SUBJECT: New Jersey Department of Human Services

DECISION

The New Jersey Department of Human Services (New Jersey) appealed the February 22, 2000 decision of the Division of Cost Allocation (DCA) of the Department of Health and Human Services (HHS) disapproving a revision to New Jersey's cost allocation plan (CAP) with a proposed effective date of October 1, 1996. New Jersey sought to revise its CAP by using a different methodology to assess the costs of county income maintenance worker activities to the child support enforcement program, with the effect that some of their costs would now be allocated to title IV-D of the Social Security Act (Act). DCA, after consultation with the Administration for Children and Families (ACF), disapproved this revision on the ground that the county income maintenance workers were caseworkers whose costs were made ineligible for federal financial participation (FFP) under title IV-D by federal regulations, citing 45 C.F.R. � 304.23(f).

We conclude that the costs in question are unallowable under title IV-D regulations and therefore may not be charged to title IV-D as proposed in the CAP revision. Consequently, we uphold DCA's disapproval.

Legal Framework

The Child Support and Establishment of Paternity program was established by Public Law No. 63-456, which created title IV-D of the Act, effective July 1, 1975. The purpose of title IV-D is to enforce child support obligations, locate noncustodial parents, establish paternity, and assure assistance to children in obtaining support. Section 451 of the Act. States with approved state plans may receive FFP in certain costs incurred in carrying out those plans. Sections 454 and 455 of the Act.

The regulations implementing title IV-D specify that FFP is available for those services and activities "made pursuant to the approved title IV-D State plan which are determined by the Secretary [of HHS] to be necessary expenditures properly attributable to the Child Support Enforcement program . . . ." 45 C.F.R. � 304.20(b). The regulations also specify, however, that FFP under title IV-D is not available for "[a]ny costs of caseworkers as described in � 303.20(e) of this part." 45 C.F.R. � 304.23(f)(emphasis added). Section 303.20(e) provides in relevant part:

No functions under the State plan may be delegated by the IV-D agency if such functions are to be performed by caseworkers who are also performing the assistance payments or social services functions under title IV-A or XX of the Act. . . .  Under this provision:

(1) Caseworker means any person who has decision-making authority over individual cases on a day-to-day basis and includes, but is not limited to such designations as intake worker, eligibility technician, caseworker, and social worker. . . .

States' IV-D agencies are required to provide sufficient staffing and resources at the state and local level to meet regulatory standards and fulfill required "support enforcement functions." 45 C.F.R. � 303.20(c). Eight specific IV-D functions are listed: intake; establishing the legal obligation to support; locate; financial assessment; establishment of the amount of support; collection; enforcement; and investigation. Id.

It is helpful for understanding the discussion below to consider briefly the overall function of the regulations at issue, which have been in place since shortly after the creation of the title IV-D child support program in 1975. Their effect is generally to place limits on the ability of states to assign certain caseworker costs to the title IV-D program rather than to the title IV-A program.⁽¹⁾ State programs under both title IV-A and title IV-D receive funds from the federal government. Title IV-A provides for assistance payments and various social services to needy families. Title IV-D assists families in obtaining appropriate financial support from non-custodial parents. Originally, title IV-A of the Act contained the Aid to Families with Dependent Children (AFDC) program. As part of welfare reform, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Public Law No. 104-193, 110 Stat. 2105 (1996) (PRWORA) replaced AFDC with the Temporary Assistance to Needy Families (TANF) program as title IV-A of the Act. The change New Jersey proposed to its CAP responded to this change in title IV-A.

The family assistance and child support enforcement programs clearly are interrelated in some ways. For example, for a state to receive a block grant under TANF, it must certify that the state operates a child support enforcement program. Section 402(a)(2) of the Act. Also, in order to receive assistance under TANF, a family generally must cooperate in establishing paternity and seeking child support and must assign its right to support collected on its behalf to the state to the extent of the assistance the family receives. Sections 408(a)(2) and (3), and 454(5) of the Act. The determination of cooperation or non-cooperation is made by the title IV-D agency, and that agency must provide child support enforcement services to (among others) families receiving assistance under title IV-A. See sections 454(4) and 454(29) of the Act.

Titles IV-A and IV-D also differ in a number of ways. Child support enforcement services are provided to families whether or not they are seeking or receiving public assistance. The title IV-D program not only requires expenditures by the state but also generates potential cost avoidance and revenue by the state. See generally Burt S. Barnow et al., The Potential of the Child Support Enforcement Program to Avoid Costs to Public Programs: A Review and Synthesis of the Literature (April 2000). States benefit in two ways: first, the support collected keeps some families from receiving assistance payments by increasing their income and, second, payments collected on behalf of families that do receive assistance payments are retained to offset welfare expenditures. See id. at 3. Title IV-D is funded through FFP payments based on a percentage of the total funds expended by each state to operate its approved plan for child support enforcement. Section 455 of the Act.⁽²⁾ The former AFDC system reimbursed participating states through FFP at a 50% rate for all those expenditures necessary for the proper and efficient administration of the state's IV-A plan. TANF, by contrast, is a block grant program, under which each state may receive an annual TANF grant in an amount set by federal law. See section 403 of the Act. One effect of this change is that there is now a limit or cap to the total amount of federal funds a state may claim under title IV-A, whereas under AFDC administrative expenditures were reimbursable without a cap.

