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                              Dignity, LLC, DAB No. 3121 (2023)
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Dignity, LLC, DAB No. 3121 (2023)








  
  
    

  
      
Department of Health and Human Services 
    DEPARTMENTAL APPEALS BOARD
          Appellate Division





Dignity, LLC
Docket No. A-21-31Decision No. 3121November 16, 2023

        
              
    

      DECISION

Dignity, LLC (Dignity) appeals the January 7, 2021 decision by the Administration for Children and Families (ACF) to withhold non-competing continuation award no. 90ZU0343 (NCC Award) for Dignity’s residential shelter services project under the Office of Refugee Resettlement’s Unaccompanied Children Program.  ACF discontinued funding under the NCC Award after the first budget period due to Dignity’s failure to secure state licensure and a location to operate the project as required by the terms and conditions of the NCC Award.  For the reasons discussed below, we sustain ACF’s decision to withhold funding after the first budget period without the possibility of continuing the NCC Award.

Legal Background

The Office of Refugee Resettlement, an office within ACF, operates the Unaccompanied Children Program, which provides care, placement, and housing services to children under 18 years of age who have no lawful immigration status in the United States and no parent or legal guardian in the United States who is available to provide care and physical custody.  *See* 6 U.S.C. §§ 279(b), (g)(1)-(2) (defining “placement” and “unaccompanied alien child”); 8 U.S.C. § 1232(b)(1).1   ACF provides residential care and services to unaccompanied children through, among other things, cooperative agreements with non-federal entities that have “demonstrated child welfare, social service, or related experience and are appropriately licensed to provide care and related services to dependent children.”  ACF Ex. 3 (Cooperative Agreement), at 1-2; *see also* 8 U.S.C. § 1232(i) (authorizing federal awards to carry out the purposes of 6 U.S.C. § 279).

A cooperative agreement is a type of federal award in which the awarding agency has “substantial involvement” in carrying out the funded project.  *See*31 U.S.C. § 6305(2); *see also* 45 C.F.R. § 75.2 (defining “Federal award” to include both grants and

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cooperative agreements).  A cooperative agreement is “distinguished from a grant in that it provides for substantial involvement between the Federal awarding agency . . . and the non-Federal entity in carrying out the activity contemplated by the Federal award.”  75 C.F.R. § 75.2 (defining “cooperative agreement”).

Awards under the Unaccompanied Children Program are subject to the uniform administrative requirements, cost principles, and audit requirements for Department of Health and Human Services (HHS) awards at 45 C.F.R. Part 75 (Part 75).  *See* 45 C.F.R. §§ 75.101(a)-(b)(1), 75.110.2   Under Part 75, award recipients must “[c]omply with Federal statutes, regulations, and the terms and conditions of the Federal awards.”  *Id*. § 75.303(b).  If the recipient fails to comply with the terms and conditions of the federal award, the awarding agency may, as appropriate, terminate the award, withhold further awards for the project or program, or impose any other remedies that may be legally available.  *Id*. § 75.371(c), (e), (f).

The NCC Award in this case was also subject to the requirements of the HHS Grants Policy Statement (GPS).  ACF Ex. 2 (Notice of Award), at 3.3  The GPS states that an HHS operating division may deny (withhold) a non-competing continuation award within the current competitive segment (*i.e.*, project period) for one or more of the following reasons:  (i) adequate federal funds are not available to support the project; (ii) a recipient failed to show satisfactory progress in achieving the objectives of the project; (iii)*a recipient failed to meet the terms and conditions of a previous award*; or (iv) for whatever reason, continued funding would not be in the best interests of the federal government.  GPS at II-89.4

The Board is authorized to review certain final written decisions in disputes arising in any HHS program authorizing the award of direct, discretionary project grants or cooperative

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agreements, such as “[a] denial of a noncompeting continuation award under the project period system of funding where the denial is for failure to comply with the terms of a previous award.”  45 C.F.R. Part 16, App. A ¶ C.(a)(3);*see also* GPS at II-89 (“If a non-competing continuation award is denied (withheld) because the recipient failed to comply with the terms and conditions of a previous award, the recipient may appeal that determination.”).  “[T]he Board has no power to review disputes over pre-award determinations, which generally are matters committed to the federal agency’s discretion.”  *Vance-Warren Comprehensive Health Plan, Inc.*, DAB No. 2180, at 2 (2008) (citing *Youth Network Council of Chi., Inc.*, DAB No. 1150, at 1 (1990)).  When reviewing a decision to withhold a non-competing continuation award, the Board is “bound by all applicable laws and regulations.”  45 C.F.R. § 16.14.

Case Background

***Funding Opportunity Announcement and Federal Award***

In September 2019, ACF issued a modified funding opportunity announcement (FOA) regarding residential shelter services for unaccompanied children.  ACF Ex. 4, at 1, 3.  The FOA informed potential applicants that ACF was seeking “shelter care providers, including group homes and transitional foster care,” for unaccompanied children and that “[c]are providers operating a shelter facility(ies) must be licensed by an appropriate state agency to provide residential, group, or foster care services for children.”  *Id*. at 3-4.  The FOA specified that “[c]are providers must provide documentation of state licensure or license eligibility.”  *Id*. at 5.  The FOA further specified that eligible applicants were required to be “licensed or license eligible . . . with [a] license being issued by a state licensing agency within 75 days of award.”  *Id*. at 24.

The FOA further stated that costs for the “acquisition, construction, and major renovation of facilities is unallowable.”  ACF Ex. 4, at 21.  In addition, the FOA advised that any rental costs for leased property are subject to the requirements of 45 C.F.R. § 75.465.  *Id*.  The FOA explained that the funding instrument for an award would be a cooperative agreement and the project period would be 36 months, with three 12-month budget periods.  *Id*. at 23.  Additionally, the FOA advised that after the initial budget period, funds “will be awarded on the basis of submission and approval of the non-competing continuation applications” and subsequent “[a]wards are subject to the satisfactory progress by the grantee and a determination that continued funding would be in the best interest of the federal government.”  *Id*. at 24.  The FOA also instructed that all applicants were required “to submit a project budget and budget justification with their application” and that “[t]he budget justification consists of a budget narrative and a line-item budget detail that includes detailed calculations.”  *Id*. at 44.  The FOA further instructed that the budget narrative “should describe how the categorical costs are derived” and “[d]iscuss the necessity, reasonableness, and allocation of the proposed costs.”  *Id*.

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On November 11, 2019, Dignity submitted an application and proposed budget to ACF in response to the FOA.  ACF Ex. 5.  Dignity represented that it “has the facility capacity to provide shelter services for 500 unaccompanied . . . children,” but initially “will host a facility for 160 [unaccompanied children] in Harlingen, Texas.”  *Id*. at 47, 61.  Dignity reported its address as 5820 Millennium Drive, Harlingen, Texas, *id*. at 61, and included a commercial letter of intent to lease a 63,000 square foot facility at 5820 Millennium Drive for three years, commencing on February 1, 2020, *id*. at 57-59.  Dignity stated it would provide its “license of eligibility (temporary, provisional, or an equivalent license) within 75 days of [its] award, by a state licensing agency, to provide residential, group, or foster care services for dependent children.”  *Id*. at 54.  Dignity represented that the proposed facility was “suitable to meet state licensure approval” and that “the facility will be able to meet the ***state’s licensing office*** recommendations within 75 days from grant award.”  *Id*. at 117.  Dignity further represented that “[a]ll equipment, software, facility upkeeps and upgrades will be put in place within the 75-day limit.”  *Id*. at 47.

