GAB Decision 128
October 31, 1980
Alabama Department of Pensions and Security;
Coster, Clarence; Settle, Norval Przybylinski, Donald
Docket No. 80-59-AL-HD
The Alabama Department of Pensions and Security (State) requested
reconsideration of the decision of the Office of Human Development
Services (Agency) disallowing Federal financial participation (FFP) in
certain training costs for personnel employed by the State to provide
services under Title XX of the Social Security Act (Act).
Background
Title XX of the Act provides at Section 2002(a)(1) that the states
shall be entitled to FFP for services provided to achieve the goals
enumerated in the enabling legislation. Services for which
reimbursement is available include expenditures for personnel training
and retraining. Section 2002(a)(2) of the Act further provides that no
payment may be made for expenditures, other than personnel training or
retraining, which exceed a state's pro rata share of the appropriations
authorized for Title XX expenditures during the fiscal year. Thus, the
question of whether an expenditure is an allowable training cost may
have a significant effect on the FFP available to a state.
The regulations governing expenditures for training and retraining,
45 CFR 22, Subpart H, were amended on January 31, 1977 (42 FR 5848).
The amendment resulted in changes in the organization and terminology of
45 CFR 228.84 -- "Activities and costs matchable as training
expenditures." The earlier version of the section had been published on
June 27, 1975 (40 FR 27354) and, as pertinent to this case, read as
follows:
Costs matchable as training expenditures include:
(c) Payment of travel, per diem and educational expenses of employees
while they are attending training programs for less than eight
consecutive work weeks;
(d) Payment of educational expenses (tuition, books, supplies) for
employees on part-time educational leave (part of the working week,
evenings, mornings).
As pertinent, the regulations were amended in 1977 as follows:
Costs matchable as training expenditures include:
(a) State agency employees.
(2) For State agency employees in full-time training programs of less
than eight consecutive work weeks: per diem, travel and educational
costs;
(3) For state agency employees in part-time training programs (part
of work week, evenings, mornings): Education costs.
The Agency, in disallowing the amounts in dispute, relied upon 45 CFR
228.84(a)(3) (1977). The Agency found that the disallowed training
costs represented expenditures for travel and per diem for employees
attending training sessions of less than five full days. Inasmuch as
the training programs lasted only "part of (a) work week" (45 CFR
228.84(a)(3)), the Agency determined that the regulations did not allow
reimbursement for such costs.
The disallowance was based on an audit (Audit Control No. 04-00563)
conducted in May and June 1979. The audit covered the period from
October 1, 1975 through March 31, 1979, but the auditors did not
identify training expenditures for fiscal years 1976 and 1977 because
the State had not exceeded its allotment of Title XX funds for those
periods and could have properly claimed the training expenditures as
administrative expenses at the same rate of FFP.
The Agency disallowed the following training costs:
10/1/77-9/30/78 $50,205 10/1/78-3/31/79
8,400 4/1/79-6/30/79 8,918 7/1/79-9/30/79
9,451
The State, although it still believed the disallowances were
unjustified, agreed to charge the $8,400 claimed for the period from
October 1, 1978 through March 31, 1979 as administrative expenses. The
State also agreed, under protest, to discontinue the practice of
claiming as training costs travel and per diem for training programs
which did not last a five full days. The State contests the remaining
disallowance on several grounds, discussed separately below.
The Board has considered the general issues raised by the instant
request for reconsideration in a prior case, Montana Department of
Social and Rehabilitation Services, Decision No. 119, September 30,
1980. Portions of Decision No. 119 have been incorporated, as
appropriate, within this decision to the extent that the facts and
circumstances compel the same conclusions.
Issues
I. The Audit
The State has questioned the validity of the audit inasmuch as the
auditors failed to cite the regulations in effect during a portion of
the audit period. The audit report only refers to the 1977 amendment of
45 CFR 228.84 although the period reviewed included a portion of 1975
and 1976. The State argued that the "Standards for Audit of
Governmental Organizations, Programs, Activities and Functions," (U.S.
General Accounting Office, 1972), requires that the applicable laws and
regulations be applied in reviewing accounts, and the auditors' failure
to recognize the existence of an earlier version of the pertinent
regulations raises a question whether the audit was made in compliance
with the Standards.
