GAB Decision 473
Docket No. 83-75
October 31, 1984
Texas Department of Human Resources and Harris County, Texas;
Ford, Cecilia; Teitz, Alexander Settle, Norval
Harris County, Texas (Appellant) /1/ appealed the decision of the
Director, Office of Child Support Enforcement (Agency or OCSE) which
upheld the disallowance of $56,783 in federal financial participation
(FFP) that Appellant had claimed under Title IV-D of the Social Security
Act during the period May 1, 1979 through March 31, 1982. The
disallowance followed recommendations contained in an OCSE audit report,
Audit Control Number TX-82-OA3. Appellant's claim represented the
salary and related costs of a deputy constable hired as a full time
process server for child support enforoement cases in Harris County.
Appellant also claimed separately the cost of certain filing fees
required under State law to be paid with each case filed in court. The
OCSE Director's decision letter indicated that the Agency would pay FFP
for either the costs of the deputy constable's salary or the service of
process fees, but not both because this would constitute a duplicate
payment for the same service (since the fees were supposed to cover
process service costs such as the constable's salary) and thus would not
meet the general criteria of being "necessary and reasonable" as
required by Office of Management and Budget Circular A-87, Attachment A,
C(1)(a).
For the reasons discussed below, we sustain the disallowance.
I. Statement of the Case
Following discussions with an Agency regional representative,
Appellant created a deputy constable's position and assigned the (2)
constable full-time to the task of serving Appellant's legal papers.
This was an effort to improve the available service of process within
Harris County. Appellant claimed FFP for the full costs of the
constable's salary. In addition to the constable's salary, State law
required Appellant to pay the regular processing fee assessed to offset
the cost of serving civil process papers in Harris County. Appellant
continued to claim FFP for these costs.
OCSE's audit staff conducted an audit of the costs claimed by
Appellant under its cooperative agreement with TDHR. One aspect of that
audit was Appellant's claims for the constable's salary and the service
of process fees. The audit reviewed similar three month periods for the
years 1979-82. Based on this review, the audit report found that
Appellant's legal papers were served by five to seven different
employees, with no one employee spending 100 percent of their time
serving Appellant's papers. Appellant Ex. B, p. 4. The audit also
determined that the regular processing fee represented a recovery of the
cost of service of process and, therefore, the claim for the constable's
salary represented a duplicate charge for the same service and as such
was not a reasonable and necessary expense of the program. Id. at p. 5.
Appellant did not contest that it claimed both the processing fees
and the costs of the constable's salary. Appellant argued, however,
that the constable's salary represented costs for services in excess of
those of service of process and, as such, was not a duplication of
costs. In addition, Appellant contended that it hired the constable
with the full knowledge of Agency officials and, therefore, the Agency
should be estopped from disallowing these costs.
II. Discussion
A. Whether the Constable's Salary Represents a Duplication of Costs.
Appellant contested the audit finding that the salaried constable was
not spending 100 percent of his time on the child support enforcement
program because the constable did not produce enough service. Appellant
submitted an affidavit by the hired constable to show that the constable
performed other functions which benefitted the child support enforcement
program. Appellant Ex. K. These collateral functions included
verifying addresses for service of process, having absent parents come
to his office and contacting their attorneys prior to bringing absent
parents to Appellant's (3) office, and locating and issuing all writs of
attachments (which was seldom done prior to the creation of this
position). Appellant Brief, p. 4.
The Agency did not specifically address whether the hired constable's
performance of either the service of process function or the alleged
collateral functions benefitted Appellant's program. Instead, the
Agency argued that under Texas law (Tex. Rev. Civ. Stat. Ann. art. 6885
(Vernon)) the service of process function was available to Appellant.
The Agency asserted that if Appellant was in need of improved service,
its remedy was to make existing constables do their job properly rather
than merely hiring another constable. The Agency cited a provision in
the Texas statute which provides that any officer may be subject to
court imposed sanctions for the officer's failure to perform a lawfully
required duty. See, Tex. Rev. Civ. Stat. Ann. art. 2287 (Vernon). The
Agency argued that Appellant thus "would receive the same benefit
without payment of a deputy constable's salary and it was neither
reasonable nor necessary to incur the expense of a deputy constable's
salary." Agency Brief, p. 3. /2/
Appellant dis not address this argument by the Agency.
