GAB Decision 498
Docket No. 83-164
January 18, 1984
Oglala Sioux Tribe;
Ballard, Judith; Garrett, Donald Teitz, Alexander
The Oglala Sioux Tribe (Grantee) appealed a disallowance by the
Acting Commissioner of the Administration for Native Americans (ANA,
Agency) of $20,196.28 claimed under several ANA grants. /1/
The costs include: $672.28 in tavel costs disallowed for lack of
adequate documentation; $2,111 in travel costs and $1,413 in equipment
costs disallowed for exceeding approved budgets and for lack of adequate
documentation; and $16,000 disallowed as funds not spent for grant
purposes. During the appeal, the Agency agreed to allow $1,260 in
equipment costs, reducing the amount in dispute to $18,936.28.
Based on our analysis of the record, we uphold the disallowance of
$16,825.28 and remand $2,111 to the Agency to consider whether it should
grant retroactive approval for travel costs exceeding the budget.
I. Breakdown of the disallowed costs.
1. $672.28 - Travel costs without adequate support documentation
(grant no. 80993(06))
Grantee initially stated that it needed further identification of
which travel costs were being disallowed for lack of documentation. The
parties identified the costs in dispute as Grantee-issued checks nos.
570, 589, and 020, totalling $672.28 (originally disallowed as $664
because no. 570 was listed as $256.63 instead of $265.63). See,
Confirmation of Telephone Conference, dated September 26, 1983. The
documentation Grantee submitted concerning those costs included copies
of the three checks, Tribe travel authorizations corresponding to each
check, and affidavits affirming that the person named on two of the
checks (nos. 570, 020) never received the checks nor (2) spent the
funds. In its appeal brief, Grantee said that it had taken the issue of
these costs "under advisement."
The Agency argued that Grantee has not sufficiently documented these
costs and, therefore, the disallowance should be upheld. We agree.
Grantee was presented with several opportunities to support its claim,
but Grantee did not submit any documentation or information to explain
how these funds were spent. The only information Grantee did submit
indicated that the money was not spent by the person to whom the checks
were written.
Regulations provide that to be allowable, costs must be reasonable
and must be supported with adequate documentation. 45 CFR 74.61 (1978).
Since Grantee has not been able to state how these funds were spent,
there is no basis to determine whether the costs were reasonable,
necessary, or otherwise allowable. Therefore, the disallowance must be
upheld.
2. $16,000 - funds not spent for grant purposes (grant no.
90-I-1868)
The parties agreed that $8,000 of the disputed amount was
misappropriated by an employee of Grantee and that the other $8,000 was
deposited into an Oglala Sioux account not related to this grant
program. Concerning the misappropriated funds, Grantee submitted
documentation to show that the person responsible had been prosecuted
and had begun to make restitution. The Agency said that none of the
misapproprated money had been returned to the Agency and that the Agency
would not agree to an informal repayment plan. The Agency argued that
the disallowance should be upheld because Grantee was responsible for
public funds entrusted to its use and care. Grantee did not present any
arguments why it should not have to repay these funds.
Concerning the $8,000 Grantee deposited in a bank account not related
to this grant, the Agency argued that since the funds were not expended
for grant purposes, the disallowance should be upheld.
The Board upholds the Agency's disallowance of these funds. Grantee
has provided no arguments or information to support its claim for these
costs. Funds which are misappropriated or which are deposited in
non-grant accounts have not been used for allowable grant expenditures.
Since Grantee admitted that these funds had not been expended for grnat
purposes, there is no basis to uphold the appeal.
3. $1,413 - equipment costs in excess of approved budget without
prior grantor approval and without adequate documentation (grant nos.
90-I-1501; 90-I-1868)
(3) During the course of the appeal, the Agency accepted
documentation for $1,260 in equipment costs ($949 in grant no.
90-I-1501 and $311 in grant no. 90-I-1868). Grantee presented no
information or documentation in support of the $153 which remained in
dispute in grant no. 90-I-1868. Therefore, we uphold the disallowance
of $153 in equipment costs.
4. $2,111 - travel costs in excess of approved budget without prior
grantor approval and without adequate documentation (grant no. 80993(
06))
The Agency disallowed these costs on two grounds. The Agency said
that it could not locate any documentation in Grantee's submissions
here, or in response to the audit, which would substantiate these costs.
See, Confirmation of Telephone Conference, dated September 26, 1983;
Agency's Brief, p. 2. The Agency also siad that Grantee failed to
obtain required prior Agency approval for these expenditures.
Grantee said that its documentation for these costs was submitted as
part of its response to the audit report. Grantee said that it had no
additional documentation to present. Grantee also argued that the
travel costs do not "represent over expenditures as per the exhibits of
the audit of J. Noonan and Company, page 7."
We find that the record does not support the disallowance based on
lack of documentation but we find that Grantee did not obtain the
required prior approval. Further, we remand this case to the Agency to
consider granting retroactive approval. Below, we discuss separately
our analysis of each of the two stated grounds for the disallowance.
A. Should the disallowance of travel costs be upheld because the
costs were not properly documented?
Based on our analysis of the record, we reject the disallowance on
the Agency's stated grounds that these $2,111 in travel costs were
undocumented because there is no indication in the audit report that the
documentation of these costs was insufficient. Further, the Agency has
not provided any arguments or evidence that the auditors were incorrect
not to question the documentation to these costs.
