Ohio Department of Human Services, DAB No. 725 (1986)

GAB Decision 725

June 6, 1986

Ohio Department of Human Services;  Request for
Reconsideration of Garrett, Donald F.; Teitz, Alexander G.  Settle, Norval D.
Decision No. 725

In Ohio Department of Human Services, Decision No. 725, March 7,
1986, the Board considered an appeal from the Ohio Department of Human
Services (State) of a determination by the Office of Child Support
Enforcement (OCSE, Agency) to disallow $1,254,170 in federal financial
participation (FFP) for operation of its child support enforcement
program under Title IV-D of the Social Security Act (Act) for fiscal
year 1981 and prior periods.  The Board upheld the part of the
disallowance which related to the State's delegation of program
operations to Lucas County, but reversed the disallowance as it related
to the delegation of the program to Summit County.  The Agency has
requested the Board's reconsideration of the Summit County part of the
decision.

Based on the additional comments received in a brief from OCSE and in a
telephone conference call, we affirm Decision No. 725. While we agree
with OCSE's general concerns, particularly that a grantee be fully
accountable for the use of program funds, we did not find that our
decision prejudices those concerns in any way as a general matter, nor
in the particular circumstances of this case.

I.  Summary of Decision No. 725

In Decision No. 725, we explained that the original basis of the
disallowance for Summit County was that the State failed to comply with
State policies requiring prior approval by the State IV-D agency of
cooperative agreements delegating program performance.  The State IV-D
agency did not approve the agreements here for Summit County.  (These
cooperative agreements were actually between counties and county courts
and other entities;  the State IV-D agency was not a party to the
agreements.)

The State maintained that its prior approval policies were non-binding
and waivable under State law.  The Agency argued that this was not so,
but also responded by arguing(2) alternatively that prior approval by
the IV-D agency was independently mandated by federal regulation and
was, in any event, an implicit part of any reasonable scheme of State
accountability for the use of federal funds.  The State rejected these
alternative arguments, arguing first that federal regulations do not
require prior approval by the IV-D agency and, secondly, the Agency's
concern about program accountability was misplaced since the State
exercised adequate accountability for the delegation of program
operations in the circumstances here.

In the Board's analysis in Decision No. 725, we first concluded that the
Agency had not adequately rebutted the State's argument that its own
approval policies were waivable under Ohio law.  We next addressed the
federal regulations cited by the Agency, and concluded that the State
could have reasonably interpreted them to not require formal approval by
the State IV-D agency in the circumstances here.  We finally considered
the Agency's argument that, even in the absence of regulation, the IV-D
agency would need to have granted prior approval in order to ensure its
accountability for the use of federal funds.  In the decision, while we
shared the Agency's general concern that a grantee must remain
accountable for the use of federa funds, we concluded that the State had
demonstrated this here.  First, the State plan (as authorized by federal
regulation) delegated the responsibility for implementing the plan to
the counties.  Second, State statutes and regulations comprehensively
addressed the local administration of the State IV-D program.  Finally,
we found an overall contextual element to color the case:  the State had
conducted its own audit of the County's program, disallowing a
substantial portion of the County's initial claim for reimbursement and
charging the federal Agency for only otherwise allowable costs of the
program.

On the basis of the foregoing, which involved much unique to the case
here, we determined that OCSE simply did not have a substantial basis
for this particular disallowance.  OCSE has nothing to fear in terms of
the effect of this case on any applicable principle, as we affirmed our
general support, reiterated through many Board decisions, for strong
fiscal oversight and affirmative accountability on the part of grantee
agencies.  We simply found no real violation of that principle based on
which OCSE should recoup money from the State for costs which appeared
otherwise allowable. /1/

(3)

In its brief on reconsideration, the Agency raised some new arguments.
As we explain in more detail below, we do not find any factual or legal
error in Decision No. 725 that would justify reversing our conclusion
regarding Summit County.  While we continue to acknowledge the Agency's
legitimate concern about program accountability, we find this concern to
have been met here.

