Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Cayuga County Action
DATE: May 8, 1990
Program, Inc. Docket No. 90-23
Audit No. A-02-88-05288
Decision No. 1151
DECISION
The Cayuga County Action Program, Inc. (CCAP, Grantee) appealed a
disallowance by the Office of Human Development Services (OHDS, Agency)
of $4332.25 in costs charged to CCAP's Head Start grant. OHDS
disallowed the claim because the Grantee could have secured
reimbursement from the United States Department of Agriculture (USDA)
Child Care Food Program as the prime provider of funds for food service
in Head Start programs. In other words, USDA, not OHDS, should have
been charged these costs.
This appeal was processed under our expedited process at 45 C.F.R.
16.12. Our decision is based upon submissions by both parties
consisting of documentary evidence and written legal and equitable
arguments, and a telephone conference with the parties held on April 19,
1990.
For the reasons discussed below, we uphold the disallowance.
Background
The Head Start program is administered by the Administration for
Children, Youth and Families of OHDS (ACYF), and provides grants for
comprehensive health, educational, nutritional, social and other
services to economically disadvantaged preschool children and their
families. 42 U.S.C. 9831 et seq. USDA, under its Child Care Food
Program, provides grants to assist states to initiate, maintain, and
expand non-profit food service programs for children in public and
private institutions providing child care, including Head Start centers.
42 U.S.C. 1766(a).
The record reflects that in October 1980, OHDS and USDA entered into a
joint agreement which recited their roles in providing funds for
nutritional services. This agreement was communicated to Head Start
recipients in a program issuance (ACYF-PI-82-2), which provided that
USDA would be the prime provider of funds for food services in Head
Start, and that Head Start funds were to be used only to supplement
those costs not covered by USDA.
In April 1989, OHDS conducted an on-site fiscal review of CCAP and found
that it had never sought reimbursement revenue in the amount of
$4,332.25 from USDA, and had, instead, used Head Start program funds to
cover the $4,332.25 in food-related costs. CCAP also failed to take
corrective action within the 90-day time period permitted by USDA for
correcting and resubmitting claims. OHDS disallowed the costs on the
basis that they were not allowable costs under the Head Start program,
since food- related costs which would have been reimbursed by USDA were
not properly charged to OHDS.
In its January 25, 1990 appeal request, the Grantee requested that the
disallowance "be forgiven" and stated that the Grantee's previous
director had advised the current executive director of CCAP that "she
had taken care of all USDA claims", when in fact, she had "failed
to
file the necessary claims with USDA". The Grantee also requested that
the amount of the disallowance be reduced on the basis that certain
third party in-kind contributions constitute an offset.
Discussion
The Grantee did not dispute that the costs were unallowable, nor did it
dispute that it was required, but failed, to seek reimbursement from
USDA for the months of October, November, and December 1987.
The ACYF program issuance provides that USDA is the primary provider of
food-related costs, and Head Start programs cover only those costs not
covered by USDA. Moreover, applicable cost principles specifically
provide that "any cost allocable to a particular award or other cost
objective under these principles may not be shifted to other Federal
awards to overcome funding deficiencies, or to avoid restrictions
imposed by law or by the terms of the award". OMB Circular A-122,
Attachment A, section A.4.b, made applicable here by 45 C.F.R. 74.174.
Thus, because these food-related costs would have been allowable under
the USDA grant program, if the claims for reimbursement had been
properly filed, the costs are not within the ambit of costs allowable
under the OHDS Head Start program. See Camden County Council on
Economic Opportunity, DAB No. 881 (1987).
The Grantee requested a waiver of the disallowance in its Notice of
Appeal on the bases that the failure to seek reimbursement from USDA was
the fault of a previous executive director of CCAP, and that this
disallowance will be a financial hardship on the Grantee. The Grantee
also requested a reduction in the amount of the disallowance based on
certain in-kind contributions made to its Head Start program.
That the failure to seek reimbursement from USDA for the costs in issue
was the result of inaction by an employee of CCAP is not mitigating.
Grantees of discretionary grants are obligated to meet certain standards
for their grant management systems, including maintaining internal
controls. 45 C.F.R. 74.60. The Grantee is in the better position to
safeguard grant funds, and CCAP recognized in its March 22, 1990 letter,
that it has the responsibility to oversee program operations.
Furthermore, the Board has no authority to grant a waiver of a
disallowance. Tulsa Community Action Agency, DAB No. 789 (1986); Ventura
County Commission on Human Concerns and Community Development, DAB No.
359 (1982).
The Grantee submitted copies of receipts of in-kind donations, totalling
$2,009.38, in support of its argument for an offset. However, only
three of the receipts submitted were for donations to CCAP's Head Start
program during the months in issue. Although these three receipts,
totalling $126.70, were for food donations made to the Grantee's Head
Start program, we find that they cannot be used to offset the
disallowance in this case.
Although the value of third party in-kind contributions may be used to
satisfy a cost sharing or matching requirement 45 C.F.R. 74.52(b), "such
contributions are not by their nature regarded as obligations chargeable
to federal funds." Project Bravo, Inc., DAB No. 925 (1987).
Moreover, in-kind contributions used to make up the non- federal share
must be such that if a grantee had expended federal funds to obtain
these supplies, the expenditures would have been allowable. If CCAP had
expended federal funds from its Head Start program to obtain the food
represented by these three receipts, there is nothing in the record to
show that the expenditures would have been allowable. On the contrary,
it appears that the Grantee would have been under the same obligations
to seek reimbursement from USDA for these expenditures as for the food
costs actually claimed. Consequently, CCAP is not entitled to an offset
of the disallowance in this case.
Conclusion
Accordingly, we sustain the disallowance in the amount of $4332.25.
___________________________ Norval D. (John)
Settle
___________________________ Alexander G.
Teitz
___________________________ Donald F.
Garrett Presiding Board