DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: South Carolina Health DATE: September 11, 1989 and
Human Services Finance Commission Docket No. 89-13 Audit
Control No. A-04-88-05005 Decision No. 1097
DECISION
The South Carolina Health and Human Services Finance Commission (State)
appealed a determination by the Office of Human Development Services
disallowing $850,696 claimed under title XX of the Social Security Act
(Act) based on an audit for the year ended June 30, 1985. OHDS found
that the State had failed to comply with section 2002(c) of the Act,
which requires that states expend title XX funds by the end of the
fiscal year following the fiscal year in which they are allotted. The
State argued that section 2002(c) did not apply since the amount in
question was authorized by legislation other than title XX, and that in
any event a portion of the disallowed costs expended after the time
limit for an audit was allowable.
For the reasons discussed below, we conclude that section 2002(c)
applied here, and that there is no exception for audit expenditures.
Since there is no dispute that the amount in question was not expended
within the time specified in that section, we sustain the disallowance
in full.
Background
The Omnibus Budget Reconciliation Act of 1981, Pub. L. 97-35,
established a new title XX grant program--known as the social services
block grant (SSBG) program--which consolidated federal assistance to
states for social services into a single grant. Section 2002(c) of the
new title XX provided that "[p]ayments to a State from its allotment for
any fiscal year must be expended by the State in such fiscal year or in
the succeeding fiscal year." Section 2003(c) authorized the
appropriation of funds for fiscal years beginning with fiscal year 1982.
On March 24, 1983, Congress enacted Public Law 98-8, the Emergency Jobs
Appropriations Act ("Jobs Bill"), to deal with an economic recession
which had resulted in high unemployment. Title I of Pub. L. 98-8
included the following provision:
INCREASING DAY CARE AND SOCIAL SERVICES
(SOCIAL SERVICES BLOCK GRANTS)
To expand the availability of day care and other social
services to unemployed and disadvantaged Americans, which also
shall include Expanded Food and Nutrition Education (Nutrition
Aides), an additional $225,000,000 for "Social Services Block
Grants", Department of Health and Human Services, for carrying
out title XX of the Social Security Act. . . .
Section 101(c) of Pub. L. 98-8 provided that--
It is the intent of the Congress that funds appropriated
or otherwise made available under this title be
obligated and disbursed as rapidly as possible so as to
quickly assist the unemployed and the needy as well as
minimize future year budgetary outlays.
The last paragraph of Pub. L. 98-8, an unnumbered section, provided in
pertinent part as follows:
AVAILABILITY OF FUNDS
No part of any appropriation contained in this Act shall
remain available for obligation beyond the current
fiscal year unless expressly so provided herein.
On April 22, 1983, OHDS published a notice in the Federal Register
announcing the amount of Jobs Bill funds allotted to each state for the
SSBG program. The notice, captioned "Notice of Allocation of Additional
Title XX--Social Services Block Grant Allotments for Fiscal Year 1983
pursuant to Public Law 98-8," also included information about the
issuance of grants and the applicability of title XX provisions for
audits and transfer of funds, and stated in addition:
There are no specific time limits in Pub. L. 98-8 which
govern the obligations of funds. The statute and
supporting report, however, make it clear that these
funds are to be obligated as rapidly as possible so as
to quickly assist the unemployed and the needy as well
as minimize future year budgetary outlays.
The Parties' Arguments
OHDS took the position that since Pub. L. 98-8 appropriated funds for
carrying out the title XX SSBG program, the time limit in section
2002(c) of title XX for the expenditure of SSBG funds applied. The
State did not dispute that, if section 2002(c) were applicable, the
disallowance would be proper. However, it argued that since no time
limit for the expenditure of the funds was specified in Pub. L. 98-8,
none should be implied. It asserted that "where Congress intended the
money to be spent by a specific time, the Act specifically says so,"
noting that Pub. L. 98-8 also contained appropriations for other
purposes which included specific time limits. State's brief dated
5/1/89, p. 3. The State also asserted that OHDS had advised the states
in the notice of allocation published in the Federal Register that there
was no specific time limit in Pub. L. 98-8 which applied to the SSBG
funds. In addition, the State argued that, notwithstanding any time
limit, it was entitled to set aside a portion of the funds in question
to be expended later for an audit of the State's expenditures.
Discussion
We find that section 2002(c) clearly applied to the funds in question.
