Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York State
Department of Social Services
DATE: February 24, 1997
Docket No. A-96-152
A-97-6
Decision No. 1610
DECISION
The New York State Department of Social Services (New
York) appealed two decisions of the Administration for
Children and Families (ACF) disallowing $1,683,031 which
New York claimed under title IV-E of the Social Security
Act (Act) for the quarters ended March 31 and June 30,
1994. The claims were for federal financial
participation (FFP) in payments made by New York to the
State Office of Court Administration (OCA) for
administrative activities of non-judicial staff assigned
to family court matters. 1/ New York claimed a portion
of these payments as administrative costs of its foster
care and adoption assistance program. ACF disallowed the
claims based on its prior disapproval of what New York
described as its proposed cost allocation plan for
charging OCA costs to the IV-E program. ACF also took
the position that the costs were not allowable because
the functions performed by the OCA staff were part of the
normal required operation of the court.
As discussed below, we conclude that New York did not
establish that the claims involved a type of cost which
was allowable as a IV-E administrative cost under the
applicable regulations. We also reject New York's
argument that it was entitled to a reversal of the
disallowances if the proper procedures were not followed
in disapproving the proposal pursuant to which New York
said it claimed the costs. Accordingly, we sustain the
disallowances in full.
Relevant Statutes, Regulations and Agency Guidance
Title IV-E, originally enacted by the Adoption Assistance
and Child Welfare Act of 1980, Public Law No. 96-272,
authorizes appropriations to enable states "to provide,
in appropriate cases, foster care . . . for children who
otherwise would be eligible for assistance under [title
IV-A (AFDC)] and adoption assistance for children with
special needs . . . ." 2/ Section 470 of the Act.
In order for a state to be eligible for payments under
the IV-E program, the state must have a plan approved by
the Secretary. Section 471(a) of the Act. The plan must
provide that the state agency responsible for
administering the title IV-B child welfare services
program will administer or be responsible for supervising
the administration of the IV-E program. Section
471(a)(2) of the Act.
Section 474 of the Act authorizes FFP in several
categories of title IV-E expenditures: foster care
maintenance payments, adoption assistance payments,
training expenses, and administrative expenses. In order
to be eligible for foster care maintenance payments, a
child must have been removed from home pursuant to either
a judicial determination or a voluntary agreement. In
the former case, the judicial determination must be to
the effect that continuation in the home would be
contrary to the child's welfare and that reasonable
efforts have been made to prevent the child's removal
from home (or to make it possible for the child to return
home). Section 472(a)(1) of the Act. Funding for
administrative expenses is authorized by section
474(a)(3)(C), which provides funding for expenditures
"found necessary by the Secretary . . . for the proper
and efficient administration of the State plan . . . ."
The regulations implementing title IV-E are codified at
45 C.F.R. Part 1356 (1983). Section 1356.60(c)(1)
provides that "costs directly related only to the
administration of the foster care program," including the
determination and redetermination of eligibility, fair
hearings and appeals, and rate setting, are allowable
administrative costs and may not be claimed under any
other federal program. Section 1356.60(c)(2) gives
"examples of allowable administrative costs necessary for
the administration of the foster care program." These
costs include "[p]reparation for and participation in
judicial determinations." Section 1356.60(c)(2)(ii).
ACF has provided guidance concerning the nature of
allowable administrative costs in several policy
issuances. In PA-ACYF-85-01, dated 11/18/85, ACF stated
in pertinent part:
Costs allowable as preparation for and participation
in judicial determinations (45 CFR
1356.60(c)(2)(ii)) are limited to the preparation of
reports to the court and participation in court
proceedings by State or local agency casework or
casework supervisory personnel.
