Skip to main content


U.S. flag
      An official website of the United States government
              Here’s how you know
        Here’s how you knowDot gov**Official websites use .gov**
                 A **.gov** website belongs to an official government organization in the United States.
                  HTTPS**Secure .gov websites use HTTPS**
                 A **lock** (A locked padlock) or **https://** means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites. 
  Menu Close
          HHS Search block
    Search
        








  
  
    

  
      

                                      About HHS
    
                        
                              
      
      
      Programs & Services
    
                        
                              
      
      
      Grants & Contracts
    
                        
                              
      
      
      Laws & Regulations Breadcrumb
    Home
                              About
                              Agencies
                              DAB
                              Decisions
                              Board Decisions
                              2024 Board Decisions
                              International Educational Services, Inc., Ruling on Request for Reconsideration of Decision No. 3055, Ruling No. 2024-2 (2024)
 Navigate to:
  Departmental Appeals Board (DAB)
    
                                                  
                                                    
            
      
      
      
      About DAB
                                            
            
            Organizational Overview
    
                                                  
                              
            
      
      
      
      Who are the Judges?
    
                                                  
                              
            
      
      
      
      DAB Divisions
    
                                                  
                              
            
      
      
      
      Contact DAB
    
                                                  
                                                    
            
      
      
      
      Filing an Appeal Online
                                            
            
            DAB E-File
    
                                                  
                              
            
      
      
      
      Medicare Operations Division (MOD) E-File
    
                                                  
                                                    
            
      
      
      
      Different Appeals at DAB
                                            
            
            Appeals to DAB Administrative Law Judges (ALJs)
                          
            
            Forms
    
                                                  
                              
            
      
      
      
      Procedures
    
                                                                
                                                    
            
      
      
      
      Appeals to Board
                          
            
            Practice Manual
    
                                                  
                              
            
      
      
      
      Guidelines
    
                                                  
                              
            
      
      
      
      Regulations
    
                                                  
                              
            
      
      
      
      National Coverage Determination Complaints
    
                                                                
                                                    
            
      
      
      
      Appeals to the Medicare Appeals Council (Council)
                          
            
            Forms
    
                                                  
                              
            
      
      
      
      Fully Integrated Duals Advantage (FIDA) Demonstration Project
    
                                                  
                                                    
            
      
      
      
      Alternative Dispute Resolution Services
                                            
            
            Sharing Neutrals
    
                                                  
                              
            
      
      
      
      ADR Training
    
                                                  
                              
            
      
      
      
      Other ADR Services
    
                                                  
                                                    
            
      
      
      
      DAB Decisions
                                            
            
            Board Decisions
    
                                                  
                              
            
      
      
      
      DAB Administrative Law Judge (ALJ) Decisions
    
                                                  
                              
            
      
      
      
      Medicare Appeals Council (Council) Decisions
    
                                    
                              
            
      
      
      
      Stakeholder Feedback
    
                                                  
                                                    
            
      
      
      
      Careers
                                            
            
            Open Career Opportunities
    
                                                  
                              
            
      
      
      
      Internships & ExternshipsText resize icon

                    




International Educational Services, Inc., Ruling on Request for Reconsideration of Decision No. 3055, Ruling No. 2024-2 (2024)








  
  
    

  
      
Department of Health and Human Services 
    DEPARTMENTAL APPEALS BOARD
          Appellate Division





International Educational Services, Inc.
Docket No. A-22-35, Request for Reconsideration of DAB No. 3055 (2021)Ruling No. 2024-2March 19, 2024

        
              
    

