DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: New York State DATE: August 15, 1989
Department of
Social Services
Docket No. 89-44
Decision No. 1087
DECISION
The New York State Department of Social Services (New York/State) appealed a determination
by the
Office of Child Support Enforcement (OCSE/Agency) disallowing $2,706,919 in federal
financial
participation (FFP) claimed by the State under Title IV-D (Child Support and Establishment
of Paternity)
of the Social Security Act (Act). New York administers its child support enforcement
program through its
State OCSE. Under a cooperative agreement with the State OCSE, the State's Office
of Court
Administration oversees court-directed child support and establishment of paternity.
During the disallowance period, July 1, 1980 through September 30, 1983, Title
IV-D of the Act had been
expanded by the enactment of section 404 of Public Law 96-265, which amended section
455 of the Act,
to provide FFP for certain court costs. Pursuant to section 455 of the Act, the
Agency disallowed New
York's entire claim for FFP of these "newly eligible" or "section
404" costs based on its findings that the
State failed to: (1) properly document its calculation of 1978 base year costs
required for a maintenance of
effort provision in the statute; (2) properly compare costs for the period of
the disallowance with the base
year; and (3) exclude costs not attributable to IV-D cases.
Summary of Conclusions
Based on the analysis below, we find that OCSE reasonably determined that the
State did not properly
calculate its 1978 base year costs according to the applicable statutory and
regulatory authorities and that
this determination was a sufficient basis for the Agency's disallowance. New
York wanted the Agency to
accept data from a 1979 quarter to partially meet the requirement for 1978 data,
but the law requires
calendar year 1978 data. In any event, New York made no substantial showing
either why it could not
meet the clear requirement for calendar year 1978 costs or, at the very least,
why the 1979 data
represented a basis for adequate reconstruction of 1978 data. Nevertheless,
the record suggests that some
potentially allowable costs may be included in the disallowance here, lacking
only New York's effort to do
what the law required it to do. The applicable authorities recognized states'
need to reconstruct
expenditures for the 1978 base year and allowed the use of OCSE-approved reconstruction
methods.
Therefore, we uphold the disallowance but give the State an opportunity, within
30 days of receipt of this
decision, to show that the disallowance should be less, by submitting appropriate
evidence of its 1978
costs for OCSE approval.
Applicable Authority
During the period in question, section 455 of the Act, in pertinent part, provided:
(c)(1) Subject to paragraph (2), there shall be included, in determining amounts
expended by a
State during any quarter for the operation of the plan approved under section
454, so much of the
expenditures of courts of such State and its political subdivisions (excluding
expenditures for or in
connection with judges and other individuals making judicial determinations,
but not excluding
expenditures for or in connection with their administrative and support personnel)
as are attributable to
the performance of services which are directly related to, and clearly identifiable
with, the operation of
such plan.
(2) The aggregate amount of the expenditures which are included pursuant to
paragraph (1) for
the quarters in any calendar year shall be reduced (but not below zero) by the
total amount of expenditures
described in paragraph (1) which were made by the State for the 12-month period
beginning January 1,
1978. (Emphasis added)
The regulations implementing section 455 of the Act were found at 45 C.F.R Part
304. In particular, 45
C.F.R. 304.21 provided:
(c) Special conditions pertaining to costs related to judicial decisions. (1)
Administrative and
personnel costs incurred by courts as part of the judicial decision-making process
are eligible for FFP only
insofar as these costs with respect to a particular cooperative agreement under
the IV-D State plan exceed
the level of calendar year 1978 expenditures for these items.
(2) Claims for FFP in expenditures incurred under paragraph (c)(1) of this section
with respect
to a particular cooperative agreement will be paid only after such expenditures
within the calendar year
exceed the level of calendar year 1978 expenditures. (Emphasis added)
Additionally, the Agency issued program instructions clarifying the requirements
for claiming the newly
eligible costs. Specifically, Action Transmittal, OCSE-AT-80-14, dated August
29, 1980, directed to state
agencies administering child support programs under Title IV-D and other interested
individuals,
provided, in relevant part:
OCSE-AT-77-3, dated January 28, 1977, specifies the documentation required to
support claims
for FFP in expenditures under cooperative agreements with courts. . . . The
alternative acceptable
methods for allocation listed in OCSE-AT-77-3 are: daily time records; predetermined
fixed rates
negotiated with the IV-D agency; sampling techniques that have prior approval
from the IV-D agency;
other methods the IV-D agency may propose, if reported to the OCSE regional
office prior to the quarter
in which the methods will be used as a basis for claiming FFP in IV-D program
costs. (Emphasis added)
Because of the short implementation period for section 404 and the need to reconstruct
costs for
previous periods for which records may not be available, it may be necessary
to develop other allocation
methods for reconstructing expenditures for calendar year 1978 . . . . Any alternative
allocation method
applied to these periods must be approved by the OCSE Regional Representatives.
