GAB Decision 697
October 17, 1985
Colorado Department of Social Services;
Settle, Norval, D.; Teitz, Alexander, G. Garrett, Donald, F.
Docket No. 85-92
DECISION
The Colorado Department of Social Services (State) appealed the
disallowance by the Social Security Administration (Agency) of $356,620
in federal financial participation (FFP) claimed under Title IV-A of the
Social Security Act (Act). The Agency determined that during the period
October 1, 1975 through June 30, 1976 the State improperly claimed
social services in child care institutions as Aid to Families with
Dependent Children - Foster Care (AFDC-FC) expenditures.
The major issues presented are whether the State can claim FFP for
social services in child care institutions under the AFDC-FC program,
and whether the Agency has waived its right to a disallowance under the
particular facts of this appeal. For the reasons stated below, we find
that under law and regulation the State was not entitled to claim under
Title IV-A for the provision of social services in child care
institutions and that the Agency is not precluded from taking a
disallowance. Accordingly, we sustain the disallowance.
Statutory and Regulatory Background
The first federal foster care program was enacted in 1961 to supplement
the already existing Aid to Families with Dependent Children program
(AFDC). Congress added to Title IV-A of the Act a provision making FFP
available for payments on behalf of children who would have been
eligible for AFDC had they remained in their own homes, but who had been
removed as a result of a judicial determination and placed in foster
care. During the time period covered by this disallowance, the AFDC-FC
program was under section 408 of the Act. /1/ Specifically, section
408(b) provided:
(b) the term "aid to families with dependent children" shall,
notwithstanding section 406(b), include also(2) foster care in behalf of
a child described in paragraph (a) of this section --
. . .
(2) in a child-care institution, whether the payment therefor is made
to such institution or to a public or nonprofit private child-placement
or child-care agency, but subject to limitations prescribed by the
Secretary with a view to including as "aid to families with dependent
children" in the case of such foster care in such institutions only
those items which are included in such term in the case of foster care
in the foster family home of an individual.
The implementing regulations for AFDC-FC, at 45 CFR 233.10, include:
State plan requirements. A State plan under Title IV-A of the Social
Security Act must:
. . .
(5) Provide that there will be specific criteria for determining the
amount of payment for foster care in foster family homes and in child
care institutions. In establishing rates of payments to institutions,
only those items included for care in foster family homes will be
included, and overhead costs of the institution will be excluded.
Under the requirements of this paragraph, provision must be made for
both foster family care and institutional care in accordance with the
individual child's needs; public institutions may be used, without
Federal financial participation, to discharge the institutional
obligation in whole or in part . . .
45 CFR 233.10(a)(5)(3)
Factual Background
During its review of the State's AFDC expenditure report for the quarter
ended June 30, 1976, the Agency discovered a substantial increase in the
average per child payment for AFDC-FC. The Agency conducted a review of
AFDC-FC payments made by the State and found that, since October 1,
1975, the State failed to separate maintenance costs from service costs
for foster care in resident child care facilities (RCCF) and claimed
both costs as AFDC-FC. Citing section 408(b)(2) of the Act and 45 CFR
233.110(a)(5) as allowing only maintenance costs to be charged to Title
IV-A, the Agency, on September 8, 1976, disallowed the State's claim for
$356,620 FFP for service costs under Title IV-A. On October 5, 1976,
the State, pursuant to 45 CFR 201.14, requested reconsideration of the
disallowance. On April 8, 1985, the Agency denied the State's
reconsideration request and affirmed the disallowance.
I. Whether under Title IV-A claims for AFDC-FC "social services"
in
addition to "maintenance" are allowable.
In its allowance determination the Agency described the nature of the
services that it considered unallowable. In 1968 the State established
tables specifying foster care rates for children receiving foster care
in foster family homes. Rates for RCCFs were established individually
for each facility based on a proposal submitted by the institution. The
rates for foster family homes included child maintenance items such as
food, clothing, first aid, personal needs, and an educational allowance.
The rates for RCCFs included most of these items and some other items
not included in the rates for foster family homes. The rates for RCCFs
included such services as direct and group therapy, psychological and
psychiatric consultation, educational therapy, and indirect costs such
as depreciation of plant and equipment.
