Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Ponce Municipality Head Start Program
DATE: March 6, 1992
Docket No. 91-156
Audit Control No. A-02-91-14607
Decision No. 1311
DECISION
The Ponce Municipality Head Start Program (Ponce) appealed a
determination
by the Administration for Children and Families (ACF) (the
current name for
the grantor agency for Head Start, which had been the
Office of Human
Development Services) disallowing $8,706 in travel
expenses incurred between
March and November of 1988. The disallowance
was based in part on the
recommendations of an independent audit
covering January 1, 1988 through
December 31, 1988, and in part on
further review of Ponce's travel
expenditures during that period by the
Regional Inspector General for Audit
of the Department of Health and
Human Services and ACF.
ACF determined that Ponce lacked adequate source documentation to
support
costs of $2,124 for subsistence, $5,264 for hotels, and $1,318
for ground
transportation. The costs consisted of travel advances to
seven employees for
trips from Ponce's location in Puerto Rico to attend
training events and
conferences in Washington, D.C., New York, and
Albany. Ponce contended
that the costs were allowable under its travel
policy, which permitted travel
advances of up to $200 for per diem
costs.
We find that Ponce's own travel policy clearly required receipts for
the
actual cost of ground transportation other than private
vehicles.
Therefore, we find that the transportation costs were
inadequately
documented, and we uphold that portion of the
disallowance. We also
find that Ponce was required to reconcile its
travel advances to the
appropriate per diem amount after each trip was
completed, which Ponce
did not demonstrate that it had done. However,
we find that ACF erred
in requiring Ponce to produce receipts or other
evidence of actual costs
for those items which are included in the per diem
fixed in Ponce's
travel policy.
Since Ponce may not have understood clearly the nature of
the
documentation needed for per diem expenses, we remand the balance of
the
disallowance to ACF in order to permit Ponce an opportunity to
produce
to ACF, within 60 days of receipt of this decision,
documentation
sufficient to permit reconciliation of the amounts advanced to
the per
diem appropriate for the actual travel completed, and to provide
an
authoritative explanation of Ponce Municipality's treatment of
hotel
costs.
Factual Background
A chart is attached as an appendix to this decision, which is based on
ACF
Exhibit (Ex.) 5, Attachment (Att.) 1 and which shows the
employees'
positions, dates of travel, destinations, purposes, per
diems,
transportation, and hotel costs for all the travel as to which the
costs
of travel advances were disallowed. Each of the trips was for
the
purpose of attending meetings, conferences, or training
sessions
sponsored by ACF and to which ACF had invited Ponce to
send
representatives.
In a letter dated April 10, 1991, ACF informed Ponce that it
should
forward additional documentation, including "copies of receipts" for
its
per diem costs and "copies of receipts for all charges" for hotel
costs.
ACF Ex. 6. 1/ ACF accepted the air fare costs because Ponce
produced
invoices from the travel agency, but ACF disallowed the other
listed
costs. The documentation which Ponce produced relating to
the other
costs consisted of: (1) written requests for travel fund advances;
(2)
documentation tracking the issuance and receipt of the advances;
(3)
materials concerning the nature and purpose of the events attended;
and
(4) the information in the chart in the appendix. ACF Ex. 5, Att. 2
and
Ex. 7. In relation to this appeal, Ponce also submitted to ACF
its
municipal travel policy and a portion of the Office of Human
Development
Services Discretionary Grants Administration Manual
(HDS-GAM). ACF Ex.
8 and 10.
Applicable Authority
The Head Start Act requires Head Start grantees to keep "records
which
fully disclose the amount and disposition".of federal
financial
assistance, as well as "such other records as will facilitate
an
effective audit." 42 U.S.C. . 9842 (a).
Regulations governing administrative requirements for grants to state
and
local governments require source documentation, such as "canceled
checks,
paid bills, payrolls . . . etc." to support grantee accounting
records.
45 C.F.R. . 74.61(g) (1989) (similar language appears in
current regulations
effective October 1, 1988 at 45 C.F.R. . 92.20(b)(6)
(1991)). The
regulations also provided throughout that the allowability
of costs should be
determined by following applicable Office of
Management and Budget (OMB) cost
principles and the terms of grant
agreements. 45 C.F.R. . 92.20(b)(95)
(1991); 45 C.F.R. .. 74.61(f) and
74.171 (1989).
The applicable cost principles for state and local governments are
found
in OMB Circular A-87 and provide that:
[t]ravel costs are allowable for expenses for
transportation,
lodging, subsistence, and related items incurred by
employees
who are in travel status on official business incident to
a
grant program. Such costs may be charged on an actual basis,
on
a per diem or mileage basis in lieu of actual costs incurred,
or
on a combination of the two, provided the method used is
applied
to the entire trip, and results in charges consistent with
those
normally allowed in like circumstances in
non-federally
sponsored activities.
