New York State Department of Social Services, DAB No. 542 (1984)

GAB Decision 542
Docket No. 83-119

June 4, 1984

New York State Department of Social Services;
Ford, Cecilia Sparks; Settle, Norval Teitz, Alexander


The New York State Department of Social Services (State) appealed the
disallowance by the Health Care Financing Administration (HCFA, Agency)
of $5,000,000 in federal financial participation (FFP) claimed under
Title XIX (Medicaid) of the Social Security Act (Act).

The disallowance stated that the regional office's review of the
claims revealed that they were not supported by adequate fiscal records
and in fact were estimated or projected audit results. HCFA cited
certain statutory and regulatory provisions for its position that only
actual expenditures, which are supported by fiscal records adequate to
assure that claims for FFP are in accord with applicable federal
requirements, may be reported on the quarterly statement of
expenditures.

For reasons stated below, we find that the Agency properly disallowed
the State's claim for FFP as an unallowable estimate. Considering the
case on its particular facts, we find that when the State filed its
claim for FFP it did not have available at that time for examination by
the Agency upon request reasonable documentation to support the claim
for FFP in the amount filed. Once it was clear that there was no
reasonable basis for the amount of the claim as filed, the Agency was
not required to defer the claim to enable the State to try to locate
documentation. The State had no right to expect that the Agency would
defer the claim simply because it had deferred others not long before
this one.

Background - The Medicaid Claiming Procedure

Once its medical assistance plan is approved, a state, in order to
receive FFP, must comply with certain regulations governing the
submission of documents to HCFA. Initially a state must file an
estimate (HCFA 25 Report) 45 days before the beginning of a quarter,
which projects the state's estimate of the total amount and the federal
share of expenditures to be made during that quarter. 45 CFR 201.5(a)(
2). Based upon a review of that document, HCFA approves a grant award
which authorizes the state to draw funds from the federal government
through a letter of credit system. (2) Subsequent to the end of the
quarter, the state is required to file a quarterly expenditure report
(HCFA 64 Report, or QER), which is "an accounting statement of the
disposition of Federal funds granted for past periods and provides the
basis for making the adjustments necessary when the State's estimate for
any prior quarter was greater or less than the amount the State actually
expended in that quarter." 45 CFR 201.5(a)(3).

Any necessary reconciliation between the estimate and the actual
expenditure data occurs in the grant award, which "shows, by program,
the amount of the estimate for the ensuing quarter, and the amounts by
which the estimate is reduced or increased because of over- or
under-estimate for the prior quarter and for other adjustments." 45 CFR
201.5(c).

A claim for reimbursement on the QER may be deferred when HCFA
believes the claim is of questionable allowability. 45 CFR 201.15(c).
In the deferral process, HCFA requests the state to make available for
inspection all documents and materials believed necessary to determine
the allowability of the claim. After receipt of the deferral notice, a
state has 60 days to make available to HCFA all requested documents in a
readily reviewable form; an additional 60 day extension is availabe to
the state upon request. 45 CFR 201.15(c)(3). If HCFA determines the
submitted documents and material are not in readily reviewable form or
supplemental information is required, the state has 15 days to complete
the required action. 45 CFR 201.15(a)(5). The state has the
responsibility to establish the allowability of a deferred claim.

Factual Background

As part of its OERs, submitted on March 16, 1982, for the quarter
ended December 31, 1981, the State listed increasing adjustments in FFP
of $4,250,000 in Medical Assistance Payments and $750,000 in
Administration costs for the period January 1, 1980 - March 31, 1980.
HCFA's on-site auditor asked State personnel to provide documentation
supporting the State's claims. /1/ In response the (3) auditor received
only a two-page memorandum (HCFA Ex. A attached to Exhibit C), and not
the type of supporting documentation such as adjustment schedules and
local district monthly statement of expenditures (RF-2's) that
customarily were provided in the past. The pertinent part of this
internal State memorandum, dated February 25, 1982, read:

SUBJECT: HR 3434 Estimate


As part of the QER that you are preparing to submit, I would like you
to include the following estimate to cover the period January 1, 1980 -
March 31, 1980:

* * *

TOTAL AMOUNTS Medicaid
($10 million) MA $8.5 million
Administration $1.5 million


If you have any questions, please contact Jim White at 4-9741.