The auditors identified Grantee travel expenditures of $16,680, of
which they questioned the documentation for $3,944. Audit report, p.
15. /2/ As we explain below, the $2,111 disallowed does not appear (4)
to represent a portion of the $3,944 questioned by the auditors. /3/
Rather, the Agency reached the $2,111 figure because it incorrectly
determined that Grantee had spent $12,736 on travel when, in fact,
Grantee spent $16,680.
The Agency's disallowance appears to be based on the following: The
Agency found that Grantee's budget provided $8,500 in travel costs, and
that Grantee could expend 125% of that amount without prior Agency
approval. Therefore, the Agency allowed a total of $10,625 in travel
costs. The Agency explained that the $2,111 disallowed was derived by
subtracting the $10,625 which it said Grantee could expend without prior
Agency approval, from the $12,736 which the Agency said Grantee spent on
travel. Confirmation of Telephone Conference, dated September 26, 1983.
However, the Agency's determination that Grantee spent $12,736 on travel
is not supported by the audit report. See, Audit report, pp. 7, 23-25.
The report clearly stated that Grantee spent $16,680 on travel under
this grant. The Agency appears to have reached its figure of $12,736 by
subtracting the $3,944 in costs questioned by the auditors from the
total $16,680 which the audit report said Grantee spent. /4/
Therefore, we have determined that the disallowance does not
represent costs which the auditors questioned. Although the Agency may
disallow costs even if the auditors determine that the costs have been
properly documented, the Agency did not explain why it took such action.
The record does not indicate that the Agency in fact reviewed any of the
documentation which the auditors accepted for these costs. As support
for the disallowance, the Agency relied on Grantee's failure to document
these costs with its reponse to the audit. However, Grantee had no
reason to submit with its response to the audit documentation for (5)
costs not questioned in the audit report. Although Grantee said it had
submitted documentation for the $2,111 with its response to the audit,
the record indicates that Grantee submitted documentation of the costs
questioned by the auditors, not the $2,111 at issue here. Without
further information stating why the Agency rejected the documentation
reviewed and accepted by the auditors, there is no basis in the record
for upholding the disallowance on those grounds.
B. Should the disallowance be upheld because Grantee failed to
request prior approval for these expenditures?
Although we do not accept lack of documentation as a proper basis for
the disallowance of these costs, the Agency also disallowed the $2,111
because Grantee had not requested or received prior Agency approval for
these expenditures. Grantee claimed that the audit report, at p. 7,
showed that there was no overexpenditure but we find that Grantee's
reliance on the audit report is misplaced. The report had the following
figures for travel costs (at p. 7):
(budget) $8,500 (actual) $16,680 (variance) ($8,180)
The audit report clearly indicates that Grantee spent more than the
grant budget provided for travel. Grantee did not argue that it could
spend more than 125% in excess of budget without requesting prior
approval for additional expenditures. /5/ However, the Agency is not
precluded from granting approval retroactively. We have said in other
decisions that the Agency has the discretion to grant approval
retroactively and that while "the Board will not interfere when the
Agency appropriately excercises its discretion, the Agency must state
the basis for its decision and may not deny retroactive approval based
on unsubstantiated conclusions or on bases so insubstantial that the
decision fairly can be described as capricious." Economic Opportunity
Atlanta, Inc., Decision No. 313, June 24, 1982, p. 3.
Therefore, we remand this case to the Agency to determine whether it
should grant retroactive approval for costs Grantee expended in excess
of 125% of its approved travel budget. If retroactive approval is
denied, Grantee may appeal to the Board on the limited issue of whether
the Agency was justified in denying retroactive approval for these
costs.
(6) II. Conclusion.
Based on the analysis above, we uphold the Agency's decision to
disallow $672.28 claimed under grant no. 80993(06) and $16,153 claimed
under grant no. 90-I-1868. We remand for further Agency consideration
the disallowance of $2,111 under grant no. 80993(06). /1/ These costs
were disallowed following an audit of three HHS grants (and one
non-HHS grant) administered by the Oglala Sioux Tribe for periods endd
August 31 and September 30, 1979. The Agency disallowed $20,188 but
adjusted that amount to reflect an arithmetic error resulting from the
transposition of two numbers in the audit report. Throughout this
decision we will refer to the amounts as corrected, unless we indicate
otherwise. /2/ In discussing this portion of the disallowance,
we will refer to dollar amounts as they appear in the audit report,
without reflecting the adjustment of one of the amounts during this
appeal. /3/ The Agency apparently resolved all of the $3,944
except for $672.28 discussed at p. 1 of this decision. /4/ The
disallowance letter indicates that, of $33,084 in costs questioned by
the auditors, the Agency had accepted $16,043 based on documentation
Grantee submitted in response to the audit. Grantee had included
documentation in support of the $3,944 in travel costs with its response
to the audit. In the disallowance letter the Agency did not
specifically identify which questioned costs it had allowed, but of the
$3,944 in travel costs questioned, the Agency appears to have disallowed
only $672.28 for lack of documentation (discussed at page 1 of this
decision). The Agency did not disallow any of those costs for lack of
prior approval. The Agency may also wish to note that although the
auditors questioned $33,084 and the Agency said it accepted $16,043, the
Agency then disallowed $20,196.28. $20,196 plus $16,043 equals $36,239,
an amount greater than the $33,084 questioned in the audit report.
/5/ See, OHD Grants Administration Manual, Part L (1977) for discussion
of prior approval requirements.
NOVEMBER 14, 1984