In January and February 2020, Dignity made numerous revisions to its application budget based on communications with ACF.  *See* Dignity Ex. 1, at 6-11;5  ACF Req. 2 – Correspondence (ACF Corresp.), at 5, 11, 34-35, 40-45.6    ACF instructed Dignity, among other things, that property taxes and capital improvements and “any improvements that increase the value of the facility are not allowed and should be removed” from its budget.  Dignity Ex. 1, at 10-11.  Prior to the award, ACF also made clear, and Dignity acknowledged, that it required only a 100-bed facility.  *Id*. at 7, 11.  On February 27, 2020, Dignity advised ACF that it changed the location of its proposed facility, which would now be located at “1001 Medford,” Brownsville, Texas.  ACF Corresp. at 41.

On March 13, 2020, ACF issued a Notice of Award (NoA) to Dignity for the initial budget period of February 1, 2020, through January 31, 2021.  ACF Ex. 2, at 1.  The NoA indicated that the award would be provided through a cooperative agreement.  *Id*.  The remarks section of the NoA noted that the “award amount of $5,219,500 represents a first installment of the TOTAL approved FY20 budget of $10,439,000,” for a 100-bed facility.  *Id*. at 2.  Under the heading “SPECIAL CONDITIONS,” the NoA provided that grant funds were restricted because Dignity did not yet have a license to provide services.  *Id*.  Consequently, ACF directed Dignity to submit a proposed “start-up budget” to serve as the basis for the release of funds during the period in which Dignity would obtain a license.  *Id*.  The NoA instructed Dignity that, “for ACF to proceed with the review and

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approval to release funds for the start-up/phase-in period,” Dignity should upload the following to “Grant Notes in GrantSolutions” within seven business days:

[1] A proposed budget for the period during which a license to provide services will be obtained.
[2] The budget should provide line-item detail of the SF 424A categorical costs necessary for the pre-license phase, and the graduated costs once a license is secured and services are able to be provided.
[3] The estimated timeline for both the pre-license phase and the period of ramp-up to be able to provide services fully[.]
[4] The official State licensing requirements that must be met in order to be eligible for the type of license being requested (e.g., excerpts from the State licensing webpage)[.]

*Id*.  The NoA stated:  “Once licensure is confirmed, the balance of funds for the initial award period may be released.”  *Id*.  The NoA also made clear that “no rental costs above the fair-market rental value of the available usable space of the leased property may be charged to the grant” and “[n]o federal funds may be used for ownership type expenses.”  *Id*. at 4.  Additionally, the NoA specified that the award is subject to the requirements of the GPS and Part 75 and that the “[i]nitial expenditure of funds by the grantee constitutes acceptance of this award.”  *Id*. at 3-4.

The Cooperative Agreement along with the terms and conditions of the NoA established “the requirements and responsibilities for implementing [Dignity’s] residential services for [unaccompanied children].”  ACF Ex. 3, at 2.  The stated purpose and objective of the Cooperative Agreement was “to support the provision of residential services for [unaccompanied children] *according to the objectives and activities outlined in the application* and consistent with State residential care licensing requirements.”  *Id*. at 3 (emphasis added).  The Cooperative Agreement further stated that Dignity “must provide residential shelter and services for [unaccompanied children] in compliance with respective State residential care licensing requirements,” in addition to other federal laws, regulations, policies, and procedures.  *Id*. at 4; *see also id*. at 27 (“[Dignity] must provide all residential services for [unaccompanied children] in compliance with respective state residential care licensing.”).

The Cooperative Agreement anticipated a three-year project period with an effective date of February 1, 2020.  ACF Ex. 3, at 29.7   The Cooperative Agreement further specified that “[a]nnual continuations will be entertained on a non-competitive basis, subject to availability of funds, satisfactory performance of the project, *capacity needs* and a

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determination that continued funding is in the best interest of the Federal Government.”  *Id*. (emphasis added).  For continuation applications, the Cooperative Agreement required that Dignity submit the application by the date determined by ACF and provide, among other things, a “Current State Residential Care License” and “Facility lease.”  *Id*. at 27.

*Pre-License Budget Delays*

On March 27, 2020, Dignity uploaded budget documentation to Grant Notes in GrantSolutions in response to the special conditions section of the NoA.  ACF Resp. to Order to Develop R. at 1-2; ACF Corresp. at 63.8   Dignity submitted, among other things, a budget document entitled “PRE LICENSE PHASE (75 DAYS),” which proposed more than $3.4 million in expenditures between April 1, 2020 and July 31, 2020.  ACF Req. 1 – Documents.9   The proposed pre-license budget failed to specify which costs were necessary to obtain the requisite state license.  *See id*.  Dignity provided information about the materials needed for a state licensing application, but no information about the specific requirements Dignity must satisfy to obtain a state license.  *See id*.

ACF notified Dignity by email on April 14, 2020, that it had reviewed Dignity’s submissions and required further information.  ACF Corresp. at 76.  ACF specified that the budget and plan “should include what funds the program needs to attain licensing, when the project licensing will be granted, what funds the program will need to phase-in the program and a timeline for these activities.”  *Id*.  ACF also reminded Dignity to produce the official state licensing requirements that had been requested in the special conditions section of the NoA.  *Id*.; *see also* ACF Ex. 2, at 2.

Starting in April 2020, ACF informed Dignity of several issues that prevented ACF from approving Dignity’s pre-license budget.  ACF Corresp. at 88.  ACF questioned Dignity’s proposed food costs, travel costs, personnel costs, and supply costs, noting that there are no children in the program during the pre-license phase and the program “needs only essential and key staff” at this time.  *Id*.  ACF reminded Dignity that during the pre-license phase “essential staff are those that the State licensing agency outlines in the application process that need to be hired and on board for full licensing approval.”  *Id*.  ACF advised Dignity to remove the unnecessary costs and resubmit the budget with a

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“narrative/justification” for each line item.  *Id*.  Dignity agreed the costs outlined by ACF were not needed for the pre-license phase and submitted the first of many revised budgets.  *Id*.  Dignity represented that its “target date” for obtaining its state license remained July 2020.  *Id*.

Over the next several months, Dignity continued to have difficulty obtaining ACF’s approval of its pre-license budget due to insufficient budget narratives, inadequate salary explanations, and duplicate costs.  ACF Corresp. at 95, 115, 127-28, 167-68, 175.  On June 30, 2020, ACF advised Dignity, once again, that it would initially fund “only the positions, items, and activities which are essential towards gaining a license.”  *Id*. at 175.  Again, ACF directed Dignity to submit only those costs necessary to obtain a license and to “provide the documentation from the State Licensing Office confirming the items that are necessary to have in place for license eligibility.”  *Id*.  On July 3, 2020, Dignity submitted yet another revised budget and indicated that it expected its state licensing inspection to occur within 21 days.  *Id*. at 177-78.  Dignity still did not provide the requested documentation from the state licensing office.  *Id*.

On July 14, 2020, ACF advised Dignity that “there are still some issues and items that need to [be] resolved and removed before the budget is approved,” and again asked Dignity to “provide a detailed budget narrative explaining each budget line item.”  ACF Corresp. at 204.  ACF then detailed 23 items on Dignity’s proposed budget that required further information or removal, including costs for unnecessary personnel, costs that were listed in multiple categories, excessive costs, and unallowable costs.  *Id*. at 204-06.  ACF requested a response by the close of business on July 15, 2020.  *Id*. at 206.  Dignity did not provide the requested response.

On August 4, 2020, following a reminder by ACF, Dignity submitted a budget narrative and budget detail.  ACF Corresp. at 209-10, 217-19.  Later that day, ACF noted that Dignity had still not addressed several of the items from ACF’s July 14, 2020 email, and asked Dignity to provide a revised budget narrative and budget detail.  *Id*. at 226-28.  That same day, Dignity informed ACF of a new license approval deadline of August 12, 2020, and acknowledged that it had withdrawn its first attempt to acquire a license due to ongoing questions about its budget.  *Id*. at 216-17.  Dignity expressed hope that it would meet the new deadline, and ACF responded that it “all depend[ed] on Dignity and revising the budget as [ACF] recommended.”  *Id*.  Dignity did not provide a revised budget before the August 12, 2020 deadline.