OMB Circular A-87, Att. B, . B.28 (emphasis added). The
HDS-GAM
provides, in its discussion of allowable costs subject to the
principles
in OMB Circular A-87, that "[t]ravel costs are limited to the
extent
provided by written organizational policy. The organization's
travel
policy must be reasonable and consistently applied to all
organizational
activities, regardless of the source of funds. If the
organization has
no written travel policy, Federal travel regulations . . .
shall be used
. . . ." HDS-GAM at 3-7.
Analysis
It is uncontested that the travel in question actually occurred, since
ACF
accepted the air fare costs as adequately documented. ACF did
not
question that the travel was properly grant-related, since the
purpose
was to attend events sponsored by ACF. Therefore, the
remaining
question is whether Ponce can sufficiently document the costs of
ground
transportation, meals, and hotels. In order to decide this
question, we
must first decide what source documentation is necessary to
support each
category of costs.
We find that under the HDS-GAM and OMB Circular A-87 it is permissible
for
a grantee to adopt a written policy different from federal
travel
regulations, if it is reasonable and consistently applied.
Further, we
find that grantees are explicitly permitted to charge travel
based on a
standard per diem, rather than actual costs. Such a method
plainly
contemplates dispensing with receipts for those items covered by the
per
diem. Therefore, we now turn to the written travel policy of
the
grantee.
Ponce submitted a Spanish original of its written travel policy in
the
form of an ordinance and regulation passed by the Ponce
Municipal
Assembly. The regulation contains a number of specific
provisions on
travel costs, some of which were provided in translation by
Ponce,
including the following:
When traveling to the United States . . . the Municipal
Assembly
may authorize per diem expenses up to $200 daily . . . .
When an airplane, ship, taxicab, rented car or other means
of
transportation excluding private car is used, the
invoices,
receipts or corresponding evidence should be attached to
the
travel related bill, unless according to the commercial
practice
in the place visited, it is impossible or impractical to
obtain
them.
The Finance Director may advance to any municipal official
or
employee . . . the travel expenses when they are so high that
it
is not fair to require him (her) to pay them and be
reimbursed
at his (her) return.
Ponce Regulation for Payment of Meals, Mileage, and Lodging for
Officials
and Employees of the Municipality of Ponce (Travel Policy),
Sections 6-B-4,
7(i), and 11 (translated version at ACF Ex. 10, Att. B).
However, Ponce did not provide a translation of certain other portions
of
the regulation relevant to the.requirements for accounting for the
use of
travel advances, including the following:
6 - Gastos de Subsistencia:
B - Fuera de los l¡mites territoriales de Puerto Rico:
1 - A los funcionarios y empleados destacados permanentemente
en
Puerto Rico, a quienes se le autorice a viajar fuera de
los
l¡mites jurisdiccionales de la isla en asuntos oficiales, se
les
pagar la parte de la dieta que corresponda por el
desayuno,
almuerzo, comida y alojamiento de acuerdo con la hora de
salida
y de retorno . . . hasta las cantidades que se indican en
la
escala a continuaci¢n . . . .
[6 - Subsistence Costs:
B - Outside the territorial limits of Puerto Rico:
1 - Officials and employees based permanently in Puerto Rico
who
are authorized to travel outside the jurisdictional limits
of
the island on official business shall be paid that portion
of
their per diem corresponding to breakfast, lunch, dinner
and
lodging according to their time of departure and return . . .
up
to the amounts indicated in the scale below . . . .
{There
followed a chart of costs for meals and lodging amounts based
on
the employee's rank, the season, and the times of departure
and
return.}] 2/
12 - Recibos:
a) Deber obtenerse un recibo por cada desembolso
efectuado
relacionado con asuntos oficiales, en exceso de 10
d¢lares,
siempre que por el gasto en que se incurre se acostumbre a
dar
recibos. No se requerir n recibos, sin embargo, para
el
reembolso de las dietas regulares que establece este
Reglamento
. . . . . [12 -
Receipts:
a) A receipt should be obtained for each disbursement made
in
relation to official business, in excess of 10 dollars,
whenever
the expense incurred is one for which receipts are
customarily
given. Receipts shall not be required, nevertheless,
for
reimbursement of the regular per diems established by
this
Regulation . . . .]