After reviewing the QER and the February 25, 1982 memorandum, the
HCFA auditors concluded that the claims for $5,000,000 FFP were not
supported by documentation to ensure that the claims were in accordance
with the applicable regulations, and that the claims did not represent
actual expenditures for medical assistance, but only (4) estimates. The
auditors recommended that the claims be disallowed and not deferred.
HCFA then disallowed the whole $5,000,000 claim.

With its appeal brief before the Board, the State submitted a number
of adjustment schedules and RF-2's, which, according to the State,
established that the claims at issue were for actual expenditures and
were supported by sufficient fiscal records. These documents
represented expenditures of $10,496,402 FFP for the Medical Assistance
program. HCFA has refused to review this documentation.

HCFA's Arguments

HCFA took the position that the $5,000,000 FFP increasing adjustment
on the QER at issue represented estimates and not actual expenditures
that qualified for federal participation under Title XIX. HCFA argued
that both regulations and instructions sent to the State Barred the use
of estimates on QERs. According to HCFA, it was evident the claims on
the QER were estimates because its on-site auditor was unable to obtain
documentary support for the claims from the usual State sources other
than the February 25, 1982 memorandum. HCFA contended that because
estimates were used it was entitled to disallow the claims immediately
rather than defer them. HCFA objected to the State's introduction of
documentation during the appeals process. HCFA argued that, if it were
required to review this documentation, the State would circumvent the
timely filing provisions of section 1132 of the Act. Furthermore,
according to HCFA, the State's initial claims were so broad that it
would be impossible to relate the proffered documentation in subject
matter or amount to the original claims.

State's Arguments

The State argued that the claims did represent actual expenditures
for its Medical Assistance program and contended that the documentation
supplied with its appeal supported the validity of the claims. Since
there was no deferral action in this case, the State argued, the State
has not had the opportunity to present this documentation to HCFA.
Citing prior Board decisions, the State declared that, although there
was not an exact correspondence in the amount of the claims and the
amount represented by the documentation, HCFA should be required to
review this documentation.

ANALYSIS

In the course of this appeal the parties raised many issues. While
we will consider the arguments of the parties, there is only one main
issue here. It is whether the Board should direct (5) the Agency to
examine the documentation submitted during the appeals process to see if
supports all, or part, of the State's claim for $5,000,000 FFP.

I. Deferral v. Disallowance

We face here initially the question we specifically did not need to
reach in New York State Department of Social Services, Decision No.
537, May 30, 1984, namely, whether the Agency may properly disallow
directly from the QER without first deferring the claim, because in that
case the Agency chose to defer.

The Agency's position that it may disallow without deferring and
giving the State time to furnish additional supporting material is based
on the specific language of the deferral regulation. This provides that
a claim for expenditures on the QER:

"shall be deferred only when . . . the Administrator, Health Care
Financing Administration, or his designee . . . believes the claim . .
. is of questionable allowability. . . .

45 CFR 201.15(c)(1).

The Agency's position is that under this regulation it shall defer a
claim only if it is questionable. If it is clearly allowable it has to
be paid. If it, is clearly unallowable, it must be disallowed. Only if
it is "questionable" is deferral to follow, "pending the receipt and
analysis of further information relating to the allowability of the
claim." 45 CFR 201.15(b)(1). /2/


(6) The State relied on Decision No. 445, New York State Department
of Social Services, June 30, 1983, for its position that the Agency
should be required to examine the documentation submitted to the Board
during the appeal process. However, Decision No. 445 dealt with a
deferral, and whether the Agency was required to examine documentation
which it had refused to look at because it had not been submitted during
the appeal process.

Here the question is whether the lack of documentation to go with the
QER justified the Agency in disallowing directly without permitting the
State to reach the deferral process. We find below that the Agency was
correct in doing so since the amount on the QER was an unacceptable
estimate.