In ACYF-PIQ-92-03, dated 7/17/92, ACF addressed the
question whether it is "permissible for a State title IV-
B/IV-E agency (State agency) to identify court activities
related to title IV-E eligible children and claim title
IV-E reimbursement on behalf of the court." ACF stated:
Section 474(a)(3) of . . . [the Act] provides for
Federal matching for State administrative
expenditures; section 471(a)(2) of the Act specifies
that the responsible State agency shall administer
the State plan. Accordingly, a State agency may not
claim reimbursement for administrative costs under
title IV-E for activities being performed by the
court.
. . . docketing of cases is a required court
activity, not a State agency function. The time of
court staff assigned to review "reasonable efforts"
made by the State agency is likewise a required
court activity, and not a State agency function. In
this regard, the State agency is required by section
471(a)(15) of the Act to provide "reasonable
efforts" prior to the placement of a child in foster
care to eliminate the need for removal of the child
from his home and, when removal is necessary, to
provide "reasonable efforts" to make it possible for
the child to return home. The court is required by
section 472(a)(1) of the Act to determine if the
State, in fact, has made "reasonable efforts" to
keep the child in his home.
Thus, activity related to the "reasonable efforts"
determination to be made by the court would not be
considered an administrative cost that is
reimbursable by the State agency on behalf of the
court. Associated clerical and overhead expenses
are similarly unallowable.
Other relevant authorities are identified later in the
text of this decision.
Factual Background
New York State's Unified Court System includes an Office
of Court Administration (OCA) which is responsible for
central management support and administrative oversight
for New York State trial courts, including the family
courts and other courts which hear family cases. New
York Ex. 8, at 5.
The New York State Department of Social Services (New
York) is the single state agency responsible for
administering or supervising the administration of the
title IV-E program in New York State. New York Ex. 14
(New York's title IV-E state plan), 2nd unnumbered page.
3/ On March 17, 1994, New York submitted to the
Director, Division of Cost Allocation, Region II, a
proposal (which New York described as a proposed cost
allocation plan) for charging to the IV-E program part of
the cost of the administrative activities of OCA staff
assigned to family court matters. The proposal states
that "[p]ositions performing general back-office duties
associated with all Family Court matters" are eligible
for title IV-E reimbursement. New York Ex. 8, at 7. The
positions in question, all of which are described as
"non-judicial," are: Chief Clerk I-VII, Court Assistant,
Office Assistant, Principal Court Clerk, Senior
Administrative Secretary, Court Reporter, Law
Stenographer, Management Analyst, Driver-Messenger,
Microfilm Supervisor, Court Officer-Sergeant, Court Aide,
and Nursery Attendant. Id. at 7-9. The proposal also
lists "typical duties" of the first six of these
positions. Id. In addition, the proposal contains a
section captioned "Title IV-E Allocation" which describes
how the "back-office" costs will be allocated between the
title IV-D (Child Support Enforcement) program and the
IV-E program based on their respective case count
percentages. Id. at 10.
In a letter dated March 28, 1994, the Director, Division
of Cost Allocation, Region II, returned the proposal to
New York and recommended that New York's request for
federal approval be addressed to ACF. The letter noted
that "the submission deals solely with the Title IV-E
program," specifically, that "the subject plan costs will
not be claimed through the DSS Cost Allocation but as a
separate line item on the Title IVE Quarterly Expenditure
Report." New York Ex. 11.
On April 5, 1994, New York resubmitted the proposal to
the Assistant Regional Administrator, ACF. By letter
dated May 10, 1994, ACF advised New York that the plan
had been forwarded to the central office for a decision.
ACF also advised New York "not to submit claims for
title IV-E reimbursement in accordance with the proposed
cost allocation plan prior to receipt of a final
determination" since "[q]uestions have been raised about
the concept of title IV-E reimbursement of OCA costs."
New York Ex. 12.
On July 26, 1994, the Commissioner, Administration on
Children, Youth, and Families, ACF, advised New York that
its "submission is not approvable since it fails to
establish the subject costs as reimbursable under title
IV-E." The Commissioner stated in part:
The question of whether costs incurred by a court
may be submitted for title IV-E reimbursement was
addressed by policy issuance, ACYF-PIQ-92-03. . . .
