DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: University of North Dakota
Docket No. 86-116
Decision No. 808
DATE: November 17, 1986
DECISION
The University of North Dakota (grantee or appellant) appealed
the
decision of the Public Health Service (PHS or respondent) to
disallow
$38,118 in salary and associated fringe benefit costs charged to a
PHS
grant during the period March 1980 to June 1982. PHS based its
decision
on grounds that the salary arrangement between the grantee and
a
National Health Service Corps doctor violated a PHS Grants
Policy
Statement provision specifying conditions under which salary payments
by
a grantee to a federal employee are allowable.
We uphold the disallowance because PHS reasonably concluded that
the
salary arrangement was unacceptable since the duties covered by
the
grant payments were also within the scope of the doctor's
federal
employment in the National Health Service Corps. As discussed
below,
however, we do not here completely adopt other aspects of the
PHS
position in this case. In particular, we think that PHS
incorrectly
implied that the grantee and doctor knowingly engaged in
improper
conduct.
This decision is based in the written record, including documents filed
in
an earlier case (Docket No. 84-208), which the Board remanded to PHS.
It is
the PHS decision on that remand that is at issue here.
Background
The costs in question here were charged to a Health Careers
Opportunity
Program (HCOP) grant awarded to the grantee 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 are complicated because more than one subagency of PHS
provided
support to the INMED Program. The essentials are: (1)
two
subagencies of PHS provided grant funds to the program and one
also
provided a National Health Service Corps (Corps) physician; (2)
the
physician was not a Corps officer at the time the grantee
requested
approval of her employment as project director under the HCOP
grant; and
(3) the grantee did not subsequently inform HCOP officials that
the
physician had become a Corps doctor or inform Corps officials that
the
physician would be receiving a salary under the HCOP grant in
addition
to her Corps salary. When - 2 -
HCOP officials learned of this in 1982, PHS sent a team to investigate
the
matter. This team found that, while the doctor should have
obtained
prior approval for the arrangement, there was no fraud involved and
no
improper dual compensation. Nonetheless, HCOP grant officials
later
determined to disallow all salary and fringe benefits paid over
and
above what the doctor was receiving under her Corps assignment.
This
determination was later upheld by a PHS review committee and appealed
to
this Board.
Although PHS first focused on statutory and regulatory provisions on
dual
compensation and conflict of interest, PHS later asked the Board to
rule on a
single question which PHS contended was dispositive of the
case:
whether the undisputed fact that grantee did not obtain approval
from PHS
prior to making the salary payments from grant funds
established that grantee
had failed to comply with a provision in the
PHS Grants Policy
Statement. That provision reads as follows:
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.
(1976) 1/
In University of North Dakota, Decision No. 707, November 22, 1985,
the
Board decided the issue posed by PHS. The Board rejected the
grantee's
argument that PHS had previously approved the salary
arrangement. While
noting that the bureaucratic structure within PHS
was confusing, the
Board found that neither subagency had full knowledge of
the situation.
The Board further ruled, however, that the provision did not,
as PHS had
alleged, preclude PHS from granting approval retroactively.
On remand,
PHS considered the matter and issued a second decision. That
decision
again disallowed the salary payment. (See Respondent's May 30,
1986
decision)
1/ The grantee did not dispute the applicability of this
provision.
Moreover, as discussed at page 2 of the Board's decision remanding
the
initial PHS disallowance, the provision was a term of the grant.
(See
University of North Dakota, Decision No. 707, November 22, 1986)
- 3 -
PHS determined that item 3b of the applicable Grants Policy
Statement
provision contains three separate conditions, all of which must be
met
for the salary payment to be allowable:
1. The employee must be performing the work during
nonduty
hours, or on leave-without-pay status, or be on detail to
a
state or local government; and
2. Reimbursement must be in accordance with terms
mutually
acceptable to the grantee institution and PHS; and
3. All parties concerned must be assured that there is
no
possibility of dual compensation or a resulting conflict
of
interest. 2/
PHS concluded that it could not now approve the salary payment because
the
payment did not meet any of these conditions. PHS noted that
failure to
meet any one of the conditions was a sufficient basis for
the
disallowance.