II. Estimated expenditures

The critical question here is whether it is all right to use an
"estimate" on the QER. As we pointed out in Decision No. 537, none of
the authorities cited in the disallowance letter specifically prohibit
the use of an estimate on a QER. While 45 CFR 201.5(a)(3) implies that
an estimate should not be used in reconciliation at the end of a
quarter, it does not actually prohibit it.

However, there is an action transmittal cited in Decision No. 537,
HCFA AT-78-95, which contains instructions for preparing the HCFA Form
64.9, the QER to report medical assistance expenditures for prior
quarters. This states:

A State Agency is to report actual expenditures which are supported
by the State's accounting records. A State Agency is not to estimate
Medical Assistance Expenditures on Form HCFA-64.9.

Agency Brief, Exhibit D, p. 16. /3/


As we pointed out in Decision No. 537, there is no definition of what
is an "estimate" in either the action transmittal or in any of the
regulations cited. Nor are the dictionary definitions of any use of us
here.

(7) We pointed out the real question was where the figure on the QER
came from. The fact that it was a round figure was in and of itself not
conclusive. Neither was the State's claim unallowable simply because
the State called it an estimate, and admitted it was put in because the
timely claiming restrictions were a factor in getting the figure on
paper before an exact computation to the penny of all expenditures being
claimed was available for the QER. We stated in Decision No. 537, and
we repeat here, that "(The) real question is where did the figure come
from." /4/

If it is a figure taken out of the air, rather than a calculation or
computation, even if approximate, it is not sufficient. If it is a
guess, or in common parlance, a "guestimate", then it will not do.
Cleary a figure grabbed out of nowhere to beat the timely filing
deadlines is not enough. . . ." (p. 15)

We went on to say that what was required was "a figure which is as
definite as reasonably possible under the circumstances."

We are faced here with a continuum. At one end is the ideal
situation, where every figure put down on a QER would be an exact
computation of every eligible expenditure, correct to the penny. At the
other end is a figure drawn out of a hat, with no plausible explanation
of where it came from, and made up solely to avoid the timely filing
limitation. (Id.)

We are faced here with a factual situation approaching the latter end
of the continuum, a figure "with no plausible explanation of where it
came from."

The State's attorney gave the following a his explanation as to how
the QER figure was derived:

(8) Someone has taken a look at the previous quarter's expenditure
reports and said because time has shown in this particular fashion that
what is there that expenditures were made in this way than in last
quarter, it is logical to assume that they were made in the same way in
the next quarter. And, we project or estimate, guess, calculate,
whatever you want to call it, that certain expenditures will be made
during this particular quarter.

Tr., Conference, p. 58. (Emphasis supplied).

Another explanation for the $5,000,000 figure on the QER came from
the New York employee whose responsibility it was to coordinate the
audits of the Medicaid program, and who was directly responsible for an
automated system that New York had developed to identify claims which
were eligible for federal participation but which had not been claimed
that way originally. Tr., Conference, p. 74.

Here is what the witness had to say about where the QER figure was
derived:

In that capacity, I was requested to prepare a memo that
would-because of the implications of Section 1132 which would identify
what we anticipated our returns to be on the (QER) as the result of our
Medicaid audits for that quarter in question.

Because of that request, I prepared the February 25, 1982 memo,
signed by John Rafter. The amount that is stated on there for the
Medicaid program is based basically on my experience and knowledge, my
experience being the amount of claims that we had submitted previously
for out audit projects and what they broke down to on a yearly and
quarterly basis and my knowledge of the current (and) on-going Medicaid
audits at that time and what we anticipated receiving from them.

During that time period, and in fact, for several years and presently
this whole area has received high priority of activity from our office
and we have numerous audits related to reclassifying claims. As a
result of that this memo was prepared and submitted. . . .

Transcript, Conference, pp. 74-75.

The most that can be said for this testimony is that the figure on
the QER is what the witness, based on his knowledge of on-going audits,
"anticipated receiving from them." In Board Docket No. (9) 83-186, which
resulted in Decision No. 537, this same witness gave several pages of
testimony showing how he personally had calculated the $22.5 million
figure on the QER; how it represented amounts paid out for expenditures
eligible for FFP; and that it was actually a conservative figure.