On August 13, 2020, ACF asked Dignity for a status update, and stated that Dignity’s lack of response was “delaying the process for approval of [Dignity’s] lease and budget.”  ACF Corresp. at 245.  Hearing nothing, on August 17, 2020, ACF reiterated that Dignity’s continued lack of “response will prolong the approval of [its] budget.”  *Id*. at 246.  On August 26, 2020, Dignity provided responses to the outstanding items from ACF’s July 14, 2020 email and submitted updated budget documents.  *Id*. at 257-61.

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After reviewing Dignity’s revised submissions, ACF responded on September 1, 2020, identifying several unnecessary and excessive itemized costs, including equipment and furniture, that needed to be changed or removed before moving forward.  *Id*. at 262.  Dignity responded:  “Not a problem.  We will review those items and once they are adjusted, we will schedule a call with you.”  *Id*.

*Facility Lease Delays*

During the time that Dignity was preparing a pre-license budget, ACF and Dignity were also communicating about Dignity’s facility lease.  On April 15, 2020, Dignity informed ACF that the facility was “being brought up to code” for an inspection in order for Dignity to obtain its state license.  ACF Corresp. at 89.  ACF twice asked Dignity for a narrative breaking down the building lease operating cost ($133,333.33) and reminded Dignity that it was not allowed to use grant funds for construction costs.  *Id*.  In response, Dignity emphasized that it was not performing any construction, but acknowledged that its landlord was “remodeling current existing structures to bring the facility up to code.”  *Id*.  Dignity also stated that its landlord “expects a financial commitment from Dignity to begin the process of getting the facility up to [its] needs and code.”  *Id*.

On June 8, 2020, ACF asked Dignity whether its lease had been “reviewed for appropriateness?”  ACF Corresp. at 115.  Four days later, Dignity responded that its team reviewed the lease and felt it was “an exceptionally good agreement,” and that Dignity had been able to reduce the overall lease costs to $400,000 per year “with a much better location and facility setup by our now current Landlord.”  *Id*. at 127-28.  On June 15, 2020, ACF asked Dignity to provide a copy of the lease as soon as possible.  *Id*. at 137.  Dignity responded the same day, stating that it would provide ACF with “a copy of the lease agreement.”  *Id*.  The following day, Dignity provided a partially executed five-year commercial lease commencing June 1, 2020, for a 100-bed facility located at 1001 N. Medford Road.  *Id*. at 142 (copy of lease attached to email).

On July 7, 2020, ACF raised several issues about the lease documentation submitted by Dignity, including questions about the lessor (who was not the property owner), improvements that were initiated as part of the lease, and the current fair market value of the property as assessed by a real estate professional consistent with 45 C.F.R. § 75.465(a).  ACF Corresp. at 181-82.  ACF also reminded Dignity of the restrictions on rental costs paid under capital leases as explained in 45 C.F.R. § 75.465(c)(5).  *Id*. at 182.  In response, Dignity submitted an “updated” lease agreement commencing July 1, 2020, and other documents but did not provide a real estate appraisal or evidence that the lessor owned the property.  *Id*. at 181 (copy of lease and other documents attached to email).  The updated lease indicated that several improvements were to be initiated as part of the lease, including the installation of five classrooms and seven living quarters for housing minors.  *Id*. at 181, 195-99.  The new documents raised additional issues and questions that ACF directed to Dignity.  *Id*. at 184, 188-89.

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On July 14, 2020, ACF stated that the lease appeared to be a capital lease, which would limit the costs that could be paid from the grant under 45 C.F.R. § 75.465.  ACF Corresp. at 195-96.  Accordingly, Dignity needed to submit an official appraisal of the property “that is accurate from the point the lease begins” (*i.e.*, before improvements).  *Id*.  Dignity did not dispute that the lease was a capital lease but provided an “updated” lease agreement on August 1.  *Id*. at 212 (without attachment).  Dignity did not provide a property appraisal as requested.  *Id*.  ACF asked Dignity several times for the status of the appraisal.  *Id*. at 212, 224, 226-27, 234, 280.  On August 26, 2020, Dignity told ACF that the appraisal was conducted on August 22, and that it expected to have the appraisal before September 7.  *Id*. at 263, 266.  Dignity sent ACF the appraisal on September 9, 2020, reflecting the prospective market value of the property after completion of planned improvements, rather than the appraised value of the property at the inception of the lease.  Dignity Ex. 15, at 57; Dignity Ex. 20 (property appraisal), at 83-84.

*Pre-License Budget Approval and Application for Continuation Award*

On September 18, 2020, ACF invited Dignity to submit an application for continuation funding under the NCC Award for the next budget period (Feb. 1, 2021 – Jan. 31, 2022).  Dignity Ex. 16a; Dignity Ex. 16b.  While Dignity had not secured either a license or a location to provide any shelter services up to this point, the letter instructed that the year two funding level under the NCC Award was anticipated to be $6.15 million for a shelter with 48-bed capacity.  Dignity Ex. 16b, at 71.  The letter specified that continued funding was subject to the availability of funds and “satisfactory progress which is measured in part by the timely submission of required financial and program reports.”  *Id*.  Dignity was required to include in its application certain assurances and certifications, a detailed itemized budget and narrative justification, a project/performance site location form, and a program narrative describing significant accomplishments and problem areas during the previous budget period.  *Id*. at 71-72.  The deadline to submit the continuation application was October 19, 2020.  *Id*. at 72.

On September 24, 2020, ACF informed Dignity that it had adjusted Dignity’s budget and outlined allowable costs for the pre-license phase of Dignity’s program for the initial budget period.  ACF Corresp. at 310.  ACF instructed Dignity to review the budget and, if it concurs, submit an updated SF 424A and budget narrative consistent with the amounts determined by ACF.  *Id*.  ACF noted that the Texas state requirements for license eligibility required Dignity’s program to “be ‘child-ready,’” and that Dignity projected having the necessary classrooms and sleeping quarters at its facility in mid-November.  *Id*.

ACF further advised Dignity that lease payments cannot be charged to the award at this time because, among other things, (i) an appraisal of the property as of the amended lease start date (9/21/20) was not provided, and (ii) the appraisal that was provided assumes

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completion of structures and improvements that do not yet exist.  ACF Corresp. at 311-12; *see also* Dignity Ex. 20, at 83-85, 94, 111 (showing the effective date of the appraisal was November 15, 2020 – the anticipated date of completed improvements).  ACF explained:

We cannot justify lease payments for improvements fundamental to gaining licensure and executing the services indicated in the grant award, that do not exist.  To do so would be paying above present market value, and would be paying for [square footage] that presently does not contain the improvements that justify the lease amount.

ACF Corresp. at 312.  ACF again noted that “[l]ease payments that result in the determination of a capital lease will be restricted to the expenses as outlined at 45 CFR 75.465.”  *Id*.  In response to the lease issues, Dignity questioned whether “finding a ‘turn-key’/‘child ready’ facility” would be “an easier situation.”  *Id*. at 309.

On October 1, 2020, ACF informed Dignity by email that “[t]he budget has been approved and you should be receiving a NOA and instructions . . . in the coming days on how to draw down your funds.”  ACF Req. 3 – Correspondence, at 1.10  ACF subsequently issued a revised notice of award on October 2, 2020, for the initial budget period of February 1, 2020, through January 31, 2021.  ACF Ex. 6.  Accordingly, ACF released $991,300 in funds to pay for certain “expenses related to the approved pre-license budget while the grantee works to secure a license to provide services.”  *Id*. at 3.  Consistent with the initial NoA, the revised notice of award specified that “no rental costs above the fair market rental value of the available usable space of the leased property may be charged to the grant.”  *Id*. at 5; *see also* ACF Ex. 2, at 4.

