SUBJECT: East Bay Perinatal Council

DECISION

East Bay Perinatal Council (East Bay) appealed the August 28, 2000 determination of the Commissioner, Administration on Children, Youth and Families, Administration for Children and Families (ACF), disallowing $241,892 charged by East Bay to a Comprehensive Child Development Program grant awarded for the year ending September 28, 1995. Of this amount, $91,892 was paid in November 1994 for work billed as "leasehold improvements" at the site of East Bay's child care center. The remaining $150,000 was paid in April 1995 for costs associated with the relocation of East Bay's child care center, which was housed in a portable building, to a new site.

ACF initially disallowed these costs on the ground that East Bay failed to obtain prior approval for the expenditures in accordance with the requirement in OMB Circular A-122 for prior approval of capital expenditures for improvements to land, buildings or equipment which materially increase their value or useful life. ACF later cited additional grounds for the disallowance, including that the costs were not reasonable, resulted in a change in the scope of work for which prior approval was not obtained, and were not included in the approved budget.

On appeal, East Bay disputed that the costs were properly classified as capital expenditures requiring prior approval. In addition, East Bay disputed the other grounds for the disallowance.

As discussed in detail below, we conclude that some of the disallowed costs were not properly categorized as capital expenditures, so that the disallowance of those costs for lack of prior approval was not valid. We also conclude that, while many of the disallowed costs constituted capital expenditures which required prior approval, ACF should have approved those costs on a retroactive basis. We further conclude that the disallowance was not warranted on any of the other grounds advanced by ACF. Accordingly, we reverse the disallowance in full.⁽¹⁾

Factual and Legal Background

East Bay is a nonprofit organization that provides perinatal services to eligible recipients in the San Francisco Bay Area through the use of a network of case management service agencies and an in-house staff.

These services are funded by various federal and state grants and donations by private organizations. ACF Br. dated 4/5/01, Ex. 2, at 6. East Bay received a grant under the Comprehensive Child Development Program for a five-year "Oakland Birth to School Project" beginning September 29, 1992. ACF Br. dated 4/5/01, Ex. 1. An award of $1,752,000 in federal funds was approved for the budget period September 29, 1994 through September 28, 1995, the period in question here. Id.

Comprehensive Child Development Program grants were awarded pursuant to the Comprehensive Child Development Act, formerly at 42 U.S.C. � 9881-9887. The Act was repealed with respect to recipients of federal financial assistance under the Head Start Act effective October 1, 1994. Section 645A of the Head Start Act permitted continued funding through 1997.

An audit report dated June 5, 1996, prepared by East Bay's independent auditor for the year ended June 30, 1995, stated as one of its findings that East Bay "did not obtain written permission prior to charging major leasehold improvement expenditures to the programs. Prior approval for major leasehold improvement expenditures is required by OMB Circular A-122." ACF Br. dated 4/5/01, at 2, and Ex. 2. This audit report was referred to the Office of the Inspector General (OIG) in the Department of Health and Human Services for its review of the findings. On December 19, 1996, OIG recommended a disallowance of $241,892 based on the finding quoted above. ACF Ex. 3.

By letter dated August 28, 2000, ACF notified East Bay of its disallowance of $241,892. The disallowed costs were incurred in connection with East Bay's child care center, which was housed in a portable building purchased by East Bay in 1993 with federal funds awarded for that year. The portable building was first located on leased property on Brann Street. In 1995, East Bay moved the portable building to leased property on 26^th Avenue. East Bay asserted, and ACF did not dispute, that the move was necessary because the Brann Street site was located too close to other sites to properly serve the geographic areas in which services were to be provided. The disallowance letter referred to the costs identified on invoices dated September 27, 1994 and April 11, 1995 (attachments to 8/28/00 letter). The first invoice, for "leasehold improvements," lists the following cost items and amounts incurred at the Brann Street site:

o replace damaged sewer line to main - $28,998
o add planter boxes and landscape around the center -
$11,588
o purchase and install new HVAC to building (2 units) -
$15,134
o add a 200 AMP panel to service child care center and run 2 inch conduit from the church to child care center - $23,655
o build additional storage for outside toys - $3,164
o remove sand pit and asphalt over area - $1,890
o remove damaged asphalt in play area - $6,388
o trim tree back away from the play area and remove debris - $1,075

