GAB Decision 707
November 22, 1985 University of North Dakota;
Garrett, Donald F.; Garrett, Donald F. Ballard, Judith D.
Docket No. 84-208
The University of North Dakota (UND or University) appealed the
decision of the Public Health Service (PHS) to disallow $38,118 in
salary and associated fringe benefit costs charged to a PHS grant during
the period March 1980 to June 1982. The basis for the disallowance was
that UND failed to comply with the conditions of a PHS Grants Policy
Statement (Policy Statement) provision governing salary payments from
federal grants to full-time federal employees. /1///
PHS asked the Board to rule on a single question which PHS contended
is
dispositive of the case: whether the undisputed fact that officials
of
the subagency which administered the grant had no knowledge that
the
salary recipient was a full-time federal employee establishes that
the
salary is unallowable.
We conclude that it does not and remand the case to PHS to examine
whether
certain conditions of the Policy Statement provision were met
and whether PHS
should agree to the salary and fringe benefit payments.
If PHS does not
ultimately approves the payments, PHS should issue a new
decision stating new
grounds and giving UND the right to appeal.
Background
The costs in question here were charged to a Health Careers
Opportunity
Program (HCOP) grant awarded to the University for its Indians
Into
Medicine (INMED) Program. The purpose of the INMED Program, as the
name
implies, was to develop Indian health professionals to provide
health
services to the Indian people.
The facts here are complicated because more than one subagency of
PHS
provided support to the INMED Program. The essentials are:
(1) two
subagencies provided grant funds to the program and one also provided
a
Commissioned Corps physician; (2)(2) the physician was not
a
Commissioned Officer at the time the University requested approval
of
her employment under the HCOP grant; and (3) the University did
not
inform HCOP grant officials that the physician had Commissioned
Corps
status or Commissioned Corps officials that the physician was
receiving
a salary under the HCOP grant in addition to her Commissioned
Corps
salary.
Applicable Provision
PHS based its argument here solely on the following provision from page
18
of the PHS Grants Policy Statement (1976):
Federal (U.S. Government) employees -- the following rules apply
to
payments made from a grant to Federal employees:
* * *
3. Salaries and travel: Allowable when the employee is:
a. Working under a grant to a Federal institution.
b. During nonduty hours, in leave-without-pay status, or
on detail
to a State or local government, provided (1) reimbursement is
in
accordance with terms mutually acceptable to the grantee institution
and
PHS, and (2) all parties concerned are assured that there is
no
possibility of dual compensation or a resulting conflict of interest.
UND did not dispute that this provision applied to the HCOP grant, and
it
is clear on the face of the Notice of Grant Award, dated June 13,
1978, that
the Policy Statement was a term of the HCOP grant.
Parties' Arguments
The parties agreed that section 3(a) of the above provision did not
apply
because UND was not a federal institution. They also agreed
that
section 3(b) did apply since UND was a state agency.
PHS argued that the requirements of section 3(b) were not met because
the
HCOP grant officials had no knowledge of the fact that Dr. X was
a
Commissioned Corps Officer on federal salary at the time they
approved
her compensation from the HCOP grant. Thus, PHS argued, there
was no
"mutual acceptance" regarding the terms of reimbursement and
assurance
of all parties regarding the possibility of dual compensation
and
conflict of interest, as required by 3(b)(1) and (2).
(Respondent's
Memorandum of Points and Authorities($)
In Support of Its Motion For Summary Decision, p. 4) PHS argued that
all
issues in the case were irrelevant aside from whether the lack
of
knowledge by HCOP grant officials about Dr. X's federal employee
status
compelled the conclusion that there was no "mutual acceptance"
or
"mutual assurance," as required by the Policy Statement. PHS asked
that
all other questions (for example, whether there was, in fact,
dual
compensation or conflict of interest) be reserved pending a ruling
on
the "mutual acceptance" and "mutual assurance" issue. /2/
UND argued that HCOP officials should have known of Dr. X's
Commission.
UND noted that it informed the other grantor subagency promptly
upon
learning of her Commission, and that while there may have been
a
communication problem between the subagencies, the University
acted
reasonably in assuming that appropriate PHS officials knew of
the
doctor's salary arrangements. The University attributed the problem
to
the "many layers of Boards, agencies, and officials within the
Public
Health Service." (Appellant's Brief, p. 2)
Analysis
Although PHS characterized the issue as one of mutual acceptance
and
assurance, the PHS position, in effect, was that the costs
were
unallowable because UND did not obtain prior approval from the
subagency
which awarded the grant.
