GAB Decision 345
September 29, 1982 Massachusetts Department of Public Welfare; Docket
No. 82-82-MA-HD Ford,Cecilia; Settle,Norval Teitz, Alexander
The Massachusetts Department of Public Welfare appealed a decision by
the Office of Human Development Services (respondent), disallowing
federal financial participation (FFP) claimed under Aid to Families with
Dependent Children -- Foster Care (AFDC-FC), Title IV-A of the Social
Security Act (the Act). The amount disalowed was $5,289,857 for the
period January 1, 1978 through September 30, 1980. The basis for the
disallowance was that the appellant had not submitted adequate
supporting documentation in readily reviewable form so that the
respondent could determine the allowability of the claim. Prior to
taking the disallowance, the respondent had deferred the claim under 45
CFR 201.15 (1980).
The appellant questioned the Board's jurisdiction, alleging that the
disallowance letter was inadequate, and challenged the legality of the
deferral methods used by the respondent. The appellant asserted that it
is making a good faith effort to produce documentation of its claim, and
requested that the Board (1) dismiss the case on the basis of the
procedural deficiencies alleged above, or (2) postpone proceeding to
decision until December 1, 1982, permitting Massachusetts "sufficient
time to document its claim for AFDC-Foster Care." Appellant's Brief,
June 23, 1982, p. 12. The Board concludes that it has jurisdiction over
this appeal, that the steps taken by the respondent in deferring and
disallowing the claim were not procedurally deficient, and that the
Board should not grant the appellant further time to document its claim.
Therefore, we sustain the disallowance, in the amount for which the
appellant has not offered documentation during this proceeding to
support the allowability of the payments claimed ($4,118,901). We
remand the remainder ($1,170,956) to the respondent for a determination
of its allowability based on the documentation offered during this
appeals process by the appellant. This decision does not apply to the
$1,482,283 for which documentation was submitted prior to the date of
the disallowance.
Background
A. The Respondent's Identification of Problems with Appellant's
Claims
The Health, Education, and Welfare (now Health and Human Services)
Audit Agency conducted an audit of the appellant's AFDC-FC program, for
the period July 1974 through March 1976, and issued a report on January
27, 1977. ACN 01-70256, Appellant's Exhibit B.
(2) The audit report included a finding that the appellant was
claiming amounts for children who were not eligible. The appellant
repaid to the federal government amounts "inappropriately claimed"
(p.
2, Appellant's brief) through March 31, 1976. In 1978 the Regional
Commissioner of the Social Security Administration (SSA) determined,
after on-site reviews made by the SSA's Office of Family Assistance, /1/
that the appellant was continuing to include unallowable amounts in its
claims. Respondent's brief, July 23, 1982, p. 2. The Regional
Commissioner requested that the appellant postpone submissions of
further claims under AFDC-FC until it could identify and document all
claims as allowable. Letter of April 12, 1978, Respondent's Exhibit A.
B. Appellant's Submission of Claim
The Adoption Assistance and Child Welfare Act of 1980, Pub. L.
96-272, section 306, required that claims for FFP for expenditures made
prior to October 1, 1979 must be filed prior to January 1, 1981. In
order to comply with that requirement, the appellant submited a claim in
December 1980, for the period January 1, 1978 through September 30,
1980, in the amount of $6,772,140.
C. Deferral Process
On March 12, 1981 the Regional Commissioner of SSA wrote to the
appellant about the claim, pointing out the "continuous difficulty"
the
appellant had experienced in claiming reimbursement under AFDC-FC, and
stating that SSA was unable to determine whether the claim was allowable
"due to lack of available supporting documentation." The Regional
Commissioner deferred the claim under 45 CFR 201.15, specifically
requesting documentation of the claims, in readily reviewable form. /2/
Under the deferral process, the appellant was
(3) required to document the claim within 60 days. 45 CFR 201.15(c)
(3). On May 7, 1981, the appellant requested an additional 60 days
pursuant to section 201.15(c)(3), and the Regional Commissioner, SSA,
granted the request on May 18, 1981. Appellant's Exhibit D. The
requested documentation was due on July 20, 1981. The appellant
submitted no documentation at that time. On March 7, 1982, the
respondent notified the appellant in writing that it had 15 days in
which to comply before a disallowance was issued.
D. Disallowance
The appellant submitted documentation for $1,482,283 on March 23,
1982, prior to the disallowance. The respondent deducted that amount
from the amount of the claim previously deferred, /3/ and disallowed the
balance because no documentation had been submitted. Thus, the
respondent disallowed $5,2898857.
