SUBJECT: Illinois Department of Children
and Family Services

FINAL DECISION ON REVIEW OF

ADMINISTRATIVE LAW JUDGE DECISION

The Illinois Department of Children and Family Services (Illinois) appealed three determinations of the Administration for Children and Families (ACF) disallowing costs claimed by Illinois for foster care training at the enhanced federal financial participation (FFP) rate of 75% under title IV-E of the Social Security Act (Act). For the reasons discussed later in this decision, we uphold in full the disallowances in all three appeals.

We note at the outset that the Board decided many of the issues raised here in prior decisions involving Illinois, including a decision upholding the disapproval of Illinois' proposed cost allocation plan. The disallowances in question here in general implement the Board's earlier decisions. While Illinois is entitled to appeal, to the extent that it seeks to re-open issues resolved by the prior decisions, these appeals are merely an artifice to delay federal recovery of costs which are clearly unallowable under those decisions.⁽¹⁾ Because of the significance here of the Board's earlier decisions, we first discuss the background of these appeals, including their relationship to the prior decisions. We then proceed to discuss our conclusion that, with one exception, the issues raised by these appeals were fully resolved in ACF's favor by the prior decisions, are moot in light of those decisions, or need not be resolved for other reasons. Finally, we discuss our rationale for upholding the disallowance with respect to the one new issue before us.

Background

The disallowed costs are related to a proposed cost allocation plan (CAP) first submitted by Illinois to the Department of Health and Human Services Division of Cost Allocation (DCA) on January 24, 1989 and resubmitted with amendments on May 12, 1992. The proposed CAP was disapproved by DCA on December 21, 1992 on the ground that it did not provide for the allocation of training costs to programs that benefitted from the costs in addition to title IV-E. DCA's disapproval of the proposed CAP was upheld by a hearing officer pursuant to reconsideration procedures in 45 C.F.R. Part 75, and then by the Board in DAB No. 1530 (1995). ACF subsequently disallowed the portion of Illinois' title IV-E claims for costs incurred during the period April 1, 1989 through June 30, 1995 that ACF found was attributable to programs other than IV-E.⁽²⁾ Some of the costs included in this disallowance had previously been disallowed by ACF. As explained below, however, the disallowance amounts had not been finally determined.

DAB No. 1530 itself upheld in principle the disallowance of costs claimed for the quarter ended September 30, 1994 and remanded the appeal to ACF to recalculate the disallowance consistent with that decision. Docket No. A-96-131 is Illinois' appeal of the recalculated disallowance for that quarter as well as of new disallowances for other quarters.

Prior to DCA's disapproval of the proposed CAP, ACF had also disallowed claims that were arguably based on the proposed CAP. In DAB Nos. 1422 (1993) and 1463 (1994), the Board had remanded Illinois' appeals of these disallowances to ACF to determine whether the claims were in fact based on the proposed CAP. The Board determined that, if that were the case, the disallowances were premature since, under 45 C.F.R. � 95.517, Illinois could properly claim FFP based on the proposed CAP (which had not been disapproved at the time the claims were made) in the absence of any contrary advice from DCA. Docket No. A-95-73 is Illinois' appeal of ACF's finding on remand that the claims were not based on the proposed CAP and that costs attributable to programs other than IV-E were properly disallowed.⁽³⁾

In all three of the decisions referred to above, the Board also upheld in principle the disallowance of state agency indirect costs claimed by Illinois at the 75% rate of FFP applicable to IV-E training costs. The Board found that 75% FFP was not available for indirect costs that are based on rates developed using cost pools containing costs that are not among those listed in 45 C.F.R. � 235.64 as training costs.⁽⁴⁾ The Board concluded that FFP should instead be charged at the 50% rate applicable to other administrative costs. ACF relied on this holding in subsequently disallowing expenditures charged at the 75% rate for both state agency indirect costs and indirect costs paid by the state agency under cost reimbursement training contracts with state universities. This disallowance was appealed in Docket No. A-96-190.⁽⁵⁾

As indicated above, some of the costs appealed here (in Docket No. A-96-131) were not previously disallowed and the subject of prior Board decisions. However, we conclude that, with one exception, the issues raised by these appeals were fully resolved in ACF's favor by the prior decisions, are moot in light of those decisions, or need not be resolved for other reasons. Moreover, to the extent that the same costs at issue in DAB Nos. 1422, 1463 and 1530 were disallowed here, another basis for upholding the disallowances is that the appeals are untimely requests for reconsideration (except with respect to the threshold issue of whether disallowances taken prior to disapproval of the proposed CAP were premature).⁽⁶⁾ The one new issue addressed in this decision is whether indirect costs paid under the training contracts with the state universities are properly chargeable at the 75% training rate. We conclude that the rationale in the prior decisions also applies and supports a disallowance in this situation.