As the Agency indicated, and Appellant did not contest, Appellant is
entitled under Texas state law to have a constable execute service of
process. For this service Appellant is required to pay a fee, part of
which goes to the payment of the constable's salary. See, Tape of
Conference Call; see also, Audit Report, pp. 3-5. Therefore, to the
extent that Appellant's hired constable performs the duties that
Appellant was entitled under state law to have performed, Appellant is
duplicating both the service and the corresponding cost of that service.
Appellant did not contest the Agency's determination that a duplication
of costs is neither (4) a necessary nor a reasonable expenditure. /3/
Therefore, we find that the constable's salary represented a duplicate
cost and as such was neither a reasonable nor a necessary expense of the
program and was properly disallowed. /4/
Appellant argued that as a result of hiring the constable, the
percentage of service of process increased and there were no longer
problems with lost papers or tracking service papers. Appellant stated
further that service of process was at the highest level ever and that
its program was the subject of a magazine article and a OCSE regional
symposium. Although the findings of the audit report (see, Appellant
Ex. B, p. 4) are not consistent with Appellant's statements regarding
the actual (5) effectiveness of the hired constable, it is unnecessary
to resolve those discrepancies. Appellant's argument is unpersuasive
for other reasons. The issue in this case is not whether the hired
constable provided some benefit to Appellant's program, but why the
Agency should be required to pay twice for the same service. As we
found above, Appellant was entitled under State law to have a constable
execute service of process and Appellant's claim for the salary of the
hired constable, who in essence duplicated this available service, was
an unallowable expense of the program.
We recognize that theoretically, to the extent that the hired
constable's performance surpassed in quality the performance available
under State law, there could be no duplication of costs since there
would be no duplication of service. However, as the Agency pointed out,
Appellant had an available remedy under State law to compel the
constables to perform their statutory duty. There is no evidence in the
record to indicate that Appellant availed itself of this statutory
remedy or pursued any other avenues in an attempt to improve the service
of process situation. Without such evidence it cannot be determined
whether Appellant could have experienced the same improvement in its
service of process with its existing resources rather than hiring a
full-time constable. To incur a substantial additional expense without
such an effort is not a reasonable and necessary expenditure.
Therefore, Appellant failed to show that the hired costable's service
did anything more than duplicate the service that was available or could
have been available to Appellant under State law. As stated above, we
find that Appellant's claim for such a duplicative service is neither
reasonable nor necessary.
As noted above, Appellant also contended that the constable provided
extra services beyond the mere service of process. The essence of
Appellant's argument is that to the extent of these extra services the
constable's salary is not a duplication of the processing fee since the
fee merely reflects the costs of serving papers. While Appellant's
argument may be superficially correct, Appellant made no attempt to
quantify the amount of time expended on these extra services, to show a
ratio of these extra services to the total services provided by the
constable, or to demonstrate the allowability of the various extra
services. In fact, Appellant conceded that it could not make such a
showing. See, Tape. The Board has stated on numerous occasions that
the burden of documenting the allowability of costs is on the grantee.
See, e.g., Urban Indian Health Board, Inc., Decision No. 315, June 28,
1982. Since Appellant is unable to document extra services performed by
the hired constable, we must conclude that any costs attributable to
those services were properly disallowed.
(6) B. Whether the Agency Should Be Estopped From Disallowing These
Claims.
Appellant argued that the Agency should be estopped from disallowing
the claim since Agency officials were aware of all the events
surrounding Appellant's claiming the constable's salary and the
statutory filing fees. Appellant submitted an affidavit of the
Director, Harris County Child Enforcement Section (Appellant Ex. O) to
show that Agency officials knew of and approved of Appellant's claiming
both costs and that the Director was requested to speak at various
functions regarding Appellant's program. In addition, Appellant
contended that previous audits did not indicate any problems with the
way in which Appellant claimed these costs.
Appellant asserted that it had a right to rely on the Agency's
actions and also on the Agency's "inactions" inasmuch as the Agency
did
not inform Appellant that the claiming of these costs constituted a
duplicate claim. Appellant asserted further that its reliance was
detrimental in that Appellant incurred these costs and the Agency
subsequently disallowed them.