The second invoice totalling $150,000 lists the following cost items incurred at the 26^th Avenue site but does not contain a breakdown of the costs:

o move portable building from Brann Street site to 26^th Avenue site
o cap off underground plumbing and electrical at Brann Street site
o remove play structures from Brann Street site and reinstall at 26^th Avenue site
o anchor down portable building and level
o hook up new sewer line and water and electrical meters to portable building at 26^th Avenue site
o purchase and install new fence around play area

ACF's disallowance letter cited as authority for the disallowance OMB Circular A-122, Att. B, � 13.d. The version of the OMB Circular in effect during the period in question (published June 27, 1980) provided that--

Capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior approval of the awarding agency.⁽²⁾

According to the disallowance letter, East Bay "failed to seek and obtain Federal prior written approval for relocating the Brann Street facility." Letter dated 8/28/01, at 3. The disallowance letter also asserted that--

Prior Approval would have been denied had the grantee requested it. ACYF expended about $205,000 in renovating the facility in 1993. Had ACYF known that the facility would be moved about 1 year later at a cost of $241,892, it would not have granted prior approval. Such approval would not have been cost effective. In all probability the facility would have been sold and the proceeds applied to a new facility. There was no budget request for such a move nor was there any justification in the file to support such a move.

Id.

In the proceedings before the Board, ACF clarified that its intent was to rely on OMB Circular A-122, Att. B, � 13.d., as the basis for disallowing both the costs billed as leasehold improvements on the first invoice and the costs associated with the relocation of the child care facility billed on the second invoice. ACF also cited the following additional authorities for the disallowance:

- OMB Circular A-122, Att. A, � A.2.a. and � A.3. The former provides that, to be allowable under an award costs must "[b]e reasonable for the performance of the award and be allocable thereto . . . ." The latter provides in pertinent part that-

A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.

- 45 C.F.R. � 74.25(c)(1) (1994), which provides that recipients of nonconstruction awards "shall obtain prior approvals from the HHS awarding agency for . . . [c]hange in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval)."

- OMB Circular A-122, Att. A, � A.b.2, which provides that, to be allowable under an award, a cost must "[c]onform to any limitations or exclusions set forth in these principles or in the award as to types or amount of cost items."⁽³⁾

Whether the costs constituted capital expenditures requiring prior approval.

ACF took the position that all of the cost items on the two invoices were subject to the requirement for prior approval of capital expenditures in OMB Circular A-122, Att. B, � 13.d. As indicated above, capital expenditures require prior approval where they are made for improvements that materially increase the value or useful life of land, buildings or equipment. The Board therefore requested that ACF explain how each cost item on the invoices met this criterion, and scheduled an informal conference to permit ACF to address this and other matters. Board letter to parties dated 4/30/01. In response, ACF asserted generally that "common sense applies here," and that the costs fell within the definition of such expenditures because of their size, scope and significance. Tr. at 13, 18. ACF also asserted that six different "experts" characterized these costs as capital expenditures requiring prior approval: East Bay's first and second auditors, two grants officers in ACF, an independent CPA firm which performed an on-site review of East Bay under a contract with the Inspector General of the Department of Health and Human Services, and Region X personnel who disallowed similar costs under another grant to East Bay. East Bay, on the other hand, contended that all of the cost items simply made the sites on which the portable building was located suitable for operation of a child care center and did not increase the value or useful life of either the land or the portable building itself. East Bay submitted a letter from a CPA who stated that he had reviewed the invoices and that-

there [has] been some misclassification of certain of the disallowed costs. Such items as . . . landscaping, tree-trimming etc. would ordinarily not be classified as leasehold improvements. Additionally, since I am informed that [East Bay's] maintenance obligations under the leases included responsibility for the sewer line, electrical, and playground maintenance, the costs for sewer line repair, electrical corrective work and replacement of asphalt areas appear to be in the area of maintenance and repair instead of leasehold improvements.

Letter from Henry C. Levy dated 9/5/01, at 2. The letter continued:

Although installation of HVAC would ordinarily be classified as [a] leasehold improvement, since the HVAC in this instance was installed to a portable modular building which could be and was, in fact, moved, it might be more properly categorized as capitalized equipment rather than a leasehold improvement. Such equipment does not improve the useful life of the original site, of the land or buildings attached to it. For the same reason, the cost of . . . moving the portable building should not be considered an improvement to the original site that increased its value or useful life.

Id.