The Board rejects this argument. The primary purpose of an audit is
to verify or establish certain facts. The audit report itself has no
binding legal effect. It is an evidentiary item subject to
interpretation and review by deciding officials at various stages of
Agency review. The Board also notes that the Agency did not disallow
FFP for any period prior to October 1, 1977. Insofar as the audit is
concerned, the earlier version of 45 CFR 228.84 was not material.
II. Amendment of the Regulations
The State has argued that 45 CFR 228, Subpart H, as amended on
January 31, 1977 (42 FR 5848), was improperly promulgated. The State
alleged that the amendment of 45 CFR 228.84 represented a change in
Agency policy regarding reimbursement for training costs, but the
preamble and the summary of changes failed to note or describe the
changes. According to the State, this did not satisfy the requirements
of 5 USC 553(b)(3) which requires that the notice of proposed
rule-making include, "either the terms or substance of the proposed rule
or a description of the subjects and issues involved." The State cities
Florida v. Mathews, 422 F. Supp. 1231 (D.D.C. 1976), to support its
contention that, ". . . the new 'part-time training' regulation should
be declared null and void. . . ." (Rejoinder to "Memorandum in Support
of Respondent's Disallowance," dated September 8, 1980).
The Board does not find it necessary to rule on this question in view
of its other findings and conclusions. However, even if the State was
correct in its assertion that the change in terminology signaled a
change in official Agency policy, this should have been sufficient to
alert the State that the former Agency practice might no longer be
applicable. The State cannot have it both ways. It cannot claim good
faith observance of Agency requirements if the amendment of 45 CFR
228.84 raised significant questions whether former Agency practices
still applied.
II. Interpretation of the Rregulations
The State argued that the costs in question were allowable under
Section 228.84(c) of the 1975 regulations and that publication of the
amended regulations in 1977 constituted a substantive change in the
Agency's policy. It argued in particular that the part-time activities
were characterized as "part-time training programs" in the 1977
regulations and as "part-time educational leave" in the 1975
regulations. It stated that such activities involved two different
concepts and argued that the State's interpretation of the regulations
were reasonable in view of the lack of notice of the change in policy.
The Agency stated that its rules governing reimbursement of state
training activities have not changed since the inception of the program.
The Agency asserted that the duration of the training program has always
been determinative of the extent to which FFP was allowable for training
costs. According to the Agency, the criteria are and have been that if
the training lasted at least five full days but less than eight
consecutive weeks, the State may claim for travel and per diem as well
as education costs. The Agency denied that it ever drew a distinction
between "part-time training programs" and "part-time educational
leave."
It stated that the regulations were amended in 1977 in order to clarify
the Agency's existing policy rather than to establish new policy (see
Declaration of Pauline Godwin dated July 29, 1980).
The evidence of record shows that the Agency articulated its policy
with respect to reimbursable training costs in an official response to a
policy interpretation question (PIQ). The response was issued on
September 14, 1977 and was designated PIQ 77-88. Apparently, all of the
Agency's regional offices receive copies of PIQs, but the regional
offices do not necessarily transmit them to the states. The Agency
characterized the PIOs as a means of providing uniform guidance to
regional offices by furnishing interpretation and clarification of the
existing law and regulations.
An Agency's interpretation of a statute or the regulations
promulgated to implement a program the Agency is charged with
administering is entitled to great deference. Udall v. Tallman, 380 U.
S. 1, 17 (1965). In this case, the Board notes that the statutory
language which exempts training costs from the ceiling imposed on a
state's expenditures for services under Title XX of the Act is extremely
broad and requires further definition. In everyday usage, the concept
of "training" includes activities ranging from informal on-the-job
instruction given by a supervisor to intense classroom instruction given
at an institution for higher education. The Agency must make
distinctions as to those activities which properly constitute "personnel
training or retraining directly related to the provision of (Title XX)
services." In this respect, the Board takes notice of the fact that the
Agency, through its day-to-day dealings with the states and its
evaluations of state program operations, is in a position to determine
which activities constitute effective training. The regulations and the
Agency's published policy statements represent a valid definition of
those training costs eligible for Federal sharing.
IV. Effective Date of the Policy Set Forth in PIQ 77-88
The Agency, through the declaration of its Director of the Division
of Training and Education, alleged that it has always been Agency policy
to disallow travel and per diem costs if the training activity lasted
less than one week. The Board finds, however, that even if this was the
policy of the Division of Training and Education, it was not the
practice of at least some of the Agency's field components. The Board
had requested the Agency to provide information in conjunction with an
appeal by the State of Oregon (Docket No. 80-76-OR-HD). In answer to a
question regarding the working definition of "part-time educational
leave", the Agency replied that such leave was considered to be leave
which lasted for less than one full day. Also, the Agency stated that
Region X, Administration for Public Services (APS), defined "training
programs for less than eight consecutive work weeks" as programs which
lasted at least one full day but less than eight consecutive work weeks.