We are not persuaded by Appellant's arguments. While it appears from
the Director's affidavit that an Agency official knew of and approved of
Appellant's claims for the constable's salary and the processing fees
(although perhaps at different times), the record does not establish
that the Agency official was aware that the claims would overlap each
other. The Director's affidavit makes no mention of the fact that a
portion of the processing fee covers the salary of the constable or that
the Agency official was aware of this fact. From the record in this
case it is reasonable to assume that this fact was not communicated to
the Agency official since Appellant at first maintained that the
processsing fee did not cover the constable's salary and was therefore
not a duplicate cost. See, Tape. Only when challenged during this
appeal by the Board did Appellant concede that the fee did cover the
constable's salary. Id. Thus, we find that Appellant failed to
establish that the Agency official had the requisite knowledge to estop
the Agency from disallowing these claims.
In addition, even if the Agency official had had full knowledge of
the facts and the other elements of estoppel existed as Appellant
alleged, it is doubtful that Appellant's estoppel argument could be
supported based on recent Supreme Court decisions. In both Schweiker v.
Hansen, 450 U.S. 785 (1981) and INS v. Miranda, 103 (7) S.Ct. 281
(1982), the Supreme Court found summarily that the facts did not justify
estopping the federal government on the basis of representations by
federal employees. The clear inference from the cases is that estoppel
applies only if there was affirmative misconduct on the part of the
federal officials involved. Appellant did not allege that any Agency
official engaged in any affirmative misconduct and the record shows no
actions which could reasonably be interpreted as affirmative misconduct.
Conclusion
For the reasons stated above, we sustain the disallowance. /5/
/1/ The disallowance was directed to the Texas Department of
Human Resources (TDHR). Harris County and TDHR both asked that Harris
County be allowed to prosecute the appeal as the real party in interest.
See, 45 CFR 16.16(a) (1982). After briefing by the parties, the Board
agreed that Harris County could prosecute the appeal as the real party
in interest, but noted that the disallowance remained the ultimate
responsibility of TDHR. See, Board's ruling of May 25, 1983. /2/ The
Agency also contended that Appellant had an agreement with TDHR
that no service fees were to be charged for service by a duputy whose
salary was reimbursed under the agreement. See, Agency Ex. A. A review
of this agreement does not reveal any clear language which supports the
Agency's contention. Since we decide this case in favor of the Agency
on different grounds, it is unnecessary to pursue further this Agency
argument. /3/ Appellant did present a collateral argument
attacking the validity of the regulation (OMB Circular A-87, Attach. A,
C(1)(a) requiring that for costs to be allowable they must be "necessary
and reasonable"). Appellant argued that the regulation is merely a basic
guideline and "there is no clear articulation of the regulation" and,
therefore, it is invalid. Appellant Brief, p. 6. We find Appellant's
argument to be without merit. Appellant presented nothing more than a
conclusory statement regarding the validity of this regulation. As we
have previously stated, grantees have had notice of the "necessary and
reasonable" standard for some time and, in fact, the public assistance
statutes use similar language in "empowering the Secretary to determine
what is 'necessary' for administration of the programs." State of Oregon
Mass Transit Assessment, Decision No. 402 - Supplementary Decision,
August 31, 1983, p. 8. We also noted in that decision that the
principles involved were: designed to cover a broad range of costs
under widely differing grant programs. The terms are specific enough to
set common sense limits on what is allowable. It would be virtually
impossible to provide detailed guidelines as to what is "necessary and
reasonable" for every aspect of the programs affected. Id. at p. 9.
/4/ We think the situation here is analagous to a previous case where a
grantee claimed the same expenditure under two different programs. The
Board ruled in that decision that such a duplicate claim was
unallowable. Louisiana Department of Health and Human Resources,
Decision No. 327, June 30, 1982. /5/ As stated above, the OCSE
Director's decision letter indicated that the Agency would pay either
the costs of the hired constable or the filing fees but not both. Our
decision is limited to the duplication issue raised by the disallowance
letter. We make no finding concerning which of the two costs Appellant
may claim.
NOVEMBER 14, 1984