Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York State Department of Health
Docket No. A-97-153
Decision No. 1632
DATED: October 10, 1997
DECISION
The New York State Department of Health (New York)
appealed the decision
of the Director, Division of Cost
Allocation (DCA), Department of Health and
Human Services
(HHS), disallowing $78,766 in federal financial
participation (FFP) claimed by New York under title XIX
of the Social
Security Act. 1/ The disallowed costs
related to the lease
of the Ten Eyck building in Albany,
New York, which was occupied by New
York, for the period
October 1, 1996 through March 31, 1997. The
amount
disallowed represents the difference in FFP between lease
costs
claimed by New York, which included amounts
attributable to interest costs,
and a use allowance to
which DCA determined New York was entitled.
In New York State Dept. of Social Services, DAB No. 1336
(1992), New York
State Dept. of Social Services, DAB No.
1590 (1996), and summary decisions
based on those
decisions, the Board upheld the disallowance of interest
costs related to the lease of the Ten Eyck building which
were claimed
by the New York State Department of Social
Services (NYSDSS).
2/ In its Notice of Appeal in the
case now before us, New York
requested that the Board
issue a summary decision in accordance with its
earlier
decisions. DCA did not object to the issuance of a
summary
decision.
In DAB No. 1336 and DAB No. 1590, the Board concluded
that interest costs
for the Ten Eyck Building were
unallowable under the plain terms of Office
of Management
and Budget (OMB) Circular A-87 and that only a use
allowance was permissible for the costs of space in that
building. 3/ DAB No. 1336 is not directly on point
here, however, since that decision considered only an
earlier version of
OMB Circular A-87, which was revised
in 1995. The 1995 revision
considered in DAB No. 1590
was applicable during the disallowance period at
issue
here. The 1995 revision provided that interest costs
were
unallowable, except that the rental cost of space
(which includes interest)
in publicly owned buildings
"acquired, constructed, fabricated,
reconstructed or
remodeled" on or after October 1, 1980 is allowable.
OMB
Circular A-87, Attachment B, 26 (published at 60 Fed.
Reg.
26484, 26499 (May 17, 1995)). The Board ruled in
DAB No. 1590 that
interest costs associated with the
lease of the Ten Eyck building were
unallowable since
none of the conditions in the Circular for allowing the
rental cost of space were met. Further, the Board
considered and
rejected NYSDSS's other arguments,
including the argument that the allowance
of interest
costs on equipment in the revised Circular made interest
costs on buildings allowable. Accordingly, the Board
found that
DCA properly disallowed the interest component
of the lease costs.
Conclusion
We therefore sustain the disallowance of $78,766 based on
the analysis in
DAB No. 1590, which we incorporate by
reference.
___________________________
Cecilia
Sparks Ford
___________________________
Norval
D. (John) Settle
___________________________
Donald
F. Garrett
Presiding Board
Member
* * * Footnotes * * *
1. Pursuant to 45
C.F.R. Part 75, New York was
entitled to appeal DCA's disallowance decision
to the
Regional Administrator. However, the Board allowed New
York
to waive its right to proceed under 45 C.F.R. Part
75 and to seek direct
review by the Board pursuant to 45
C.F.R. Part 16. See July 30, 1997
letter from Berger to
Settle. Part 75 was deleted effective August 18,
1997.
62 Fed. Reg. 38217 (July 17,
1997).
2. NYSDSS was
the state agency responsible for
administering the title XIX program until
April 1, 1996.
The most recent summary decision is DAB No. 1601
(1996).
3. OMB
Circular A-87 was issued by OMB for use
by federal agencies. The
Circular's cost principles for
state and local governments were adopted by
HHS as part
of its general grant regulations. 38 Fed. Reg. 26274
(September 19, 1973); 45 Fed. Reg 34272 (May 22, 1980)
(45 C.F.R. §
74.171) (adopting revisions to the
Circular). Currently, 45 C.F.R. §
74.27 makes the
Circular's cost principles applicable to state and local
governments. The Board noted in DAB No. 1590 that the
Board is
bound by all applicable regulations (45 C.F.R.
§ 16.14).
(..continued)