In its disallowance letter, the respondent pointed out that the
appellant had had a considerable amount of time, from the time the audit
and on-site reviews noted the problems, in which "to develop or refine
its documentation procedures to produce an acceptable AFDC-Foster Care
claim." Disallowance letter, p. 2. The respondent also pointed out that
it had provided the appellant even more time by telling it not to claim
until it could document the claims, and that when the appellant filed a
claim because Congress required it to, the respondent allowed it another
year, through the deferral process, before taking the disallowance.
E. Summary of Time Elapsed and Documentation Produced
In summary, then, the appellant submitted a claim for expenditures,
some of which were already almost three years old when the claim was
made. The appellant did not submit any documentation of the
expenditures until well over one year after it had submitted the claim,
and another six months have elapsed since that submission was made.
Thus, the expenditures claimed are at least two years old, and some of
the expenditures are over four years old. The appellant has indicated
to the Board during this appeals process that there is available
documentation for an additional $1,170,956. Appellant's Exhibit N. The
appellant has requested additional time for further submissions.
(4) Applicable Regulations
This disallowance was taken after the respondent used the deferral
process established by 45 CFR 201.15, which applies to all claims for
FFP pursuant to, inter alia, Title IV. 45 CFR 201.15 (a). Deferral
action is defined as "the process of suspending payment with respect to
a claim . . . pending the receipt and analysis of further information
relating to the allowability of the claim. . . ." 45 CFR 201.15(b).
The procedures outlined in the regulation provide for the respondent
to take a deferral action within 60 days after receipt of the Quarterly
Statement of Expenditures, 45 CFR 201.15(c)(1), and to give written
notice to the State within 15 days of the action, identifying the claim
and reason for deferral. 45 CFR 201.15(c)(2). Within 60 days of
receipt of that notice, the State "shall make available to the Regional
office, in readily reviewable form, all requested documents and
materials. . . . If the State requires additional time to make the
documents and material available, it shall upon request be given an
additional 60 days." 45 CFR 201.15(c)(3). If the Regional Commissioner
finds that the documents and materials are not in readily reviewable
form or that supplemental information is required, he will notify the
State, and the State then has 15 days from the date of notification to
complete the action requested. 45 CFR 201.15(c) (5). Furthermore,
section 201.15(c)(5) states:
If the Regional Commissioner . . . finds that the documents necessary
to determine the allowability of the claim are not made available within
the allowed time limits, or that the documents are not made available in
readily reviewable from, he shall promptly disallow the claim.
Section 201.15(c)(7) states:
It is the responsibility of the State agency to establish the
allowability of a deferred claim.
Analysis of Issues
A. Jurisdiction
The appellant claimed that this Board does not have jurisdiction over
the appeal, alleging that applicable regulations and SSA guidelines
require a disallowance letter to specify the amount of FFP disallowed,
and that the disallowance letter of April 2, 1982 did not do so. That
letter specified the amounts listed on the appellant's claim, showed the
amount already submitted by the appellant for review, and
(5) stated a balance which represented the disallowed amount. The
letter did not specifically identify the amounts as FFP, but since the
amounts were stated as taken from the appellant's Quarterly Statement of
Expenditures, and were otherwise clearly identified, we conclude that
the appellant's attempt to disqualify the letter as inadequate cannot be
accepted.
The regulation cited by the appellant, 45 CFR 74.304 (1981), which
contains a description of what final decisions appealable to this Board
must contain, requires that the decision contain "enough information to
enable the grantee and any reviewer to understand the issues and the
position of the HHS component." Section 304(c)(2). The guidelines cited
by the appellant (Disallowances of State Expenditures, Family Assistance
Guide, SSA: FA. R. 710-5) are guidelines to those writing disallowance
letters within SSA's Office of Family Assistance and do not control
whether this Board has jurisdiction over a particular appeal.
Furthermore, the disallowance letter was issued by the Office for Human
Development Services (OHDS), not SSA, and guidelines for an SSA office
do not necessarily apply to OHDS. The disallowance letter included
references by number to particular lines of the appellant's identified
expenditure report, a reference to an audit control number and title of
the audit report referred to in the Background section above, and
considerable description of the general problem leading to the
disallowance. We conclude that the respondent's letter of disallowance
was sufficient to enable the appellant to understand which claim was
being disallowed, the amount disallowed, and the position of the
respondent.