This issuance clarified that activities performed as
part of the required functions of a court cannot be
claimed as title IV-E administrative costs.
Furthermore, the submission does not contend that
OCA has legal authority to or performs child
placement functions under a written agreement with
the IV-E State agency. Policy issuance ACYF-PIQ-85-
2 . . . specifies the nature of the relationship
which must exist between the IV-E State agency and
another State agency as a precursor to title IV-E
reimbursement.
The Commissioner also noted that "[t]he merits of the
allocation methodology . . . need not be addressed since
the nature of the activities do not meet title IV-E
matching requirements." New York Ex. 13, at 1-2.
On October 30, 1995, New York entered into a memorandum
of understanding with the Unified Court System for the
"purpose of claiming federal reimbursement for
administrative cost involving Title IV-E foster care
related cases." 4/ New York Ex. 9, at 1. The
memorandum provided in pertinent part that:
1. UCS agrees . . . that the New York Family Courts
will accept, process and adjudicate petitions on
behalf of candidates for foster care. . . . Court
staff will perform the administrative duties of
furnishing all data needed by the Court System in
discharging its federally mandated responsibilities
in administering . . . Title IV-E cases. . . .
* * * *
8. UCS agrees to provide to the Department copies
of current forms of notices, petitions, orders and
any other pertinent forms used by the Family Courts
in NYS in conjunction with Title IV-E cases.
9. UCS agrees to continue to provide all Family
Court Judges and Chief Clerks copies of the State
and federal laws, rules and regulations, and any
subsequent amendments for the hearing and
disposition of Title IV-E cases.
10. UCS agrees to produce and retain all the
documentation which is needed to support the claims
submitted for federal reimbursement. . . .
Id. at 1-2.
New York subsequently submitted the claims at issue here,
which were disallowed by letters dated June 10 and
September 17, 1996.
Analysis
1. The claims did not involve a type of IV-E cost which
was allowable under the applicable regulations.
In its initial brief, New York asserted that the costs in
question were incurred for non-judicial activities
conducted in preparation for family court proceedings in
which court orders are sought to remove a child from home
or to approve the continuation of a foster care
placement. New York further described these activities
as "designed to support and assist [social services
district] efforts to present to family court judges the
best evidence in support of judicial findings that it
would be contrary to the welfare of a child to remain at
or return home, and that reasonable efforts were made to
avert foster care placement." New York Br. at 11. In
its reply brief, New York stated that these activities
were "related to the preparation, drafting, and
preliminary review of proposed documentation and
suggested court order language developed in anticipation
of judicial proceedings related to judicial orders of
removal." New York Reply Br. at 6. New York maintained
that these activities would be reimbursable under IV-E if
performed by state agency personnel and that it was New
York's prerogative to have OCA staff perform these
activities instead in order to free caseworkers for other
duties. In New York's view, these activities were
undertaken to assure that court-ordered placements met
the requirements of section 472(a)(1) of the Act
(particularly the requirement for a contrary-to-the-
welfare and reasonable efforts finding in the judicial
determination removing the child), and that the costs
were therefore necessary for the proper and efficient
administration of New York's IV-E program. New York also
argued that the costs were specifically allowable under
45 C.F.R. § 1356.60(c)(2)(ii) as costs of preparation for
and participation in judicial proceedings.
