New York State Office of Temporary and Disability Assistance

The New York Office of Temporary and Disability Assistance (New York) appealed a determination by the Administration for Children and Families (ACF) disallowing $396,050 in federal funding for New York's Job Opportunities and Basic Skills Training Program (JOBS) (former Title IV-F of the Social Security Act). The funds represented central office cost allocation claims for fiscal years 1994 and 1995. ACF disallowed the costs as untimely liquidated. New York submitted that the disallowance was overstated, contending that $341,949 of the amount was timely liquidated.

For the reasons stated below, we find that ACF properly disallowed the funds at issue based on the applicable program regulations.

I. Legal Authority

Congress created the JOBS training program under the Family Support Act of 1988. Pub. L. No. 100-485, � 201 (repealed 1996). Under the statute, federal funding for approved state JOBS programs was provided as a capped entitlement. Implementing the JOBS legislation, the Secretary of the Department of Health and Human Services promulgated regulations at 45 C.F.R. Part 250, Subpart H, governing federal funding for JOBS programs. 54 Fed. Reg. 42,146, 42,255 (1989). Section 250.70 of the regulations, "JOBS allocation entitlement," addresses when JOBS federal funds must be used, obligated and liquidated by a state:

(c) In accordance with � 92.23, JOBS funds allocated to a State IV-A agency for a given Federal fiscal year are for use during that fiscal year and must be obligated by the State no later than the end of the fiscal year. Carry forward of an unobligated balance of Federal funds to a succeeding Federal fiscal year is not permitted. . . .

(d) A State must liquidate all obligations incurred under the title IV-F grant awards not later than one year after the end of the fiscal year for which the funds were awarded and obligated. The Federal share of unliquidated obligations will be returned to the Federal government.

Section 92.23 of the Department's regulations, referenced in 45 C.F.R. � 250.70(c), sets forth the period of availability of funds under the Secretary's uniform administrative requirements for grants to states. It provides:

(a) General. Where a funding period is specified, a grantee may charge to the award only costs resulting from obligations of the funding period unless carryover of unobligated balances is permitted, in which case the carryover balances may be charged for costs resulting from obligations of the subsequent funding period.

(b) Liquidation of obligations. A grantee must liquidate all obligations incurred under the award not later than 90 days after the end of the funding period (or as specified in a program regulation) to coincide with the submission of the annual Financial Status Report (SF-269). The Federal agency may extend this deadline at the request of the grantee.

In addition, 45 C.F.R. � 92.3 defines "obligations" as--

the amounts of orders placed, contracts and subgrants awarded, goods and services received, and similar transactions during a given period that will require payment by the grantee during the same or a future period.

Section 92.3 of the regulations also provides that--

"Unliquidated obligations" for reports prepared on a cash basis means the amount of obligations incurred by the grantee that has not been paid. For reports prepared on an accrued expenditure basis, they represent the amount of obligations incurred by the grantee for which an outlay has not been recorded.

II. Factual Background

The parties are in agreement as to the material facts underlying the disallowance at issue. On January 13, 1998, the ACF Regional Administrator for Region II issued a decision to disallow $396,050 in federal funding claimed by New York under the JOBS program for fiscal years 1994 and 1995. ACF denied the claims because, ACF contended, they were liquidated after the expiration of the applicable liquidation period for each fiscal year (September 30, 1995, and September 30, 1996, respectively). The disallowed claims were as follows:

ACF-331

Quarterly Report Date of

(* Disallowed claims not appealed by New York)

The ACF Regional Administrator cited 45 C.F.R. �� 250.70(c) and (d) to support the disallowance. Under the regulations, the Regional Administrator wrote, funds allocated for a given federal fiscal year must be obligated no later than the end of that fiscal year, and obligations must be liquidated not later than one year after the end of the fiscal year for which the funds were awarded and obligated.

Following New York's request for an interim administrative review of the disallowance, the Assistant Secretary for Children and Families affirmed the Regional Administrator's decision on December 14, 1998. The Assistant Secretary wrote that the deadline for liquidating fiscal year 1994 award obligations was September 1995, and the deadline for liquidating fiscal year 1995 award obligations was September 1996. By New York's own admission, the Assistant Secretary stated, New York did not liquidate the fiscal year 1994 obligations until the fiscal quarters that ended in March and June 1996, and New York did not liquidate the fiscal year 1995 obligations until the fiscal quarters that ended in December 1996 and March 1997. Affirming the Regional Administrator's decision, the Assistant Secretary rejected New York's argument that the fiscal year 1995 obligations that were liquidated by December 1996 were allowable because 45 C.F.R. � 92.23(b) extended the one-year liquidation period in 45 C.F.R. � 250.70 by an additional 90 days. The Assistant Secretary also rejected New York's request that the agency use its discretion to extend the liquidation deadline in the regulations to reverse the entire disallowance.⁽¹⁾

On appeal, New York contended that the claims of $307,250 and $34,699 for FY 1995, appearing on the ACF-331 for the quarter ending December 31, 1996, were allowable because they were liquidated within 90 days after the end of what New York defined to be the applicable funding period. New York submitted that the term "funding period" in section 92.23(b) means the period of time during which federal funding is available to a grantee. Under the JOBS program, New York argued, that period of time includes both the one-year period during which funds must be used and obligated pursuant to 45 C.F.R. � 250.70(c), and the one-year liquidation period of 45 C.F.R. � 250.70(d). Thus, New York submitted, 45 C.F.R. � 250.70 creates a two year funding period in conjunction with 45 C.F.R. � 92.23(b), which "adds a 90 day extension to said period." App. Reply at 2. New York argued that by applying this definition of "funding period" to claims for funds that had to be obligated by September 30, 1995, those funds could properly be liquidated through the quarter ending December 31, 1996.⁽²⁾