Even assuming that size, scope, and significance would be factors in determining whether a disputed cost item was for a capital expenditure under � 13.d., ACF did not explain how these factors applied here other than to rely on the characterization of the costs as capital expenditures by various "experts." In spite of specific directions to explain why each cost item was a capital expenditure, ACF did not give any underlying rationale for the opinions of its purported experts.

On the other hand, we agree with the CPA retained by East Bay that the following cost items on the first invoice constituted maintenance and repair costs that are allowable without prior approval: replacing the damaged sewer line, removing the sand pit and asphalting over the area, and replacing damaged asphalt in the play area. As the CPA indicated, this classification is consistent with the terms of the lease for the Brann Street site, which required that East Bay "maintain all of the premises in a tenantable condition as part of the consideration for rental . . . ." East Bay Ex. 9, at 2, �6.

We also see no reason to doubt the CPA's opinion that tree-trimming and landscaping are not generally regarded as leasehold improvements, i.e., capital expenditures.

We disagree with the CPA's opinion that the purchase and installation of the HVAC units did not involve a capital expenditure within the meaning of � 13.d. The CPA stated that this cost item would constitute such an expenditure but for the fact that the building was portable. East Bay admitted that the HVAC units continued to be used in the building after it was moved, however. Thus, the fact that the building was portable was immaterial. Accordingly, prior approval was required for this cost item.

We also conclude that the 200 AMP panel and 2-inch conduit were capital expenditures within the meaning of � 13.d. The CPA did not address this cost item. It appears that this cost item involved adding electrical capacity to the church and using the additional capacity to operate the HVAC units in the portable building. This increased the value of the church, which retained the additional electrical capacity even after the portable building was moved. Accordingly, prior approval was required for this cost item.

In addition, we conclude that building storage for outside toys was a capital expenditure within the meaning of � 13.d. The CPA did not address this cost item. Although its immediate purpose was to make the site suitable for East Bay's child care center, this cost item might have increased the value of the land for future tenants as well. (If in fact the storage was so specialized in nature as to not be of value to a future tenant, it was East Bay's responsibility to document this.) Accordingly, prior approval was required for this cost item.

Moreover, despite the CPA's opinion that moving the portable building from Brann Street to 26^th Avenue did not involve a capital expenditure within the meaning of � 13.d, we find that all of the work items on the second invoice in the aggregate affected the value or useful life of the portable building. These work items represented different steps in one project and must be evaluated together. Accordingly, these work items were for capital expenditures for which prior approval was required.

As discussed in the next section, however, we conclude that, although prior approval was required for some of these costs, ACF's disallowance was not warranted since ACF should have granted retroactive approval.⁽⁴⁾

Whether ACF's decision not to grant retroactive approval of capital expenditures was arbitrary and capricious.

It is well-established that retroactive approval may be granted for transactions that would have been approved had the grantee requested approval in advance. The Board has held that in making its determination on a request for retroactive approval, the federal agency has considerable, but not completely unbounded, discretion. The federal agency may consider all relevant factors in deciding whether ultimately to grant retroactive approval where prior approval was required but not obtained. Although the Board will not interfere when the agency appropriately exercises 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. Enterprise for Progress in the Community, Inc., DAB No. 1558 (1996), and authorities cited therein.

In the case now before us, ACF declined to grant retroactive approval on the ground that the costs were unreasonable. As discussed in the next section, however, ACF failed to substantiate this conclusion, while East Bay provided evidence supporting a contrary conclusion. Accordingly, we conclude that ACF's decision not to grant retroactive approval on the ground that the costs were unreasonable was arbitrary and capricious.

Whether the costs were reasonable.

As noted above, ACF declined to grant retroactive approval of the disallowed cost items on the ground that the costs were not reasonable. ACF also advanced as an independent basis for the disallowance that the costs were not reasonable for the performance of the award, as required by OMB Circular A-122, Att. A, � A.1.a.