Prior to October 1, 1975, the portion of RCCF rates charged to the AFDC
Maintenance Assistance grants were based on inclusion of only those
items included for foster family homes. The State, however, issued a
rule (Transmittal Letter No. 1525), effective October 1, 1975, with
instructions identifying separately the expenditures eligible for FFP
under Title XX and with the remainder of the expenditures for eligible
children charged to the AFDC-FC program. As a result of Transmittal
Letter No. 1525, claims for FFP for RCCFs were based on rates that
included additional items not provided to children in foster family
homes as part of the AFDC-FC payment.(4)
The State argued that the Agency disallowed payments for services that
must be provided under federal law. The State maintained that under 45
CFR 233.110(a)(2)(iii) it was required to have a State plan under Title
IV-A mandating the provision of social services in question here to
AFDC-FC children. The State contested the Agency's reliance on 45 CFR
233.110(a)(5) as a basis for the disallowance, contending that this
regulation does not distinguish between payments for "social services"
and "maintenance," nor exclude payments for "social services."
Furthermore, according to the State, this regulation requires that
"institutional care," if used, must be provided "in accordance
with the
individual child's needs." Without specifically identifying them, the
State argued, "The social services in question here are nothing more or
less than a portion of the institutional care provided in accordance
with the individual child's needs." State's brief, p. 2.
The Agency responded that, while the State is correct in its assertion
that 45 CFR 233.110(a)(2)(iii) mandates that certain services be
provided, it does not provide for federal payment for all of those
services. Rather, according to the Agency, section 408(b) of the Act
and 45 CFR 233.110(a)(5) clearly limit the rate of payment to child care
institutions to only those items which are included for care in foster
family homes.
We agree with the Agency about the effect of section 408(b). Section
408(b) is clear on its face. It provides for AFDC assistance for a
child in a child care institution for "only those items which are
included . . . in the foster home of an individual." When the State
drafted its State plan under Title IV-A, it could have provided for
social services in foster family homes. Yet the State did not. The
State has never denied the Agency's allegations that the questioned
social services in the RCCFs, including for example psychological and
psychiatric consultation, were not included in the State plan for care
in foster family homes. Based on section 408(b), therefore, we find
that, since the State did not make these social services reimbursable in
its State plan generally for care in foster family homes, it cannot
claim them under AFDC-FC in the RCCFs.
As to the State's claim that section 233.110(a)(2)(iii) mandates the
services at issue here, we note that the State has not even identified
and documented which, if any, of the claimed services comes within the
ambit of that regulation.
Section 233.110(a)(2)(iii) refers only to: "services . . . to improve
the conditions from which (the foster child) was removed or to make
possible his placement in the home of another relative . . ."(5)
Even if some of the activities here were documented as being services
covered by the regulation, however, we agree with the Agency that this
regulation merely requires provision of services under the State plan
and is not a guarantee of funding. The State is still barred from being
reimbursed by the statute and the funding regulation discussed
previously. The Board has previously considered a comparable situation
where a state may have to provide specific services under its State
plan, but nevertheless is precluded from receiving reimbursement by
regulation and statute. See, e.g., New York State Department of Social
Services, Decision No. 552, July 16, 1984.
We find therefore the State was not entitled to charge the AFDC-FC
program for the provision of the claimed social services in RCCFs. /2/
II. Whether the Agency's inaction constituted a waiver of the
disallowance.
As discussed above, the State sought reconsideration, as provided under
45 CFR 201.14, of the Agency's initial disallowance determination in
October 1976, but the Agency did not deny the State's request and affirm
the disallowance until April 8, 1985. The State argued that the Agency
had, in effect, waived the disallowance by not ruling on the State's
reconsideration request for over eight years. The State alleged that it
had no responsibility for the Agency's inaction, as all of the arguments
and facts concerning the disallowance had been available to the Agency
shortly after the disallowance was taken. Contending that the Agency's
delay has prejudiced the State in its appeal before the Board, the State
argued that documents relating to the questioned costs and personnel
familiar with the RCCF rate-setting are now unavailable. The State
quoted an Agency memorandum (State's Appeal File, Ex. E) to support its
contention that the Agency's calculation of the disallowance amount was
"guesswork" unsupported by documentation.