The Agency acknowledged that Region X did permit FFP in travel costs and
per diem if the training program lasted at least one full day (Agency's
response dated August 7, 1980 to Board's request in Docket No.
80-76-OR-HD).
In addition, the Board notes that on June 20, 1977, the Director,
APS, Region IV, requested the Acting Commissioner, APS, to provide
written confirmation of the definition of part-time and short term
training (PIQ 77-88). In his submittal, the Director, APS, Region IV,
asserted that, "(states) in Region IV as well as in other Regions were
led (by Regional Office) to give the interpretation to the phrase 'less
than eight consecutive work weeks' to accommodate any duration of
in-service training programs where employees were engaged strictly in
training and not in provision of services with FFP for travel, per diem
and educational expenses." The Director, APS, Region IV, further
commented with respect to the amended regulations and their effect on
allowable FFP that "the practice had in fact been established with
differentiated part-time educational leave activities from in-service
training." Also, the Regional Program Director, APS, Region VII,
addressed on November 10, 1977 additional questions regarding part-time
training to the Acting Commissioner. His comments included the
observation that the amended regulations appeared to omit "educational
leave," which he distinguished from part-time in-service training. The
tenor of the Program Director's presentation was the Region VII allowed
FFP for travel and per diem costs even though the training was less than
one full week in duration. A submittal from the Regional Program
Director, APS, Region V, dated December 5, 1977, also affirmed that such
training costs were customarily paid.
Based on the foregoing, the Board finds that even though the Agency's
central office may have always had a policy which precluded Federal
sharing in travel and per diem costs for training sessions lasting less
than one full week, the Agency's field components followed a different
practice. The Agency itself apparently realized this fact because on
August 23, 1979, the Commissioner, APS, issued Information Memorandum
HDS-IM-79-10(APS), which transmitted a complete set of PIQs to the state
agencies administering social service programs under Title XX of the
Act. The Commissioner stated:
Since these interpretations have not been available on a routine or
uniform basis, states will not be held accountable for administering
their programs in accorandance with PIQs issued up to and including
September 1, 1979 until receipt of them, unless they have previously
been given actual knowledge of the contents.
Accordingly, the Board finds that it was Agency policy not to hold a
state accountable for the policy interpretation contained in PIQ 77-88
until such time as the State received actual notice of the
interpretation.
V. Notice to the State
Actual knowledge of the policy interpretation would have been
sufficient to bind the State to the terms thereof. Whelan v. Brinegar,
538 F. 2d 927 (2d Cir. 1976); United States v. Aarons, 310 F. 2d 341
(2d Cir. 1962); Kessler v. FTC, 326 F. 2d 673 (D.C. Cir. 1963). The
Board had asked the Agency specific questions in a request dated June
17, 1980, in an attempt to elicit evidence as to the date the State was
put on notice of the Agency's policy. In reply to the Board's request,
the Agency merely stated, ". . . the State was given reasonable notice
of the regulation's requirements upon promulgation of the Title XX
regulations" (Memorandum in Support of Respondent's Disallowance, dated
August 18, 1980). However, since in the context discussed in this
decision, the State might reasonably have questioned what was meant by
"part-time training," this conclusory statement is not useful.
The record is not specific with respect to the date the Agency
informed the State that it was Agency policy that a training program
must last five full days if travel and per diem costs were to be
eligible for FFP. The report on the audit conducted by the HEW Audit
Agency, however, indicates that State officials were aware of PIQ 77-88
at the time of the audit in May and June of 1979. (Audit Control No.
04-00563, p. 4.) The State in its comments on the audit report did not
deny that this was the case, and has presented no contrary evidence.
Accordingly, the Board finds that the State had actual knowledge of the
Agency's policy as of that time and was bound by the terms thereof
beginning July 1979.
Conclusion
The Board holds that the Agency's disallowance of FFP in training
costs incurred during the period from October 1, 1977 through June 30,
1979 is reversed. The Agency's disallowance of FFP in training costs
incurred during the period from July 1, 1979 through September 30, 1979
is sustained.
OCTOBER 04, 1983