Accordingly, we uphold in full the disallowances at issue in all three appeals.⁽⁷⁾

Discussion

DAB No. 1530 fully resolved the issue of whether ACF could lawfully disallow costs as not properly allocated to title IV-E for periods prior to the issuance of that decision.

Illinois contended that ACF could not lawfully disallow costs as not properly allocated to title IV-E for periods prior to the issuance of DAB No. 1530 (or at least prior to DCA's disapproval of the proposed CAP on December 21, 1992). According to Illinois, the methodology in its proposed CAP was approvable, and it was therefore entitled under 45 C.F.R. � 95.517 to be reimbursed for training costs claimed based on that methodology until the CAP was finally (or at least initially) disapproved. Illinois contended that this issue was not resolved in DAB No. 1530, which Illinois said decided only that DCA had discretion to disapprove Illinois' proposed CAP, not that the methodology in Illinois' proposed CAP was not approvable.

Illinois is correct that the Board decided in DAB No. 1530 that DCA had discretion to disapprove Illinois' proposed CAP. See DAB No. 1530, at 2. Board precedent cited in DAB No. 1530 states that "an agency has considerable discretion to determine which of a wide range of methodologies would be 'equitable,' including a pro rata distribution as well as assignment of [costs that reasonably could be deemed fully assignable to each one of several programs] exclusively to one of the fully benefitting programs." DAB No. 1530, at 17 (quoting Oklahoma Dept. of Human Services, DAB No. 963 (1988)). However, the Board also observed in DAB No. 1530 that "the title IV-E regulations provide that states may claim costs (including administrative and training costs) only in accordance with an approved CAP. . . ." Id. at 20 (emphasis added). Thus, it is clear from this decision that, even if the methodology in Illinois' proposed CAP was approvable, as Illinois asserted, this would not be sufficient to render the costs claimed based on the proposed CAP allowable absent DCA approval of the proposed CAP. The Board further observed in DAB No. 1530 that "section 474(a)(3) of the Act . . . authorizes federal funding for expenditures found necessary by the Secretary for the proper and efficient administration of the state plan." Id. at 21. The lack of an approved CAP implies that the costs have not been found necessary for the proper and efficient administration of the state plan.⁽⁸⁾

In any event, Illinois' contention that its proposed CAP was approvable is without merit. The applicable regulations require that a proposed CAP "[c]ontain sufficient information in such detail to permit the Director, Division of Cost Allocation, after consulting the operating divisions, to make an informed judgment on the correctness and fairness of the State's procedures for identifying, measuring, and allocating all costs to each of the programs operated by the State agency." 45 C.F.R. � 95.507(a)(4). Here, the proposed CAP in essence provided for ad hoc determinations of how individual training costs should be allocated. See DAB No. 1530, at 10. Thus, even if a methodology that allocated wholly to one program costs that could reasonably be deemed assignable to each of several programs were approvable in concept, Illinois' proposed CAP did not provide sufficient information to assure that this was the methodology Illinois would follow.

Furthermore, the Board determined in DAB No. 1530 that Illinois received notice of DCA's policy to require the use of a pro rata allocation to all benefitting programs "well before the submission of its proposed CAP . . . ." DAB No. 1530, at 18. Thus, Illinois knew before the costs in question were incurred that DCA did not regard as approvable the methodology on which Illinois allegedly based its claims for these costs. Even if Illinois did not have adequate notice at that juncture and could have properly made claims based on that methodology, Illinois could not reasonably assert that it was entitled to the funds claimed once DCA had disapproved the proposed CAP.⁽⁹⁾

DAB No. 1530 fully resolved the issue of whether ACF's disallowances of costs as not properly allocated to title IV-E are based on invalid legislative rules.