In support of its position, ACF argued that since the authority for Comprehensive Child Development Program grants was due to expire in 1997, it would not have been "a reasonable or prudent use of the funds to initiate capital improvements and renovations of this magnitude for a project that was ready to expire . . . . [A] major expenditure, which this was, of Federal funds . . . for such a short-lived project . . . fails the reasonableness test." Tr. at 96. ACF also asserted that the costs were not reasonable because in 1993, the prior grant year, East Bay had expended $205,000 in federal funds for renovations at the Brann Street site. ACF Br. dated 7/13/01, at 4. ACF also indicated in its disallowance letter that the costs were unreasonable because it would have been more prudent to sell the portable building and rent another building than to move the portable building.⁽⁵⁾

We find that ACF's denial of retroactive approval on these grounds was arbitrary and capricious.⁽⁶⁾

First, ACF's reliance on the fact that the grant program was ending when the expenditures were made is clearly unwarranted. East Bay asserted, and ACF did not dispute, that discretionary grants such as the one in question here are awarded with the intent that services to the target population will be continued after the program funding ends. Moreover, in the same document in which ACF first made the point that the grant was ending, ACF acknowledged that the portable building had been transferred to East Bay's successor grantee. ACF Br. dated 4/5/01, at 3-4, 5, n.2.

Second, ACF provided no basis whatsoever for its determination that the costs were unreasonable in light of East Bay's expenditures for the Brann Street site in the prior grant year. (ACF did not challenge the amount of individual cost items as unreasonable.) In contrast, East Bay performed a detailed cost analysis. East Bay noted that, of the $205,000 expended in 1993, $159,433 was used to purchase the portable building and improvements to it, and that $15,134 of the $91,892 billed on the first invoice was expended for the HVAC units. East Bay maintained that the $174,567 ($159,433 plus $15,134) expended for the portable building itself should not be considered in determining the reasonableness of the amount expended for improvements to the Brann Street site. Dividing the $122,325 of remaining expenditures (i.e., the sum of $205,004 and $91,892, minus $174,567) by 24 months, East Bay calculated that the monthly cost of its occupying the Brann Street site was $5,096 (excluding the rental paid for the leased land). East Bay asserted that this amount was reasonable "[p]articularly since these costs were attributable in part to maintenance and repair that should have been done in previous grant periods, and in view of [East Bay's] negotiation of reduced rent in return for assuming the obligation for maintenance and repairs under the lease." East Bay Br. dated 2/28/01, at 6.⁽⁷⁾ East Bay also calculated that the monthly cost of occupying the new site at 26^th Avenue was $1,923 (excluding the rental paid for the leased land). It arrived at this amount by dividing the $150,000 billed on the second invoice for costs associated with the relocation of the portable building by the 78 months it stated the site had been used to date (by both East Bay and the successor grantee). East Bay Br. dated 2/28/01, at 6-7, and Ex. 6. East Bay asserted that "[t]hese calculations result in amounts that are patently reasonable for childcare facilities in the San Francisco Bay Area." East Bay Br. dated 8/13/01, at 2.

To further support its position, East Bay provided a letter from a licensed real estate broker who stated that he had "served as a consultant for non-profit organizations regarding various real estate leasehold and other transactions and with regard to modular buildings in the San Francisco Bay area and other areas." Letter from Ira K. Glasser dated 8/8/01 (East Bay Ex. 7). Mr. Glasser's opinion was that the expenditures in question, when "spread over the actual years of use as shown in the [East Bay] brief, . . . are reasonable in relation to the value received by the program for which they were made." Id. ACF did not challenge the validity of East Bay's calculations of the monthly expense of occupying the two sites in question.⁽⁸⁾

Third, ACF offered nothing to support its position that it was unreasonable for East Bay to move the portable building to the 26^th Avenue site instead of selling it and leasing another building. East Bay, on the other hand, submitted a letter from the executive director of the Tri-Cities Children's Center, who indicated that he had had 22 years of experience with childcare facilities, including some comprised of leased land with modular buildings on them. Letter from Paul Miller dated 8/9/01 (East Bay Ex. 8). Mr. Miller stated that, in his experience, "both the use of a modular building on a single site and moving a modular building for use at a new site is cost effective with respect to these facilities." Id. Mr. Miller further stated:

Although the cost of relocating a modular is substantial, the use of an already-owned modular unit on land usually still results in saving over a lease of land with a building due to the cost of the specialized improvements needed for a childcare facility. Another factor that enters into the decision as to whether it is prudent to move a modular building and continue its use, versus selling it and leasing an entirely new facility, is that the salvage value of a modular is negligible even shortly after it is purchased.

Id. This evidence clearly shows that East Bay acted reasonably in moving the portable building from the Brann Street site to the 26^th Avenue site instead of selling the portable building and leasing another building.