Between October and December 2020, the parties continued to correspond about Dignity’s attempts to finalize a location to operate its project and obtain licensure.  In a November 11, 2020 update, Dignity informed ACF that its landlord had “run into unforeseen financial issues and had advised [Dignity] that he CANNOT move fast enough to get the facility operationally ready for licensing.”  ACF Corresp. at 326.  Dignity informed ACF that the landlord’s delay “forced” Dignity to find a new location for its facility, and that it identified a new “‘turnkey’ ready” location at 2144 Central Boulevard, Brownsville, Texas.  *Id*.  According to Dignity, the landlord for the new location “has previous experience working with other shelter organizations and is very familiar with what is needed to get facilities of this nature up and running in a fast and timely manner.”  *Id*. at 327.  Dignity communicated to ACF that it was “working non-stop” to have its facility ready at the new location by December 15, 2020.  *Id*.

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On November 23, 2020, ACF reminded Dignity that it was reviewing non-competing continuation awards and still needed Dignity’s proposed budget and budget narrative for the next year.  ACF Corresp. at 332.  On November 30, 2020, following up on its year two budget request, ACF asked Dignity to provide its time frame for obtaining its license and a space to lease.  *Id*. at 333.  Dignity then provided a budget and budget narrative for year two and reiterated its goal of being operationally ready by December 15.  *Id*.  Dignity indicated it would initially have the capacity to accommodate “16 (+)” children and would “begin rolling out full 48 bed capacity on a weekly basis after that.”  *Id*.  Dignity also informed ACF of its intention to switch the location of its shelter back to the original location at 1001 Medford Road.  *Id*.

On December 2, 2020, Dignity submitted yet another “updated” lease agreement for the location at 1001 Medford Road commencing on December 15, 2021.  ACF Corresp. at 338 (copy of lease amendment attached to email).  ACF determined that the amended lease raised a number of new issues and questions regarding the revised monthly rent amount, the need for a new appraisal based on the current condition of the property, and the impact an amended lease would have on Dignity’s December 15 target date and its ability to obtain a state license.  *Id*. at 339-40.

On December 7, 2020, in response to questions ACF raised, Dignity told ACF that the planned renovations for “additional needed space” had been delayed and that the shelter would not be ready until December 29.  ACF Corresp. at 346-47.  Dignity stated it planned on having its license before December 29 but emphasized that “there MUST be a physical space ready for the State to come in and inspect.”  *Id*. at 347.

On or about December 16, 2020, Dignity informed ACF that it once again planned to change the location of its facility and identified a location at 8280 N. Expressway, Brownsville, Texas, and another at 12505 N. Expressway 281, Edinburg, Texas.  ACF Corresp. at 362-63.  On December 18, 2020, ACF advised that a change of location “would constitute a change of scope for the grant” and directed Dignity to request formal approval for such a change.  *Id*. at 367.  ACF further advised that it was “re-assessing these new site locations and will make a determination of whether [it] will be moving forward with this change of scope.”  *Id*.  On December 22, 2020, Dignity submitted a change of location statement and unsigned lease for review by ACF for the location at 8280 N. Expressway, Brownsville, Texas.  *Id*. at 360 (with attachments); *see also* Dignity Ex. 21, at 192-206 (unsigned commercial lease for property located at 8280 N. Expressway).

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*ACF Withholds Continued Funding Under the NCC Award*

By letter dated January 7, 2021, ACF informed Dignity of its decision to withhold the NCC Award for Dignity’s residential shelter services project under the Unaccompanied Children Program.  ACF Ex. 1.11  ACF’s decision to discontinue funding after the first budget period was based on Dignity’s failure to secure state licensure and its inability to secure a location to operate the project as required by the terms and conditions of the NCC Award and Cooperative Agreement.  *Id*. at 1-2.  ACF found that, notwithstanding the time allowed, Dignity failed to secure a state residential care license and failed to lease a facility capable of providing shelter services to children.  *Id*.  ACF further determined that continued financial support was not in the best interests of the federal government and that Dignity failed to show satisfactory progress in achieving the project objectives.  *Id*.  ACF noted that, “as a steward of federal taxpayer dollars,” it would be “imprudent” to continue funding the program.  *Id*. at 2.  ACF’s decision “shorten[ed] the overall project period without the possibility of continuing the NCC [A]ward.”  *Id*. at 1.

ACF explained that it had the authority to make its decision pursuant to 45 C.F.R. § 75.371, and noted that GPS pages II-89, I-34, and II-53 supported its decision.  ACF Ex. 1, at 1.  The notice advised Dignity that it had a right to appeal ACF’s decision to the Board under 45 C.F.R. Part 16.  *Id*. at 3.

*Board Proceedings*

On February 10, 2021, Dignity filed a notice of appeal with the Board, asserting that ACF’s decision to withhold the NCC Award was wrong because “a series of factors outside Dignity’s control inhibited and sometimes prohibited progress toward” securing a property and appropriate state license to open a shelter.  Notice of Appeal at 2.  Dignity subsequently filed an appeal brief, accompanied by 24 exhibits, in which Dignity asserts two main arguments.  Dignity Br. at 2-3.  First, Dignity asserts that its inability to comply with the Cooperative Agreement was due to circumstances “completely outside of its control.”  *Id*. at 2.  Second, Dignity contends that it is in the best interest of the federal government to “reinstate” the grant given the increased need for shelter services due to “the current (and changed) circumstances under which [unaccompanied children] are entering the United States” in South Texas.  *Id*. at 2-3, 9.

ACF filed a response brief, along with six exhibits, arguing that the Board should uphold ACF’s decision to withhold further funding under the NCC Award because it is undisputed that Dignity failed to secure either a license or location to operate its project

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as required under the terms of the NCC Award and Cooperative Agreement.  ACF Br. at 1, 5-7.  ACF asserts that, without a license or location, Dignity was unable to provide the services required under the Unaccompanied Children Program.  *Id*. at 6-7.  ACF noted that Dignity was unable to obtain the required license and location within the first year of the award and after the draw-down of nearly $1,000,000 in federal funds.  *Id*. at 6-7, 8.  ACF contends that it properly withheld funding for year two having determined that continued financial support was not in the best interests of the federal government.  *Id*. at 1.  ACF further argues that the Board cannot reverse or modify ACF’s determination to withhold additional funding under the NCC Award based on equitable arguments.  *Id*. at 7 (quoting *ChildCareGroup*, DAB No. 3010, at 10 (2020)).

Dignity filed a reply brief reiterating the same arguments made in its opening brief, but also complaining that it was not allowed “the time or opportunity to comply with the changing requirements” purportedly imposed by ACF.  Reply at 2.  Dignity asserts that its arguments have “nothing to do with equity,” and “everything to do with” what is in the best interest of the federal government.  *Id*. at 3.

After reviewing the parties’ submissions, the Board ordered ACF to submit documents, correspondence, and other information to facilitate the Board’s decision-making in this matter.  Order to Develop Record.  ACF filed additional documents and information responsive to the Board’s Order.  ACF Resp. to Order to Develop R.  Dignity filed a response, stating that ACF’s submission “neither negates nor detracts” from Dignity’s prior arguments, which Dignity then reiterated.  Dignity Resp. to Order to Develop R. at 2.  Dignity acknowledged in its response that it “does not argue that the written materials and communications upon which the ACF made its . . . determination are inaccurate or not authentic.”  *Id*. at 3.