Illinois argued that its title IV-E training costs were primarily direct costs, and that the applicable cost principles in Office of Management and Budget (OMB) Circular A-87 do not require the allocation of direct costs.⁽¹⁰⁾ According to Illinois, ACF issued an invalid legislative rule when it required the allocation of the training costs to all benefitting programs since it modified the Circular without notice and comment rulemaking.

This argument was in effect resolved by the holding in DAB No. 1530 that there is authority in the Circular for requiring the allocation of costs to all programs that benefit from those costs. See DAB No. 1530, at 17-18. Illinois' reading of the Circular's provisions on allocation as applying only to indirect costs reflects a fundamental misunderstanding of the nature of direct and indirect costs.⁽¹¹⁾ Costs are charged indirectly because they cannot be allocated readily through normal accounting methods, and are therefore allocated based on a ratio. Indirect costs are distributed among benefitting cost objectives by applying the indirect cost rate to a direct cost base for that cost objective. Direct costs can sometimes be identified wholly with a particular cost objective (such as title IV-E), but that does not mean that they cannot sometimes be identified with more than one cost objective and allocated using techniques other than an indirect cost rate. The allocation of direct costs among several benefitting cost objectives is required by the Circular's directive to charge costs in accordance with relative benefits. OMB Circular A-87, Att. A, C.2.a. (1981). Thus, the requirement for allocating direct training costs did not modify the provisions of the Circular or conflict with the allocation of indirect costs through a rate mechanism.⁽¹²⁾

Furthermore, ACF's requirement that Illinois use a particular allocation method (eligibility ratios) not required by the statute or regulations to calculate the disallowances does not make the requirement for allocating training costs a legislative rule. A legislative rule consists of binding standards. 1 Kenneth Culp Davis et al., Administrative Law Treatise,

� 6.3 (3rd ed. 1994). ACF's policy announcement specifically indicated, however, that training costs could be allocated based on eligibility ratios or on "some other equitable basis." ACYF-PA-87-05, at 4. ACF required the use of eligibility ratios here only because Illinois did not propose another method of allocating costs which was equitable. See DAB No. 1530, at 23.

Illinois' argument that the adjustments that ACF made in Illinois' claims for training costs are not in accord with DAB No. 1530 is not persuasive.

Illinois argued that ACF's disallowances were not made in accord with the principles in DAB No. 1530 because ACF did not exclude from the disallowed amounts costs that Illinois contended were properly charged wholly to title IV-E (other than costs relating to eligibility determinations, which were excluded). We do not consider Illinois' argument to be persuasive.

Illinois submitted a proposal that identified several activities as directly related only to the administration of the IV-E foster care program in the course of discussions between the parties on the implementation of DAB No. 1530. See Illinois Ex. 42. However, this submission did not represent Illinois' final position in this matter. Ultimately, at ACF's request, Illinois calculated the adjustments that are at issue here, asserting only that the adjustments should be made for a more limited time period (i.e., only for the time period following the issuance of DAB No. 1530 or at least not before the disapproval of the proposed CAP on December 21, 1992). See Illinois Br. dated 8/28/96, at 12. Since Illinois itself made the calculation without any other reservation and does not allege that it made an error in the calculation, Illinois cannot reasonably claim that there needs to be a recalculation to implement DAB No. 1530. (In any event, it appears from Illinois' description of the training activities that they may have addressed "compliance with federal requirements which affect the administration of the title IV-E program as well as other programs," in which case they were not wholly allocable to title IV-E. See DAB No. 1530, at 40.)

The issue of whether certain claims were submitted in accord with a proposed cost allocation plan, and the disallowances were thus premature, is moot.

Illinois appealed ACF's determination on remand from DAB Nos. 1422 and 1463 that the claims had not in fact been based on the proposed CAP and were thus not prematurely disallowed. We conclude that it is unnecessary to reach this issue because it is moot. ACF no longer takes the position that the claims are unallowable because they were not submitted in accord with a proposed CAP, relying instead on the subsequent disapproval of the proposed CAP (upheld in DAB No. 1530) as the basis for disallowing the claims. Thus, there would be no practical effect if the Board were to decide that the claims were not submitted in accord with a proposed CAP unless ACF sought to assess interest on the disallowances beginning on the dates the disallowances were originally taken. However, ACF did not seek any interest on the disallowances as of those dates.