We therefore conclude that ACF's determination that the disallowed costs were not reasonable was based on unsubstantiated conclusions. Accordingly, ACF's denial of retroactive approval was arbitrary and capricious.

Whether the costs resulted in changes in the scope or objectives of the project for which prior approval was required.

ACF took the position that prior approval of the cost items was required pursuant to 45 C.F.R. � 74.25(c)(1) (1994) because they resulted in changes to the scope or objectives of the approved project. The HDS GAM states that changes to the grant scope or objectives "may result from a significant alteration of the approved project activities, change in the direction of the project, the types of services delivered, the number of beneficiaries to be served or training provided." HDS GAM, pp. 1-13 - 1-14. According to ACF, there was a change in the scope of the grant as defined in the HDS GAM simply by virtue of the fact that East Bay spent a significant amount of funds for costs not included in its approved budget. ACF asserted that this necessarily diverted a significant amount of the $1,752,000 in federal funds awarded for the grant from the approved programmatic activity of providing services to children. Both parties agreed, however, that there was no information in the record regarding whether program services were in fact affected by the expenditures in question, including whether the number of children served remained the same. Tr. at 87-88.

We note preliminarily that the amount of funds used for costs not in the approved budget may not have been as large as ACF suggested. East Bay's grant application included a budget line item of $153,314 for maintenance, utilities and rent. ACF Br. dated 7/13/01, Ex. S-1, 6^th page. East Bay asserted that the full amount billed on the first invoice--$91,892--fell within this budget category because it was expended pursuant to East Bay's obligation under the lease for the Brann Street site to perform all maintenance and repairs. Tr. at 63. In response, ACF stated that the costs could not properly be considered rental costs because ACF would not have approved the lease had it known that the lease obligated East Bay to incur the types of costs in question here. However, ACF did not cite any authority requiring approval of a lease. ACF also questioned whether the $153,314 appearing in the grant application was part of the approved budget, noting that an applicant may be asked to provide a revised budget after ACF does a cost analysis of the proposed budget in a grant application. However, the $153,314 budget line item in East Bay's grant application was approved by ACF since the total budget amount proposed by East Bay in its application was $1,752,000, the same as the total ultimately awarded. In addition, a budget negotiation sheet signed by ACF officials indicates that no changes were made in the budget proposed by East Bay. ACF Br. dated 7/13/01, Ex. S-1, 1^st page.

In any event, we are not persuaded that the use of funds for costs not included in the approved budget necessarily establishes that there was a change in the scope or objectives of the grant. Changes in the amounts of an approved budget are addressed in a separate section of the HDS GAM (discussed in the next section). The focus of section 74.103(b), as interpreted in the HDS GAM, is on programmatic changes. ACF did not make any finding as to what type of programmatic changes resulted from the expenditures in question here. In the absence of such a finding, East Bay cannot reasonably be expected to identify all possible programmatic changes and prove that none occurred. Clearly, there could have been circumstances in which programmatic changes did not result from the changes in the approved budget, e.g., if the move to the 26^th Avenue site resulted in cost savings in other areas for which East Bay had budgeted funds. Accordingly, we find that prior approval was not required pursuant to section 74.25(c) since there is no evidence in the record of programmatic changes that changed the scope or objectives of the grant.

Whether the costs failed to conform to limitations set forth in the award as to types or amount of cost items.

OMB Circular A-122, Att. A, � 2.b., requires that costs conform to any limitations set forth in the award as to types or amount of cost items. ACF took the position that the expenditures in question were unallowable under this provision because they "were not included in grantee's application nor in the actual grant award that specifically identified the approved cost categories." ACF letter dated 5/25/01, Attachment.

As discussed in the prior section, some of the disallowed costs appear to have been in the proposed budget in the grant application that was approved as part of the grant award. To the extent that this was not the case, however, this does not establish that East Bay failed to comply with the OMB Circular provision on which ACF relied. The HDS GAM states in pertinent part:

The approval of a grant or subgrant budget constitutes prior approval for the expenditure of funds for specific items included in that budget. Except as provided below, HDS' recipients may make revisions between and among the object class categories within the total direct costs budget of the project, provided that the funds are used for allowable costs of the project.