Analysis

***We sustain ACF’s decision to withhold continued funding under the NCC Award because Dignity failed to secure the required license and location for its project within the first year of the award.***In an appeal before the Board challenging the withholding of funding under a federal award, an appellant must submit evidence and “argument concerning why the respondent’s final decision is wrong.”  45 C.F.R. § 16.8(a)(2).  When analyzing the denial of continued funding under an award, the grantee “always bears the burden to demonstrate that it has operated its federally funded program in compliance with the terms and conditions of its grant and the applicable regulations.”  *Vance-Warren Comprehensive Health Plan, Inc.*, DAB No. 2180, at 16-17 (2008) (quoting *Away From Home, Inc.*, DAB No. 2162, at 18 (2008)).  Dignity acknowledged that it has the burden of proof in this case.  Dignity Resp. to Order to Develop R. at 3.  In reviewing an agency’s decision to withhold continued funding, the Board is “bound by all applicable

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laws and regulations.”  45 C.F.R. § 16.14.  Thus, “the Board must uphold an agency determination where it is authorized by law and the grantee has not disproved the factual basis for the determination.”  *Beloved Cmty. Fam. Wellness Ctr.*, DAB No. 2960, at 6 (2019) (quoting *Family Voices of D.C.*, DAB No. 2409, at 2 (2011)).  We affirm ACF’s decision to deny continuation funding under the NCC Award based on Dignity’s failure to comply with the terms and conditions of the award because it is authorized by law and Dignity did not disprove the factual basis for the decision.

The NCC Award is subject to the requirements of Part 75 and the GPS.  ACF Ex. 2, at 3.  Under Part 75, if an award recipient fails to comply with the terms and conditions of a federal award, the awarding agency may, as appropriate, terminate the award, withhold further awards for the project or program, or impose any other remedies that may be legally available.  45 C.F.R. §§ 75.371(c), (e), (f).12   Similarly, the GPS authorizes an operating division, such as ACF, to deny continuation funding under a non-competing continuation award when, among other things, the award recipient fails to meet the terms and conditions of a previous award.  GPS at II-89.  Here, ACF denied continuation funding under the NCC Award because Dignity failed to comply with the terms and conditions of the award when it failed to secure the required license and location for its project within the first year of the award.  ACF Ex. 1, at 1 (“ACF bases its decision on [Dignity’s] failure to secure State licensure, and its inability to secure a location to operate the project, as required by the NCC award and cooperative agreement.”).

As explained above, ACF issued a notice of award (NoA) to Dignity on March 13, 2020, based on Dignity’s award application and budget, as amended in January and February 2020.  *See supra* at 3-4.  The first-year budget period ran from February 1, 2020 through January 31, 2021.  ACF Ex. 2, at 1.  The NoA and Cooperative Agreement established the “requirements and responsibilities” for Dignity’s implementation of residential services for unaccompanied children under the NCC Award.  ACF Ex. 3, at 2.  The Cooperative Agreement required, among other things, that Dignity provide residential shelter and services for unaccompanied children in compliance with State residential care licensing requirements.  *Id*. at 4, 27.  The initial NoA stated that Dignity was to obtain the required state license to provide residential shelter services for unaccompanied children at a facility having a 100-bed capacity.  ACF Ex. 2, at 2.

As specified in the Cooperative Agreement, the stated purpose of the NCC Award was “to support the provision of residential services for [unaccompanied children] *according to the objectives and activities outlined in the application*and consistent with State residential care licensing requirements . . . .”  ACF Ex. 3, at 3 (emphasis added).  In its

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application, Dignity made representations about its capacity to provide shelter services for hundreds of unaccompanied children, including representations about the location and suitability of its facility and its ability to obtain the required state residential care license within 75 days of the award.  ACF Ex. 5, at 47, 54, 57-59, 61, 117.  Specifically, Dignity represented that it would provide its “license of eligibility (temporary, provisional, or an equivalent license) within 75 days of [the] award, by a state licensing agency, to provide residential, group, or foster care services for dependent children.”  ACF Ex. 5, at 54.  Dignity further represented that its proposed facility was “suitable to meet state licensure approval” and that “the facility will be able to meet the ***state’s licensing office*** recommendations within 75 days from grant award.” *Id*. at 117.  Additionally, Dignity represented that “[a]ll equipment, software, facility upkeeps and upgrades will be put in place within the 75-day limit.”  *Id*. at 47.  As noted above, by January 2021, Dignity had achieved none of these things despite drawing down nearly $1 million in federal funding under the NCC Award.  *See supra* at 10-11.

Moreover, for continuation applications after the first year of the award, the Cooperative Agreement required that Dignity submit, among other things, a “Current State Residential Care License” and “Facility lease.”  ACF Ex. 3, at 27.  Dignity was unable to provide either of these things because Dignity did not have a state residential care license or a lease for any facility at the time that ACF was considering whether to provide continued funding for year two.  In fact, as of December 22, 2020, Dignity proposed changing the location of its facility for the fourth time, having failed to secure a lease for any location.  ACF Corresp. at 360; *see also supra* at 4, 10-11.  As of January 4, 2021, Dignity had not even submitted a complete state license application or undergone a state inspection to obtain the required license.  Dignity Ex. 23, at 217-18.

Dignity does not deny that it was required to secure a license and location for its project in accordance with the terms and conditions of the NCC Award.  Dignity Br. at 2.  Nor does Dignity dispute that it failed to secure the necessary license and a suitable location within the first year of the award.  *Id*. (arguing that the “circumstances” resulting in its “inability to comply” with these award requirements were “completely outside of its control”).  Without a location and without a license, Dignity could not provide the residential shelter services for unaccompanied children that was the central objective of the NCC Award.  We conclude, therefore, that ACF was authorized to withhold further funding under the NCC Award given Dignity’s undisputed failure to secure a state residential care license and suitable location for its project in accordance with the terms of the NCC Award.  *See, e.g.*, *AmASSI Health & Cultural Ctr.*, DAB No. 2516, at 15 (2013) (sustaining denial of further funding under non-competing continuation award and termination of cooperative agreement where grantee failed to comply with terms and conditions of award by failing to achieve central objectives of its cooperative agreement);*Partnership for Youth & Cmty. Empowerment*, DAB No. 2306, at 10-14 (2010) (sustaining denial of further funding under non-competing continuation award after first year of project where grantee failed to comply with financial and program management

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requirements of its award); *see also Asian Media Access*, DAB No. 2301, at 10-11 (2010) (sustaining termination of federal grant because grantee failed to comply with the terms and conditions of its award when it did not meet the timetable in its application to develop and begin operating a youth shelter within the first year).  As detailed above, ACF’s determination to deny continued funding under the NCC Award on the ground that Dignity failed to comply with the terms and conditions of the NCC Award and Cooperative Agreement is fully supported by the record, and Dignity has not disproved the factual bases for that determination.

***Dignity’s excuses for failing to comply with the terms of the NCC Award due to circumstances “completely outside of its control” provide no basis to overturn ACF’s decision.***Before the Board, Dignity does not dispute that it failed to comply with the terms and conditions of the NCC Award within the first year.  Rather, Dignity claims that “the specific circumstances that resulted in Dignity’s inability to comply with the Cooperative Agreement . . . were completely outside of its control.”  Dignity Br. at 2.  Dignity asserts that “delays in processing” the award caused “potential and promising lessors of adequate facilities” to decline to sign leases with Dignity and, without a facility lease, Dignity was unable to acquire a state residential care license.  *Id*.  Dignity points to a “series of factors” that purportedly “inhibited and sometimes prohibited progress” towards acquiring a suitable property and state residential care license.  *Id*. at 3.  We address each of these “factors” below and conclude that they provide no basis to overturn ACF’s decision to deny continuation funding under the NCC Award.

Dignity asserts that it had trouble “knowing precisely what was being requested of it, especially during the first half of 2020.”  Dignity Br. at 3.  Dignity asserts that its interactions with ACF were “confusing and unpredictable at best.”  Dignity Resp. to Order to Develop R. at 2.  Dignity alleges that miscommunications with ACF occurred, but the evidence Dignity cites does not substantiate any miscommunication by ACF.  Dignity Br. at 3 (citing Dignity Exs. 3, 15).  One exhibit shows that in March 2020, following a telephone conference, Dignity asked questions about completing certain forms.  Dignity Ex. 3.  ACF provided a timely response to those questions, and Dignity responded, “Got it, thanks . . . !”  *Id*.  Another exhibit shows that ACF asked Dignity for a copy of the appraisal of the property at 1001 Medford Road before an upcoming conference call.  Dignity Ex. 15.  Dignity provided a copy of the appraisal to ACF the following day.  *Id*.  Dignity does not explain how these exhibits (or any other record evidence) demonstrates any relevant or material miscommunication by ACF.