In Decision No. 537 we stated that we were dealing with a gray area,
and there was a continuum to be considered. Here we believe we are at
the end of the continuum with no reasonable basis for selecting the
actual figure on the QER. It is an objectionable estimate, not because
the State or the Agency called it an estimate per se, but because there
were apparently no reasonable bases for selecting this figure rather
than some other one. /5/


III. Actual expenditures

The parties seemed to be talking past each other when they discussed
whether the claimed amount on the QER had to be a summary of "actual"
expenditures.

The State used the words in the sense of whether the State had at
some time and place actually paid out money for medical assistance
(including administraction) for recipients. In this sense HCFA agreed
that actual expenditures were made.

However, in this case, the Agency is not questioning the fact that
expenditures . . . were actually incurred by the State during the
relevant time period.

Tr., Hearing, p. 222.

The Agency continues with its view why this is not enough:

However, not all expenditures made by the State are eligible for
Federal participation. . . .

(10) In order to make a valid claim for Federal financial
participation, the State must break-down its expenditures and identify
which portsions were eligible for FFP.

Tr., Hearing, pp. 222-23.

We would not go as far as the Agency's next statement, that "(T)he
State must be prepared to give a precise accounting of the exact amount
of Federally eligible expenditures." p. 223. We have explained under
"Estimated expenditures" above, that something less than a "precise
accounting" of the "exact amount" will suffice for the figure on the
QER.

But that is not the point as far as "actual" expenditures go. How
much the State "actually" paid out for medical assistance during the
amounts in question is not what matters. What does matter is that the
figure it puts on the QER has to be a calculated amount representing the
best the State can do in getting together from all its various districts
what it reasonably believes is entitled to FFP, and have documentation
reasonably supporting that figure available at the time the QER is
prepared.

IV. Documentation

The question of documentation is inextricably linked with that of
"estimated" and "actual" expenditures. The reason is that only by
looking at what documentation was in fact available when the QER was
filed can we tell if the figure claimed was any more than one taken out
of a hat. The dollar figure on line 7 of the QER for increasing
adjustments for prior quarters does not prove anything by itself. The
Agency has indicated that a round number, such as $5,000,000, is by
itself more likely to be an out-and-out guess; a figure representing
the adding up of extensive documentary backup would not come out that
way. We do not consider the roundness of the figure conclusive. /6/


(11) The critical factor in this case is that when the HCFA auditor
went looking for the normal documentation for the line 7 figure, he
found none. He testified that he sought documentation from the State
sources he usually went to after he received a QER and all he could
obtain was the memorandum referred to above which identified the claim
only as:

Total Amounts *2** * * Medicaid
($10 million) n7 MA $8.5 million
Administration $1.5 million

This failure of the State to have any documentation for its claim
came out when the HCFA auditor who handled this QER for the Agency
testified at the conference in New York City. When the State claimed it
had a right to rebut the testimony but could not do so at that time, the
Board scheduled a hearing in Albany for the convenience of the State.
The three persons whom the HCFA auditor said he had asked for
documentation all gave substantially the same testimony. They did not
remember whether the auditor had come to them and asked for
documentation, but they did not come out and say categorically that he
did not. /8/

(12) We do not mean that once the State places a figure on the QER it
must have assembled in one location every piece of paper, every receipt,
that supports the claim. On the other hand, the State must at least
know where the original documentation for the claim is. The Agency in
the disallowance letter cites several regulations for fiscal
record-keeping. For example, 45 CFR 74.61, the general grant regulation
for "Financial Management Standards," requires both proper accounting
records in (b) and source documentation in (g). As we noted in Decision
No. 537, the regulations require fully supportive documentation, but "do
not reasonably require an instantly available, final compilation of the
required documentation." p. 20.

But here we have nothing. The HCFA auditor was given nothing to
start him on the way to see if there were something approaching an audit
trial from the figure on line 7 of the QER to the documentation in local
offices. He was not given the usual supporting summaries of RF2's and
adjustment schedules or any other explanation of the basis for the
amount claimed. Under the circumstances the Agency was justified in
believing that the amount claimed was tantamount to a guess unsupported
by any documentation then available.