It is not clear from New York's briefs precisely what
types of activities it was alleging gave rise to the
costs at issue here. Activities incurred "in preparation
for" IV-E proceedings or "related to" preparation,
drafting and review of documentation for such proceedings
could conceivably encompass a wide range of activities
only tangentially related to the IV-E program. In any
event, New York's characterizations of the costs in
question are not supported by the record. According to
New York, it claimed these costs based on the proposed
"cost allocation plan" that it submitted first to the
Division of Cost Allocation and then to ACF. That
proposal describes the OCA positions which New York
believed were eligible for IV-E reimbursement as
performing "general back-office duties associated with
all Family Court matters." New York Ex. 8, at 7. There
is nothing in this language which suggests that any of
the duties involved the actual drafting or review of
documents needed for a judicial determination which met
the requirements of IV-E, or were even related to these
activities. In addition, only a few of the "typical
duties" described in the proposal (e.g., reviewing
documents for accuracy and legal sufficiency and
preparing court forms) might arguably encompass the
activities which New York alleged were involved. Most of
the "typical duties," including such things as
"monitor[ing] the operation of trial parts to insure
maximum utilization," scheduling court proceedings,
docketing incoming cases, reviewing statistical reports
and summaries regarding case management and court
operations, and taking and transcribing dictation,
clearly do not. New York Ex. 8, at 7-9. Moreover, it is
clear merely from the titles of some of the positions
(e.g., Driver-Messenger; Microfilm Supervisor, Court
Officer-Sergeant, Nursery Attendant) that none of their
duties involved the drafting or review of documents
needed for a judicial determination which met IV-E
requirements, or related duties. Furthermore, the fact
that the proposal provides for the same pool of OCA costs
to be allocated between the IV-D and the IV-E programs
based on their respective case counts indicates that the
costs were incurred for activities which may not even
have involved documents needed for IV-E purposes.
The description of OCA's responsibilities in the
memorandum of understanding (which was entered into after
the period in question here but which New York claimed
reflects its view of the role of OCA with respect to the
IV-E program during the disallowance period) also fails
to provide convincing support for the description in New
York's briefs. The memorandum states that court staff
will furnish all data needed by the court system for IV-E
cases and will produce and retain documentation to
support the IV-E claims. This might arguably consist
merely of transmitting to the court the petition for the
child's removal and any supporting documentation so that
the court could make the determination required by
section 472(a)(1) of the Act, and of making and
maintaining a record of the court's determination.
These appear to be duties that OCA would have for any
foster care case, irrespective of the memorandum of
understanding.
Thus, the record shows that the OCA activities for which
New York claimed IV-E reimbursement were, for the most
part, administrative activities necessary for the day-to-
day operation of the court. The activities arguably
enabled the court to make determinations that are a
prerequisite for foster care eligibility under title IV-
E; nevertheless, they were not activities which would
ordinarily have been performed by state agency personnel,
as New York alleged. Even if some of the "typical
duties" of a limited number of the OCA staff positions
might have qualified as IV-E activities (which, as noted
below, would have been contrary to ACF's interpretation
of 45 C.F.R. § 1356.60(c)(2)(ii) as referring only to
caseworker activities), New York did not separately
identify the cost of any such activities. Instead, New
York apparently charged IV-E a share of the full salaries
of all of the positions identified in the proposal based
on the IV-E case count.
As ACF correctly found, costs incurred to perform
administrative duties necessary for the day-to-day
operation of the court are not reimbursable as IV-E
administrative costs. Under section 474(a)(3)(C) of the
Act, the Secretary determines what expenditures are
reimbursable as IV-E administrative costs, i.e.,
expenditures necessary for the proper and efficient
administration of the state plan. ACF, as the
Secretary's delegate, listed such expenditures in 45
C.F.R. § 1356.60. In DAB No. 1428, the Board held that
"[u]nless an activity is specifically listed or is
closely related to a listed cost, New York could not
reasonably consider an activity to be one which had been
`found necessary by the Secretary . . . for the proper
and efficient administration' of title IV-E. . . ."
New York claimed here that the expenditures in question
were made for the activity listed in section
1356.60(c)(2)(ii): preparation for and participation in
judicial determinations. (As indicated above, New York
appeared to take the position that the activities
involved preparation for rather than participation in
court proceedings.) However, New York had notice through
ACYF-PIQ-92-03 and PA-ACYF-85-01 that its expenditures
did not fall in this category. (New York did not deny
that it had timely, actual notice of these issuances.)