Based on our review of the record, we find that ACF provided clear and consistent guidance to Dignity regarding the need to secure a state residential care license and a suitable facility in accordance with the NCC Award.  From the outset, Dignity understood that it needed to obtain a state residential care license to operate a shelter for

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unaccompanied children.  ACF Ex. 5, at 54, 117 (acknowledging licensing requirement in application).  That requirement was reiterated in the NoA and Cooperative Agreement.  ACF Ex. 2, at 2; ACF Ex. 3, at 3-4, 27.  The NoA made clear that grant funds would be restricted until Dignity obtained the required state license; however, Dignity could submit a pre-license budget to obtain federal funding for costs necessary to secure the required license.  ACF Ex. 2, at 2.  Despite clear and consistent guidance from ACF, Dignity repeatedly submitted proposed pre-license budgets for costs that were excessive, unnecessary, duplicative, lacking a sufficient explanation, or otherwise unallowable.  *See supra* at 6-7.  Before the Board, Dignity made no showing that any of the pre-license budgetary revisions required by ACF were unnecessary or unfounded.  While ACF’s required revisions undoubtedly delayed Dignity’s receipt of federal funding, the record shows that those delays were directly attributable to Dignity’s failure to follow and timely respond to ACF’s clear and consistent instructions.  *See supra* at 6-7, 9-10. 
ACF also provided clear and consistent guidance regarding the use of federal funds in connection with proposed lease agreements.  Again, from the outset, ACF made clear that Dignity could not use federal funds to pay for any improvements that increase the value of leased property.  The FOA advised that costs for the “acquisition, construction, and major renovation of facilities is unallowable.”  ACF Ex. 4, at 21.  In January 2020, during ACF’s review of Dignity’s proposed initial budget, ACF advised Dignity that “[c]apital improvements . . . and any improvements that increase the value of the facility are not allowed and should be removed” from the budget.  Dignity Ex. 1, at 10.  The NoA issued in March 2020 further stated that “no rental costs above the fair-market rental value of the available usable space of the leased property may be charged to the grant” and “[n]o federal funds may be used for ownership type expenses.”  ACF Ex. 2, at 4.

Despite these clearly defined limitations, Dignity proposed leasing a facility at 1001 Medford Road that needed to be brought “up to code” and required other extensive renovations.  *See supra* at 8-9.13   Despite assurances from Dignity that federal funds would not be used for construction costs, the lease documentation submitted by Dignity indicated that major renovations, including the installation of five classrooms and seven living quarters for children, were to be initiated as part of the lease.  *Id*. at 8.  In July 2020, ACF requested that Dignity provide a property appraisal reflecting the fair market value of the property at the start of the lease (before completion of the planned improvements).  *Id*.  Two months later, after repeated requests from ACF, Dignity provided an appraisal reflecting the prospective market value of the property *after* completion of the planned improvements.  *Id*. at 8-9.  Not surprisingly, ACF then notified

Page 18

Dignity that lease payments cannot be charged to the NCC Award because (i) an appraisal of the property as of the amended lease start date (9/21/2020) was not provided; and (ii) the appraisal that was provided assumes the completion of structures and improvements that do not exist.  ACF Corresp. at 311-12 (explaining that federal funds cannot be used for lease payments that exceed the present market value of the property).  Dignity did not dispute ACF’s assessment of the lease, but instead questioned whether it would be better to find a “‘turn-key’/‘child-ready’” facility.  *Id*. at 309.  Dignity raised this question for the first time in late September 2020, more than six months after issuance of the NoA and three days before approval of its pre-license budget.  *Id*.

On October 1, 2020, ACF approved Dignity’s pre-license budget and, in connection with that approval, issued an updated notice of award.  *See supra* at 10.  The updated award notice, like the original, stated that “no rental costs above the fair market rental value of the available usable space of the leased property may be charged to the grant.”  ACF Ex. 6, at 5; ACF Ex. 2, at 4.  Dignity proceeded to draw down nearly $1 million in federal funds under the NCC Award for the ostensible purpose of securing a state residential care license.  *See supra* at 10, 12.14   And, despite the need for major renovations at 1001 Medford Road, Dignity pressed on with its plan to lease that property.  *See id*. at 10.

On November 11, 2020, Dignity informed ACF that the landlord for 1001 Medford Road had “run into unforeseen financial issues” and was unable to complete renovations needed for Dignity to obtain its state license; however, Dignity had purportedly found a turn-key ready facility at 2144 Central Boulevard, Brownsville, Texas, which would be ready by December 15, 2020.  ACF Corresp. at 326-27.  Then, on November 30, Dignity informed ACF that it was changing the location of its facility back to 1001 Medford Road and submitted another proposed amended lease for ACF’s review.  *Id*. at 333.  According to ACF, the amended lease raised several new issues and questions about the revised rental amount, the need for a new appraisal, and the impact a new lease would have on Dignity’s December 15 target date.  ACF Corresp. at 339-40.  On December 7, Dignity advised ACF that the planned renovations at 1001 Medford Road were again delayed and would not be ready until December 29.  *Id*.  at 346-47.  Less than 10 days later, Dignity notified ACF that it was again changing the location of its facility (for a fourth time) and submitted a proposed lease for 8280 N. Expressway, Brownsville, Texas.  *Id*. at 350-52; *see also* Dignity Exs. 21, 21a, 22.  ACF did not approve the change of location and notified Dignity of its determination to deny continued funding under the NCC Award.  *See supra* at 11-12.

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Based on our review of the record, we find Dignity’s assertions about alleged miscommunications by ACF are unsubstantiated.  We find that ACF provided clear and consistent guidance to Dignity regarding the requirements for obtaining federal funding, that Dignity repeatedly failed to comply with ACF’s guidance and instructions, and that the ultimate responsibility for Dignity not securing the necessary license and a suitable location for its project rests squarely with Dignity.  *See, e.g.*,*AmASSI* at 15-17, 20 (rejecting grantee’s “claims that the delays it experienced in achieving the central goals and objectives of its . . . project were caused by factors beyond its control” where the record showed that the awarding agency gave the grantee extensive guidance and technical support but the grantee “failed to satisfactorily use this help to advance its . . . project”); *Asian Media Access*at 13 (sustaining ACF’s decision to terminate grant because the grantee was “responsible for ensuring that the timetable in its grant application for developing and opening its shelter was realistic and that it was feasible to obtain the necessary state operating license, building permit, and city zoning changes soon enough to meet that timetable”).

We are also unpersuaded by Dignity’s contention that “reductions” in bed capacity in January 2020 and September 2020 made it “increasingly difficult to secure a suitable location, obtain equipment, hire personnel, and secure licensure.”  Dignity Br. at 3-4.  According to Dignity, bed capacity “reductions” caused it to “significantly revise its budget twice” and these budgetary revisions delayed its receipt of federal funds.  *Id*. at 4.  Dignity claims, without evidence, that delays in funding caused vendors and potential lessors to “hesitate” to sign binding contracts “when Dignity could neither pay for the locations, nor commit to a particular facility given the changing requirements for the amount of space needed.”  *Id*.  Dignity’s attempt to blame its inability to secure a state license and suitable location on reductions in bed capacity is unsupported by the record.

