GAB Decision 587
Docket No. 84-92
October 31, 1984
Our Free Will Baptist Church;
Garrett, Donald; Teitz, Alexander Settle, Norval
The Office of Human Development Services, Region II (OHDS),
terminated a Runaway and Homeless Youth grant awarded to Our Free Will
Baptist Church (church or Appellant). OHDS said Appellant failed to
submit documentation which OHDS requested as proof of Appellant's
tax-exempt status and Appellant's accountability for the grant-supported
project (called "Project Help").
In addition to reviewing the regular record, the Board held two
telephone conferences in this case, and allowed Appellant to make a
supplementary submission of documents after the second conference.
Based on our review of the record, we uphold OHDS's determination.
Background.
OHDS advertised the availability of grant funds under its Runaway
Youth Program in March, 1983. Appellant responded in May, 1983, with an
application for funding for a temporary shelter and drop-in center. The
application was signed by "Dorothea Cornwell, Trustee." OHDS brief,
pp.
2-3, and Exhibit 3. OHDS awarded a $70,000 grant to Appellant in
August, 1983. In February, 1984, apparently reacting to indications
that the role of the church vis-a-vis Project Help was unclear, an OHDS
representative asked Appellant for proof of non-profit status and for
more information about Appellant's relationship with Project Help. When
Appellant did not respond, OHDS asked again, threatening termination if
the information was not provided. Appellant then responded, but not to
OHDS's satisfaction, and OHDS terminated the grant. It appears that
little, if any, of the grant was spent.
As a result of two telephone conferences, the Appellant and OHDS
presented further evidence and argument to the Board, and the primary
issue in the case--whether Appellant was institutionally responsible and
accountable for the project--became clarified. The Appellant's case has
been presented primarily by Ms. Cornwell, who signed the grant
application.
(2) Non-profit status.
OHDS argued, and Appellant did not dispute, that the statute and
regulations applicable here specifically made only certain public and
non-profit private entities eligible for the kind of grant involved. 42
U.S.C. 5711; 45 CFR 1351.11.
OHDS asked for proof of non-profit status in February, 1984. OHDS
received no response, and reiterated the request in March, 1984.
According to the termination letter, neither this request nor subsequent
OHDS requests produced the information. Only when Appellant filed its
Notice of Appeal did it finally present a document: what appeared to be
an application for status as an exempt organization in New York.
Exhibit A to Notice of Appeal. After the Board gave Appellant further
opportunity to present the information, Appellant finally presented what
it called "a copy of our tax exempt certificate." Appellant's letter
of
September 19, 1984. This is not a document issued by New York or other
tax officials; it is a "certification," signed by Appellant's "church
clerk," that Appellant had received a State tax exempt organization
certificate, stating the number. In response, OHDS submitted an
affidavit of counsel that she had contacted New York State tax
authorities and was told that the exemption number had at one time been
issued to a different church at a different address; that the number in
any event was currently invalid; and that Appellant itself had not been
accorded status as a tax exempt organization. OHDS's letter of
September 27, 1984.
When the Board received this appeal, our preliminary reaction to
OHDS's complaint about non-profit status was that it was a technical and
rather insubstantial problem accompanying a more serious problem of
accountability (discussed below). After all, it seems likely that a
church from a major denomination, which Appellant appears to be, should
be eligible for tax exempt status. We therefore gave Appellant every
opportunity to overcome this objection. Despite repeated opportunities
at the Board and over the months earlier, Appellant has not done so;
indeed, Appellant's last submission of several in the case, dated
September 19, 1984, seemed to impeach, rather than support, its
credibility. * There is no substantial (3) basis for the Board to find
that OHDS was other than correct. Furthermore, Appellant's chronic
inability to deal with the issue adequately buttresses reasonable
concern about whether the level of Appellant's oversight capabilities
were appropriate to the responsibility for a $70,000 project.
Accountability for the grant.
The grant application contained a statement, signed by Dorothea
Cornwell, that the application had been authorized by the "governing
body of the applicant." OHDS, for reasons not fully developed in the
record here, apparently came to suspect that there was a question about
Appellant's commitment to and responsibility for the project.The record
shows that there was dispute within the church, and among persons
associated with Project Help, about the project. Tape of conference of
September 17, 1984.
OHDS's termination letter noted that, despite OHDS requests,
Appellant had provided no evidence that the church's governing body had
authorized Ms. Cornwell (who signed the grant application) to act on
behalf of the church, and that there was no record of any formal action
by the church authorizing the filing of the application.
With its Notice of Appeal, Appellant submitted what was described as
follows:
. . . enclosed you will find a copy of a letter, (exhibit C)
forwarded to the proper authorized committee heads on the appointment of
Dorothea Cornwell, Trustee of Our Free Will Baptist Church, as the
Designee on the development of the program known as Project Help, and
additionally, to serve as the Church's designee as the Project Help's
Program Coordinator; and finally, upon certification, to serve in the
official capacity as the liason between the Church (Our Free Will
Baptist) and Project Help.
This description raised as many questions as it purported to answer.
It implied separation between the church and Project Help, and
established Ms. Cornwell in the ambiguous role of a "liason," and
resolved nothing concerning the institutional responsibility of the
church itself for management, and fiscal oversight, of Project Help.