In Decision No. 537 one of the factors considered was the failure of
the HCFA auditor to go to Jim White in State Audit and Control, simply
because the auditor thought that the mrmoranda he had been given
referred to other claims. In this case the one memorandum the auditor
was given had as its last sentence, "If you have any questions, please
contact Jim White at 4-9741." This was an internal State memorandum not
addressed to HCFA. In Decision No. 537 there was something much more
than the internal memoranda which said to contact Jim White if there
were any questions. There was a memorandum from a State employee to the
auditor's team leader telling him that documentation for the claim was
available in two places, the second of which was Audit and Control.
When the auditor went to one office and found documentation for 6-1/2
million dollars of the claim, we thought it was unreasonable for him not
to go to Audit and Control even if he thought he would find nothing
there. Here there was no direction of any sort from the State to HCFA
telling the auditor where to go to find documentation.

As for the documentation itself submitted to the Board during the
appeals process, we feel that the amount supports the Agency's position
that it should under no circumstances be required to examine it. It
totals over $10,000,000 in support of a claim of $5,000,000. We pointed
out in Decision No. 537 that there is a great difference between
submitting documentation greatly (13) exceeding a claim and offering
supporting material for an amount less than the claim. In Decision No.
537 the State offered some $13,000,000 documentation to support a
$22,500,000 claim. At least theoretically all of it could be related to
the claim; here about half of the documentation cannot possibly be
related. In Decision No. 433, we stated that we did not conclude that
an exact correspondence between the amount of a claim and the amount
represented by supporting documentation was always required. We stated,
however, that in furnishing $102 million documentation for claims
originally totalling about $52 million, what the State had done "is
tantamount to a taxpayer's giving the Internal Revenue Service
voluminous financial records in order to support a particular deduction,
when he should have supplied only those records pertaining to the
deduction." We went on to say: "To document an expenditure means to
provide evidence of that expenditure, not evidence of all expenditures
of a related nature." (p. 6)

We do not mean that it is necessary to examine the documentation to
uphold the disallowance in this case. We believe that the disallowance
is proper because the amount claimed on the QER was a guess unsupported
by any records available at the time to support it. However, if there
were any doubt in our mind, the amount of the documentation would
bolster our view. If some two years after the claim was filed, the
State had not been able to assemble and sort its documentation so that
it is approximately the amount of the claim, it is unlikely that the
State had any basis for the amount o the claim when filed. /9/


V. Timely claiming

There is no doubt that the State was spurred to file these claims for
expenditures during the period January 1, 1980 - March 31, 1980 on the
QER for the quarter ending December 31, 1981 by the approaching deadline
imposed by section 1132 of the Act. This section bars payment of any
claim not filed within two years of (14) the calendar quarter in which
the expenditures claimed were made, with certain exceptions. /10/


The only documentation available when the QER was filed--the February
25, 1982 memorandum--more than supports this conclusion. It bears the
subject heading of "HR 3434 - Estimate." HR 3434 was the designation of
the bill that became Pub. L. 96-272, part of which was codified in
section 1132 of the Act.

The problem of timely claiming is a serious one and is faced by this
Board in many cases involving very large sums of money. The States were
accustomed to filing their QERs many years after expenditures were made,
when they had collected all the backup documentation, since there was no
time limit on filing until fiscal year 1980. The Agency properly argued
that the states would be frustrating the intent of Congress if they were
allowed to throw in any figure on the QER, describe it in language vague
enough to be supported by any documenation that might turn up, and then
go search for such documentation.

We repeat what we have said before, that a state must do the best it
can. Section 1132 was not truly retroactive; the states had some time
to file their claims after it was passed. See, New York State
Department of Social Services, Decision No. 521, March 6, 1984, p. 12.
Here the expenditures were for the quarter for January-March 1980. Pub.
L. 96-272 was effective June 17, 1980, so New York had two years, or
until March 31, 1982, to file its claim, or almost two years from
passage of the Act. In that time it should have been able to get
together a more definite figure with more documentation when it filed
its QER.