The grantee appealed this determination to the Board, but failed to
submit
its brief in a timely manner. PHS moved to dismiss the appeal.
The
Board denied this motion. Since grantee had not shown good cause
for
its delay, however, the Board determined to proceed to decision
based on the
record previously made in this case, including the
grantee's submissions in
the earlier proceedings. (See Board's Ruling
dated October 16,
1986)
There, the grantee presented a number of arguments relevant here about
why
salary payments should be allowed. Basically, the grantee argued
that
the Corps doctor performed numerous duties that justified the
salary payment,
that the salary arrangement did not constitute dual
compensation under
applicable law, that the PHS investigative report
found no knowing improper
conduct, and that the doctor's services
promoted the goals of the INMED
Program, as shown by the success of the
program and awards given to the Corps
doctor for her outstanding
service.
Discussion
While we do not here adopt PHS' rationale completely, we are
constrained
ultimately by the terms of the PHS Grants Policy Statement
provision,
which applies here and which conditions allowability of PHS
grant
payments to a federal employee on the
2/ PHS specifically noted that item 3a did not apply because grantee
was
not a federal institution (but rather a state agency).
(See
Respondent's May 30, 1986 decision, p. 3) Grantee did not dispute
this
or allege that the payment was allowable under the terms of 3a.
- 4 -
reimbursement being acceptable to PHS and on PHS being assured that
there
is no dual compensation or conflict of interest. This affords PHS
with
discretion to apply its programmatic expertise, and we will not
substitute
our judgment for that of PHS so long as the PHS decision is
reasonable.
Based on our review of the record, we have determined that the
conclusion
by PHS not to approve the arrangement has a basis sufficient
to support PHS'
judgment as a reasonable one. One of the key premises
of the grantee's
arguments concerning the reasonableness of paying the
doctor from grant funds
is the allegation that she was performing duties
in addition to those she was
required to perform under her Corps
assignment. PHS found that these
"additional duties" were within the
scope of the assignment. This
finding is sufficiently supported by the
record.
The grantee stated that the doctor's Corps assignment was to be
project
director for the INMED Program and to provide medical services
to
patients at various underserved reservations in North Dakota and
to
INMED students. The grantee further stated that the doctor was
assigned
by the University to be Instructor of Family Medicine and
INMED
Director. (Appellant's brief dated April 30, 1985, p. 1) In
support of
its argument that the doctor performed duties separate and
distinct from
her Corps assignment, the grantee listed the following as
duties that
the doctor performed in addition to her Corps assignment:
lecturing at
University classes, liaison on topics concerning Indian
health,
University tribal activities, curriculum development for the
University
to further the goals of Indian students, representation of
the
University at various meetings, dealing with minority issues and
Indian
health issues, and services as Minority Student Affairs Officer for
the
American Association of Medical Colleges. (Id., p. 5) PHS
concluded
that all of these duties were within the scope of her Corps
assignment
based on various descriptions of the duties under her
assignment.
(Respondent's May 30, 1986 decision, pp. 3-4) While PHS provided
no
analysis in support of this conclusion, we agree with PHS that most
of
the so-called "additional duties" could fit within her assignment.
For
example, the objectives of the assignment as stated in the
agreement
between the doctor, the grantee, and the Corps were described
as
follows:
The major objective is the management of the overall
operation,
administration, and program development
of the INMED Program,
including recruitment and
working with staff and students.
Secondary
objectives are to communicate at the National,
regional
and local levels on Indian health-related
activities. The
development of a quality
clinical educational program at the
undergraduate
and graduate levels, with additional attention
focused on the service aspects of the program. (Respondent's
May
30, 1986 decision, Att.3, p. 1)
- 5 -
This is extremely broad and appears to encompass the duties described
by
the grantee, such as lecturing in University classes,
attending
meetings, and developing curriculum. 3/ Other descriptions of the
Corps
assignment are similarly broad. (See Respondent's May 30,
1986
decision, pp. 3-4)
Moreover, the flaw in grantee's argument is that, to the extent the
duties
may have fit more with her role as an instructor with the
University, rather
than with her role as project director of INMED, they
are not the duties for
which she received compensation under the HCOP
grant. The grantee's own
reports indicate that the payment of grant
funds was for 50% (and later 30%)
of her salary as project director.