The letter which the quotation above described, Exhibit C to the Notice
of Appeal--dated February 22, 1984--was addressed to Ms. Cornwell from
the church's pastor, and stated:
(4) As per our many discussions regarding the new Project Help
program and our further involvement in the active development and the
commitment to the community and its youth, you are hereby officially
appointed designee to represent and act in this capacity for Our Free
Will Baptist Church.
As designee, we wish you render (sic) in the development of the
program and thereafter as its official representative of the Church in
the active program itself.
Again, the letter does nothing more than establish Ms. Cornwell as a
"representative of the Church," and says nothing at all about fiscal
responsibility for the project; indeed, one can read the letter as
fully consistent with a posture that the church had no substantive
responsibility at all for the project. This is important because it
confirms the clear inference one draws from a letter of March 5, 1984
from the church to OHDS, which stated in part:
In the development of the program, Project Help, which was submitted
and approved, the church, Our Free Will Baptist Church would have the
responsibility as prime sponsor. However, the program, as well as the
intent of all parties was that the financial vehicle for the operation
of said program would be assigned to another audit agency serving in the
capacity as a 'conduit' for the administration of all funds.An example
would be Opportunities for Income, a non-profit community based agency.
Therefore, all pertinent material for that purpose would be coming from
that agency.
OHDS brief, Exhibit 7.
The letter also stated that the church would serve the program as a
"drop in center" and "to that end would be modestly reimbursed
for this
expense." Id.
The foregoing documents show that not only is there a legitimate
question about the grantee's institutional commitment to the project,
there is affirmative evidence that the grantee never intended to be
financially accountable for the overall project.
The record also indicates that even if the church's pastor had
clearly given Ms. Cornwell authority to apply for federal grant funds
and bind the church to accountability for those funds--which he did not
clearly do--his authority to do so would have been questionable. The
Notice of Appeal stated that the pastor had (5) authority to "appoint
and approve" Ms. Cornwell as "the designee for Our Free Will Baptist
Church, in relation to Project Help." But OHDS noted (and Appellant did
not specifically contest) that the Constitution and Bylaws of the
church, adopted in 1974 (Exhibit 10 to OHDS's brief), clearly gave only
the church's Board of Trustees authority to manage monies of the church
and to "attend to all legal transactions of the Church." Id., Article
VI, Section 5. Appellant offered nothing showing that the pastor had
been delegated responsibility to commit the church to this project, much
less that he could appoint someone else to do so.
In response to the complaint that Appellant had not fully understood
what evidence OHDS sought, the Board in the second telephone conference
allowed Appellant to make a further submission to show its
responsibility for the project. In response, Appellant submitted three
handwritten pages of notes of a meeting in May, 1983, which Appellant
said were minutes written by the church clerk. The notes indicate there
was a discussion of Project Help, and that Ms. Cornwell had the "go
ahead to continue with the application for project help" because those
present wanted to "pursue this project and find out all we can about it
. . . ." Second (unnumbered) attachment to Appellant's letter of
September 19, 1984, p. 1. The minutes also indicate that Ms. Cornwell
was nominated and seconded as the church's agent regarding Project Help.
Id., pp. 2-3. The minutes state, "provisions were worked out in the
budget by herself (Ms. Cornwell) Joan and Mr. Jim Scripa, to (illegible)
nominally any expense the church might have as the drop in center for
their space and utilities." Id., p. 2.
OHDS responded that the Appellant's submission contains nothing to
indicate that this represents action by the Board of Trustees in
accordance with the church's bylaws, which required five members of the
Board to constitute a quorum. More important, while Ms. Cornwell was
designated to have responsibility for an application process, it is not
clear that those present understood or ever intended that the church
would become fully financially responsible for Project Help. The
language of the minutes suggests that those present may have thought
that the application implied a preliminary stage before actual
commitment by the church; certainly, the language quoted above
indicates that those present primarily focused on financial
responsibility only for a "drop-in" portion of the program, just as
Appellant's March, 1984 letter indicated. In short, the minutes do not
show the church's institutional commitment to the full project.
Indeed, one may infer from the overall circumstances of this case
that it involves a rather basic failure of communication. It appears
that the church may never have intended to assume (6) responsibility for
that which the church is now told it has failed to be responsible for:
the overall management and fiscal responsibility for Project Help.
Indeed, the record suggests that from the beginning, everyone connected
with the church intended the church's role to be minimal--a conduit of
funds to others, and a provider of "drop-in" services. Whatever the
case, we find that OHDS reasonably determined that Appellant had failed
to prove its overall financial and managerial responsibility for the
project, notwithstanding Ms. Cornwell's signature on the grant
application, and we uphold the termination. * On October 18, 1984, over
two weeks after the Board had received OHDS's submission with the
affidavit, Appellant's representative called the Presiding Board Member,
indicating by her preliminary comments that she wished to discuss the
Agency's submission. The Presiding Board Member told her that the Board
would not receive ex parte comments on the substance of the case, and
that she should submit any comments she wished to make in writing
immediately to the Board and the Agency. The Board received no
comments.
MARCH 19, 1985