Illinois argued that this issue was not moot because ACF indicated that, if the Board's decision upholding the disapproval of the proposed CAP is reversed on appeal, ACF might argue that the claims were unallowable because they were not submitted in accord with a proposed CAP. However, the possibility that this issue may later be revived is not a reason for the Board to address it now.

The issue of whether ACF may properly disallow indirect costs claimed at 75% FFP for periods prior to the issuance of DAB No. 1422 is no longer before the Board.

Illinois appealed the disallowances of state agency indirect costs and indirect costs paid by the state agency under training contracts with state universities. Illinois disputed the full amount of the disallowances for reasons discussed later; however, it also argued that the Board's holding in DAB No. 1422--that Illinois could not properly charge (at the 75% rate) indirect costs that were based on rates developed using indirect cost pools containing costs that are not training costs under 45 C.F.R. � 235.64--constituted a new rule. Illinois argued that the alleged new rule may not be applied to indirect costs incurred prior to the issuance of the decision (on July 1, 1993). Illinois asserted that ACF did not require other states to make retroactive adjustments for indirect costs claimed at 75% FFP prior to the states' receipt of notice of the Board's decision, and argued that this inconsistent treatment warrants partial reversal of the disallowances in question here.

The Board need not consider this argument since, at the conclusion of the Board proceedings in the appeals now before us, ACF withdrew the disallowances with respect to indirect costs incurred prior to July 1, 1994. ACF letter dated June 26, 1997. (We note in any event that DAB No. 1422 held that section 235.64 on its face limited the types of costs that may be reimbursed as training expenditures at 75% FFP and did not include indirect costs of a type not specified there. Thus, DAB No. 1422 clearly did not purport to enunciate a new rule in this regard.)

The issue of whether indirect costs are chargeable at 75% FFP as part of the total cost of the grant was fully resolved by DAB Nos. 1422, 1463 and 1530.

Illinois argued that the indirect costs it claimed under title IV-E are chargeable at 75% FFP because section 474(a)(3) of the Act provides for reimbursement of 75% of the total cost of IV-E training and OMB Circular A-87 provides that the total cost of a grant program includes its indirect costs. Illinois further argued that 45 C.F.R. � 235.64, which specifies the types of costs that may be claimed as training, can be read to include indirect costs that are associated with the direct costs listed there.

The Board found in DAB No. 1422 that neither section 474(a)(3) of the Act nor the Circular supported Illinois' position since "the regulations limiting the types of costs which may be charged as training take precedence over the general principles set forth in these authorities." DAB No. 1422, at 19.⁽¹³⁾ Moreover, the Board noted that, consistent with OMB Circular A-87, ACF allowed all of the indirect costs as charges to the title IV-E program, although it did not allow them at the enhanced rate sought by Illinois. See id. In addition, the Board found in DAB No. 1530 that a cost is not intrinsically a direct or an indirect cost and may be charged either directly or indirectly, depending on the circumstances. See DAB No. 1530, at 45. Thus, regardless of how they are charged, only costs of the type specified in the regulation are training costs. Illinois presented no evidence to show that the indirect cost pools used to calculate the indirect cost rate were composed solely of the types of costs listed in section 235.64.

Illinois asserted, however, that section 3400 of the Handbook of Public Assistance Administration, issued in 1965 by the Social and Rehabilitation Service (SRS), the agency that then administered the foster care program (then under title IV-A of the Act), provided for FFP at the 75% rate for "'all expenses' of the various training categories." Illinois Supp. Br. at 3.⁽¹⁴⁾ This appears to refer to section 3400.1. of the Handbook, which lists as costs claimable at 75% FFP--

[p]ayment of personal services for staff development personnel, including clerical and other staff, and all other expenses, e.g., travel, per diem, rent, postage, communications, equipment, etc.

Illinois Ex. 50, first page. Section 3400 of the Handbook was codified in 1971. See Illinois Ex. 52. Illinois argued that section 235.64 should be interpreted "in the context provided by . . . the Handbook and the previous regulation." Illinois Supp. Br. at 6. ACF took the position that the Handbook provisions were not relevant since they were published fifteen years before title IV-E was enacted.