HDS GAM at 1-12. The exceptions to the general rule that a grantee is permitted to transfer costs among budget categories as long as the total cost of the award is not exceeded include those costs for which prior approval is required under the applicable cost principles, as modified or supplemented by the HDS GAM. We previously concluded, however, that ACF should have granted retroactive approval of the disallowed costs to the extent that they were subject to the prior approval requirement in OMB Circular A-122, Att. B, � 13.d.⁽⁹⁾ Thus, pursuant to the general rule, East Bay could have transferred costs among approved budget categories (which included the general categories "Contractual" and "Other"). Under these circumstances, it is simply irrelevant whether the disallowed costs were included in East Bay's application or in the grant budget as originally approved.

Conclusion

For the reasons discussed above, we reverse the disallowance in full.

Cecilia Sparks Ford

Marc R. Hillson

M. Terry Johnson
Presiding Board Member

1. East Bay argued that the disallowance should be reversed because ACF benefitted from the continued use by East Bay's successor grantee of the portable building at the new site. ACF offered to consider an offset based on the benefit to it only if the disallowance were upheld. East Bay also argued that the disallowance should be reversed on the ground that East Bay was prejudiced by the delay in issuing the disallowance, which is dated over four years after the date of the audit report questioning the costs. Since we reverse the disallowance in full on other grounds, we need not reach these issues.

2. The term "capital expenditure" is not defined in OMB Circular A-122. The Office of Human Development Discretionary Grants Administration Manual (HDS GAM), (published at 51 Fed. Reg. 6936 (Feb. 27, 1986) and made applicable to the grant in question here by item 4 of Grant Terms and Conditions attached to the award), defines the term in part as "[t]he cost of the asset including the cost to put it in place." HDS GAM at ix.

3. ACF identified as one additional basis for the disallowance that the costs resulted from procurements that failed to comply with requirements for competitive bidding. However, ACF later indicated that it was withdrawing this basis for the disallowance. Transcript of 9/6/01 telephone conference (Tr.), at 91.

4. In response to the Board's inquiry, ACF also asserted that several of the cost items at issue constituted construction costs. Both parties agreed that construction costs were not allowable under the authorizing legislation for the Comprehensive Child Development Program. ACF noted that a recent policy directive defined construction costs as the costs of "initial building or large-scale modernization or permanent improvement of a facility." Tr. at 50-51. However, ACF did not identify the policy directive or assert that it was applicable during the grant year in question.

5. In this brief as well as at the informal conference, ACF appeared to argue in addition that the costs were unreasonable because they did not conform to the limitations set forth in the grant award as required by OMB Circular A-122, Att. A, � A.b. However, � A indicates that whether a cost conforms to such limitations and whether a cost is reasonable are two discrete factors affecting allowability. We therefore discuss whether the costs conform to such limitations separately below.

6. This is a different standard than we would employ if the only question were whether ACF properly found as an independent basis for the disallowance that the costs were unreasonable. In that case, we would simply determine whether East Bay had met its burden of demonstrating the reasonableness of the costs. See, e.g., Utica Head Start Children and Families, Inc., DAB No. 1765 (2001); see also 45 C.F.R. �� 74.50-74.53 (1994).

7. East Bay indicated that the predecessor grantee had allowed the condition of the site to deteriorate to an unacceptable level of use by the time East Bay took over the grant in October 1992. East Bay Br. dated 2/28/01, at 5.

8. However, ACF submitted an untimely objection to East Bay Exhibit 7 as well as Exhibit 8, discussed below, on the grounds that these exhibits "were apparently created solely for the purpose of supporting defendant's positions in the current appeal," that it is unclear "whether Mr. Glasser or Mr. Miller have or will be compensated for providing their opinions" or whether they "had, have or will have any personal or business relationships with Appellant," that "it is unclear whether Mr. Glasser or Mr. Miller are fully familiar with the facts of the current case," and that "Respondent has had no opportunity to explore . . . [their] education, qualifications, credibility and experience . . . ." 9/6/01 e-mail from ACF counsel to Board. At the informal conference, the Presiding Board Member found the exhibits relevant to the issues at hand and overruled ACF's objection. Tr. at 8-9. Moreover, the objections do not affect the weight to be given to the exhibits since expert opinions are typically solicited for use in litigation and are compensated, and since ACF would have had an opportunity to explore the other matters it mentioned had it objected in a timely manner.

9. The same conclusion applies to the more narrow requirement in the HDS GAM for prior approval "for general purpose equipment and other capital expenditures having an acquisition cost of $500 or more per unit and a useful life of more than two years."