      RULING ON REQUEST FOR RECONSIDERATIONOn December 30, 2021, the Departmental Appeals Board (Board) upheld two decisions the Administration for Children and Families (ACF) issued on February 21, 2018.  *International Educational Services, Inc.*, DAB No. 3055 (2021).1  The decisions arose from ACF’s awards of federal funding to International Educational Services, Inc. (IES) under multiple cooperative agreements between ACF’s Office of Refugee Resettlement (ORR) and IES for the provision of residential shelter and services to children in Texas under the Unaccompanied Children (UC) program.  The Board first upheld the disallowance of $17,673,785.40 of $19,655,761.05 that ACF had disallowed in IES’s costs related to awards under 14 cooperative agreements.  The Board also upheld ACF’s decision not to give IES a non-competing continuation award for the second year under nine of the 14 cooperative agreements.On February 1, 2022, IES requested reconsideration of DAB No. 3055, arguing that the Board’s decision was factually and legally erroneous.  The Board gave ACF an opportunity to respond to IES’s request.  On March 8, 2022, ACF notified the Board that it did not intend to file a brief in response to IES’s request because IES “raise[d] no issues not already addressed” in DAB No. 3055.As we explain below, IES has not identified any clear legal or factual error in DAB No. 3055.  Accordingly, we decline to reconsider DAB No. 3055.Legal BackgroundORR, a component of ACF, administers the UC program, which provides placement, housing, food, and other 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**Page 2**States who is available to provide care and physical custody.  6 U.S.C. §§ 279(b), (g)(1)-(2); 8 U.S.C. § 1232(b)(1).  ORR is responsible for “coordinating and implementing the care and placement of unaccompanied . . . children,” “identifying . . . qualified individuals, entities, and facilities to house” them, and “overseeing the infrastructure and personnel of facilities in which [the children] reside.”  6 U.S.C. § 279(b)(1)(A), (F), (G).  ORR administers the UC program through contracts and cooperative agreements with entities that have demonstrated child welfare, social service, or related experience and are appropriately licensed to provide care and related services to dependent children.2  *See* 8 U.S.C. § 1232(i) (authorizing federal awards to carry out the purposes of 6 U.S.C. § 279).Awards under the UC 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.  45 C.F.R. §§ 75.101(a)-(b)(1), 75.110.  Award recipients must “[c]omply with Federal statutes, regulations, and the terms and conditions of the Federal awards,” and they “assume[ ] responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award.”  *Id*. §§ 75.303(b), 75.400(b).  If the recipient fails to comply with the terms and conditions of the award, the awarding agency may disallow the costs of the non-compliant conduct, withhold further awards for the project or program, or impose any other legally available remedies.  *Id*. § 75.371(b), (c), (e), (f).  The notice of award or cooperative agreement may also be subject to the requirements of the HHS Grants Policy Statement (GPS) and ORR Policy Guides.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) when, among other reasons, an award recipient fails to show satisfactory progress in achieving the project’s objectives or fails to meet the terms and conditions of a previous award.  GPS at II-89.Case Background and the Board’s Decision4In DAB No. 3055, the Board upheld $17,673,785.40 in disallowed costs related to federal awards under 14 cooperative agreements between ORR and IES, an amount that comprised most of the amount ACF had disallowed.  DAB No. 3055, at 1-2, 18, 40.  The amount of disallowance the Board upheld ($17,673,785.40) consisted of $851,756.35 in**Page 3**excess executive compensation; $8,111,360.35 in impermissible related-party lease costs and $217,500 in depreciation costs for those leases; and $8,493,168.70 in unauthorized costs related to a shelter in San Benito, Texas.  *Id*. at 2, 8, 40.5  The Board also upheld ACF’s decision not to give IES a “Year 2 NCC award” (i.e., a non-competing continuation award) related to nine of the 14 cooperative agreements.  *Id*. at 2, 8, 40.  The awards associated with the 14 cooperative agreements covered various project periods, the earliest beginning in October 2013 and the most recent ending in March 2020.  *Id*. at 5.  ACF issued its decisions based on the findings from a 2016 audit of IES’s fiscal year (FY) 2015 awards performed by the HHS Office of the Inspector General (OIG).  *Id*. at 1, 4-5.  The OIG found that IES, among other things, engaged in less-than-arm’s length transactions in obtaining property leases, paid certain individuals salaries that exceeded the applicable executive compensation cap, and did not comply with conflict-of-interest requirements and applicable cost principles.  *Id*. at 1, 4-5.The Board first explained that it was deciding the cases based on the written arguments and evidence submitted by the parties without holding an in-person hearing because IES, which had asked the Board to convene a hearing, did not identify, and the Board did not discern, any material factual dispute or other issue for which testimonial evidence was necessary.  DAB No. 3055, at 9-10.  The Board then rejected IES’s three “overarching” arguments alleging that ACF’s decisions were legally infirm because the decisions were: (1) not sufficiently specific in explaining the bases for the decisions and, with respect to certain costs, ACF had not yet reached a final decision (*id*. at 11-13); (2) based on an audit that was flawed and apparently incomplete, because OIG should have provided IES a draft report of audit findings for IES to first review and comment on, but OIG did not issue a draft or final audit report (*id*. at 13-16); and (3) issued without first giving IES an opportunity to implement a corrective action plan to address alleged instances of noncompliance, as contemplated by the “monitoring” procedures in the cooperative agreements.  *Id*. at 16-18.The Board rejected all of IES’s arguments challenging the validity of ACF’s decisions.  The Board concluded that ACF met its initial burden of proof and sufficiently explained the bases for its decisions to enable IES to understand and respond to them during the appeal, and that the absence of ACF decisions on certain other costs, to date, did not preclude the Board from reviewing the disallowance of $19,655,761.05 and the denial of a non-competing continuation award.  DAB No. 3055, at 12-13.  The Board also found that IES identified no authority precluding ACF from taking authorized action, such as disallowing costs, based on an OIG audit, if the OIG had not issued an audit report,**Page 4**whether in draft or final form.  *Id*. at 14-15.  With respect to IES’s argument that ORR should have first followed the monitoring procedures in the cooperative agreements and given IES an opportunity to implement a corrective action plan, the Board noted that the monitoring procedures applied where ACF/ORR identified performance problems through a monitoring review or visit, not where, as here, the OIG identified financial mismanagement problems through an audit.  *Id*. at 16-17.  Moreover, the Board noted, even assuming the monitoring procedures addressed situations where performance problems were identified through an OIG audit, IES did not address what it could or would have done to correct the financial mismanagement problems that OIG had identified.  *Id*. at 17.  The Board also determined that the cooperative agreements did not preclude ACF from taking authorized action, such as the disallowance of costs, once ACF determined that IES had not complied with all applicable authorities.  *Id*. at 17-18.With respect to executive compensation, in 2015 IES paid its “top five paid employees” compensation totaling over $1.7 million.  DAB No. 3055, at 18 (chart).  ACF disallowed $851,756.35, which represented the aggregate compensation paid to the five individuals in excess of the $183,300 Executive Level II cap.  *Id*. (chart).  The Board rejected IES’s arguments denying that it improperly paid compensation in excess of the cap (1) because the payments were allocated as “indirect” and not “direct” costs, and (2) since ACF gave IES multiple awards, IES could pay an executive salary up to the cap for each award.  *Id*. at 19-24.  The Board explained, among other things, that the applicable authorities and award terms did not authorize the treatment of executive salary compensation as an “indirect cost,” and that the cap applied per executive per year, and no authority supported IES’s assertion that “because IES received multiple ACF awards, IES may pay any of its executives as many $183,300 salaries (the 2015 limit) as it has awards.”  *Id*. at 19-21, 22-24.The Board also upheld ACF’s disallowance of $8,111,360.35 of $10,070,736 in rental costs and $217,500 in depreciation associated with numerous related-party leases.  DAB No. 3055, at 24-32.  Noting abundant evidence of numerous “less-than-arm’s-length” leases between IES and high-level IES employees and/or companies in which those employees held an interest (which IES did not dispute), the Board made clear that the rental and depreciation costs associated with such related-party leases did not comply with applicable regulations and GPS provisions.  *Id*. at 24-30.The Board also upheld ACF’s disallowance of about $8.5 million in costs for “major renovations” to, and other expenses (to include personnel and fringe benefits costs and security costs) incurred for, an IES shelter in San Benito, Texas, in FY 2015, before IES obtained the required state license to operate the shelter.  DAB No. 3055, at 32-38.  The Board rejected IES’s argument that the disputed renovation costs were permissible “rearrangement costs.”  *Id*. at 32.  The Board made clear that, among other things, the regulations and GPS provisions were sufficiently specific to put IES on notice that the work done on San Benito constituted major renovations or construction that must be**Page 5**authorized by law and regulations and for which the required awarding agency approval had not been provided.  *Id*. at 32-35.  The Board also rejected IES’s argument that ACF had approved roughly $8.5 million in start-up costs that IES had incurred before IES obtained a state operating license and that ACF had extended the time for IES to obtain the license.  *Id*. at 35-38.Lastly, the Board rejected IES’s arguments challenging ACF’s decision to withhold a non-competing continuation award for the second year.  The Board concluded that the regulations and GPS provisions authorized ACF to do so based on IES’s demonstrated failures to adhere to applicable requirements and award terms and conditions.  *See*DAB No. 3055, at 38-40.Standard for ReconsiderationThe Board has the authority to grant a request to reconsider its decision “where a party promptly alleges a clear error of fact or law.”  45 C.F.R. § 16.13.6  “Reconsideration of a decision is not a routine step in the Board’s adjudication process, but provides an opportunity to identify a clear error of fact or law so that the Board can make any needed correction.”  *Tex. Health and Hum. Servs. Comm’n*, Ruling on Request for Reconsideration, Ruling No. 2020-1, at 4 (2019) (citation and internal quotation marks omitted); *see also* *Practice Manual*, “What can I do if I think a decision issued by the Board is wrong and should be reconsidered?”AnalysisIES raises four main arguments in its Request for Reconsideration (Request).  First, IES argues that in concluding that “ACF was not required to follow the process for corrective action under the cooperative agreements before taking action against IES,” the Board “fail[ed] to give effect to important provisions within the agreements,” which is “inconsistent with basic rules for contract interpretation.”  Request at 2.  Second, IES argues that the Board erroneously held that the executive salary compensation limit**Page 6**applied per executive per year and reasserts that the compensation limit applied “on a per agreement basis.”  *Id*. at 3-4.  Third, IES argues that the San Benito shelter costs were allowable, and that the Board erred in upholding the disallowance of those costs because the course of the dealings between ACF and IES demonstrate that ACF approved “an extension and the costs incurred.”  *Id.*at 5.  Fourth, IES urges the Board to reconsider and reverse ACF’s decisions based on ACF’s inaction in not submitting a brief and appeal file (supporting documents) earlier, in A-18-46.  *Id*. at 1-2, 4-5.The Board declines to reconsider DAB No. 3055 because IES does not identify a clear error of fact or law in the decision.IES’s repeated argument that ACF failed to follow the cooperative agreements’ monitoring provisions does not identify a clear factual or legal error in DAB No. 3055.IES asserts that the cooperative agreements between IES and ACF “provided a specific process for dealing with allegations of noncompliance by the awardee that culminated in a corrective action plan.”  Request at 2.  IES says the “agreements should be read as requiring the awardee be given notice of noncompliance and the opportunity to demonstrate or come into compliance before the ACF could assert a material failure to comply with the terms and conditions of the award[.]”  *Id*.  However, because ACF failed to adhere to this requirement, “IES was not allowed the opportunity to develop or implement a corrective action plan before the ACF not only disallowed previous expenditures but also denied a continuation award.”  *Id*.  IES argues that the “Board’s decision that these provisions . . . are not a prerequisite to the ACF taking enforcement action . . . renders these provisions meaningless and is contrary to basic rules of interpretation.”  *Id*. (footnote omitted).  IES asserts that the Board “should” therefore “find that the ACF did not satisfy the prerequisites to bringing an enforcement action found in the cooperative agreements.”  *Id*. at 3.In DAB No. 3055, the Board made clear that the “monitoring” provisions in the cooperative agreements contemplated notice of noncompliance with, among other things, applicable authorities, policies, and procedures, and an opportunity to implement a corrective action plan when *ACF/ORR* found noncompliance through a performance monitoring review or an agency site visit, not when, as here, the noncompliance was discovered through an *OIG audit*.  *See*DAB No. 3055, at 16-17.  The Board stated, “IES has not shown any authority requiring ACF to follow the monitoring provisions for notifying IES of performance problems disclosed by an OIG audit and providing IES an opportunity to correct them.”  *Id*. at 17.  The Board also rejected IES’s implication that “ACF/ORR, having assented to the monitoring procedures, was limited to using them to remedy any performance problems and therefore that ACF, not having used them, later had no grounds to issue the decisions.”  *Id*.  The Board also clarified that, as set forth in the award notices and cooperative agreements, “IES was required to comply with all**Page 7**applicable authorities, including the regulations in Part 75, notwithstanding the monitoring procedures,” and that ACF, “[h]aving determined that IES had not complied, . . . was within its authority . . . not to allow a non-competing continuation award and to disallow costs.”  *Id*. at 17-18.  IES has never asserted, or shown, that IES and ACF agreed to apply the monitoring provisions to resolve any dispute about noncompliance findings discovered through an OIG audit, or that any applicable authority required ACF to forbear from disallowing costs or from withholding a non-competing continuation award in favor of permitting IES to take corrective actions.  Moreover, IES did not address earlier, and still does not address, what corrective actions it could or would have taken to remedy the financial mismanagement problems OIG had identified.  *See* *id*.To be clear, nowhere in DAB No. 3055 did the Board state or suggest that ACF is not obligated to follow the cooperative agreements’ monitoring provisions.  Rather, the Board rejected IES’s arguments in reliance on the monitoring provisions because the provisions set out the procedures to follow if ACF/ORR identified noncompliance through a performance review and for which “monitoring” would be appropriate.  There is no evidence in this case that ACF disallowed costs and withheld a non-competing continuation award based on noncompliance ACF/ORR found upon a performance review, and IES does not dispute that.IES simply sidesteps the Board’s key finding that the monitoring provisions did not address the situation presented here because OIG had identified financial mismanagement problems through an audit, without alleging the finding is erroneous, and repeats its arguments that are based on a misreading of the monitoring provisions.  Mere repetition of arguments already addressed and rejected does not amount to identification of legal or factual error in the Board’s decision and, thus, is not a basis for reconsidering the Board’s decision.  *See N.Y. State Off. of Temp. and Disability Assistance*, Ruling on Request for Reconsideration, Ruling No. 2017-2, at 4-5 (2017); *Pa. Dep’t of Public Welfare*, Ruling on Request for Reconsideration, Ruling No. 2016-2, at 1 (2016).IES now appears to pursue a new angle to its repeated, and rejected, arguments, however.  IES maintains that the Board’s determination that ACF was not required to give IES an opportunity to implement corrective actions is “inconsistent with basic rules for contract interpretation” and “renders [the monitoring] provisions meaningless” or “pointless.”  Request at 2-3; *id*. at 1 (stating, similarly, that the Board’s analysis was “inconsistent with general rules of contract interpretation”).7**Page 8**IES’s apparent argument that the Board ought to apply “general rules of contract interpretation” in assessing the cooperative agreement terms is an argument that IES could have made, but did not make, earlier.  The Board has consistently disfavored attempts to use the reconsideration process under 45 C.F.R. Part 16 to raise new arguments that could or should have been raised earlier, making clear that “arguments” and “representations” made too late “are not considered allegations of errors of fact or law justifying reconsideration of a decision.”*Econ. Opp. Comm’n of Nassau Cnty., Inc.*, Ruling on Request for Reconsideration, Ruling No. 2017-1, at 1 (2017).  The Board therefore will not reconsider its decision to address an issue that could have been but was not raised earlier.  *See Ill. Dep’t of Healthcare and Family Servs.*, Ruling on Request for Reconsideration, Ruling No. 2019-1, at 2 (2019).Because IES is late in raising the argument, we are under no obligation to now consider it.  But even were we to entertain the argument, it does not identify any factual or legal error in the Board’s decision.  Moreover, we note, without deciding whether “general rules of contract interpretation” are appropriately employed in reading the cooperative agreements between IES and ACF (*see supra* note 7), that IES does not specify what the Board failed to do in assessing the monitoring provisions within the full context of the cooperative agreements.  Specifically, IES does not explain how applying the “general rules of contract interpretation” would support a conclusion that ACF acted prematurely or improperly in issuing its decisions notwithstanding the Board’s determination – which IES does not dispute – that the monitoring provisions do not address the situation presented here.In short, IES’s new argument about the application of “general rules of contract interpretation” does not identify a clear error of fact or law in DAB No. 3055.IES’s reiterated argument that the executive compensation cap applies on a “per agreement” basis fails to allege a clear error of fact or law.IES did not dispute ACF’s determination that the salaries for each of its five highest-paid employees in 2015 exceeded $183,300, the statutory executive compensation limit for 2015.  DAB No. 3055, at 18-19 (noting that in the aggregate, the salaries exceeded the statutory “Executive II” compensation limit for 2015 by $851,756.35).  