Without offering any explanation for the length of time it took to rule
on the State's request, the Agency argued that the State was put on
notice that its request for reconsideration of the disallowance was
being reviewed and that,(6) until the review was completed, the State
had the responsibility, under 45 CFR 74.21, to maintain all
documentation necessary to support its claim. This regulation provides:
(a) Except as provided in paragraphs (b) and (c) of this section,
records shall be retained for 3-years from the starting date specified
in Sec. 74.22.
(b) If any litigation, claim, negotiation, audit or other action
involving the records has been started before the expiration of the
3-year period, the records shall be retained until completion of the
action and resolution of all issues which arise from it, or until the
end of the regular 3-year period, whichever is later.
The Agency further argued that no statute of limitations exists for the
taking of disallowance for improper claims, and cited Maryland
Department of Human Resources, Decision No. 519, February 29, 1984, for
the proposition that the federal government is not subject to the
defense of laches in enforcing its rights.
We agree that the Agency is not precluded from taking this disallowance.
The State provided no legal basis for its allegation that the Agency's
delay constituted a waiver of the disallowance. In a comparable
situation, the Board concluded that the doctrine of laches could not
preclude a disallowance for costs that were not authorized by law or
regulations. See our analysis in Maryland Department of Human
Resources, Decision No. 519, February 29, 1984, p. 4. Thus, we find no
support for the State's waiver position.
The State as the recipient of federal funds has the ultimate burden of
demonstrating the allowability of claimed costs and providing supporting
documentation. See, e.g., New York State Department of Social Services,
Decision No. 204, August 7, 1981, and 45 CFR 74.61 and 45 CFR Part 74,
Appendix C, Part I, Section C. Further, the State was bound by the
terms of 45 CFR 74.21 to retain all documentation relating to the
disallowance until the disallowance was finally resolved and cannot now
argue that it was prejudiced for not having done so. The State was
given notice of the disallowance amount from the outset of the
disallowance, and if it disagreed, it was obliged under the regulations
to have retained documentation to demonstrate what part of its original
claim represented social services for RCCFs. While the Agency
disallowance amount may in fact have been arrived at by deduction, that
would not be unexpected since it is the State, not the Agency, which has
the responsibility of documenting the proper breakdown of costs and of
identifying(7) the ingredients of rates for RCCFs that the State itself
has set. We also find the State's arguments considerably weakened by
the fact that, on two occasions during the early stages of the Agency's
review of the State's reconsideration request, the State responded on
March 2, 1977 (Agency's Ex. 8) that it had "no new evidence,
documentation or argument" to be submitted and on May 26, 1977 (Agency's
Ex. 12) that "we have no new or supplemental material to be entered into
the record." Clearly then, back in 1977 the State chose not to attack
the accuracy of the Agency's calculation of the disallowance amount.
Finally, the State has not provided us with any suggestion as to how the
Agency's calculation was erroneous.
Furthermore, the record is not clear as to which party held the
questioned funds since 1976. However, if the State retained the funds,
it has had use of the money for over eight years since no regulations
were in effect during that time which assessed interest against the
State for the retention of disallowed funds pending appeal.
Accordingly, we find that the Agency has not waived the disallowance at
issue because of the length of time incurred in ruling on the State's
reconsideration request. We also find that the State has not
demonstrated that it was prejudiced by the delay.
Conclusion
For the reasons stated above, we sustain the disallowance in the amount
of $356,620. /1/ A new Title IV-E Foster Care and Adoption Assistance
Program was added by section 101(a)(1) of Public Law 96-272, effective
October 1, 1980. The AFDC-FC program under Title IV-A was repealed by
section 101(a)(2) of that law, effective at the time a State plan under
IV-E became effective, but no later than September 30, 1982. For
purposes of this decision, however, the provisions of Title IV-A apply.
/2/ The Agency noted that the record is not clear as to whether
the questioned services in this case could have been properly claimed
under another section or title of the Act. Agency's brief, p. 6. As
the State did not raise this issue, we do not address it.
JANUARY 14, 1986