The appellant also alleged that the Regional Commissioner did not
follow the consultation procedures set out in the Family Assistance
Guide referred to above, prior to issuing the disallowance. As we
pointed out above, the disallowance was taken by OHDS, not SSA, and
therefore SSA's Family Assistance Guide need not apply. In addition,
the record in the appeal shows that there was interaction between the
appellant and first, SSA, and then the respondent, over a long period of
time. The respondent also provided the appellant with notice that it
would take the disallowance, as required by 45 CFR 201.15(c)(5), giving
appellant another opportunity to submit documentation before the
disallowance was taken. Therefore, any departmental policy of ensuring
that both parties understand the issues and each others' positions,
prior to the time of a disallowance, would appear to have been met.
B. The validity of the Deferral Action
The appellant has not challenged the appropriateness of deferring the
claim involved in this appeal. The appellant alleged, however, that the
deferral action was improperly taken because the Regional
(6) Commission of SSA, who issued the deferral letters, did not have
authority to do so. The appellant argues that the Regional Commissioner
did not have authority to issue a deferral because the Secretary had
transferred responsibility from SSA to OHDS for "deferrals and claims
submitted prior to December 31, 1980." Appellant's brief, p. 7. The
appellant argued that if the Regional Commissioner did not have
authority to issue the deferral letter, then the entire deferral process
was invalid, then the timeliness and validity of the disallowance is
also questionable.
The appellant alleged that the transfer of authority occurred in
February 1981, in a document signed by the Acting Assistant Secretary,
OHDS. Appellant's Exhibit F. That document is an agreement between SSA
and OHDS regarding options for handling Foster Care claims, and is, on
its face, no more than a proposal of various ways to accomplish that.
The cover letter points this out, and the agreement itself is entitled,
Option Paper. Included in the agreement is a statement, "Implementation
of this agreement is subject to review by the Office of General
Counsel." p. 1. The agreement also stated that OHDS would assume
responsibility for claims filed after December 31, 1980. p. 1. It
makes no definitive reference to claims filed prior to December 31,
1980. Furthermore, the transfer agreed to by SSA and OHDS could not be
implemented until the Secretary signed a delegation. The delegation of
authority with regard to the transfer of authority for the AFDC-FC
program was not published until June 1981. 46 Fed. Reg. 30894-5, 30897,
June 11, 1981. At that time the Secretary amended the delegation of
authority so that OHDS received authority to administer the AFDC-FC
program.
SSA reatined some authority however. The Statement of Delegation of
Authority pointed out that, to aid in the orderly transfer of the
program, the Commissioner of Social Security retained authority to
determine the allowability of state claims for expenditures currently
under consideration by a Regional Commissioner. 46 Fed. Reg. 30895,
30897. Thus, deferral actions in process could conceivably have been
retained by SSA, and authority was, to some extent, overlapping.
The letters initiating and extending the deferral process were both
written prior to June 1981, and, thus, were properly written by SSA's
Regional Commissioner. The final notice that a disallowance would be
taken if the appellant did not comply within 15 days was sent in March
1982, and, therefore, was properly issued by the respondent, who had
authority by that time. The appellant has not argued that it has been
prejudiced by the transfer of authority. Furthermore, whether the
deferral process itself was proper does not necessarily affect the
validity of the subsequent disallowance, since a deferral action is not
a condition precedent to a disallowance.
(7) C. The Appellant's Request for Additional Time to Produce
Documentation
The appellant alleged that it worked diligently to provide
documentation of its claim and to make the good faith submission in
March 1982. The appellant submitted an additional offer of
documentation during this appeal process, though the appellant has not
actually submitted any documentation as yet. The appellant alleged that
"all of the . . . activity toward documentation . . . should be allowed
to proceed uninterrupted." Appellant's brief, p. 11. Furthermore, the
appellant pointed out that, in another appeal before this Board
involving documentation by this same appellant of a claim under the Work
Incentive Program (WIN), the Board dismissed the case without prejdice
to permit the appellant aditional time to document its claim.
The appellant alleged that it requires the assistance of the
Massachusetts Department of Social Services to document the claim, and
that the Department was not created until July 1, 1979. An interagency
agreement for operating the AFDC-FC program was signed on August 27,
1981.Appellant's Exhibit G. Apparently, the Department of Social
Services holds the records for all the cases, including those prior to
June 1980. See Appellant's Exhibit H. The appellant did not explain
why there should be such a delay in obtaining documentation from this
department, but implied that things move more slowly because of the
relative youth of the new department.