Applying the plain language of the Secretary's regulations to the facts presented, we conclude that ACF properly disallowed the claims at issue as untimely liquidated. Subsection 250.70(c) of the Secretary's regulations establishes that funds allocated to a state JOBS program for a given fiscal year must be used and obligated no later than the end of that fiscal year. It is this subsection of the JOBS regulations which references 45 C.F.R. � 92.23, indicating that the JOBS provision is consistent with the Department's general rule that "[w]here a funding period is specified, a grantee may charge to the award only costs resulting from obligations of the funding period unless carryover of unobligated balances is permitted." 45 C.F.R. � 92.23(a). Subsection 250.70(d) of the regulations, which is silent with respect to 45 C.F.R. � 92.23, provides that the liquidation period for obligations incurred under a JOBS award ends one year after the end of the fiscal year for which the funds were both awarded and obligated. Thus, the deadline for liquidating obligations made under New York's JOBS funding awards for the fiscal year ending September 30, 1995, was September 30, 1996, and not December 31, 1996, as New York argued. Accordingly, ACF properly disallowed New York's claims for funds liquidated after this deadline.

We reject as patently unreasonable New York's assertion that, based on 45 C.F.R. � 92.23(b), the liquidation period could be extended for an additional 90 days beyond the one year authorized for liquidation by 45 C.F.R. � 250.70(d). Under the Department's uniform administrative rule at 45 C.F.R. � 92.23(b), a grantee generally has 90 days after the end of a funding period to liquidate its obligations. Section 92.23(b) expressly provides, however, that a program-specific regulation may supersede the general rule to establish an entirely different liquidation period: "A grantee must liquidate all obligations incurred under the award not later than 90 days after the end of the funding period (or as specified in a program regulation) . . . ." (Emphasis added.) As explained above, 45 C.F.R. � 250.70(d) does in fact specify a different liquidation period for obligations made under the JOBS program. Thus, read together, sections 92.23(b) and 250.70(d) establish a one-year liquidation period for JOBS program obligations. The 90-day period in section 92.23(b) is, by the regulation's own terms, superseded by the program-specific rule; it does not add a three-month extension to the basic one-year JOBS program liquidation deadline.

We also reject New York's contentions that the term "funding period" in section 92.23(b) of the regulations means the period of time during which federal funding is available to a grantee for both obligation and liquidation and that the JOBS program funding period would thus include the one-year liquidation period established under 45 C.F.R. � 450.70(d). The plain language of section 450.70(c) of the regulations effectively delineates the JOBS funding period as the year for which the funds were awarded. Section 450.70(c) specifically refers to the period as the period during which the funds must be "used" and "obligated" for a state's JOBS program. Moreover, while Part 92 of the regulations does not include a definition of the term "funding period," the term is defined in Part 74 of the Department's regulations⁽³⁾ as "the period of time when Federal funding is available for obligation by the recipient." (Emphasis added.) 45 C.F.R. � 74.2. Thus, while not applicable here, this definition is consistent with our interpretation of the meaning of "funding period" in section 92.23(b) of the regulations.

Further, ACF's and our construction of the regulations is supported by the preamble to the final rule implementing the JOBS legislation. Describing the obligation and liquidation periods established in section 250.70 and how the program-specific rule relates to section 92.23, the Secretary stated:

States will be required to liquidate all obligations incurred during a fiscal year within one year after the end of that fiscal year. The liquidation period for grant programs subject to the regulations at Part 92 is normally 90 days (� 92.23(b)). However, we are permitting one year for liquidation in the regulations at � 250.70(d) for the JOBS program because we recognize that a State may need more flexibility in administering the JOBS program as many services are likely to be provided under contract.

54 Fed. Reg. 42,146, 42,193 (1989).

Finally, we note that the record shows that ACF gave New York specific notice of the Secretary's liquidation deadline in the July 1, 1995 JOBS program grant award representing the fourth quarter allocation for federal fiscal year 1995. In the award letter, ACF stated that the obligation period for fiscal year 1995 federal funds was October 1, 1994, through September 30, 1995. The letter also explicitly provided that New York had "up to one year beyond the end of the grant year to liquidate obligations . . . ." ACF Ex. 1. Thus, in addition to the clear regulatory notice, New York was made explicitly aware of the Secretary's JOBS program liquidation rule before either the fiscal year 1994 liquidation period or the fiscal year 1995 liquidation period expired.

Based on the foregoing analysis, we uphold the disallowance at issue.

1. In its January 12, 1999 Notice of Appeal, New York also again requested "that ACF retroactively grant an extension of the normal liquidation period" for the entire amount disallowed because the funds were legally authorized and were otherwise allowable. New York did not, however, suggest that the extension request was an issue before the Board nor did it pursue the request in its subsequent submissions to the Board. In denying New York's request for an extension, the Assistant Secretary stated: "Given the generous amount of additional time already permitted by program regulations, we find no justifiable reason to extend this deadline further."

2. New York did not dispute ACF's findings concerning when the period for obligation ended under 45 C.F.R. � 250.70(c) nor did it dispute ACF's findings as to when the obligations in question were in fact liquidated.

3. Part 74 of the regulations sets forth the Department's uniform administrative requirements for awards and subawards to institutions of higher education, hospitals, other nonprofit organizations and commercial organizations and certain grants and agreements with states, local governments and Indian tribal governments.