ACYF-PIQ-92-03 stated generally that a "required court
activity" was not eligible for reimbursement as a IV-E
administrative cost, and specifically identified
docketing of cases--one of the activities performed by
OCA staff--as a non-IV-E activity. 5/ PA-ACYF-85-01
stated that costs allowable under section
1356.60(c)(2)(ii) were limited to the preparation of
reports to the court and participation in court
proceedings by state agency caseworkers. Even if this
issuance permitted these activities to be performed by
other than state agency personnel, the OCA activities
would not qualify since (with the possible exception of
some activities the costs of which were not separately
identified by New York) these activities did not involve
either the preparation of reports or participation in the
judicial proceedings themselves. Moreover, the OCA
activities were not closely related to preparation of
reports or participation in judicial proceedings. In
Illinois Dept. of Children and Family Services, DAB No.
1530 (1995), the Board stated that "[a] close
relationship means that the activities are similar in
nature, not simply that some connection between them can
be made." DAB No. 1530, at 44. Both preparation of
reports and participation in judicial proceedings (in the
role the state agency would ordinarily perform, i.e., as
a protector of the child's welfare) require substantive
knowledge of the child's circumstances as well as of
title IV-E requirements. The OCA activities involved
essentially ministerial duties which required no such
knowledge. (We question in any event whether OCA
personnel could properly act as a protector of the
child's welfare.) Since the OCA activities were neither
listed in the regulations nor closely related to a listed
activity, it is clear that these activities were not
incurred for IV-E activities under the applicable
regulations.
New York argued, however, that ACF could not reasonably
rely on either ACYF-PA-85-01 or ACYF-PIQ-92-03 since
neither issuance was promulgated pursuant to notice and
comment rulemaking. We disagree. As New York
acknowledged, the requirement for notice and comment
rulemaking in section 553 of the Administrative Procedure
Act (APA) applies only to legislative rules and not to
interpretative rules, which merely "clarify or explain
existing law or regulations." 6/ See New York Br. at
17 and Reply Br. at 18 (quoting Powderly v. Schweiker,
704 F.2d 1092 (9th Cir. 1983)). PA-ACYF-85-01 addressed
what the regulations at 45 C.F.R. § 1356.60(c)(2)(ii)
meant by the phrase "preparation for and participation in
judicial proceedings" and was thus an interpretative
rule. ACYF-PIQ-92-03 also addressed what constituted
allowable administrative costs under section 1356.60(c).
Thus, neither issuance constituted a legislative rule
which was subject to the notice and comment rulemaking
requirement.
New York also argued that ACYF-PIQ-92-03's
disqualification of all activities performed by a court
as IV-E activities "is not supported by the plain
language of Title IV-E and is wholly inconsistent with
the overall statutory scheme of Title IV-E and the intent
of Congress . . . ." 7/ New York Br. at 14. According
to New York, Congress intended to afford participating
states "great discretion to establish and implement Title
IV-E state plans" and "to make the best and most
appropriate use of state resources to devise effective
Title IV-E state plans." Id. at 15. New York asserted
that it had "determined that it can make the best use of
its resources by structuring its administrative support
systems to provide family court judges with
administrative staff from . . . UCS," and that the
restriction imposed by PIQ-92-03 was "arbitrary and
unreasonable" because it "usurps state discretion to
administer Title IV-E state plans . . . ." Id. New York
also argued that ACYF-PIQ-92-03 was a legislative rule
because of its limiting effect on states' discretion.
8/
It is not clear that ACYF-PIQ-92-03 prohibits IV-E
funding for all activities performed by a court, as New
York argued. This issuance contrasts a "required court
activity" with a "state agency function," providing that
IV-E reimbursement is available only for the cost of the
latter and not the former. It does not address whether
IV-E reimbursement is available for the cost of a
function for which the state agency is responsible but
which it delegates to a court. 9/ In any event, since
the activities for which New York claimed IV-E funding
were (at least primarily) required court activities, this
issuance is directly apposite here.