The appellant is under an obligation to establish the allowability of
its claim. 45 CFR 201.15(c)(7). The respondent generally has statutory
authority only to pay for expenditures properly made. "(Therefore),
unless the Department is able to determine that an expenditure is
appropriate it cannot by law allow it to be paid. The burden of
properly documenting their claims has always rested with the States." 41
Fed. Reg. 7104, February 17, 1976. The appellant has a history of
claiming unallowable payments, as evidenced by the background to this
disallowance. Therefore, the respondent is justified in requesting
documentation.
The deferral process sets a specific time frame for submission of
additional documentation, and the respondent is required to "promptly
disallow the claim," 45 CFR 201.15(c)(5), if the necessary documents are
not made available within the time set by the regulation. Therefore, we
conclude that the respondent reasonably and properly took the
disallowance for the amount of the claim for which the appellant had not
submitted the requested documentation.
(8) Once the respondent has properly deferred and disallowed a claim
for lack of documentation, it is within the respondent's discretion to
allow additional time to the appellant to document the claim. The
respondent has stated that it will not cooperate in allowing additional
time to the appellant here because the appellant has "already had more
than sufficient time to document the claim in question." Respondent's
brief, page 8. The appellant has not pointed to anything which would
provide a basis for the Board to require the respondent to accede in
allowing the appellant additional time. In the other appeal pointed to
by the appellant, both parties agreed to allow the appellant more time,
and the Board dismissed the appeal on the basis of that agreement. The
respondent has pointed out that, in the prior appeal, the appellant
provided little additional documentation to support its claim, despite
the grant of additional time. This strengthened the respondent's
decision not to wait any longer in this instance. Respondent's brief,
p. 8. We also note that, in the prior appeal, the amount of time which
had elapsed between the point when the costs were incurred and the date
of the disallowance was considerably less than here (one and one-half
years as opposed to three years here).
In the preamble published at the time the deferral regulation was
finally promulgated, the respondent stated that the time frame provided
by the deferral process was designed to assure adequate time for
handling the most complex claims, and that the time period for action on
a deferred claim is "sufficient time to make available requested
supporting documents and materials. Some form of documentation must be
used in the preparation of the original claim. Making that
documentation available . . . in readily reviewable form should impose
no substantial additional burden." 41 Fed. Reg. 7103. The appellant has
had a considerable amount of time in which to document its claim. It
has submitted materials for less than half of its claim, and the only
reason it offers for this is the fact that another state department,
created three years ago, has the records. We do not believe that the
respondent must bear the burden of the appellant's inefficiency. The
appellant has provided no evidence that it could provide any further
documentation if it had still further time. The respondent has provided
the appellant with considerable time and has provided a reasonable basis
for its decision not to wait longer.
Conclusion
We conclude that this Board has jurisdiction of the appeal, and that
the deferral and disallowance actions taken by the respondent were
proper. We further conclude that the rspondent's refusal to provide the
appellant further time in which to document its claim is reasonable, and
thus, we deny the appellant's request for additional time in which to
provide documentation. Therefore, we sustain the disallowance in the
amount for which the appellant has offered no
(9) documentation ($4,118,901). We remand the remainder of the
disallowance ($1,170,956) to the respondent so that it can examine the
documentation offered by the appellant during this appeal. Appellant's
Exhibit N. If that examination results in a new disallowance decision,
the appellant may appeal that decision to this Board. /1/ At that time,
the SSA had authority for administering the AFDC-FC program.
The transfer of authority from SSA to OHDS in 1981 is discussed later in
this decision. /2/ The Regional Commissioner specifically
requested documentation (1) that the claims were only for children
eligible for AFDC-FC under 45 CFR 233.110, and that the case records
supported the eligibility findings with dates; (2) that dated
applications had been filed, and determinations of eligibility made; (3)
that determinations had been made that the children were continuously
eligible for all months claimed; (4) that there is evidence of
court-ordered placement; (5) that the children were placed in approved
homes or institutions; (6) that payments had been made for the children
claimed; and (7) that applicable audits were accounted for and either
offset against the claim, or credited to the federal government.
Appellant's Exhibit C. /3/ During Board proceedings, the
respondent stated that its examination of the documentation for
$1,482,283 was incomplete. Respondent's brief, p. 3. Thus, no
determination had been made that the claim for this amount was
allowable.
OCTOBER 22, 1983