In its application, Dignity represented that it would initially “host a facility for 160 [unaccompanied children].”  ACF Ex. 5, at 47, 61.15   In January 2020, *before* ACF approved Dignity’s application, Dignity submitted a proposed budget for a 100-bed facility.  Dignity Ex. 1, at 11.  Accordingly, the NoA issued on March 13, 2020, was for a 100-bed facility.  ACF Ex. 2, at 2.  Thus, from the outset of the award, ACF required only a 100-bed facility during the first year of the award.  *Id*.  And, as described above, the record reflects that the revisions to Dignity’s pre-license budget after issuance of the NoA, and the delays associated with those revisions, had nothing to do with any post-award “reduction” in bed capacity.  *See supra* at 6-7.

The record further reflects that in September 2020, in connection with ACF’s invitation for Dignity to apply for continuation funding, ACF advised that it required only a 48-bed

Page 20

facility for the second year of the award (February 1, 2021, through January 31, 2022).  Dignity Ex. 16a; Dignity Ex. 16b.  At the time Dignity was invited to apply for continuation funding, Dignity had not secured a lease for any facility and did not have the capacity to serve any children.  Moreover, as specified in the Cooperative Agreement, continued funding under the NCC Award was not guaranteed, but was subject to ACF’s “capacity needs,” among other things.  ACF Ex. 3, at 29.  Dignity was also required to submit a continuation application and new budget for year two, regardless of any change in bed capacity.  *Id*. at 27.  Having accepted the NCC Award, Dignity was bound by its terms and conditions, including the possibility that ACF’s capacity needs may change from year to year.  *Cf. AmASSI* at 16 (rejecting grantee’s argument that funding under the award was insufficient to meet its project responsibilities having accepted the award’s terms and conditions when it drew down funds).

We further find no evidence substantiating Dignity’s claim that vendors and potential lessors declined to contract with Dignity due to a reduction in bed capacity either before issuance of the NoA or after ACF invited Dignity to submit a continuation application.  Dignity points to no evidence demonstrating a concern by any potential lessor regarding the reduction in bed capacity for year two.  In fact, the record shows that more than two months after Dignity learned of ACF’s reduced capacity needs for year two, Dignity changed the location of its project back to the “previously planned” location at 1001 Medford Road.  ACF Corresp. at 333.  This undermines any suggestion that reduced bed capacity was a factor in Dignity’s choice of location since Dignity re-selected the same location for its project that it had selected in February 2020.  Dignity further assured ACF that its facility would be “operationally ready” for “16+” children by December 15 and would “begin rolling out full 48 bed capacity on a weekly basis after that.”  *Id*.  Dignity has made no showing that reduced capacity needs in year two prevented Dignity from securing a suitable location in year one.

Nor is there any evidence that a change in bed capacity for year two prevented Dignity from hiring necessary personnel or purchasing equipment and supplies needed to obtain a state residential care license in year one.  In fact, the record reflects that ACF released nearly $1 million in federal funds in year one in accordance with Dignity’s approved pre-license budget, which included $296,009 for personnel costs and fringe benefits and $418,965 for equipment and supplies.  ACF Ex. 6, at 3 (itemizing pre-license funding for personnel, fringe benefits, equipment, supplies, and other costs).  Dignity does not deny drawing down the full amount of these funds and, moreover, points to no evidence that it was unable to hire essential personnel or purchase necessary equipment and supplies after the approval of its pre-license budget.  For all these reasons, we reject Dignity’s argument that its failure to secure a license and suitable location for its project within the first year of the award was the result of a reduction in bed capacity for the proposed second year.

Dignity also argues that the COVID-19 pandemic hindered its ability to obtain background checks for hiring essential personnel and “made startup difficult during the

Page 21

critical formative phase of organizing and setting up the shelter, including creating various policies, handbooks, and trying to meet state operating requirements.”  Dignity Br. at 5-6.  Any difficulties Dignity had in obtaining background checks on potential personnel are immaterial because ACF did not deny continued funding due to a lack of personnel.  Nor has Dignity shown that it was unable to secure the required state license due to a lack of personnel or problems with its policies or handbooks.  If anything, the record reflects that Dignity’s repeated attempts to obtain funding for unnecessary personnel during the pre-license phase hindered the approval of its pre-license budget and contributed to the delays that Dignity now complains about.  *See supra* at 6-7; *see also* ACF Corresp. at 88, 175, 204-05, 226.

Dignity highlights various other circumstances having no obvious relevance to any issue before the Board.  Dignity Br. at 6-7.  For example, Dignity points out that, at the end of June 2020, the program specialist for ACF that had been working with Dignity was replaced by a project officer who was to provide training to a new project officer, whose training ended on October 6, 2020.  *Id*. at 6.  Dignity does not explain how these circumstances, or anything else it highlighted, would excuse its failure to secure a license and suitable location for its project within the first year of the award.16

Finally, we reject Dignity’s argument that the decision to withhold continued funding was “wrong” because Dignity was not allowed “the time or opportunity to comply with the changing requirements of the ACF.”  Reply at 2.  This argument is immaterial because ACF had no obligation to provide Dignity with more time to achieve its year one project objectives before denying funding for year two.  *See* *P’ship for Youth & Cmty. Empowerment*at 14.  “[W]hile a grantor agency may, ‘as a matter of policy or prudence,’ provide a grantee an opportunity to remedy deficiencies prior to denying an application for continuation funding, nothing in the applicable regulations requires a grantor agency to do so.”  *Id*. (quoting *Vance-Warren* at 16); *see also Nat’l AIDS Educ. & Servs. for Minorities*, DAB No. 2401, at 17 (2011); *Away from Home* at 19.

In any event, ACF provided Dignity with more than ample opportunity to secure a license and location for its project within the first budget period.  Those two requirements – to secure a license and location – never changed.  Moreover, Dignity failed to show that any change in bed capacity for year two would excuse its failure to secure a state license and suitable location in year one.  As detailed above, the NoA was issued on March 13, 2020.  ACF Ex. 2, at 1.  Over the next nine months, ACF provided Dignity with clear and consistent guidance regarding the requirements for obtaining federal funding under the

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award, including the need for an appropriate pre-license budget and an acceptable lease.  *See supra* at 6-11.  During this time, Dignity failed to timely and sufficiently complete the suggested corrective actions and repeatedly failed to meet its own deadlines and target dates, as well as those imposed by ACF.  *See id*. at 4, 6-11.  By the beginning of January 2021, and despite drawing down nearly $1 million in federal funding, Dignity had secured neither a state residential care license nor a location to operate its project.  *Id*. at 11-12.  Given these circumstances, “ACF was under no obligation to continue funding an organization” that demonstrated an inability to manage its award and failed to achieve the central objective of its project—to provide shelter services for children.  *See* *Asian Media Access* at 16-17.

For all these reasons, we sustain ACF’s decision to deny continuation funding under the NCC Award due to Dignity’s failure to comply with the terms and conditions of the award.

***Dignity’s assertion that continued funding under the NCC Award would be in the best interests of the federal government does not raise a reviewable issue and, in any event, has no merit.***Notwithstanding its failure to secure a location and state license to operate a residential shelter facility, Dignity challenges ACF’s determination that continued financial support under the NCC Award would not be in the best interests of the federal government.  ACF Ex. 1, at 1-2; ACF Br. at 1, 4; *see* *also* GPS at II-89 (authorizing the withholding of a non-competing continuation award if, “[f]or whatever reason, continued funding would not be in the best interests of the Federal government”).  Dignity contends that continued funding would be in the best interests of the federal government given the “current (and changed) circumstances under which [unaccompanied children] are entering the United States” in South Texas.  Dignity Br. at 2-3.  Dignity asserts that South Texas is experiencing an “overwhelming influx” of unaccompanied children that “has been calculated to continue to increase.”  *Id*. at 9.  Additionally, Dignity asserts that after the denial of continued funding, its managing members “developed strong relationships” with local health officials, governmental entities, and charities, and they believe that Dignity “can assist in the Federal government’s efforts to provide safe and healthy facilities for [unaccompanied children] entering the United States.”  *Id*.  Thus, Dignity contends “resumed and continued funding” under the NCC Award would “be in the continued best interest of the Federal government.”  *Id*.; *see also* Reply at 2-3, 5.

