New Hampshire Division of Human Resources, DAB No. 583 (1984)

GAB Decision 583
Docket No. 84-35

October 26, 1984

New Hampshire Division of Human Resources;
Ford, Cecilia; Settle, Norval Garrett, Donald


Background

The New Hampshire Division of Human Resources appealed the
disallowance of $232,339.79 by the Office of Family Assistance, Social
Security Administration (Agency), relating to program and administrative
costs for the State's fiscal year (FY) 1981 Low Income Energy Assistance
Program (LIEAP). For the reasons discussed below, we sustain the
Agency's disallowance.

The disallowance is comprised of the following:

1. $215,854.39 in unallowable energy assistance payments for:

* fuel deliveries before September 30, 1981 which could not be
documented;

* fuel deliveries after September 30, 1981, under prepaid vendor
lines of credit which were not supported by client-vendor agreements
signed by November 30, 1981, as required by the approved State Plan;

* cash payments by the vendors to clients to close outstanding
balances of those clients which were not made by November 30, 1981, as
required by the approved State Plan; and

* energy which was not delivered (wood which was paid for but not
delivered)

2. $16,485.40 in administrative costs related to the unallowable
assistance costs listed above. (The (2) program limits the State in
claims for administrative costs to 7 1/2 percent of the total allowable
costs of carrying out the Plan.)

The New Hampshire approved State Plan at Section M 9e, page 35c, as
amended and approved December 8, 1981, stated that prepaid vendor line
of credit balances would be reconciled with the costs of energy
delivered or furnished to households on or before September 30, 1981 so
that any balance either would be paid in cash to the household by
November 30, 1981 or written agreements between the client and vendor
recognizing a credit balance on behalf of the client would be completed
by November 30, 1981. The Agency argued that the State failed to
present documentation demonstrating compliance with the approved State
Plan and the program regulations. The State has been unable to document
the delivery of energy by September 30, 1981 or either the payment of
the cash balance to the household by November 30, 1981 or the execution
of vendor-client agreements reflecting a credit balance by November 30,
1981.

Also, the Agency stated that federal reimbursement was not allowable
for administrative costs in excess of 7 1/2 percent of the total
allowable costs of carrying out the plan. The disallowance of
expenditures for assistance payments discussed above diminishes the
total "allowable" costs of carrying out the program and hence the amount
the State may claim for administrative costs at the rate of 7 1/ 2
percent.

Analysis

1. Federal reimbursement is not available for expenditures not
supported by documentation and expenditures not made in accordance with
the State plan.

The State argued that although there was a lack of necessary
documentation to verify the energy assistance payments, there was no
evidence to indicate that anyone other than eligible clients received
these payments. State's brief, p. 6; Transcript of conference call,
dated September 10, 1984. Consequently, the State contended that since
it had made a good faith effort to obtain documentation, any violation
of the State Plan by the appellant was a non-intentional procedural one.
State's brief, p. 6.

The program regulations at 45 CFR Part 260, Appendix B, Section C.8
provide that expenditures which are not in accordance with the State
Plan are not reimbursable under (3) FY 1981 LIEAP. New Hampshire's
State Plan, as amended, provided at Section P.l.b. that where prepaid
vendor lines of credit are established, any balances remaining as of
September 30, 1981 (the end of the program year) in the household's
account would be issued by check from the vendor to the household or,
under written agreement, would remain with the vendor as a deposit in
the household's account. The State Plan specified that either the
payment or the execution of the agreement should be completed by
November 30, 1981.

The State here has not provided and, in fact, admitted it cannot
provide the requisite documentation to show that agreements were signed
or cash payments made by November 30, 1981. Because of that failure,
the State cannot show that its expenditures were in compliance with the
State Plan and as a consequence reimbursable. 45 CFR Part 260, Appendix
B, Section C.8.

Moreover, the regulations at 45 CFR Part 260, Appendix B, Section A
(1980) require the states to administer the FY 1981 LIEAP in accordance
with 45 CFR Part 74. The provisions of 45 CFR 74.61(g) require grantees
to support their accounting records with source documentation, such as
cancelled checks and paid bills. Indeed, this Board, on several
occasions, has indicated that the standards for financial management for
grantees at 45 CFR 74.61(b), (f), and (g) require that grantees make and
retain records of expenditures and support these records with source
documentation. See e.g., City of Dayton, Ohio, Decision No. 325, June
30, 1982, p. 11. The Board has stated that "(these) provisions clearly
place the burden of establishing the allowability of costs on the
grantee." Neighborhood Services Department, Decision No. 110, July 15,
1980, p. 3. As we indicated above, the State here has failed to
document its claim for vendor payments and vendor-client agreements. In
addition, the State has not been able to document that energy, in this
case, wood, was delivered to recipients although the vendor had already
been paid $690. The State cannot be reimbursed for energy assistance
payments when it cannot document that the energy has been received.

In view of the State's failure to demonstrate that it has acted in
accordance with its State Plan and its related failure to document the
allowability of program costs under 45 CFR Part 74, we uphold the
disallowance of $215,854.39 in energy assistance payments. We should
emphasize that the State's burden here is an affirmative one under the
(4) regulations. Thus, for example, we could not conclude that
agreements were in fact executed or vendor payments made simply because
there was no evidence to the contrary in the record. There is also no
basis to forgive the failure based on a "good faith effort" to
administer the program as a whole.

2. The Board does not have authority to waive the disallowance.

The State asked that the Board weaive the disallowance here because
of mitigating factors such as a change in October, 1980 in the program
regulations, a change during the program year of the State's program
director, the fact that New Hampshire is a small rural state and the
fact that the vendors were, in most instances, "mom and pop" operations
unfamiliar with requirements for keeping documentation. While we might
sympathize with the State, we cannot waive the disallowance here. As we
discussed above, the program regulations require the State to keep
supporting documentation of expenditures and to make expenditures in
accordance with the State Plan provisions. The Board is bound by all
applicable laws and regulations. 45 CFR 16.14. Consequently, we cannot
overlook the clear and specific requirements of the regulations.

The State argued that the Board has broad authority to resolve
disputes. 45 CFR 16.13. While that regulation states that Board
members have the power to take any action necessary to resolve disputes
in accordance with Board goals of providing a fair, impartial, quick,
and flexible process, it does not mean that the Board can ignore
applicable regulations.

3. Administrative Costs.

The provisions of 45 CFR 260.84 allow the State to use an amount of
its allotment up to 7 1/2 percent of the total cost of carrying out the
plan as reimbursement for administrative costs. "Total cost of carrying
out the plan" means "the sum of all expenditures for allowable
assistance payments and administrative costs made under the approved
State plan." Emphasis added. Consequently, since we have found that
$215,854.39 in assistance costs is unallowable, $16,485.40 in
administrative costs (claimed on the basis of the assistance costs) also
is not allowable under 45 CFR 260.84.

(5) Conclusion

For the reasons discussed above we sustain the disallowance in the
amount of $232,339.79.

MARCH 19, 1985