to enable participants to implement Project ALERT, a school-based prevention curriculum, within their school district's existing health curriculum); (2) an internal Association memorandum dated October 4, 1996 stating that "The Project ALERT training will still be held on October 24 and 25;" (3) an Association program committee meeting report dated 12/21/96 stating that "Project ALERT training will be October 24 and 25, 1996 . . . ;" and (4) an invoice for $750 for two catered breakfasts and two catered luncheons on October 24 and 25, 1996. Association's Response to Board's Request for Further Information, dated 12/17/98, Ex. D-9 - D-15.

The documentation provided by the Association clearly establishes that the costs in question were incurred for training that was grant-related. The documentation is therefore sufficient to support these costs.

Accordingly, we reverse the disallowance for this cost item.

13. FAX Charge ($44.49)

SAMHSA disallowed $44.49 claimed under the CUP grant for January 1997 as a FAX charge on the ground that the Association failed to provide adequate documentation. On appeal, the Association did not provide any documentation or explain why this cost should be allowed as a charge to the grant.

Accordingly, we uphold the disallowance for this cost item.

14. Postage ($2,118.50)

SAMHSA disallowed $1,000 claimed under the CUP grant for January 1997 and $1,118.50 claimed under the CCI grant for December 1996 for postage on the ground that the Association failed to provide adequate documentation. On appeal, the Association provided a receipt dated 12/16/96 for rental of a postage meter, installed at CCI's offices, in the amount of $118.50. Association Response to Board's Request for Further Information, dated 12/17/98, Ex. C. The Association conceded that the remaining $2,000 was properly disallowed because it had never incurred the costs. Id. at 5.

Accordingly, we reverse the disallowance for this cost item in the amount of $118.50 and uphold the disallowance in the amount of $2,000.

Conclusion

For the foregoing reasons, we reverse the disallowance of $13,600.02, uphold the disallowance of $2,794.15, and remand the disallowance of $8,723.84.

______________________
Cecilia Sparks Ford

______________________
Donald F. Garrett

______________________
M. Terry Johnson

Presiding Board Member