Moreover, New York's arguments are based on a misreading
of the statute. As noted above, section 474(a)(3)(C) of
the Act provides that administrative costs are allowable
under IV-E to the extent determined by the Secretary to
be necessary for the proper and efficient administration
of the IV-E program. Moreover, a state plan must be
approved by the Secretary in order for costs incurred
under that plan to be allowable. Section 471(a). Thus,
it is the Secretary or her delegate, and not a
participating state, that is to determine what costs are
allowable as IV-E administrative costs. While the
Secretary could not exercise this authority in such a way
as to preclude a state from charging costs to IV-E which
were intended by Congress to be reimbursable, there is no
evidence that Congress intended the costs in question
here to be reimbursable.
Indeed, the interpretation of the regulations in ACYF-PA-
85-01 and ACYF-PIQ-92-03 is clearly consistent with
congressional intent in enacting title IV-E. 10/ As
the Board has previously held, title IV-E is a program of
limited purposes which is designed primarily to provide
funding for foster care maintenance and adoption
assistance payments. Illinois Dept. of Children and
Family Services, DAB No. 1530, at 27 (1995); New York
State Dept. of Social Services, DAB No. 1428, at 14
(1993). The requirement for a judicial determination is
simply a condition on the availability of these payments
which is designed to further the general purpose of the
Adoption Assistance and Child Welfare Act to encourage
states to prevent improper foster care placements and to
ensure that children remain in substitute care only when
necessary. Courts have upheld other conditions on
federal funding even where the conditions have entailed
substantial increased outlays of non-federal funds. See
DAB No. 1530, at 30, citing Oklahoma v. Schweiker, 655
F.2d 401 (D.C. Cir. 1981). Thus, New York was not
entitled to IV-E funding for payments made to OCA to
assure that New York complied with this condition on IV-E
funding.
Contrary to what New York suggested, however, this does
not mean that, in order for an administrative cost to be
allowable under title IV-E, the activity for which the
cost is incurred must be "unique" to the title IV-E
program. New York Reply Br. at 11. In DAB No. 1428, the
Board found that the activities of child protective
services workers were not IV-E activities, and gave as a
reason that "the activities are not unique to the title
IV-E program and do not further the specific limited
goals that program [i.e., an income maintenance program]
was designed to meet." DAB No. 1428, at 10. However,
the lack of uniqueness was merely one factor based on
which the Board found that the activities in question,
which were clearly part of the state's responsibility for
the general welfare of its citizens, were not a type
of activity which Congress intended to fund under title
IV-E. Thus, the fact that the OCA activities related to
court proceedings for children in addition to IV-E
eligible children is not a basis for the disallowance
here. Rather, the cost of the OCA activities is
unallowable because New York has failed to establish that
these activities were other than administrative
activities necessary for the day-to-day operation of the
court.
2. It is irrelevant whether the costs were claimed in
accordance with a proposed CAP.
New York took the position that the costs in question
should be allowed since they were claimed in accordance
with a proposed cost allocation plan (CAP) which was not
disapproved following the proper procedures. A CAP is
defined in 45 C.F.R. § 95.505 as "a narrative description
of the procedures that the State agency will use in
identifying, measuring, and allocating all State agency
costs incurred in support of all programs administered by
the State agency." A state is required to submit a
proposed CAP, as well as any amendments to a CAP, to the
Director, Division of Cost Allocation (DCA), in the
appropriate HHS regional office. 45 C.F.R. §§ 95.507(a),
95.509. If DCA disapproves the proposed CAP, a state may
seek reconsideration of the DCA decision by the HHS
Regional Director. 45 C.F.R. § 75.5. A Regional
Director's negative determination may be appealed to the
Board. 45 C.F.R. § 75.6(c). Pending DCA's action on a
proposed CAP or CAP amendment, a state may claim FFP
pursuant to the amendment unless otherwise advised by
DCA. 45 C.F.R. § 95.517. A state must claim FFP for
costs associated with a program only in accordance with
its approved CAP. Id.