At the outset, we note that the Policy Statement is not a prohibition
on
payment of additional compensation to a federal employee
altogether.
Rather, it provides that salaries and travel costs are allowable,
so
long as certain conditions are met. First, the services must
be
provided during nonduty hours, in leave-without-pay status, or on
detail
to a state or local government. When the Board inquired about
nonduty
hours, PHS refused to respond, arguing that it was
irrelevant.
(Respondent's Supplemental Memorandum, p. (16) The record shows
that it
it is at least possible that Dr. X's assignment to the University
is
equivalent to a detail to a state government since a PHS team
which
investigated the situation noted the procedures for such a detail
should
have been used, rather than an "assingment" to the
Unversity.
(Appellant's Appeal File, (Appellant's File) AF11, p. 9)(4))
The two conditions which PHS argued could not have been met here are
that
the reimbursement must be in accordance with "terms mutually
acceptable to
the grantee institution and PHS" and "all parties
concerned" must be "assured
that there is no possibility of dual
compensation or a resulting conflict of
interest." PHS in effect
interpreted this as requiring a prior "mutual
agreement" between the
University and HCOP grant officials regarding the
salary. The provision
merely say that the terms of the reimbursement
must be "acceptable" to
'PHS" and that "all parties" must be "assured" that
there is no problem
with the arrangement. The provision does not
require prior written
agreement from PHS, nor does it specify that
"acceptance" has to come
from any specific subagency of PHS. To read
the provision as PHS
proposed would require upholding the disallowance
without considering
the factors which the provision specifies are
relevant.
PHS argued that the Policy Statement provision in question was
different
from other provisions which allow for retroactive approval under
certain
circumstances where the Policy Statement calls for prior
approval. PHS
attempted to distinguish such provisions on grounds that
they deal
generally with matters of expenditures by grantees while the
provision
at issue here deals with the much more sensitive area of a
federal
employee receiving grant funds. PHS asserted that while any
harm done
by a simple expenditure could be remedied retroactively, the harm
done
to the federal government by dual compensation or conflict of
interest
could not.
We are not persuaded by this argument. We see no valid reason for
not
granting approval if a determination is first made that there was
no
conflict of interest or dual compensation. If there is no conflict
or
dual compensation, there is no "harm" PHS needs to be protected
against
and there is nothing achieved by denying approval. Moreover, the
Policy
Statement provision does not state that prior approval is required
or
that retroactive approval will not be allowed. It makes no mention
of a
time frame for approval at all. It merely requires that the terms
of
reimbursement be acceptable to PHS and that PHS receive
proper
assurances. We can see no basis for interpreting the provision
more
narrowly that other provisions which on their face specify
prior
approval. (See, e.g., Policy Statement, pp. 21, 26, 28, 48)
Indeed, the
term "prior approval" triggers formal processes. (See,
e.g., Policy
Statement, pp. 4, 64-70) The absence of the term from this
provision
could have been interpreted to indicate that the provision was
less
formal than the other provisions and that approval alone, regardless
of
when given, would be sufficient. Finally, we note that the
provision
itself is somewhat ambiguous (in that section 3 (b)(2) reffered to
"all
parties" without providing guidance as to what that meant)
and,
therefore, should not be read narrowly against UND.(5)
While there may be valid policy reasons why prior approval should
be
required and retroactive approval prohibited, that is not sufficient
to
transform a provision written as this was into a prior
approval
requirement. While the Board recognizes that PHS has
considerable
discretion in determining whether costs should be approved, PHS
cannot
apply this provision in a manner not warranted by its plain
language.
We do think that PHS would be justified, however, in disallowing if
UND
cannot provide reasonable assurance that there was no dual
compensation
or conflict.
UND also argued that it reasonably thought that the reimbursement
was
acceptable to "PHS." The INMED Program received assistance through
both
an Indian Health Service (IHS) grant and an HCOP grant, and through
the
Commissioned Corps (Dr. X's IHS assignment as INMED Director).
PHS
admitted that the University informed IHS of Dr. X's status as
a
Commissioned Officer by letter dated March 18, 1980. IHS, at the
time,
was a part of the Health Services Administration which was, at the
time,
one of six agencies of PHS. HCOP was at the time part of the
Health
Resource Administration (HRA). HSA both provided assistance to
INMED.