The Board “may review ‘a denial of a noncompeting continuation award under the project period system of funding where the denial is for failure to comply with the terms of a previous award.’”  *Vance-Warren* at 2 (quoting 45 C.F.R. Part 16, App. A, ¶ C.(a)(3)).  “Apart from this narrow exception, the Board has no power to review disputes over pre-award determinations, which generally are matters committed to the federal agency’s discretion.”  *Id*. (internal quotations omitted).  In *Vance-Warren*, the

Page 23

Board explained that an HHS operating division may decide to withhold a non-competing continuation award for multiple reasons, including a determination that continued funding would not be in the best interests of the federal government; however, the Board is limited by Part 16 to reviewing only a determination that the recipient failed to meet the terms and conditions of a previous award.  *Id*. at 2-3; *see also* *P’ship for Youth & Cmty. Empowerment* at 9 (“[T]he Board previously has acknowledged that, pursuant to the GPS and applicable regulations, it lacks the authority to review a pre-award decision to deny continuation funding that is not based on the grantee’s failure to meet the terms and conditions of a previous award.”).  As explained above, we reviewed this question and sustain ACF’s decision to deny continuation funding based on Dignity’s failure to comply with the terms and conditions of the award because that decision is authorized by law and Dignity did not disprove the factual basis for the decision.

In this case, ACF also determined that continued funding of the NCC Award is not in the best interests of the federal government.  ACF Ex. 1, at 1-2.  We have no authority under Part 16 to review this separate determination, except to the extent that it is based on Dignity’s failure to comply with the terms and conditions of the first-year award.  *Cf*. *P’ship for Youth & Cmty. Empowerment*at 8-9 (concluding that Board had authority to review decision to deny continuation funding based on grantee’s failure to meet project objectives because that determination was “merely incident to [grantee’s] violation of terms and conditions of the first-year award”).  Thus, the Board has no authority to overturn ACF’s determination to withhold continuation funding based on considerations, such as an increased need for residential care services for unaccompanied children in South Texas, having nothing to do with Dignity’s compliance (or lack of compliance) with the terms and conditions of the NCC Award.

Moreover, Dignity’s contention that it could somehow provide shelter services to a surging population of unaccompanied children in South Texas is belied by the fact that it has demonstrated no capacity to provide such services.  The record reflects that Dignity has no facility and no license to provide residential care services to any children.  Thus, even if the Board could review ACF’s determination about what is in the best interests of the federal government, given Dignity’s failure to secure a location and license to provide residential care services in South Texas, we would find no error in ACF’s determination that continued funding under the NCC Award is not in the best interests of the federal government.

Page 24

Conclusion

For the foregoing reasons, we sustain ACF’s decision to withhold continued funding under the NCC Award without the possibility of continuing the award.



Endnotes

1  For simplicity, we will refer to the respondent, including both ACF and the Office of Refugee Resettlement, as ACF.

2  We cite to the HHS regulations at 45 C.F.R. Part 75 in effect at the time of the award at issue.  The Part 75 regulations implement the language in 2 C.F.R. Part 200 (Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards) and supersede OMB circulars and earlier regulations in Title 2 of the Code of Federal Regulations and HHS regulations at 45 C.F.R. Parts 74 and 92.  *See* 45 C.F.R. §§ 75.104, 75.106.

3  The current version of the GPS has an effective date of January 1, 2007, and is available at https://www.hhs.gov/sites/default/files/grants/grants/policies-regulations/hhsgps107.pdf.

4  Under the project period system, a project may be approved for a multi-year period, but generally is funded in annual increments known as ‘budget periods.’”  GPS at I-15.  “This system provides the recipient with an indication of the [HHS operating division’s] intent to non-competitively fund the project during the approved project period as long as required information is submitted, funds are available, and certain criteria are met.”  *Id*.  Thus, for non-competing continuation awards, the grantee does not compete with other grantees for continuation awards during the project period, but the awarding agency is not obligated to make such awards.  *See Youth Network Council of Chi., Inc.*, DAB No. 1150, at 2 (1990).

5  Contrary to the Board’s instructions in the Acknowledgement Letter, Dignity combined its documentary exhibits (1-24) and exhibit list into a single PDF without page numbers.  We refer to the page numbers of the PDF as it appears in DAB E-File.

6  "ACF Req. 2 – Correspondence” refers to the 374-page PDF, primarily consisting of emails (with attachments), filed by ACF on August 2, 2021, in response to the Board’s order to develop the record.  We refer to this exhibit as “ACF Corresp.”

7  Although the Cooperative Agreement was executed by Dignity on November 17, 2020, neither party disputes the effective date of the Cooperative Agreement.  ACF Ex. 3, at 29.

8  According to ACF, “start-up” costs or budgets “include those costs that are limited to the initial budget year and are typically one-time costs incurred in the creation of a new program,” whereas “pre-license” budgets must be submitted by grant recipients who are approved for funding but do not possess a facility license to provide residential services to unaccompanied children.  ACF Resp. to Order to Develop R. at 3.  The “pre-license” budget is limited to “those costs that are necessary to meet the minimum state licensing requirements.”  *Id*.

9  "ACF Req. 1 – Documents” refers to a PDF portfolio filed by ACF on August 2, 2021, in response to the Board’s order to develop the record.  The PDF portfolio consists of five unnumbered documents that Dignity uploaded to GrantSolutions on March 27, 2020.  ACF Resp. to Order to Develop R. at 1-2.

10  "ACF Req. 3 – Correspondence” refers to the 16-page PDF, consisting of emails, filed by ACF on August 2, 2021, in response to the Board’s order to develop the record.

11  Dignity incorrectly refers to this letter as a “disallowance letter.”  Dignity Br. at 1-2.  This case does not involve a disallowance.  The letter is a denial (or withholding) of a non-competing continuation award for year two under the project period system of funding, without the possibility of continuing the award.  *See* 45 C.F.R. Part 16, App. A ¶ C.(a)(3); *see also* GPS at II-89.

12  The predecessor to section 75.371 authorized withholding of further awards for a project or program if an award recipient “materially fails to comply with the terms and conditions of an award.”  *See* 45 C.F.R. § 74.62 (effective to Dec. 25, 2014).  The term “materially” does not appear in the text of 45 C.F.R. § 75.371.

13  In its award application, Dignity represented that it intended to lease a facility at 5820 Millennium Drive, Harlingen, Texas.  ACF Ex. 5, at 57-59.  At the end of February 2020, before issuance of the NoA, Dignity advised ACF that its facility would be located at 1001 Medford Road, Brownsville, Texas.  ACF Corresp. at 41.

14  ACF released $991,300 in federal funds to pay for costs related to the approved pre-license budget, including substantial funding for personnel, equipment, supplies, and other expenses.  ACF Ex. 6, at 3; *see also* ACF Corresp. at 315-16.  ACF alleged, and Dignity does not deny, that Dignity drew down the full amount of available funds.  ACF Br. at 3, 8.

15  Dignity’s assertion that its “initial Grant request was for a 200-bed facility” (Dignity Br. at 3) is unsupported by the record evidence.

16  Dignity also asserts that it was compelled to withdraw its state license application “due to [ACF’s] error in submitting” the application.  Dignity Br. at 7 (referring to the Office of Refugee Resettlement).  Dignity points to no evidence indicating that ACF somehow submitted a state license application to the State of Texas on Dignity’s behalf.  The record reflects that on August 4, 2020, Dignity advised ACF that it had withdrawn its first attempt to acquire a state license due to ongoing questions about its pre-license budget.  ACF Corresp. at 216-17.
  
          /s/
        Karen E. Mayberry

                      Board Member
          /s/
        Constance B. Tobias

                      Board Member
          /s/
        Michael Cunningham

                      Presiding Board Member Back to top
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