New York asserted that "[i]n this case DCA abdicated its
responsibility to review and act on [New York's] proposed
CAP amendment." New York Br. at 22. New York further
asserted that "ACF overstepped its authority, first, by
directing [New York] not to file claims while review of
the proposed CAP was under its own review, and second, by
acting unilaterally to disapprove the proposed CAP
without affording the Department an opportunity for
timely reconsideration pursuant to 45 CFR Part 75 or in
the alternative, pursuant to 45 C.F.R. Part 16." Id. In
support of its position, New York cited Illinois Dept. of
Children and Family Services, DAB No. 1422 (1993), for
the proposition that "[a] CAP is intended to assure the
distribution of State agency costs, whether attributable
to a single program or multiple programs, on a consistent
basis." New York Br. at 21. New York also relied on the
holding in that decision that "it is appropriate to have
DCA approve a state's allocation methodology, rather than
to allow individual program agencies to determine whether
costs have been properly allocated," since DCA has
expertise in the accounting principles necessary to
determine how to allocate costs to benefitting programs.
Id.
ACF maintained that the proposal at issue here was not in
fact a proposed CAP, but was simply a plan developed by
New York for determining the cost of services it receives
from OCA and which it intended to claim under title IV-E.
ACF asserted that New York already had an approved CAP
in place. 11/
We need not resolve this issue, however. As noted above,
a CAP allocates costs which are "incurred in support of"
programs administered by the state agency. The
applicable regulations also require that a CAP conform to
pertinent Department regulations and instructions and be
compatible with the state plan. 45 C.F.R. § 95.507(a)(2)
and (3). Thus, in order for a cost to be reimbursable
under a particular program, the cost must be of a type
allowable under the program as well as allocable to the
program. The determination about whether any of the OCA
costs may properly be considered allowable costs of the
IV-E program is a decision reserved for ACF, the program
agency. As discussed in the first part of this decision,
ACF properly determined that the costs were not
reimbursable as IV-E administrative costs. Accordingly,
even if New York's proposal constituted a proposed CAP or
CAP amendment, New York is not prejudiced by the lack of
a determination by DCA about whether the allocation
method in the proposal was correct. Even if the OCA
costs had been claimed pursuant to a CAP which was
approved, that would not make the costs allowable.
In any event, New York might not have received a
favorable determination from DCA. New York's proposal
provided that the full salaries for the OCA positions
named were to be allocated between the IV-D and the IV-E
programs. There is no provision in the proposal for
allocating part of the salaries to state-funded programs
or to any other federal program (such as the title IV-B
child welfare services program) even though not all of
the children involved in Family Court proceedings were
eligible for title IV-D or title IV-E. Thus, it appears
that the proposed allocation method was not acceptable.
12/
Conclusion
For the reasons discussed above, we uphold the
disallowances in full.
____________________________
Donald F. Garrett
____________________________
Norval D. (John) Settle
____________________________
Judith A. Ballard
Presiding Board Member
* * * Footnotes * * *
1. New York claimed $829,192 as increasing
adjustments for the quarter ended March 31, 1994 and
$853,839 as increasing adjustments for the quarter ended
June 30, 1994. New York did not appeal the disallowance
of the amounts originally claimed for these quarters.
See Docket No. A-96-152, disallowance letter dated
6/10/96; Docket No. A-97-6, disallowance letter dated
9/17/96.
2. The Personal Responsibility and Work
Opportunity Reconciliation Act of 1996, Public Law No.
104-193, which abolished the AFDC program, amended title
IV-E to refer to title IV-A as in effect as of June 1,
1995.