While the Board has found Handbook provisions to constitute valid authority in some other situations (see, e.g., North Carolina Dept. of Human Resources, DAB No. 1631 (1997)), the provisions in question here have been superseded and are no longer valid. In 1977, SRS proposed to revise the training policies applicable to title IV-A. The proposed revision provided, inter alia, that FFP at the 75% rate was available for--

[s]alaries (including fringe benefits) travel, per diem for agency State and local staff development personnel, including support staff . . . .

* * * * *

[c]osts of rental of space, postage and purchase and development of necessary teaching materials and equipment such as books, audiovisual aids and technical devices for agency in-service training; . . . .

42 Fed. Reg. 2440, at 2447 (January 11, 1977) (Docket No. A-97-56, New York Ex. 26). This is roughly the same as the disputed language in the current regulations. The preamble to this proposed rule stated that it contained "substantive changes aimed at improving the management and effectiveness of public assistance State and local training programs." Id. at 2445. Specifically, the revision was intended "[t]o clarify the conditions under which State agencies administering or supervising the administration of these programs can receive Federal matching for training expenditures." Id. The preamble further stated that "[g]reater clarity would be achieved by . . . [s]pecific listing of costs and activities matchable as training expenditures and those matchable as administrative expenditures. . . ." Id. The proposed changes were finally adopted by the Social Security Administration, then responsible for administration of title IV-A, in 1980. See Illinois Ex. 53, 45 Fed. Reg. 29831 (May 6, 1980). The preamble to these regulations noted that numerous commenters had "opposed the changes in the Federal reimbursement for expenditures in providing in-service training." Id. at 29832 (emphasis added).

We conclude from the foregoing that the elimination of the phrase "all other expenses" was part of a substantive change intended to limit the types of costs which could be reimbursed as training. Accordingly, if, as Illinois argued, "all other expenses" encompasses all costs of training whether charged directly or indirectly, then the regulation without this phrase cannot reasonably be read as broadly (i.e., costs not specifically listed cannot be charged at the higher rate whether charged directly or indirectly). That there may have been confusion within ACF regarding whether indirect costs are reimbursable at the 75% rate as training costs does not change the meaning of the regulation as illuminated by its history.

The Board's holding regarding state agency indirect costs in DAB Nos. 1422, 1463 and 1530 applies to Illinois' claim for the indirect costs of state universities under contract with Illinois to provide IV-E training.

Illinois took the position that DAB Nos. 1422, 1463 and 1530 are not dispositive as to indirect costs incurred by Illinois under contracts with three state universities to provide IV-E training. The universities billed the indirect costs to the state agency on vouchers that identified "reimbursable" costs. "Review of Title IV-E Training Costs," Office of Inspector General Report A-05-95-00022, February 1996, at 3. The indirect costs at issue in the prior decisions resulted from the application of the state agency's indirect cost rates to personal service costs incurred for training prepared and provided by state agency personnel.

Illinois asserted first that universities receiving federal grant funds are entitled to charge their indirect costs to the grant through an indirect cost rate established for the particular institution.⁽¹⁵⁾ Illinois argued that, under the cost principles for educational institutions (OMB Circular A-21), as long as indirect costs are allowable, they are properly charged to the federal government as part of the cost of the grant.

However, the salient question here is not whether the indirect costs were allowable costs of the IV-E program, but whether Illinois may be reimbursed for these costs at the 75% rate applicable to training costs or at the 50% rate applicable to other administrative costs. Our conclusion that Illinois is entitled only to 50% FFP in the indirect costs does not mean that these costs were not allowable grant costs. Moreover, regardless of the rate at which Illinois was reimbursed, the universities were entitled to reimbursement of their indirect costs by Illinois in accordance with the terms of their contracts.

Similarly, Illinois' position is not advanced by the statement in ACYF-PIQ-82-17 (dated October 14, 1982) that "costs for the contractor to administer the contract and conduct the training" are "allowable FFP costs" and "reimbursable." See Illinois Ex. 54. This statement does not identify the rate of FFP at which the costs are reimbursable.

