Opinion ID: 658774
Heading Depth: 2
Heading Rank: 2

Heading: Proceedings Before the Agency

Text: 7 Following a 1989 audit, HHS' Office of Human Development Services (OHDS) advised SLCAP that it could not charge its Head Start grant rental fees in excess of [304 U.S.App.D.C. 190] depreciation and operating expenses for the two buildings, because the sale-and-leaseback had not been an arms-length transaction. OHDS calculated that $40,323 in costs already charged were impermissible and instructed SLCAP to repay the sum from non-grant funds. 8 SLCAP appealed the disallowance to the DAB pursuant to regulations that specifically vest that body with jurisdiction to hear disallowance disputes. See 45 C.F.R. Part 16, App. A, Sec. C(a)(1) (1992). Before the DAB, SLCAP argued, inter alia, that its leases were in fact arms-length, that the rental costs charged to the government were reasonable, and that it should be granted a waiver from Circular A-122. It is undisputed that SLCAP never contended before the DAB that any other statute or regulation deprived the DAB of jurisdiction to determine the validity of the disallowance or that SLCAP was entitled to a hearing before an ALJ. 9 The DAB affirmed the disallowance in full on the grounds that the sale-and-leaseback transaction had been less than arms-length. Salt Lake Community Action Program, Decision No. 1261 (D.A.B.1991), reprinted in Appendix for Appellants (A.A.) 200-05. The DAB noted that, under 45 C.F.R. Sec. 16.14, it was bound by all applicable regulations and, therefore, was required to uphold the disallowance regardless of the reasonableness of the rental charges. The DAB further stated that it had no power to direct OHDS to waive the applicable cost principles, but suggested that OHDS consider SLCAP's request. Id. at 5-6. OHDS thereafter denied SLCAP's request for a waiver and demanded repayment of the disallowance.