VI. The fairness issue

In submitting a list of questions to be addressed at the conference
in this case, the first question asked whether "fundamental fairness"
required that the State be given at least one opportunity to submit
further documentation. Questions (6) and (8) indicated that the Agency
had in rather similar prior cases deferred the claims, rather than
disallowing them.

(15) The Agency addressed this concern head-on. It stated that it
had suspected for some time that New York was putting in estimates on
its QER for which it had insufficient documentation available for making
such claims. As the timely claiming requirements put pressures on the
states to file their claims, New York, according to the Agency, was just
throwing in any kind of an estimate and giving such an ambiguous
description that any documentation located long after would support it.

The Agency, too, felt pressure because of timely filing requirements.
It felt that it would be disregarding the intent of Congress if it
allowed unsupported estimates. This case happened to be what the Agency
thought was a flagrant one, and the first after the regional auditors
had obtained clearance from HCFA Central Office to recommend
disallowance directly without first deferring. /11/


The HCFA auditor testified that while the State officials may have
felt he would recommend deferral of this claim, he had cautioned them
before this disallowance.

I had informed them that in my judgment and the judgment of our
Albany staff that estimates were unallowable and that we were seeking
agreement from our regional office and central offices to estimate on an
expenditure report was in violation of the regulation and that we would
recommend disallowance action.

So, they were aware of our thinking. It is not that this was a shot
out of the blue.

Tr., Conference, p. 132.

At the hearing Mr. Provost testified again that discussions were held
with various officials with the State, "concerning estimates, and our
concern that they did not belong on the expenditure report." Tr.,
Hearing, p. 201, 202-03. Mr. Provost gave the names of the State
officials to whom he had expressed his concern. Although the hearing
was held in Albany, no one named was called to deny Mr. Provost's
statement.

(16) We agree with the Agency that its position in this case did not
represent a change in policy which it could not in fairness implement
without formal notice to the State. The Agency claimed its policy never
changed, that an estimate was not acceptable on the QER, as provided for
as early as 1978 in AT-78-95. Prior to section 1132 in June 1980 there
was no problem, because the states were under no time pressure to put a
final figure on a QER until they had detailed documentation. After
that, the regional officials at HCFA began to question whether the
figures New York were putting on the QER were anything more than
guesses. In Decision No. 537 the Agency thought the QER figure was a
guess, although it gave the State the benefit of the doubt by deferring.
When this case came along the Agency thought the QER figure was clearly
a guess, without the usual documentation, and therefore no deferral was
required.

Under the circumstances of this case, taking into account the
complete lack of usual documentation when first sought by the Agency, we
feel the Agency was justified in disallowing without deferring.