(See Respondent's Brief, August 9, 1985,
Att.lO; see also Appellant's
Brief dated April 30, 1985, AFll, p. 2) Her
Corps assignment also was to
serve as project director, and there is no
indication in any of the
documents related to the assignment that she was
expected to work only
as a half-time project director rather than a full-time
project
director.
Thus, we think that PHS reasonably determined that it would not
approve
the salary arrangement where grant funds would be used to reimburse
the
doctor for activities covered by her Corps assignment.
In reaching our conclusion here, we have considered grantee's
argument
(which PHS failed to address) that the PHS investigative report
found no
dual compensation. That report did state that the
investigators did not
feel that the doctor's activities "constituted improper
dual
compensation." (Appellant's Brief dated April 30, 1985, AFll, p.
4
(emphasis added)) In context, however, we read this finding
as
indicating no more than the investigators' belief that no
fraudulent
intent was involved, a finding with which we concur. The
investigators
expressly viewed their role as determining whether there was
any
evidence of "impropriety, fraud, [or] any attempt to hide
the
information that [the doctor] was receiving additional compensation
to
her salary." (Id.)
We also note that the grantee argued that the salary arrangement did
not
fall within the meaning of "dual compensation" in the
statutory
provision originally cited by PHS as a basis for the disallowance,
5
U.S.C. 5534. The grantee's arguments on this point were premised on
its
view that the compensation was for duties separate and distinct from
her
Corps assignment. As discussed above, the record does not support
this
view. Moreover, both the grantee and the PHS investigative team
viewed
the "dual compensation" issue as involving the question of whether
the
doctor received payments directly from more than one federal source.
3/ Although the assignment agreement was not signed until a year after
her
assignment began, there is no allegation or evidence that the
agreement did
not reflect the duties and objectives from the beginning
of the
assignment. - 6 -
Even if the payment from the grant funds does not fall within
this
technical definition of "dual compensation," however, PHS
could
reasonably determine that the terms of reimbursement were not
acceptable
to it.
While the grantee argued that extra pay was reasonable, considering
the
low level of pay the doctor received under her Corps commission,
the
amount her predecessor had received as project director, and the
amount
of time that she devoted to her duties, PHS reasonably was
concerned
that the extra pay was simply not a necessary grant cost if she
could
have been required to perform the duties under her Corps
assignment.
Moreover, while the Corps salary does seem low for the duties
performed,
the purpose of the Corps assignment was in part so that the
doctor
could, in effect, pay back PHS for scholarship support she had
received.
Thus, it is to be expected that a Corps salary would be lower than
a
civilian salary.
The record does support the grantee's position that the doctor
performed
her services well and that neither the grantee nor the
doctor
intentionally engaged in improper conduct. Moreover, there is
no
evidence that there was in fact any conflict of interest in
the
situation, and it appears that all of the doctor's activities
were
consistent with the project goals. We are concerned that the
PHS
decision on remand did not fully consider the grantee's arguments or
the
findings of the PHS investigative team regarding these points. In
light
of the clearly applicable PHS Grants Policy Statement
provision,
however, the grantee simply could not rely on the extra salary
payments
being considered allowable charges to grant funds without PHS
approval
of the arrangement. Since PHS reasonably denied that approval,
the
grantee is not entitled to the funds and must return them.
Conclusion
For the reasons stated above, we uphold the PHS decision to
disallow
$38,118 as a charge to HCOP grant funds.
________________________________ Donald F. Garrett
________________________________ Alexander G. Teitz
________________________________ Judith A. Ballard
Presiding
Board