Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York State Department of Social Services
DATE: January 9, 1995
Docket No. A-95-23
Decision No. 1506
DECISION
The New York State Department of Social Services (NYSDSS) appealed a
determination of the Division of Cost Allocation (DCA) disallowing
$532,784 for fiscal year ending March 31, 1994 and $53,907 for the prior
year (in addition to amounts previously disallowed for that time period)
for federal financial participation (FFP) in costs relating to the lease
of the Ten Eyck building in Albany, New York. The amount disallowed
represented the difference in FFP between lease costs claimed by NYSDSS
and a use allowance to which DCA determined NYSDSS was entitled for the
space costs.
NYSDSS argued that it was entitled to the larger amount (including
amounts attributable to interest costs) on several grounds. NYSDSS
summarized its arguments as follows:
Interest is allowable as a cost of space under the existing
lease/purchase agreement. The Department's claim is allowable
pursuant to [Office of Management and Budget Circular] A-87
attachment B, C.2.a. The first occupancy date of October 1, 1980
established in that provision is unreasonable and should not bar
reimbursement. The distinction in OMB Cir. A-87 between public and
private landlords for lease/purchase contracts is unreasonable and
rent paid to a public landlord should be subject to FFP in the same
manner and extent as rent paid to a private landlord. The
reimbursement paid to the State should be subject to the same rules
governing payments made by federal agencies to their contractors.
Federal agencies regularly pay their contractors interest under a
variety of contracts. Finally, Congress through the Tax Reform Act
of 1986, encouraged states to borrow money to meet their costs of
operation and thus this federal legislation creates an exception to
OMB Cir. A-87, Attachment B, D.7.
Notice of Appeal at 2. NYSDSS noted that this appeal is "substantially
similar" to the issues decided in New York State Dept. of Social
Services, DAB No. 1336 (1992), and indicated that NYSDSS would not
object to a summary decision based on the record in DAB No. 1336. Id.
Summary decisions for other time periods based on substantially similar
facts were issued in New York State Dept. of Social Services, DAB No.
1377 (1993) and New York State Dept. of Social Services, DAB No. 1445
(1993).
The decision in DAB No. 1336 addressed each of the arguments raised by
NYSDSS and found that none of them had merit. Rather, we concluded that
interest costs for the Ten Eyck building were unallowable under the
plain terms of OMB Circular A-87 and that only a use allowance was
permissible for the costs of space in that building.
In acknowledging the appeal here, the Presiding Board Member proposed to
issue a summary decision. DCA was directed to notify the Board within
15 days of its receipt of the acknowledgment whether or not it objected
to that procedure. Counsel for DCA indicated by telephone on January 4,
1995 that DCA had no objection to the issuance of a summary decision.
Therefore, we sustain the disallowance of $586,691 based on DAB No.
1336, which we incorporate by reference.
___________________________ Donald F.
Garrett
___________________________ Norval D. (John)
Settle
___________________________ Judith A.
Ballard Presiding Board Member