This provision was included in the legislation which authorized the SSBG
program. Pub. L. 98-8 did not purport to change the SSBG program as
authorized by Pub. L. 97-35, but merely appropriated additional funds
for that program for fiscal year 1983. There is no reason why the
appropriation of additional funds should excuse the State from complying
with all requirements of the SSBG program, including the time limit in
section 2002(c).
This view is consistent with the long-standing position of the
Comptroller General of the United States that a supplemental
appropriation "is subject to the purpose and time limitations, plus any
other applicable restrictions, of the appropriation being supplemented."
Principles of Federal Appropriations Law, Office of the General Counsel,
General Accounting Office (First Ed. 1982), p. 5-105, citing 27 Comp.
Gen. 96 (1947); 25 Comp. Gen. 601 (1946); 20 Comp. Gen. 769 (1941) and 4
Comp. Dec. 61 (1897). The legislative history of Pub. L. 98-8
specifically refers to the provision in question as a supplemental
appropriation. S. REP. NO. 17, 98th Cong., 1st Sess. 31 (1983). There
is no dispute that the appropriation being supplemented was subject to
the time limit in section 2002(c).
The State based its argument that Pub. L. 98-8 should be read as
imposing no time limit on the expenditure of the SSBG funds on the fact
that the statute set specific time limits with respect to other funds.
There are in fact a variety of time limits specified in Pub. L. 98-8.
However, it does not follow from the absence of any specific time limit
in Pub. L. 98-8 for the expenditure of SSBG funds that section 2002(c)
does not apply pursuant to the normal rule that supplemental
appropriations are subject to requirements in the original legislation.
The State argued, however, that OHDS itself had interpreted Pub. L. 98-8
as not imposing any time limit with respect to the SSBG funds. The
State cited in support of its argument the notice of allocation of Jobs
Bill funds published by OHDS in the Federal Register, which stated that
"[t]here are no specific time limits in Pub. L. 98-8 which govern the
obligations [sic] of funds." This is not a statement that there is no
time limit at all for a state's expenditure of SSBG funds appropriated
by Pub. L. 98-8. Regardless of whether OHDS intended to refer to the
obligation of the funds by a state, or by the federal government, the
notice leaves open whether there is a time limit in Pub. L. 98-8 or
elsewhere for the expenditure of the funds. Thus, there is no basis for
finding that OHDS's determination that the State violated section
2002(c) represented a change in OHDS's interpretation of the applicable
law.
The State also asserted that, even if section 2002(c) applied, $338,208
of the amount in question was properly expended for an audit of the SSBG
program after the expiration of the time period specified in that
section. The State asserted that "[i]t is axiomatic that audits are
often conducted after expenditures occur." State's brief dated 5/1/89,
p. 6. As OHDS pointed out, however, the State could have paid for the
audit with title XX funds allotted for the year when money was actually
expended for the audit. Moreover, there is nothing in the language of
section 2002(c) which suggests that any particular types of expenditures
are excepted from the time limit. Accordingly, we do not find any basis
for reversing the disallowance to this extent. (In view of this
conclusion, we need not address OHDS's contention that the use of Jobs
Bill funds to audit the expenditure of funds awarded under the original
SSBG appropriation violated the requirement in Pub L. 98-8 that Jobs
Bill funds be used in addition to and not in lieu of existing funds.)
The State also argued in the alternative that the provision in Pub. L.
98-8 requiring the obligation of funds within the current fiscal year
unless otherwise specified applied here, and that the disallowance
should be reduced since most of the funds in question were effectively
obligated by the State within that time limit. OHDS argued that if this
general time limit applied, the amount of the disallowance should be
increased since the State "would have been required to expend its Jobs
Bill appropriations within fiscal year 1983," instead of having until
the end of fiscal year 1984. OHDS brief dated 6/26/89, p. 7. We find
that both parties have misconstrued this provision, however.
In the context of an appropriations act, the term "obligation" means
"some action that creates a liability or definite commitment on the part
of the [federal] Government to make a disbursement at some later time."
Principles of Federal Appropriations Law, supra, p. 6-4. The general
time limit for the obligation of funds in Pub. L. 98-8 therefore refers
to the commitment of funds by the federal government, while section
2002(c) refers to expenditures by a state. Thus, OHDS was required to
obligate the funds by the end of fiscal year 1983 and the State was
required to spend the funds by the end of fiscal year 1984.
Accordingly, there is no basis here for either reducing or increasing
the amount of the disallowance.
Conclusion
For the foregoing reasons, we conclude that the disallowance in the
amount of $850,696 should be sustained.
Cecilia Sparks Ford
Norval D. (John) Settle
Alexander G. Teitz Presiding Board