New York State Department of Social Services, DAB No. 1377 (1993)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

SUBJECT:  New York State Department of Social Services

DATE:  January 7, 1993
Docket No. A-93-32
Decision No. 1377

DECISION

The New York State Department of Social Services (NYSDSS) appealed a
decision by the Division of Cost Allocation (DCA) disallowing $1,467,984
in federal financial participation (FFP) claimed for space costs
associated with NYSDSS headquarters at the Ten Eyck building in Albany,
New York.  The disallowance represents the difference between FFP
claimed by NYSDSS as lease costs for the period April 1, 1989 through
March 31, 1992 and FFP in the amount of a use allowance to which DCA
determined that NYSDSS was entitled for the space costs.

NYSDSS argued that it was entitled to the larger amount (including
amounts attributable to interest costs) on several grounds.  NYSDSS
summarized its arguments as follows:

 Interest is allowable as a cost of space under the existing
 lease/purchase agreement.  The Department's claim is allowable
 pursuant to [Office of Management and Budget Circular] A-87
 attachment B, C.2.a.  The first occupancy date of October 1,
 1980 established in that provision is unreasonable and should
 not bar reimbursement.  The distinction in OMB Cir. A-87 between
 public and private landlords for lease/purchase contracts is
 unreasonable and rent paid to a public landlord should be
 subject to FFP in the same manner and extent as rent paid to a
 private landlord.  The reimbursement paid to the State should be
 subject to the same rules governing payments made by federal
 agencies to their contractors.  Federal agencies regularly pay
 their contractors interest under a variety of contracts.
 Finally, Congress through the Tax Reform Act of 1986, encouraged
 states to borrow money to meet their costs of operation and thus
 this federal legislation creates an exception to OMB Cir. A-87,
 Attachment B, D.7.

Notice of Appeal at 2.  NYSDSS noted that this appeal is "substantially
similar" to the issues decided in New York State Department of Social
Services, DAB No. 1336 (1992), and indicated that NYSDSS would not
object to a summary decision based on the record in DAB No. 1336.  Id.
In acknowledging the appeal, the Presiding Board Member proposed to
issue a summary decision unless DCA objected to that procedure within
ten days.  The ten days have expired, and the Board has received no
objection from DCA.

The decision in DAB No. 1336 addressed each of the arguments raised by
NYSDSS and found that none of them had merit.  Rather, we concluded that
interest costs for the Ten Eyck building were unallowable under the
plain terms of OMB Cir. A-87 and that only a use allowance was
permissible for the costs of space in that building.

Therefore, we sustain the disallowance of $1,467,984 based on DAB No.
1336, which we incorporate by reference.

 


       ___________________________
       Donald F.
       Garrett

 


       ___________________________
       Norval D. (John)
       Settle

 


       ___________________________
       Judith A.
       Ballard
       Presiding Board