3. The state plan further provides that the New
York State Department of Social Services will supervise
the administration of the plan "by local political
subdivisions." New York Ex. 14, Attachment A. This
appears to refer to New York State's social services
districts, which New York said were responsible for
placement and supervision of foster children. See New
York Reply Br. at 4. The state plan does not contain any
reference to administration by the courts.
4. New York asserted that the memorandum of
understanding "had been drafted and was being implemented
at the time the proposed CAP was submitted." New York
Reply Br. at 16. The memorandum provided for a
retroactive effective date of March 1, 1994.
5. New York argued that "the Agency's policy in
PIQ-93-02, was responsive to a question arising from
Alabama and is vaguely worded as applied to New York
State." New York Br. at 17. While it is true that ACYF-
PIQ-93-02 does not specifically consider the eligibility
of all of the OCA activities in question here, this
issuance clearly indicates that no IV-E funding is
available for a "required court activity" as opposed to a
"State agency function."
6. Section 553 of the APA includes an exemption
for matters relating to grants. However, the Department
of Health and Human Services (then the Department of
Health, Education and Welfare) stated in a notice
published in the Federal Register on February 5, 1971 (36
Fed. Reg. 2532) that it was waiving this exemption and
would require public participation in accordance with the
APA when formulating rules.
7. New York did not argue, however, that PA-
ACYF-85-01 was invalid because it limited preparation for
and participation in court proceedings to activities
performed by state agency personnel.
8. In addition, New York suggested that, in
accordance with Executive Order 12612, a "Federalism
Assessment" should have been prepared to determine
whether "the restrictions articulated in the [PIQ]" were
proper in light of their impact on states. New York
Reply Br. at 19. However, New York did not allege, nor
does it appear, that the failure to prepare such an
assessment carries any consequences.
9. Both of the disallowance letters appealed
here indicate that reimbursement would be permitted where
"the court is performing child placement functions under
a written agreement with the IV-E State agency."
However, even if the memorandum of understanding between
the Unified Court System and the state agency was in
effect during the periods in question here, the OCA costs
would not have been reimbursable under IV-E because the
memorandum of understanding did not provide that OCA
would perform child placement functions but instead
delineated OCA's role in assuring that a child's
eligibility for IV-E funding would be properly
documented.
10. Furthermore, this interpretation is
consistent with Office of Management and Budget (OMB)
Circular A-87, which provides that the "general costs of
government," including the "[c]ost of the judiciary
branch," are unallowable. OMB Circular A-87, Attachment
B, 23. (This provision of the 1995 revision of the
Circular is unchanged from the provision in the version
previously in effect.) OMB Circular A-87 is made
applicable to title IV-E by 45 C.F.R. §§ 74.27(a) and
1355.30(b).
11. ACF also pointed out that, even assuming
that New York's proposal was a CAP, under 45 C.F.R. §
95.513, reimbursement would not be available for any
costs claimed prior to the first day of the calendar
quarter following the date the proposal was submitted.
ACF Br. at 18-19, n. 5. The proposal was submitted to
DCA on April 1, 1994. Thus, reimbursement would not be
available for the costs claimed for the quarter ended
March 31, 1994. (ACF erroneously concluded that
reimbursement would not be available for the subsequent
quarter as well.)
12. The cost allocation regulations also
provide that, wherever costs are claimed for services
provided by a governmental agency outside the state
agency responsible for administering or supervising the
administration of a program, the state may either provide
for the allocation of the cost of such services in its
CAP or include a statement in its CAP stipulating that
the costs will be supported by a written agreement
identifying the services being purchased and the basis
upon which the billing will be made. 45 C.F.R. §
95.507(b)(6). The memorandum of understanding merely
stated that the costs would be calculated pursuant to the
CAP. Thus, New York could not rely on the memorandum of
understanding in lieu of the CAP as a basis for
allocating the costs.