Yet, relying solely on language in a document titled “Salary Rate Limitation Questions and Answers APM 2012-03 Implementation of the Requirements of the FY2012 HHS Appropriations Acts and HHS’ Nondiscrimination Policy” available online8 (*see* DAB No. 3055, at 22-23, referring to the document as the “‘Question 11’ document”), IES argued that it did not exceed the compensation limit for any of the five individuals because HHS**Page 9**“interprets” the limit “as applying to each [cooperative] agreement in full,” so that IES, to which ACF had given multiple awards, “can charge up to the full amount to each award without running afoul of the” limit.  *Id*. at 19 (quoting IES’s Consol. Br. at 7).9The Board found this argument unpersuasive, noting, first, that the governing authorities did not support IES’s “per-award” salary limit concept, and that the Question 11 document on which IES relied “does not have the force and effect of law.”  DAB No. 3055, at 22, 23.  The Board noted that IES had not claimed that this document governed the cooperative relationship between IES and ACF, or that IES had relied on any portion of this document (which addressed salary limitations for fiscal year 2012) to determine how to pay executive salary compensation in 2015.  *Id*. at 22-23.  Most important, the Board found that the language in the Question 11 document on which IES relied did *not* support IES’s theory that “because IES received multiple ACF awards, IES may pay any of its executives as many $183,300 salaries (2015 limit) as it has awards.”  *Id*. at 23.  Rather, “[t]he basic problem the ‘Question 11’ language addresses is how to properly allocate an individual’s annual salary where an individual who is subject to a salary cap is working on more than one award or ‘contract,’ so that multiple salaries paid on awards or contracts collectively do not exceed the cap.”  *Id*.  The Board also stressed that IES’s theory ran afoul of a core regulatory cost principle that a cost must be “reasonable.”  *Id*. at 23-24 (citing regulations and GPS provisions).In its request for reconsideration, IES again points to the same “Question 11” language, asserting that it represents HHS’s “interpretation” of appropriations legislation to mean that “the salary limitation applies on a per agreement basis rather than a global basis.”  Request at 3.  According to IES, that “interpretation in the procurement context is also directly analogous to the cooperative agreements at issue,” but the Board apparently “rejected” the “interpretation” because it was “informal.”  *Id*. at 3-4.  IES says that “the Board erred because an informal interpretation is still entitled to deference in this context” as it is “not unreasonable, is longstanding, is published, and was intended to provide guidance on an issue where there was apparent uncertainty.”  *Id*. at 4.10**Page 10**IES’s argument that the agency’s “informal” “interpretation” of appropriations law in the Question 11 document is entitled to deference is a new argument that could have been but was not raised earlier.  On that ground alone the argument cannot serve as a basis for alleging “clear error of fact or law.”  *See P.R. Dep’t of Health*, Ruling on Request for Reconsideration, Ruling No. 2011-5 (2011), at 2-3, 5-6, 8-9 (rejecting new arguments and new documentation that were never proffered to the Board before the Board issued its decision and thus were “not a basis for reconsideration”) (citing cases).Furthermore, IES repeats its earlier argument to the extent it maintains that certain language in the Question 11 document supports its “per award” or “per agreement” theory.  As we have stated, *see supra* at 7 (citing Board rulings), mere reiteration of an argument considered and rejected by the Board fails to articulate a “clear error of fact or law” that could serve as a basis for reconsideration of the Board’s decision.IES’s argument is also based on a misunderstanding of the Board’s analysis and is off point.  The Board rejected IES’s argument in reliance on the language in the Question 11 document because that language simply did *not*address the issue of whether an award recipient may properly pay compensation up to the limit on a “per award” basis as IES argued.  The Board did state that the Question 11 document is not a statute or regulation and therefore does not have the force and effect of law (DAB No. 3055, at 23), which IES does not dispute, but that does not then mean that the Board determined that the document announced an “informal” agency “interpretation” warranting no deference.  IES is no less incorrect now as to the meaning and application of the salary compensation limit than it was when it first made the argument, and IES has never shown that HHS, whether in the Question 11 document or any other document, interpreted the statutory executive compensation limit for 2015 as permitting the payment of compensation up to the cap per award, as IES claims.  In short, arguing that the Question 11 language represents “informal” agency “interpretation” of appropriations legislation that is entitled to deference does nothing to advance IES’s cause because the language itself – regardless of where it is found – does not state what IES says it does.**Page 11**IES’s repeated argument that ACF approved almost $8.5 million in start-up costs related to the San Benito shelter or gave IES more time to obtain an operating license does not articulate a clear error of fact or law.IES asks the Board to reconsider its affirmance of ACF’s disallowance of roughly $8.5 million in costs related to the San Benito shelter.  Request at 5.  IES argues that these costs (incurred before the shelter was licensed in Texas and housing unaccompanied children) were allowable because “the course of dealings between ACF and IES demonstrate that the ACF did approve an extension,” which “need not be explicitly stated,” and approved “the costs incurred.”  *Id*.  Referring to the fact that the parties entered into cooperative agreements, IES states it is “appropriate” to consider “the course of the parties’ actions” given “[t]he close working relationship envisioned by a cooperative agreement.”  *Id*.  IES also implies that ACF’s alleged “failure . . . to instruct IES to discontinue the project” supports a conclusion that ACF allowed IES more time to obtain an operating license and be prepared to open the shelter, and approved the costs incurred.  *Id*.These arguments amount to a reformulation of the arguments IES made earlier, which the Board found unavailing, and as such do not articulate “clear error of fact or law” that is required for the Board to reconsider its decision.  *See supra*at 7.  Our view of the arguments has not changed since the Board first addressed them in DAB No. 3055.  