II.  Agency Arguments on Reconsideration

A.  Can the State's Waiver be "Binding" on OCSE?

The Agency argued on reconsideration that, even if the State could waive
its own approval policies, such waiver would not be "binding" on the
Agency.  Supplemental Memorandum of OCSE, p. 2.  For the waiver to be
"binding" on the Agency would be unfair, argued the Agency, since it
would make unenforceable a federal regulation requiring compliance by a
state with its own "laws, rules, regulations and standards." 45 CFR
304.11.  The State had argued that the language of this provision
compelled deference to Ohio law which authorized the waiver of such
regulations or policies here.

We find that it is illusory to frame the issue in terms of the "binding"
effect of the "waiver" on OCSE.  The Board agrees with the Agency that a
state may not waive any federal regulation or a state rule which would
affect a state's accountability for the use of federal funds;  it would,
of course, be absurd to hold that Ohio has a giant loophole in its laws
allowing it to escape the rightful consequences of State or federal
requirements.  In this case, however, we found that the State's waiver
of its approval policies had no substantial effect on the State's
accountability for the particular federal funds in question and that the
waiver of the policies was thus harmless.  First, only a State
requirement was at issue here;  there was no corresponding federal
requirement requiring prior approval by the State IV-D agency of
cooperative agreements of delegate agencies, nor was there any violation
of any other federal requirement that has been demonstrated to be at
stake here. /2/ Second, the record(4) provides no indication that the
particular costs here were otherwise unallowable.  Indeed, the State
conducted its own audit and itself disallowed on a substantive basis
some portion of the money initially claimed by the counties.  Third, as
we found in Decision No. 725, the concern for ongoing accountability was
met here, since the State plan authorized a delegation of authority to
the counties and State statutes and administrative rules addressed fully
the local administration of the program. /3/

 

The Agency also argued that the waiver of State rules was not binding on
the Agency because of the federal regulation requiring a state to submit
all changes in its state plan to the Agency for review.  The Agency
appeared to argue that the waiver of the State's approval policies
needed to be submitted to the Agency as part of the State plan process.
The Agency cited 45 CFR 301.13, which provides:

   After approval of the original plan by (OCSE), all relevant changes
required by new statutes, rules, regulations, interpretations, and court
decisions are required to be submitted currently so that (OCSE) may
determine whether the plan continues to meet Federal requirements and
policies.

The Agency appeared to argue that 45 CFR 301.13 should be broadly
interpreted to preclude waiver since the Agency depended on the
existence of the State policy issuances when it approved Ohio's state
plan. /4/ However, we have no evidence of this in the record.  (The
State plan was not previously discussed in the appeal.) Furthermore, the
Agency has referred us to no authority or standard which requires or
expects the Agency to rely upon all existing state policies(5) when it
considers approval of a state plan. /5/ We do not question the
proposition that a change in a State policy which was a recognized basis
for State plan approval is subject to review under section 301.13.
However, in this case, there is no evidence of that circumstance.

 

B.  The Issue of Prospective Control over the Program

The Agency further argued that the Agency need not wait until "money is
mispent" before requiring accountability from the State IV-D agency.
Supplemental Memorandum of OCSE, p. 4.  We fully agree.  The Agency
acknowledged that administration of the state plan can be delegated to
the counties (See 45 CFR 302.10), but noted that the IV-D agency must
continue to "supervise . . . the administration of the plan by its
subdivisions." 45 CFR 305.21(a).  The Agency maintained that the State
has not demonstrated that it maintained its supervisory responsibility
here.

As explained in part II A above, we also agree with the Agency that a
state must maintain its supervisory or oversight responsibility.  We
have found, however, that this concern was met on the overall record of
this case.  While the Agency concentrated on the issue of "prospective"
accountability, a significant factor in the Board's decision was that
the State conducted its own audit of the program and only charged the
Agency for otherwise allowable costs, thus maintaining its
accountability responsibility.  As we discussed in Decision No. 725, and
as reiterated below, the record indicates that the State had some
ongoing accountability mechanisms in place.  We would agree that the
State could have done a better job;  but we think it unreasonable to
ignore, when examining the State's process with the benefit of
hindsight, that no otherwise unallowable costs have been claimed.