Further, Action Transmittal, OCSE-AT-80-17, dated December 5, 1980, in pertinent
part, stated:
In addition, these revised instructions provide clarification of the requirements
pertaining to 1978
base period expenditures for the newly eligible costs. . . .
* * * *
In OCSE-AT-80-14, courts and IV-D agencies were instructed to reconstruct the
1978 base
period figures in accordance with allocation methods specified in OCSE-AT-77-3,
dated January 28,
1977. However, in light of the potential difficulties faced by courts in reconstructing
these costs, the
instructions of OCSE-AT-80-14 permit allocation methods different from those
specified in AT-77-3, if
these alternative methods are approved by Regional Offices. These instructions
remain in effect.
As with any item of expenditure upon which a claim for FFP is based, the 1978
base period
expenditure figures are subject to Federal audit procedures. Claims for FFP
in costs above the 1978 level
are similarly subject to review. Thus, courts which submit claims for reimbursement
of costs under the
provisions of Section 404 of P.L. 96-265 must maintain in their files sufficient
documentation to verify the
accuracy of the reported 1978 expenditure level. Failure to do so could result
in a disallowance of all
expenditures for which FFP was claimed under Section 404, since it would be
impossible to determine if
any of the costs claimed were in excess of 1978 expenditures. (Emphasis added)
Contrary to the above provisions, because New York could not reconstruct all
of its calendar year 1978
expenditures, it substituted, without Agency approval, the expenditures of the
first quarter of fiscal year
1979 for the expenditures of the first quarter of 1978 in its 1978 base year
calculation
Analysis
The State did not comply with the plain
language of the statute and regulations.
The dispositive issue in this case, as the Agency argued, is whether the State's
failure to use 1978 calendar
year costs as a base for cost calculations was an adequate ground for the disallowance.
We find that such
a failure by the State is an adequate basis for the Agency's decision, and we
therefore uphold the
disallowance (subject to a limited opportunity to provide further information
in support of a reduction of
the disallowance, as discussed below).
The State does not contest the finding that it failed to use 1978 calendar year
costs to reduce its claim for
FFP. Instead, the State basically wanted the Agency to accept its 1979 data
based on the argument, when
boiled down to its essentials, that this data is close enough. The State argued
that its claim for FFP of the
newly eligible costs of court personnel was in keeping with the purpose of Public
Law 96-265, and that the
Agency's refusal to reimburse the State for any of those costs violated the
intent of the statute and is
without support. Citing from the comments to the House of Representatives bill,
the State asserted that
the legislative history of Public Law 96-265 shows that Title IV-D requires
"aggressive administration at
both the Federal and State levels with various incentives for compliance and
non-compliance" and that to
this end, Title IV-D specifically required that states enter into financial
arrangements with the
"appropriate courts and law enforcement officials to assist the agency
in administering the program".
(1980 U.S. Cong. and Ad. News at 1344). State's brief, p. 6. The State concluded
that its claim for FFP
for the administrative costs of court personnel conformed to the purpose stated
in the legislative history.
Section 455(c)(2) of the Act specifically provides that a state must reduce
its claim under this provision
"by the total amount of expenditures . . . which were made by the State
for the 12-month period beginning
January 1, 1978." This requirement is repeated in the implementing regulations
under "special conditions
pertaining to costs related to judicial decisions" at 45 C.F.R. 304.21(c).
The Board, in Tennessee Dept. of
Human Services, DAB No. 1054 (1989), at page 5, stated:
The plain language of a statute is always the best evidence of the meaning of
a statute, and there
is no reason to go beyond that plain language to examine other evidence of legislative
intent unless the
language is unclear or ambiguous. Caminetti v. United States, 242 U.S. 470 (1917);
Chevron, U.S.A. v.
Natural Resources Defense Council, Inc., 467 U.S. 836 (1984).
Similarly, in this case, we find no reason why the Agency had to go beyond the
plain language of the
statute. The State was clearly required to calculate all calendar year 1978
costs related to judicial
determinations incurred on behalf of cases receiving services under the IV-D
State plan. 45 C.F.R.