At that time, the Board made clear that ACF lawfully disallowed the renovation-related costs because they involved “major” renovations and construction for which statutory authority and prior awarding agency approval were required, but not given, and that existing agency guidance was “sufficiently specific” for IES to have known that it was “undertaking major renovations, and to have recognized that the scale of the renovation or alterations involved here was clearly major.”  DAB No. 3055, at 32-35.  The Board found that the notices of award did not authorize capital expenditures, such as expenditures for “Facilities/Construction,” and that even assuming the disallowed costs involved only minor “rearrangements,” as IES alleged, “the net effect of the regulations on which IES relies” for that argument was that “affirmative, advance approval by the awarding agency is required under these circumstances,” yet no evidence in the record suggested ACF had given that approval.  *Id*. at 35.The Board also considered at length, and rejected, IES’s argument that the course of its ongoing dealings with ACF supported the view that ACF had affirmatively or tacitly approved the roughly $8.5 million in costs that IES incurred before the San Benito shelter was state-licensed and operational.  DAB No. 3055, at 35-38.  As the Board noted, the funding opportunity announcements (FOAs) giving rise to IES’s notices of award made clear that to be eligible to apply for a cooperative agreement, and thus receive federal funding, “the applicant is required to be licensed by a state licensing agency to provide residential, group, or foster care services for dependent children[,]” while “the cooperative agreements, including that for San Benito, provided that award recipients**Page 12**must be appropriately licensed to provide shelter, care, foster care, or group care and related services to dependent children, . . . among other requirements.”  *Id*. at 35 (citations omitted).  However, the Board was not persuaded by IES’s argument that the ongoing negotiations and communications between IES and ORR about the San Benito budget, or any aspect of the “cooperative” relationship between the parties, showed that ACF had approved almost $8.5 million in start-up costs or had allowed IES more time to obtain an operating license.  *See, e.g., id.* at 37 (“Certainly, our review of the exchanges between IES and ORR about the budget for San Benito discloses nothing suggesting ACF/ORR approved incurring costs in excess of $8 million before San Benito had any assurance that it would be able to operate.”), 38 (“That ORR may have authority to grant extensions up to one year in no way empowered IES to presume approval of an extension and permission to keep incurring costs throughout the period, especially given its history of inadequate disclosure to ORR.”).  And, considering evidence – submitted by IES – indicating that IES “repeatedly allowed ACF to believe that [an operating] license was imminent only disclosing each incremental delay at the last moment before each projected opening date” for San Benito, the Board stated, “That ACF continued to wait for IES to meet each promised licensing date, rather than cancelling the cooperative agreements with IES altogether, can certainly not be construed as permitting IES to claim costs it incurred without becoming licensed as a facility or during the time period when it served no unaccompanied children.”  *Id*. at 35 n.35.  Thus, to the extent that IES continues to argue that its ongoing communication with ACF about San Benito or the “course of the parties’ actions” as a function of the cooperative agreements somehow evidenced ACF’s approval of these costs or ACF’s “extension” of time for IES to obtain an operating license, the Board found the argument unsupported.  Accordingly, these repetitive arguments do nothing to identify a clear factual or legal error in DAB No. 3055.ACF’s earlier inaction in not submitting a response brief and documentation is not a basis to reconsider DAB No. 3055.IES repeatedly points to ACF’s earlier inaction in not submitting a response brief or documentation to supplement the evidentiary record despite having been given multiple opportunities to do so.  Request at 1, 4-5.  IES also maintains that because ACF did not do so, ACF “never disputed” IES’s position about the agency’s “interpretation of the salary limitation” or “the incorrectness of” ACF’s disallowance of costs related to the San Benito shelter.  *Id*. at 4, 5.  IES urges the Board to reconsider its decision and reverse ACF’s decisions based on ACF’s failure to file a brief and documents.  *Id*. at 1-2, 5-6.IES accurately points out that ACF did not use the opportunities the Board gave ACF to submit a response brief with supporting documentation.  *See*DAB No. 3055, at 6, 7.  The Board also ordered ACF to submit certain documents that had not already been made a part of the record, but ACF did not respond.  *Id*. at 7.  The Board then gave ACF a final opportunity to respond but warned ACF that if it did not respond the Board would**Page 13**proceed to decision based on the existing record and construe against ACF any document or information within the scope of the Board’s order requesting the production of documents that was necessary to the resolution of the case but which ACF failed to submit.  *Id*.  ACF did not respond.  *Id*.  Accordingly, in consideration of ACF’s non-response disputing, specifically, IES’s assertion that ACF improperly disallowed certain lease costs, the Board reduced the disallowance of such costs by almost $2 million in total ($1,481,925.65 and $477,450).  *Id*. at 30-32.  The Board having issued DAB No. 3055, the fact that ACF previously failed to submit a response brief and supporting documentation or to respond to the Board’s order to produce documents is no longer at issue.  ACF’s inaction in earlier proceedings cannot be a basis for reconsidering DAB No. 3055 because the standard for reconsideration is whether there is a clear factual or legal error in the Board’s decision.  And, IES does not cite, and the Board is not aware of, any Board case in which the Board reconsidered its decision under 45 C.F.R. § 16.13 (and then modified and/or reversed the decision in favor of the non-federal party) on the ground that the federal party had failed to submit a brief or supporting documentation (whether as exhibits to a brief or in response to a Board order to supplement the record) before the Board issued its decision.Furthermore, the appropriate question is not whether, by silence or inaction, ACF conceded, by default, any IES argument or position.  As the Board explained in DAB No. 3055, in this case, as in other cases governed by 45 C.F.R. Part 16 regulations, once the federal party meets its initial burden (as ACF did here), the question is whether the non-federal party (IES) carried its ultimate burden to show that the federal agency’s decision was wrong.  *See*DAB No. 3055, at 11-12.  The non-federal party “*always* bears the burden to demonstrate that it has operated its federally funded program” consistent with applicable authorities and the award’s terms and conditions.  *Gulf Coast Cmty. Action Agency, Inc.*, DAB No. 2670, at 3 (2015) (emphasis added); *see also* *Targazyme, Inc.*, DAB No. 2939, at 4 (2019) (“[I]n the kind of cases that come before the Board under 45 C.F.R. Part 16, the appellant always bears a general burden of proof.”); *Cmty. Action Agency of Central Ala.*, DAB No. 2797, at 9 (2017) (citing cases).  As the Board determined in DAB No. 3055 and addressed to some extent above, IES did not show that ACF unlawfully withheld a non-competing continuation award.  With respect to the disallowed costs, the Board determined that IES’s documentation at best supported a reduction of the disallowance by about $2 million.  Nothing IES now says causes us to question the Board’s determinations in DAB No. 3055.**Page 14**ConclusionThe Board declines to reconsider DAB No. 3055.Endnotes1  The Board issued one decision for both cases (App. Div. Docket Nos. A-18-46 and A-18-47), which the Board had consolidated under lead docket number A-18-46.  DAB No. 3055, at 2.2  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); *accord* 45 C.F.R. § 75.2 (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”).3  The GPS is available at https://www.hhs.gov/sites/default/files/grants/grants/policies-regulations/hhsgps107.pdf.  The ORR Policy Guides are available at https://www.acf.hhs.gov/orr/policy.4  This section briefly summarizes the case background and DAB No. 3055.  It is intended only to provide context for the discussion to follow.  It does not alter or replace any part of DAB No. 3055, which is available at:https://www.hhs.gov/about/agencies/dab/decisions/board-decisions/2021/board-dab-3055/index.html.5  The Board did not uphold about $2 million in disallowed costs related to certain other IES rental leases ($1,481,925.65 and $477,450), thus reducing the total disallowance by that amount.  DAB No. 3055, at 30-32.  Furthermore, the Board did not review ACF’s disallowance of certain costs totaling $22,600 for which IES had elected not to seek Board review.  *Id*. at 1-2, 8 n.16.6  The regulations in 45 C.F.R. Part 16, which governed the Board’s review of this case (A-18-46) and which govern the reconsideration of DAB No. 3055, do not prescribe a specific timeframe for requesting reconsideration of a Board decision.  However, *in general*, in Part 16 cases for which no statute or other governing authority prescribes a timeframe for requesting reconsideration (such as this one), the Board considers a reconsideration request submitted within 30 days after receiving the Board’s decision to be timely.  *See* *Appellate Division Practice Manual* (*Practice Manual*), “What can I do if I think a decision issued by the Board is wrong and should be reconsidered?”  (“In most types of cases under Part 16, there is no specified time limit for submitting a request for reconsideration, but it is obvious that the sooner a party submits the request, the less likely it is that there will be an issue of untimeliness; a reconsideration request submitted within 30 days after receiving the Board’s decision would generally be considered timely.”)  (The *Practice Manual* is available at:  https://www.hhs.gov/about/ agencies/dab/different-appeals-at-dab/appeals-to-board/practice-manual/index.html#40.)  In deciding to accept IES’s reconsideration request, we noted that IES filed its request on the 33rd day after DAB No. 3055 was sent to the parties electronically, on December 30, 2021.  We also considered that ACF elected not to submit a response brief in which ACF could have objected to IES’s request if, in ACF’s view, IES’s request was not “promptly” filed.7  Because, as we explain in the text, IES’s arguments about “general rules of contract interpretation” do not identify any error that could be the basis for reconsidering DAB No. 3055, we need not determine whether common law contract principles apply or ought to be applied in reviewing the cooperative agreements.  To the extent that IES’s arguments suggest an assumption that “cooperative agreements” are equivalent to “contracts,” we note that there are distinctions between the two.  *See* *The Children’s Center, Inc.*, DAB No. 2506, at 2 (2013) (distinguishing a “cooperative agreement,” a funding instrument used to accomplish a public purpose authorized by federal law, from a “contract,” the principal purpose of which is to acquire property or services for an awarding agency’s benefit or use); *see also* DAB No. 3055, at 2 n.3, and *supra* at 2 n.2 (discussing “cooperative agreements”).8   *Available at* https://www.hhs.gov/grants/contracts/contract-policies-regulations/salary-rate-limitation/index.html#Q11.9  IES also argued that the compensation limit did not apply to these salaries because IES had classified the salaries as “indirect costs,” an argument the Board roundly rejected.  DAB No. 3055, at 19-21.  IES does not attempt to resuscitate this argument in its request for reconsideration.10  In support of this argument, IES cites a number of U.S. Supreme Court decisions, which address deference that federal courts accord to an agency’s interpretation of law or regulations when conducting judicial review of final agency actions.  *See* Request at 4.  The Board is not a court; Board members are adjudicators in an administrative appeals process.  *See* *Cal Turner Extended Care Pavilion*, DAB No. 2030, at 7 (2006) (discussing the distinction between federal courts’ role in overseeing review of agency decisions and the internal agency appeals process for formulating final agency actions subject to judicial review); *Joseph L. Russino, M.D.*, DAB No. 3057, at 9 (2022) (stating that the Board is “an administrative adjudicative body”).  However, the Board, in general, defers to a federal agency’s interpretation of the authorities under which it implements its program as long as the interpretation is reasonable, and the non-federal party has had timely and adequate notice of that interpretation or did not rely to its detriment on another reasonable interpretation.  *See, e.g., Blackfeet Tribe*, DAB No. 2675, at 11 (2016) (citing *Mo. Dep’t of Soc. Servs.*, DAB No. 2184, at 2 (2008)).  To the extent IES’s argument may be understood as asserting that the Board, as an administrative adjudicative body, ought to accord appropriate deference to HHS’s informal interpretive rule, we need not further address the argument because, as explained in the text, the argument does not meet the standard for reconsideration and is based on a misreading of the “Question 11” language IES asserts is HHS’s informal interpretation.
  
