Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York State Department
DATE: May 17, 1990
of Social Services Docket No. 90-32
Decision No. 1158
DECISION
The New York State Department of Social Services (New York/State)
appealed a determination by the Office of Child Support Enforcement
(OCSE/Agency) which rejected the State's cost calculations pursuant to a
remand provision in New York State Dept. of Social Services, DAB No.
1087 (1989).
As discussed below, we uphold OCSE's determination to reject the State's
proposed cost calculations.
Summary of DAB No. 1087
In DAB No. 1087, the State appealed a determination by OCSE 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). Prior to 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, 1/ to provide FFP for certain court costs. 2/
The regulations implementing section 455 of the Act were found at 45
C.F.R. Part 304. 3/ Both the statute and the regulation refer to the
use of 1978 calendar year costs as the base year costs necessary to
calculate any claim for FFP.
In upholding the disallowance, the Board found that OCSE reasonably
determined that the State did not properly calculate its calendar 1978
year base costs according to the applicable statutory and regulatory
authorities and that this determination was a sufficient basis for the
disallowance. Further, the Board found that, although the law required
the use of calendar year 1978 data, New York wanted the Agency to accept
the data from a 1979 quarter to partially meet the requirement for 1978.
In any event, the Board concluded that 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. Still, the Board
reasoned that the State should be given the opportunity to submit
appropriate evidence of its reconstructed costs to the Agency. Further,
the Board provided that, if New York submitted such evidence and
ultimately disagreed with the Agency on this issue, the State could
return to the Board. Thus, after the Agency's rejection of New York's
cost calculations, the State instituted this appeal.
The proposed cost calculation
Pursuant to the Board's provision in DAB No. 1087, the State, by letter
dated October 24, 1989, submitted to the Agency its proposal. In part,
New York stated:
We have asked the Office of Court Administration (OCA) to research
the payroll/expenditure records and determine the 1978 calendar
year costs. Unfortunately, eleven years after its creation much of
the required documentation (e.g. payroll summaries, expenditure
reports) is no longer available. We were, however, able to
determine that the total costs for all family courts excluding New
York City for SFY [State Fiscal Year] 1977-78 (April 1, 1977 -
March 31, 1978) and SFY 1978-79 (April 1, 1978 - March 31, 1979)
were $11,190,561 and $13,021,076 respectively. There is no similar
data available for New York City. Based on this information we
offer the following as a resolution to the newly eligible [costs
pursuant to the section 404] claim.
Since the Family Court costs increased by 16.4% (13,021,076 divided
by 11,190,561) from SFY 1977 to SFY 1978, and since we only used
one quarter of SFY 1977 in our calculation (when the costs would
presumably have been lower than in 1978) we are proposing to
increase our base year costs by 4.1% (16.4% divided by 4) and
recalculate the costs based on this new adjusted figure. This is,
to our thinking, the fairest method to reconstruct these costs.
The Agency rejected the State's proposal finding that, since New York
City comprised "between 6% and 32%" of the Statewide IV-D "newly
eligible" court cost quarterly claims in the eligible period (July 1,
1980-September 30, 1983), conclusions based on court cost data excluding
New York City could not be used to justify those claims. The Agency
also questioned the State's "discrepant account of the methodology."
4/
Agency's December 28, 1989 letter.
Analysis
Despite the uncontested fact that the State did not have expenditure
records for New York City, which comprised between 6% and 32% of its
claimed costs, the State argued that the Agency's decision to reject the
reconstructed data is unreasonable, arbitrary and capricious. State's
notice of appeal, p. 1. In a telephone conference held in this case, on
March 6, 1990, the State attempted to draw an analogy between its number
of cases and its costs to support its position. The State argued that
since the level of effort and the activity, i.e., the number of
locations, the number of paternities established and the number of
support obligations established, during the period at issue was fairly
constant for the last three quarters of 1978 and the first quarter of
1979, it could somehow be used to estimate costs for that period.
We reject the State's position, and find that it is unsupported by the
facts in this case. First, the State's position is undercut by the
plain language of the statute and regulation which provided for calendar
year 1978 costs to be used as the basis for any calculation. As noted in
DAB No. 1087, the Agency had no reason to go beyond the plain language
of the statute. New York State Dept. of Social Services, DAB No. 1087
(1989), at p. 6. Further, as noted above, New York City records, 6% to a
possible 32% of the State's entire claim, are not available. Since the
purpose of the statute was to reimburse states for additional expenses
that they incurred for enforcement over and above what they spent in the
base year, in this case the 1978 calendar year, New York's lack of a
very significant portion of its base year costs renders this calculation
meaningless. We therefore conclude that the Agency was reasonable in
determining that a calculation by the State that does not include New
York City is unacceptable.
In addition, we reject the State's attempt to substantiate its
calculations by arguing that somehow it could use its level of effort
and the activity during that period, i.e., the number of paternities and
support obligations established, to estimate costs. There is no factor
to connect this type of numerical case count with the 1978 calendar year
expenditures. Indeed, by the State's own admission, the correlation
between its numerical statistics and its costs is not a direct one. In
the telephone conference in this case, a State representative stated in
regard to the statistics:
The statistics that I just gave you are from the Office of Child
Support Enforcement that we have to submit quarterly. They do not
relate directly to the OCA expenditures for that particular period.
Transcript, Board's telephone conference, p. 12. While the Agency
itself recognized the need for alternate methods for reconstructing
expenditures, the State has not presented the Agency with an acceptable
reconstruction method. The Agency is entitled to demand more definitive
evidence to establish 1978 costs. Conclusion
In light of the foregoing, we uphold the Agency's decision to reject the
State's proposed cost calculations. Thus, we unconditionally affirm the
Agency's determination in DAB No. 1087.
____________________________ Judith A.
Ballard
____________________________ Donald F.
Garrett
____________________________ Norval D.
(John) Settle Presiding Board Member
1. Section 404 was subsequently repealed effective September 30, 1983,
by Public Law 97-248, the Tax Equity and Fiscal Responsibility Act of
1982. (Section 455 of the Act was replaced with other provisions not
relevant here.)
2. 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.
3. 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.
4. The Agency questioned the State's methodology because New York, in
its October 24, 1989 letter to the Agency, stated that costs used to
calculate the calendar year 1978 base costs were derived by using costs
from the State's 1977-78 and 1978-79 fiscal years. However, in DAB No.
1087, the State argued that it could use 1978-79 costs, and 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. In a telephone conference held by the Board, the State
explained that the costs were calculated twice. The State maintained
that, based on federal concerns that its method was not adequate, it
changed to using the 1978 and 1979 fiscal year costs.
In any event, we find that, without New York City costs, neither of the
calculation methods asserted by the State are adequate. Therefore, we
do not discuss this further in the