13 - Rendici¢n de Informe y Cuentas:
a) Los funcionarios y empleados que viajen en asuntos
oficiales
presentar n una cuenta detallada, Cuestionario "b",
suscrita por
los mismos, acompa¤ada de los recibos originales para
cada
partida de gastos, excepto dietas, los cuales se computar n
de
acuerdo con los t‚rminos de este reglamiento.
b) El functionario o empleado a quien se le conceda un
anticipo
tendr que devolver al Director de Finanzas toda cantidad
que se
le adelante, de la cual no rinda debida cuenta dentro
del
t‚rmino de diez d¡as despu‚s de su regreso de un viaje
al
exterior . . . .
[13 - Rendering of Report and Accounts:
a) Officials and employees who travel on official business
shall
present a detailed accounting, Questionnaire "b", signed
by
them, accompanied by the original receipts for each category
of
costs, except per diems, which shall be calculated in
accordance
with the terms of this regulation.
b) Any official or employee to whom an advance has been
granted
must return to the Finance Director all funds advanced for
which
the appropriate accounting has not been rendered within
the
period of ten days from their return from a trip abroad . . .
.]
Travel Policy, Sections 6-B-1, 12, 13 (a) and 13 (b) (Spanish
original,
ACF Ex. 8, Att. 5).
The import of this travel policy read as a whole is that Ponce
required
its employees to account for funds used in travel by
reconciling
advances to an accounting of actual travel, with receipts for
all
expenses except the per diem costs. The per diem is referred to
as
including not only the meals, but the hotel costs as well. However,
the
policy is not clear on whether this means that hotel costs need not
be
supported with receipts, since they are part of the per diem, or
simply
that the amount spent on hotel costs is subtracted from the total
per
diem allowance to limit the amount available for meals (for
which
receipts were clearly not required). Ponce's listing of the costs
at
issue divided hotel charges into a separate category from per
diem
costs, suggesting that they may have been treated differently even
if
both categories could only be reimbursed up to the daily per diem
amount
limits. No evidence was submitted about whether Ponce had
any
consistent practice regarding whether it required hotel receipts.
In
light of this ambiguity, Ponce should submit on remand an
authoritative
explanation (by affidavit or supplemental municipality rules)
of its
treatment of hotel costs and receipts.
ACF argued that, even if the expenditures were within the scope of
Ponce's
travel policy, the HDS-GAM refers only to limiting the amount of
travel costs
rather than their documentation. ACF Brief (Br.) at 8. 3/
ACF based
this conclusion on the statement in the HDS-GAM that the
travel policy must
comply with applicable cost principles. Id.
However, ACF did not
explain why a travel policy permitting a set per
diem without proof of actual
receipts would not comply with OMB Circular
A-87 which permits costs to be
charged on a per diem basis in lieu of
actual costs. We find that
Ponce's use of a per diem was reasonable,
the costs were allocable to the
grant, and the policy complied with
applicable authority. ACF did not
suggest that Ponce's policy was
applied inconsistently to programs with
federal funding as opposed to
other sources. Therefore, we do not find
any violation of the HDS-GAM.
ACF did not demonstrate any reason to believe
that the HDS-GAM language
was intended to apply the grantee's travel policy
only as to the amount
of travel costs, and not to the particular
documentation requirements.
ACF argued that, even though the funds were "apparently expended
for
grant-related purposes, and are seemingly allowable,"
nevertheless
"detailed documentation in the form of receipts . . . is also
required."
ACF Br. at 5. In support of this proposition, ACF cited a
number of our
decisions, none of which we find controlling here.
In Rio Bravo Association, DAB No. 1161 (1990), the grantee provided
travel
advances to employees and recorded them as travel expenditures,
without
reconciling the amounts to expenses incurred for travel. Id.
at
21. No source documentation, such as receipts, was available for any
of
the costs. The grantee's explanation was that the bookkeeper
lost
receipts and was fired. Id. Clearly, under Rio Bravo, it is
not enough
for a grantee to treat a travel advance as an expenditure for
travel,
without verifying that travel occurred as planned and that the
amount
represented the allowable costs of that travel.
However, in the present case, unlike Rio Bravo, we find that (1)
no
dispute exists that grant-related travel occurred, (2) ACF sponsored
the
events which occasioned the travel and thus had independent knowledge
of
the travel and its purposes, (3) the grantee has a written travel
policy
establishing a per diem system, (4) Ponce offered detailed
paperwork
documenting the requests for, purposes of, and issuance of the
travel
advances, as well as invoices for the air fares, and (5) both ACF
and
Ponce appear to have been confused about what documentation
was
acceptable to reconcile travel advances to actual travel under a
per
diem system. Therefore, we conclude that a further look is called
for
by ACF into whether documentation sufficient to reconcile the
travel
advances can be provided by Ponce on remand. 4/
ACF also cited to two decisions which hold that, even when no
provision
specifies a documentation requirement for travel expenditures,
basic
principles of grants management imply "some type of
record-keeping."