          /s/
        Jeffrey Sacks

                      Board Member
          /s/
        Constance B. Tobias

                      Board Member
          /s/
        Susan S. Yim

                      Presiding Board Member Back to top
    Contact HHS
    
                        
                                            
      
      
      Careers
    
                        
                                            
      
      
      HHS FAQs
    
                        
                                            
      
      
      Nondiscrimination NoticeHHS Archive
    
                        
                                            
      
      
      Accessibility Statement
    
                        
                                            
      
      
      Privacy Policy
    
                        
                                            
      
      
      Viewers & PlayersBudget/Performance
    
                        
                                            
      
      
      Inspector General
    
                        
                                            
      
      
      Web Site Disclaimers
    
                        
                                            
      
      
      EEO/No Fear ActFOIA
    
                        
                                            
      
      
      The White House
    
                        
                                            
      
      
      USA.gov
    
                        
                                            
      
      
      Vulnerability Disclosure Policy
        Sign Up for Email Updates

Receive the latest updates from the Secretary, Blogs, and News Releases.

Sign Up
  HHS Headquarters
          200 Independence Avenue, S.W.
                  Washington, D.C. 20201
                  Toll Free Call Center: 1-877-696-6775​ Disclaimer Policy: Links with this icon () mean that you are leaving the HHS website. The Department of Health and Human Services (HHS) cannot guarantee the accuracy of a non-federal website.
                  Linking to a non-federal website does not mean that HHS or its employees endorse the sponsors, information, or products presented on the website. HHS links outside of itself to provide you with further information.
                  You will be bound by the destination website's privacy policy and/or terms of service when you follow the link.
                  HHS is not responsible for Section 508 compliance (accessibility) on private websites. For more information on HHS's web notification policies, see Website Disclaimers.
 Continue
                  Go back