FROM THE PEOPLE 2 2 Robert Showers, Esq. Legal Counsel for Shelter for Life 305 Harrison Street, S.E., 3?l Floor Leesburg, VA 20175 Subject: Appeal of Agreement Of?cer's Decision under Cooperative Agreementr'Grant Nos. 306-A-00-04-0053 1-00 and Ref: Shelter for Life (SFL) Appeal of November 23, 2009 Dear Mr. Showers: This is the Final Decggn by USAID on the referenced Appeal of the Agreement Of?cer?s decision to disallombl?l under the subject (Imperative Agreement and Grant. Per 22 CFR this decision shall have reviewed the information submitted with your Appeal and concluded to allowlibll?) for newly-documentethosts incurred on a program in Sri Lanka. remaining amounts appealed mm of unsupported costs in Afghanistan, and the lbw) related to subaward remains disallowed. My decision in this Appeal is explained below. The A-l33 audit of Shelter For Life for ?scal years 2004 and 2005 generated several ?ndings regarding its performance of the subject awards. The majority emerged from its activities in Afghanistan. A. Audit Finding 04-02 On May 8, 2004, USAID awarded SFL cooperative agreement 306-A-00-04-00531-00 for ?Schools and Clinics Construction and Refurbishment Program" in Afghanistan. Shortly thereafter, SFL entered into an interim agreement with [Ml a U.S.?based, for-pro?t corporation. This interim agreement authorized ltt?til to begin work on the program while-?ora] sub- agreement was negotiated. As a result, SFL advanced HI to begin the project and agreed to directly reimburse vendors for invoices Emit: approved. SFL did secure the Agreement Of?cer?s approval. through an award modi?cation, for a subaward to item which had participated extensively in the preparation and submission of SFL's application for assistance. Throughout June and July 2004. SFL and I discussed the terms of a subaward, but were unable to reach one. On July 15, 2004, SFL suspended negotiations with Lthl? and repudiated the interim agreement. It demanded the return of advanced funds, or substantiation of allowable costs on which they had been expended. Throughout the rest of 2004, and into 2005, [third resisted efforts from both SFL and the A0 to recover program assets. When [third did submit to a ?nancial audit, the report found that had expended a total of in program funds on these assets and other unsupported costs. Moreover, in the absence of an executed subagreetnent, and SFL struggled to demonstrate how the costs were chargeable to the USAID program that had funded them. SFL requested that the A0 declare costs allowable, despite its lack of documentation and inability to recover program assets. However, he never did so. The AO's ?nal communication on property disposition came in October 2005, when he e-mailed SFL: ?please do not make any final decision in terms of agreements, etc. until you formally [hear] from me in regards to asset disposition. Your letter appropriately outlines what I had in mind but I still need a chance to thoroughl evaluate this and give you a formal response." When the A-133 audit eventually considered these circumstances, it adopted the ?ndings of the 2004 ?nancial audit of RR and noted that SFL had never recovered the assets from itblt .7 Auditors from contacted SFL to afford it the Opportunity to present additional documentation. At that time, the USAID auditors emphasized that, as the prime recipient, SFL was accountable for federal monies or assets originally entrusted to it. SFL's response asserted that it should not be held responsible for :l failure to return assets because had required SFL to hire lihl?i?. as a subrecipient. Although efforts to recover the assets were taken into consideration, the A0 supporting reiterated that the prime recipient, was responsible for the costs incurred. He disallowed the entirellhh?ll in program costs had expended. In its appeal, SFL attempts to demonstrate that USAID demanded it hire lib?ll] however, nothing in the exhibits persuades that USAID required SFL to partner with :(blt Although the appeal does not describe how SFL and first united, they proposed together. Their application details their intention that receive a pass through grant for the bulk of program performance, while SFL would perform only oversight functions. The fact that several of the principals of were former employees of SFL suggests that the two organizations had, if not an existing relationship, at least familiarity with one another. Additionally, SFL had the right to refuse any agreement, yet it willingly accepted. Upon award execution, modi?cation #1 established a budget which relied on to perform construction activities, in accordance with preposal. What SFL now identi?es as a demand that it use services is the approval to subaward, required under the agreement?s substantial involvement provision. Once the cooperative agreement to SFL was formalized, it was proper for USAID to demand agreed-upon performance. insistence that SFL comply with the terms of its award does not diminish accountability for assets entrusted to it. Also in the appeal, SFL asserts that the A0 stated that atelbl?? would be allowable; however, there is no evidence of that final determination. The A0 did state that is willing