The bureaucratic structure was confusing. UND could easily have
assumed
that IHS and HCOP were part of the same agency. In fact, HSA
and HRA
merged in 1984 and became the Health Resources and
Services
Administration. The confusing way the INMED Program received
assistance
weighs in UND's favor. /3/ Nonetheless, we cannot view what
occurred
here to be an implicit approval by PHS of the payments since
neither
subagency had full knowledge of the situation. This finding
does not
change the result here, however, since we conclude that lack of
prior
approval does not itself render the costs unallowable.
(6)
Remand
The Board remands to PHS to consider whether Dr. X's compensation from
the
HCOP grant resulted in dual compensation or a conflict of interest
and
whether the services were provided either during nonduty hours or
on
detail. With regard to these questions, the following is already
part
of the record: (1) IHS' own investigators concluded that there was
no
"dual compensation" (Appellant's File, AF11, p. 4); (2) Dr. X
received
approximately the same overall salary as the previous director of
INMED
although Dr. X's INMED duties apparently included all those of
the
previous Director (a non-physician) plus numerous additional duties
such
as patient care (Appellant's File, AF11, p. 2); (3) the
IHS
investigators found no evidence of impropriety, fraud or any attempt
to
hide the fact that Dr. X was receiving compensation in addition to
her
Commissioned Corps salary (Appellant's File, AF11, p. 4); (4)
the
current record reveals no conflict of interest in Dr. X's duties and,
in
fact, the Assistant Surgeon General may have implicitly endorsed
her
dual roles for the Commissioned Corps and the INMED program
(Appellant's
Supplemental Brief, Exh. E); (5) Dr. X received awards for
outstanding
services to the INMED program (Appellant's Reply to Motion for
Summary
Judgment, Exh. C); (6) while the main reason given by PHS for
not
considering retroactive approval was that damage from a conflict
of
interest could not be undone, we think that there is less of a
potential
for conflict in circumstances such as this where employment by IHS
in
part was to work specifically on INMED - thus the goals of the
federal
employment were the same as the goals of the grant; (7)
IHS
investigators found fault with PHS for failing to inform Dr. X
about
policies regarding dual compensation and conflict of interest and
noted
that the problem here may have been avoided if PHS had provided
adequate
"orientation" (Appellant's File, AF11, pp. 3, 9); and (8)
IHS
investigators also found fault with PHS for not having a system in
palce
for sharing information and noted that such a system would have
provided
another way the problem could have been avoided.
If PHS determines that there was no conflict of interest or
dual
compensation, and that the services were provided during nonduty
hours
or on detail, and reimbursement was in accordance with terms that
are
acceptable, then it appears the salary payments from the grant funds
are
allowable. If PHS officials determine there was(7) a conflict or
dual
compensation, or that the services were not performed during duty
hours
or on detail, or that reimbursement was not in accordance with
terms
that are mutually acceptable, PHS must issue a new decision
stating
grounds and giving UND an opportunity to appeal. /1/ During the
course
of the proceeding PHS
stated that certain other legal grounds
cited in the disallowance letter as a
basis for the disallowance in fact
were not and that the Policy Statement
provision was the only legal
basis. (Respondent's Supplemental
Memorandum, pp. 8, 11, 12)
/2/ The Board's regulations do not
specifically provide for a "summary
decision" procedure but do provide that
we can take whatever steps
necessary to resolve a dispute. (45 CFR
16.13) The Board informed the
parties by telephone that if that if we
determined that it was
appropriate to decide that isue alone and if we found
against PHS on
that issue, the Board would remand the case to PHS with
appropriate
directions. The parties did not object to that
procedure. Since it
appeared that a resolution of teh threshold issue
in PHS' favor would
resolve the case, the Board concluded that a decision on
that issue was
appropriate. 3 PHS' own investigators recognized the potential
confusion
caused by "the multiple PHS foci . . . involved with the INMED
program .
. . (including) project officers of the two grants, grants
management
officials of the two grants, CPOD, Director, IHS, IHS Division
of
Program Operations, IHS Physician Recruitment Branch, (and)
HRA
Scholarship Program. . . ." (Appellant's File, AF11 p. 7)
MARCH 28, 1987