304.21(d)(1). Having determined this figure, the State was then required to
reduce any claims submitted
for FFP under section 455 of the Act by that figure. Moreover, the Agency provided
instructions, in its
program transmittals, to clarify the requirements for claims submitted under
this provision. As noted
above, Action Transmittal, OCSE-AT-80-17 notified the states that:
As with any item of expenditure upon which a claim for FFP is based, the 1978
base period
expenditure figures are subject to Federal audit procedures. Claims for FFP
in costs above the 1978 level
are similarly subject to review. Thus, courts which submit claims for reimbursement
of costs under the
provisions of Section 404 of P.L. 96-265 must maintain in their files sufficient
documentation to verify the
accuracy of the reported 1978 expenditure level. Failure to do so could result
in a disallowance of all
expenditures for which FFP was claimed . . . .
New York did not allege that it fulfilled the requirements. Instead, the State
argued that it complied with
the intent and purpose stated in the legislative history of this provision.
As we stated in Tennessee, supra,
we do not need, however, to look to the legislative history in this case. We
find that New York simply did
not comply with the stated requirements.
While the disallowance was proper, the State
should be given an opportunity to request
approval of its base year allocation method.
Alternately, the State argued that since the regulations provided it with discretion
regarding the method of
calculating eligible expenditures, the Agency's disallowance of the entire claim
was inappropriate. The
State noted that the original 1978 base year costs were incurred for costs that
were not at the time eligible
for FFP and were not subject to federal record-keeping requirements, and, in
any event, records are only
required to be maintained for three years after a claim is made. See 45 C.F.R.
74.21 (1980). The State
contended that since its records are kept on a fiscal year basis, and its fiscal
year ran from April 1, 1978 to
March 31, 1979, one quarter of 1979, at the most, was substituted for one quarter
of 1978. The State
argued that any increase in costs for the period January through March 1979
compared to January through
March 1978 was absorbed by the State in the calculation of its claim. State's
brief, p. 8. Moreover, the
State alleged that from 1982 to 1988 it was not aware that there were any problems
with its base year
costs.
While the Agency, in Action Transmittal OCSE-AT-80-14, recognized that all records
for calendar year
1978 might not be available and noted that it might be necessary to develop
alternative methods for
reconstructing expenditures for calendar year 1978, this does not eliminate
the State's obligation to
comply with statutory and regulatory requirements. What the Agency's action
transmittal did was to allow
more flexibility in the reconstructing of those expenditures, which still required
approval by the Agency.
The State has never alleged that it used an approved method to reconstruct calendar
year 1978 costs.
Instead, the State argued that since it kept its records on a fiscal year basis,
it could substitute January
through March 1979 for January through March 1978. The State has not provided
any evidence that it
received Agency approval to reconstruct its calendar year 1978 base costs simply
by using the costs from a
quarter of 1979. In light of the statute, regulations, and action transmittals,
we reject the State's
argument.
We also reject the State's arguments that it was not aware of any problems with
its base year costs from
1982 to 1988 and had no obligation to retain 1978 records. The State knew of
the 1980 statutory
requirement to use calendar year 1978 costs or an Agency approved allocation
method for its calculations.
Moreover, Action Transmittal OCSE-AT-80-17, which the State received in 1980,
stated that "the 1978
base period expenditure figures are subject to Federal audit procedures."
However, fairness and the circumstances of this case indicate the State should
be given an opportunity to
restate its claim for OCSE approval. Since the entire claim was disallowed (a
reasonable OCSE action
given that it had no basis for accurately calculating the correct claim), common
sense suggests that some
undefined portion of the disallowed costs here probably would have been allowable
if the State had done
its homework. The Agency's guidelines contemplated leeway in calculating 1978
data, and there is
nothing in the record here which appears to preclude OCSE from reviewing a proper
New York
presentation now, if New York chooses to make one. New York, therefore, is provided
thirty days from
the date of receipt of this decision (or such longer period as OCSE approves)
to submit evidence of its
1978 costs to OCSE for approval. This information should either be actual or
reconstructed 1978 data,
although it does not appear that New York is precluded from submitting evidence
from other periods in
support of reconstruction of 1978 costs. If New York does not timely make this
submission, the
disallowance is considered upheld. If New York does, OCSE should review the
submission and respond
in writing. If New York disagrees with OCSE on this issue, it may return to
the Board within 30 days
after receiving the OCSE determination
Conclusion
Based on the foregoing analysis, we uphold the Agency's disallowance, subject
to OCSE review of the
State's request for approval of its reconstructed 1978 data as discussed above.
___________________________________
Donald F. Garrett
___________________________________
Alexander G. Teitz
___________________________________
Norval D. (John) Settle
Presiding Board Member