Illinois also asserted that the indirect costs of the universities were part of the total allowable costs charged to Illinois under the contracts. As such, Illinois argued, the universities' indirect costs were direct costs to Illinois that are properly reimbursed at the 75% FFP training rate since they were incurred specifically for training. This argument is flawed in several respects. First, as noted in DAB No. 1530 and discussed above, section 235.64 necessarily limits both direct and indirect costs that may be charged as training costs reimbursable at 75% FFP. Thus, a cost that is not listed in that regulation is not such a training cost regardless of whether it is charged as a direct or an indirect cost. Moreover, the fact that the university indirect costs were incurred under a contract with the state agency does not mean that these costs are direct costs of the state agency. The payments made pursuant to the contracts were merely accounting transactions between two entities of the state government--state universities and the state IV-E agency. These transactions did not change the fact that the costs for which the payments were made included costs not allowable as training costs under section 235.64.⁽¹⁶⁾ Illinois' argument that the limitations on training costs in section 235.64 somehow do not apply because of the state agency's contractual arrangement with the universities is also untenable since section 235.64(d) applies specifically to "payments to educational institutions."

Illinois argued in the alternative that all of the costs on which the university indirect cost rates were based were training costs under section 235.64(d). This section provides that "FFP is available for payments to educational institutions . . . for salaries, fringe benefits, and travel of instructors, clerical assistance, teaching materials and equipment." Illinois argued that the indirect costs in question here were for "clerical assistance," which Illinois asserted refers to work done by "a person employed, as in an office, shop, business, etc., to keep records, accounts, files, handle correspondence, or the like . . . ." Illinois Br. dated 2/11/97, at 3, n.2, citing the definitions of "clerical" and "clerk" in Webster's Encyclopedic Unabridged Dictionary of the English Language. Illinois took the position that the universities' indirect cost pool should thus "be deemed a pool of training costs," so that the indirect costs based on the rates developed from those pools should be reimbursed as training costs at 75% FFP. Illinois Br. dated 10/31/96, at 14.

However, Illinois did not document its assertion that the indirect cost pools used to develop the universities' indirect cost rates consisted of the types of costs listed in the regulation. In any event, we are not persuaded that Illinois' expansive reading of the term "clerical support" in the regulation is justified. University indirect cost rates are used to allocate among a university's functions the following categories of costs: depreciation and use allowances, general administration and general expenses, sponsored projects administration expenses, operation and maintenance expenses, library expenses, departmental administration expenses, and student administration and services. See OMB Circular A-21, E.1.⁽¹⁷⁾ Thus, indirect costs, although they may include clerical costs, are not limited to clerical costs. Accordingly, Illinois did not establish that the costs in the cost pools used to develop the indirect cost rates were training costs under section 235.64.

The Board has consistently held that an enhanced FFP rate "is an exception to the generally available reimbursement rates, and a state must accordingly meet a higher standard of proof to justify a claim at an enhanced rate." DAB No. 1530, at 44, quoting Colorado Dept. of Social Services, DAB No. 1277 (1991). For the reasons discussed above, we conclude that Illinois has not met its burden of showing that the university indirect costs were eligible for reimbursement at the enhanced rate of 75% applicable to training costs.

For the foregoing reasons, we reaffirm our prior decisions and uphold in full the disallowances at issue in all three appeals.

Judith A. Ballard

M. Terry Johnson

Cecilia Sparks Ford

1. ¹We note, however, that, pursuant to 45 C.F.R. Part 30, Illinois is liable for interest on the amount of any disallowed funds it retained pending the issuance of this decision.

2. ² The determination in question, dated May 3, 1996, required Illinois to "provide . . . FFP adjustments of $11,979,832 for title IV-E training claims made for the period April 1, 1989 through June 30, 1995." ACF took the position that the "adjustments" were not appealable to the Board because the Board addressed the same matters in its prior decisions. In a July 11, 1996 "Ruling on Jurisdiction and Schedule of Further Procedures," the

Board Chair held that the Board had jurisdiction to review ACF's adjustments as disallowances under title IV of the Social Security Act even if the appeal raised some issues previously decided by the Board.

3. ³ The quarters at issue in DAB No. 1422 ended December 31, 1989, March 31, 1990, September 30, 1991 and December 31, 1991. The quarters at issue in DAB No. 1463 ended December 31, 1990, March 31, 1992, June 30, 1992, and September 30, 1992. DAB No. 1463 also involved increasing adjustments for some unspecified quarters. DAB No. 1463 summarily upheld the disallowance at issue there based on DAB No. 1422.