The Agency disputed the position that State statutes and regulations
fulfilled the State's supervisory or oversight responsibility, arguing
that this position was undermined when the Board in Decision No. 725
accepted the argument that the State could waive such rules.
Supplemental Memorandum of(6) OCSE, pp. 4-5.  However, the Board in
Decision No. 725 certainly did not conclude that Ohio could waive a
statute, nor did the Board address specifically whether the State could
waive a properly promulgated regulation.  We made no general conclusions
about what Ohio could waive.  The Board simply was not dealing with an
issue of the permissible scope of the State's right to waive
administrative requirements;  certainly, as we have indicated above, we
agree that the State's waiver authority is clearly subject, at the
least, to limitations necessary to maintain accountability for federal
funds.  We merely concluded that the Agency had not rebutted the State's
argument that it could waive the State's policy in the circumstances
here, where one factor was that the waiver of the rule had no effect on
the substantive allowability of costs.  We continue to conclude from the
record that the Agency's concern about whether the State exercised
control over operation of the program was met on the record here, since
the State plan, as approved by the Agency, provided for administration
of the plan by the counties;  State statutes and regulations governed
how the program must operate;  and the State's own audit established
that costs charged to OCSE were otherwise fully allowable (a proposition
not meaningfully disputed by OCSE).

Another Agency argument about these applicable State statutes and
regulations was that, unless the State reviewed the cooperative
agreements in advance of their implementation, the State would have no
way to monitor whether these statutes and regulations were followed by
the counties.  First, the comprehensiveness and specificity of the
regulations would appear to indicate that county officials would not
require this type of monitoring.  We would presume that the counties
would comply with regulations specifically addressed to the day-to-day
operation of the program.  Furthermore, the Agency has not demonstrated
how the IV-D agency's prior review of the cooperative agreements would
demonstrate that all statutes and regulations were being complied with
by the counties, since the regulations go far beyond the matters
addressed by the cooperative agreements themselves.  (One small part of
the regulations addressed the items needed to be included in the
cooperative agreements.  See Ohio Administrative Code 5101:1-29-53.)
Finally, we reiterate that we do not disagree that prior review of the
agreements would have been better than no review, and OCSE may well want
to mandate such a review in its own guidelines;  but in the peculiar
circumstances here, the lack of such review of the particular agreements
involved represented something tantamount to harmless error and operated
in the context of at least minimal prospective accountability.(7)

CONCLUSION

For the reasons discussed above, we affirm Decision No. 725.  /1/
        Furthermore, we are aware of nothing which would now prohibit
OCSE from looking specifically at those costs in more detail to
determine whether any are in fact unallowable.         /2/ Although not
addressed, by the parties on reconsideration, the Board in Decision No.
725 discussed an Agency argument about the effect of a federal
regulation which required the state plan to "provide that the State will
enter into written agreements for cooperative arrangements with
appropriate courts and law enforcement officials." 45 CFR 302.34.  We
explained in the decision why we concluded that this provision did not
specifically require the signature of a IV-D agency official before
implementation of County-managed cooperative agreements.  See Decision
No. 725, pp. 7-9.         /3/ On reconsideration, the State made the
additional comment that the State maintained ongoing oversight since it
had the ability to reject claims for IV-D funding made by the counties
on a monthly basis.  Tape of May 7, 1986 Telephone Conference Call.  /4/
        The Agency did not maintain that Ohio actually made any changes
in its state plan for our purposes.         /5/ During the telephone
conference call held during reconsideration, an Agency official stated
in argument that the Agency considers all existing policies and
regulations when reviewing a state plan.  Tape of May 7, 1986 Telephone
Conference Call.  However, the Agency identified no specific state plan
provision affected by the State's policies here, nor did the Agency show
that these particular State policies were in fact even considered when
Ohio's plan was approved.

MARCH 28, 1987