CONCLUSION

Taking into consideration the specific facts of this case, we find
that the Agency's disallowance should be sustained. We believe that the
figure the State put on the QER as its claim for FFP was not only an
estimate, but an unsupportable estimate, and in fact little more than an
outright guess. Under the circumstances the Agency properly disallowed
without deferring. /1/ In the course of the appeal a factual dispute
arose over whether the HCFA on-site auditor had, in fact,
requested documentation from various State personnel. The HCFA auditor
testified at the January 12, 1984 conference that he asked three State
employees for documentation to support the State's claim. Because the
State questioned whether the HCFA auditor had requested and was then not
given documentation, the Board held, at the State's request, an
evidentiary hearing on March 8, 1984 to discuss this and other issues.
At the hearing the HCFA auditor and the State personnel named by the
HCFA auditor testified about their working relationship. HCFA on-site
personnel and the State employees worked together in the same floor of a
State office building, often conferring together on a daily basis.
Their working relationship could be termed informal, with neither HCFA
nor State personnel normally keeping written records of their meetings
with each other or of what documentation was requested and supplied.
None of the State personnel could recall whether or not the HCFA auditor
had requested documentation concerning the QER in question or whether
any documentation had been supplied. Because none of the State
personnel would specificaly deny the HCFA auditor's testimony, we have
accepted as fact his recollection of the events concerning this QER.
See also, p. 7 below. (The two transcripts are referred to as Tr.,
Conference, and Tr., Hearing, for ease in identification.) /2/
At the hearing the Board pointed out that the preamble to the notice of
proposed rulemaking of the deferral regulations in 1975 contained a
statement that retroactive claims were automatically subject to the
deferra process. 40 Fed. Reg. 34138, August 14, 1975. However, in the
preamble to the regulation when adopted, it appeared that the states
were the ones who objected to such a procedure, because they felt there
was no basis for treating every retroactive claim as necessarily of
questionable allowability. The preamble to the final regulation points
out that a retroactive claim could be determined allowable without
deferral if adequate documentation was submitted with the claim. 41
Fed. Reg. 7103-04, February 17, 1976. It appears that the states'
objections were based on fear of having clearly allowable claims
deferred solely because they were retroactive, and thereby delaying
payment of clearly valid claims. There was no consideration of the
issue in this case, whether a retroactive claim which the Agency finds
is clearly unallowable as submitted has to be deferred. /3/ We
do not rely on the changes made in the instructions for completing the
HCFA-64 form in the revision of the State Medicaid Manual, although the
language there was more specific on barring use of an estimate on the
QER (Exhibit 9A). The changes were not intended to be effective until
reporting Medicaid expenditures for the first quarter of fiscal year
1984. /4/ Compare the statement of the attorney for New York:
So, I do not think that this question of whether or not this is an
estimate is a black and white issue as was earlier said. I think it is
a very gray issue as to what is an estimate and, indeed, what estimate
can be put upon the QER as such. (Tr., Conference, p. 79) with Decision
No. 537, p. 15: Of course, as in so many gray areas, the question is
where you draw the line. . . . /5/ The State's position on use
of an estimate, as presented at the conference, is, to say the least,
ambiguous: The quarterly expenditure report has to show absolute
expenditures. I do quarrel with the idea that because you have arrived
at an inexact figure that is on that QER that it falls into the
definition of an estimate as it is being defined by HHS. . . . Tr.,
Conference, pp. 72-73. /6/ We note, however, in the record on
the second page of Exhibit A to Exhibit C, the only round figure on the
whole page, out of 18 figures, is the $750,000 for "Retroactive
Adjustments MA Administration and Training claims submitted for the
period January - March 1980." (The HCFA auditor's testimony was that he
was not certain who gave him this sheet, although he stated it had to be
given to him by the State, since it was part of the QER.) In examining
the entire QER (Exhibit IA), the separate page with just one item of
$8,500,000, or $4,250,000 FFP, for "Retroactive Adjustment of MA claims
submitted for the period January - March 1980" stands out like a sore
thumb among all the more exact amounts on other pages also claiming
"Line 7 Increasing Adjustment." We consider this factor as supporting
the Agency's position although not of itself conclusive. /7/ It is
undisputed that the figures on this memorandum represent the
total amount of expenditures to be claimed; the amount of FFP claimed
was 50% of each amount. /8/ The following testimony is fairly
typical of what the witnesses said in cross-examination: Q. Do you
recall whether Mr. Provost came to you and asked for documentation
relating to line 7, increasing adjustments? A. I couldn't recall any
particular request. Q. Okay. So you're saying, you can't recall for
certain; definitely yes or definitely no? A. I couldn't remember. Q.
So, you couldn't definitely state that Mr. Provost never came to you?
A. Oh, no. Tr., Hearing, p. 24. /9/ The State spent considerable time
arguing that it was not necessarily the filing of the QER which
constituted a claim. This is not vital here, since the amount claimed
was not disallowed because it was not filed in time. If that were the
basis of the disallowance, then the State would at least have some
reason for making the argument it did. In Oklahoma Department of Human
Services, Decision No. 484, November 30, 1983, we considered the request
for FFP in an expenditure report as being a claim. /10/ 0ne of
these exceptions is for so-called audit exceptions. The State contended
that its claim here could come under this language. We need not reach
this, because the claim here was not disallowed because it was not filed
in time; it was disallowed because it was an estimate without
documentation. /11/ The testimony showed that this was not only the
first, but the only instance, where HCFA had disallowed a claim directly
from the QER without deferring solely because the claim was an estimate.
Tr., Conference, p. 47. HCFA at the hearing gave several examples where
it had disallowed without deferring, but the cases were different types.

NOVEMBER 14, 1984