4. ⁴ The title IV-E regulations at 45 C.F.R.

� 1356.60(b)(3) state that training "may be provided in accordance with the provisions of �� 235.63 through 235.66(a) of this title."

5. ⁵ According to Illinois, some of the costs disallowed in Docket No. A-96-190 "overlapped" the costs disallowed in Docket No. A-96-131. Docket No. A-96-190, notice of appeal dated 9/4/96, at 2.

6. ⁶ The Board's regulations provide for reconsideration only where a party promptly alleges a clear error of fact or law. 45 C.F.R. �� 16.13. The appeal in Docket No. A-96-131 was filed nearly ten months after DAB No. 1530 was issued, over two years after DAB No. 1463 was issued, and over three years after DAB No. 1422 was issued. The appeal in Docket No. A-96-190 was filed even later in each instance. Moreover, as our substantive discussion indicates, Illinois did not show that there was an error of fact or law in our prior decisions, so there is no basis for modifying or reversing those decisions.

7. ⁷ Illinois claimed that ACF "apparently" disallowed all of the indirect costs that were claimed, not just the costs in excess of the amount allowable at the 50% rate. Illinois Br. dated 10/31/96, at 12. Illinois cited the statement in ACF's June 12, 1989 disallowance letter that "indirect costs are not listed as allowable items for reimbursement." Illinois Ex. 8, at 3. ACF should review its calculations to determine whether it in fact erroneously disallowed all indirect costs claimed by Illinois, and should make any necessary adjustments.

8. ⁸ This conclusion is not undermined by the fact that ACF is willing to pay some of the costs claimed by Illinois. By paying some costs, ACF in essence recognizes as allowable costs that would be allowable under a CAP that DCA would approve.

9. ⁹ The Board found that Illinois had received notice through ACF-IM-91-15 (dated July 21, 1991) and DCA's November 12, 1987 letter approving Illinois' Random Moment Study. DAB No. 1530, at 18. Since DCA disapproved the proposed CAP, we need not address the argument made here by Illinois that the notice given by DCA was invalid due to its informal nature or because it incorrectly required the application of eligibility ratios.

10. ¹⁰ OMB Circular A-87 is made applicable to title

IV-E by 45 C.F.R. �� 74.27 (1994) and 1355.30(b).

11. ¹¹ Indeed, Illinois' confusion in this area is evident throughout its brief, which makes repeated, erroneous points about indirect and direct costs.

12. ¹² Moreover, this requirement was not inconsistent with the regulations, which, as noted above, already limited the states' ability to determine how costs should be allocated by providing that states may claim costs only in accordance with an approved CAP.

13. ¹³ ACF clearly had the authority to promulgate regulations limiting the expenditures which are reimbursable as training at the 75% rate. Section 474(a)(3) of the Act authorizes federal funding for expenditures found necessary by the Secretary for the proper and efficient administration of the state plan and section 1102 of the Act authorizes the Secretary to promulgate such regulations, not inconsistent with the Act, as may be necessary to the efficient administration of the functions with which she is charged.

14. ¹⁴ Illinois made this argument in response to the Board's invitation to the parties to provide supplemental briefing in light of arguments raised by the New York State Department of Social Services in pending appeals which involved a similar issue. See Docket Nos. A-97-56, A-97-123 and A-97-130. In its supplemental brief, ACF incorporated by reference the response brief and exhibits it had filed in the New York appeals.

15. ¹⁵ We note, however, that reimbursement of indirect costs is not always automatic. The grant agreement with a university must provide specifically for the award of indirect costs. In addition, some programs are subject to statutory restrictions on indirect costs.

16. ¹⁶ The uniform administrative requirements for grants awarded by the Department provide that a grant recipient "is the entire legal entity even if only a particular component of the entity is designated in the award document." 45 C.F.R. � 74.2. Thus, as the Board has previously pointed out, "the state as a whole is the entity ultimately responsible under applicable regulations for accounting for the use of federal funds." New York State Dept. of Social Services, DAB No. 1336, at 7 (1992).

17. ¹⁷ OMB Circular A-21 was revised in 1996 to replace the term "indirect costs" with "facilities and administrative costs." 61 Fed. Reg. 20880 (May 8, 1996).