Pennsylvania College of Podiatric Medicine, DAB No. 299, at
8 (1982);
Head Start of New Hanover County, Inc., DAB No. 65, at 3
(1979).
However, the question is not whether any record-keeping is required,
but
exactly which records are required. In Pennsylvania, the
employee
routinely added the same amount for travel in each quarter without
any
documentation of the purpose of the trips, the number of trips
taken,
the mode or costs of travel, or any other records. DAB No. 299,
at 8.
Unlike Ponce, the grantee in Pennsylvania did not show that the
trips
were actually taken or were grant-related, nor was there any
reference
by the grantee to a travel policy governing per diems. In New
Hanover,
we suggested that affidavits might have been sufficient to show that
the
travel funds were properly used, since the per diem involved for
hotel
and meals was so low as to leave little room for abuse. DAB No.
65, at
3. However, the documentation submitted by the grantee failed to
show
clearly that the "trips were in fact made" and we declined to offer
yet
another opportunity to so demonstrate. Id. at 4.
By contrast, ACF has already accepted Ponce's evidence that the trips
were
in fact taken and were for grant-related purposes. It seems
likely,
therefore, that some portion of the per diem relating to these
trips should
be allowable. It is possible that ACF can assist Ponce in
determining
this portion, since ACF itself may have records of the
attendance of Ponce's
employees at the conferences involved and of the
hotels used by the
registrants.
We find that Ponce's own travel policy required it to reconcile the
funds
advanced for travel purposes with the actual travel after its
completion, and
that Ponce has so far failed to demonstrate that it
performed the necessary
reconciliations. However, we find that ACF
misstated the applicable
requirements when it insisted that the
reconciliation must be based on actual
receipts for all costs. Rather,
we find that receipts are not required
for those costs included in the
per diem under Ponce's written travel
policy. Reconciliation of those
costs required only satisfactory
evidence of what the actual time in
travel status was and what the applicable
per diem would total. Since
Ponce may have been confused about what
documentation was needed, we
conclude that it is reasonable to permit a
further opportunity for Ponce
to demonstrate what per diem costs are
allowable in relation to these
trips.
Ponce failed to provide receipts for ground transportation other
than
private vehicles, even though they were clearly required by its
travel
policy. Ponce made no argument that the commercial practices of
the
places visited (New York, Albany and Washington, D.D.) made
obtaining
such receipts impossible or impractical. We therefore uphold
that
portion of the disallowance.
Conclusion
For the reasons explained above, the disallowance of $1,318 in
ground
transportation costs is upheld. The disallowance of $2,124 for
meals
and $5,264 for hotels is remanded to permit Ponce to produce to
ACF,
within 60 days of receipt of this decision, documentation sufficient
to
permit reconciliation of the amounts advanced to the per
diem
appropriate for the actual travel completed, and to provide
an
authoritative explanation of Ponce Municipality's treatment of
hotel
costs. ACF may determine to reissue the disallowance in whole or
in
part, if Ponce fails to produce the required documentation
or
clarification to support the questioned costs on remand. If
the
disallowance is reissued, Ponce may appeal to the Board.
Judith A. Ballard
Norval D. (John) Settle
Cecilia Sparks Ford Presiding Board Member
1. This correspondence also addressed other costs questioned in
the
audit which were resolved and are not at issue here.
2. The translations in brackets are unofficial versions provided by
the
Board; the Spanish language texts are in the official record.
3. Part of the confusion may have resulted from Ponce's position
that
the costs were reasonable because they were less than the $200 per
day
limit for high-cost cities mentioned in the travel policy.
ACF
accurately pointed out that this is not sufficient to make the
costs
allowable, but only sets an upper limit on the amount of per
diem
permitted. ACF Br. at 9. It is also correct that complying
with
organizational travel policy would not be enough to make a
cost
allowable if the policy were unreasonable or if it violated
provisions
of cost principles or other authority. However, as discussed
below, the
portions of the travel policy translated by the Board reflect a
policy
of using per diems in lieu of actual costs for some items and
are
consistent with applicable authority.
4. ACF also cited to LAU-FAY-TON Community Action Agency, DAB No.
1126
(1990), and Hualapai Tribal Council, DAB No. 597 (1984). ACF Br.
at 5.
However, in LAU-FAY-TON, the grantee submitted no documentation for
the
questioned costs before the Board, except a hotel bill the connection
of
which to the disallowed items was unsupported, and we therefore
upheld
the disallowance. We stated, however, that "[t]ravel costs may
be
charged on an actual basis, or on a per diem or mileage basis." DAB
No.
1126, at 2. In Hualapai, as well, the grantee failed to support
claimed
advances with any documentation, and had no "documented tribal
travel
policy" against which to measure what documentation was
required. DAB
No. 597, at