to pay costs considered allowable?fair and reasonable and where the project bene?ted and regardless of whether SFL believes should have stopped work or not.? Willingness to pay allowable costs is substantially different from allowing a cost. As noted above, the A0 never allowed the drill; costs. To have done so, he would have needed to ?nd that the costs were allowable, allocable, and reasonable under the federal cost principles. Given libii?ii lack of documentation and cooperation, it would have been dif?cult to arrive at such a ?nding; even now, the record lacks documentation that would permit us to ?nd that the amounts REE spent are properly chargeable to the program. As previously stated, the last communication from the A0 on allowability of those costs instructed SFL to wait before making any ?nal decisions. in his November 24, 2009 Af?davit, SFL Chairman Mr. David Orinesher states that he had, ?every impression that [the intended to rule that the costs were allowable.? Intention, however, is not suf?cient to approve the questioned costs incurred. It is important to note that even if the costs had originally been found allowable, USAID was empowered to demand the return of property it funded. When 7H7 refused to return the property, despite stakeholders? efforts, USAID was entitled to reimbursement under 22 CFR 226.34. Therefore, I decline to overturn the disallowance of . The facts do not support a conclusion that [Eli?ii] expenditures are properly chargeable to the award. Although SFL did not intend for money to be diverted from the program, as the prime recipient, SFL must remain accountable for the funds entrusted to it. B. Audit Finding 05-01 Simultaneously, the A0 considered costs the A-133 audit questioned relating to internal controls over cash management and supporting docu_r_r_1_en_ta_tion. Of these questioned costs. $5,577 were charged to a program in Afghanistan, whileibli4} were charged to a program in Sri Lanita. The federal cost principles require that costs under an award be adequate] documented in order to be considered allowable. At the time of its A433 audit report, SFL had not adequately documented journal entries and expenditures posted to the general ledger. After review of additional documents submitted, USAID determined that a portion of the costs were allowable, leavingiibii?? unsupported and therefore disallowed. In its appeal, SFL explained that it found previously-missing documentation when it moved its Sri Lankan headquarters to a new location. SFL has presented photocopies of receipts as an exhibit with its appeal. These total 1 Moreover, SFL contacted the independent auditor that performed the A-133 audit and presented him with the documentation. He acknowledged that those items he had originally questioned were now appropriately supported within the new accounting records. Upon review of the Sri Lanka receipts and the auditor?s supporting statement, I arnlailowing $16,376 in costs that were previously disallowed as unsupported. However, theitbli4) .from Afghanistan for which no additional documentation has been presented remains disallowed. DECISION In my capacity as the Senior Deputy Assistant Administrator, I have fully considered your appeal and the information proyidedjvith it. I have decided to overturn in part the AO's previous ?nal decision. I now allowlibli?? but the amount of 'iemains owed to the Agency. Per 22 CFR this decision shall be ?nal. However, I also note that this appeal has taken over two years to resolve. Therefore, I waive the collection of interest that would ordinal-[11v be ass ssed against an existing debt to the Agency. Action will be taken to recover only the-1mm? Flexplained above. Please remit payment of within 30 days of receipt of this decision to: MIFMICAR, Cashier US Agency for International Development 1300 Ave. NW SA-44, Room 485C Washington, DC 20523-7802 Any amounts which remain unpaid beyond that date will bear interest from the date of this letter at the rate established by the Secretary of the Treasury, for the period affected, per 31 US. Code Section 3717. If payment is not received within 30 days from the date of this letter, USAID intends to use non-centralized administrative offset to collect the debt plus any additional administrative expenses, if appropriate. If collection cannot be accomplished by offset, then MIFMIA will transfer the debt to the Financial Management Service in the Department of Treasury, which will collect the amount owed to USAID plus Treasury?s processing and administrative costs from the debtor. FMS will use all means available to the Federal government for debt collection, including the possibility of referral to the Department of Justice for litigation if the debt cannot be collected. Detailed procedures for collection are contained in 22 CFR 213. You have the right to review and copy records related to this debt. You have the right to propose a repayment plant. Please reference the cooperative agreement number 1-00 on the check remittance stub for our ?nancial management section and include a copy of this letter with your remittancean!" Angeliqlle??rumbly Acting Assistant to the Administrator Bureau for Management