A state participating in the various public assistance programs under the Act, including title IV-D, is required to make determinations as to the amount of commonly-incurred expenditures allocable to each program the state administers.⁽³⁾ For this purpose, a state is required to submit a cost allocation plan (CAP) to the Director, DCA, in the appropriate HHS regional office. 45 C.F.R. � 95.507(a). A CAP is defined as "a narrative description of the procedures that the State agency will use in identifying, measuring, and allocating all State agency costs incurred in support of all programs administered by the State agency." 45 C.F.R. � 95.505. Once approved by DCA, a CAP may continue in effect indefinitely if the state submits an annual statement to DCA certifying that the CAP is not outdated. 45 C.F.R. � 95.509(b). The effective date of a CAP amendment is generally the first day of the calendar quarter following the event that required the amendment. 45 C.F.R. � 95.515.

Factual Background

New Jersey's CAP allocated the costs of county income maintenance workers based on a random moment study (RMS) methodology set out in a "Random Moment Study of County Welfare Agency Workers: Handbook for Monitors" (Handbook). This methodology generally required observing a random sample of workers at randomly selected times during each quarter and recording the tasks the workers were engaged in at the selected times. The observations were then to be tabulated and the statistical distributions of the time devoted to various tasks to be converted into dollar amounts of the actual program expenditures. New Jersey had been assigning the worker's activity when observed according to the primary program benefitting from that activity.

New Jersey sought to revise its RMS, beginning October 1, 1996, to assign an observed task which impacted two or more programs to all programs impacted by a task, rather than solely to the program that primarily benefitted from the task. To accomplish this switch "to the `benefitting' program concept," New Jersey submitted a revised Handbook (dated October 1996) to DCA by transmittal letter dated February 10, 1997.⁽⁴⁾ New Jersey Appeal File (N.J.A.F.) at Aa6-Aa42. The revised Handbook states that there are "several programs for which the tasks or activities may be performed," and instructs the RMS Monitor to identify "all the program(s) which necessitated the performance of the task or activity observed at the random moment." New Jersey App. File at Aa27. The monitor thus identifies both the task observed (from a list of over 25 tasks) and the programs benefitted or impacted by performing the task. See id. at Aa10-Aa11, Aa21.

DCA acknowledged receipt of the CAP revision by letter dated February 18, 1997, stating that it had "initiated the Federal review process by disseminating the proposal to the applicable Federal components for their review and comment." DCA advised New Jersey by letter dated April 4, 1997 that New Jersey's submission was still under review. While that review was still pending, the Regional Commissioner of ACF, which administers the IV-D program, questioned (but did not disallow) $1,765,829 FFP claimed under title IV-D for the period October 1, 1996 to March 31, 1998 on the ground that 45 C.F.R. �� 304.23(f) and 303.20(e) prohibited charging the cost of eligibility or income maintenance workers to title IV-D. N.J.A.F. at Aa45 (Letter dated August 27, 1998). Furthermore, a draft audit by the Office of Child Support, Division of Audit, recommended that New Jersey refund $2,030,283 FFP claimed for the period October 1996 through September 1998 "as a result of the improper allocation of costs of intake workers . . . ." New Jersey App. File at Aa122.⁽⁵⁾

DCA notified New Jersey on February 22, 2000 that it was disapproving the revised Handbook. DCA's determination stated that the county income maintenance workers meet the definition of "caseworker" in 45 C.F.R. � 303.20(e)(1) "as they have decision making authority with regard to eligibility determination on a day-to-day basis," and concluded that the income maintenance costs allocated to the IV-D program are thus ineligible for FFP under 45 C.F.R. � 304.23(f).

New Jersey later submitted to DCA two further CAP revisions by letters dated July 21, 1997 and November 13, 1997. DCA disapproved both revisions on the basis that they continued to include the child support enforcement program as a benefitting program to which costs of county income maintenance workers could be assigned based on RMS observations. New Jersey appealed these disapprovals to us as well. Neither party objected to consolidating these cases, since the issues appear to be the same. New Jersey Department of Human Services, Board Docket Nos. A-2000-88 and A-2000-102. Unless otherwise noted, the analysis and conclusion here apply to all three cases.

Parties' Arguments

DCA read section 304.23(f) as prohibiting FFP in any costs incurred by an individual meeting the definition of caseworker in section 303.20(e)(1). DCA Br. at 6. Thus, in response to a request for clarification of this determination, DCA stated that "any activity performed by caseworkers assigned to the Child Support program" is ineligible for FFP, rendering New Jersey's revised RMS methodology unapprovable. DCA letter to Board, dated Apr. 26, 2000, at 1.

The principal argument in New Jersey's initial brief was that New Jersey was in full compliance with the regulations, if properly interpreted, and that the FFP restrictions should be read more narrowly. See N.J. Br. at 2-3, 17-21. According to New Jersey, the regulations only prohibit charging the title IV-D program with the costs of a subset of caseworkers (those who also perform assistance payment or social services functions under titles IV-A or XX) for a subset of activities (those that meet a specific definition of functions under the title IV-D state plan). Id.

Before turning to this core dispute, we address first in our analysis as preliminary matters two other arguments raised by New Jersey. First, New Jersey asserted that the regulations at issue had been overtaken by events because of changes to the administration of welfare by the repeal of the title IV-A Aid to Families with Dependent Children program and adoption of the Temporary Aid to Needy Families (TANF) program. N.J. Letter to Board, dated Nov. 28, 2000, at 2. As a result, according to New Jersey, the entire concept of a "Title IV-A caseworker" was now invalid. Id. Under this reasoning, New Jersey took the position that the caseworkers at issue were not "Title IV-A caseworkers" but rather "`generic' workers" performing many duties for many federal programs. Id. DCA responded that the regulations remain in full effect under TANF and continue to prohibit delegating any title IV-D functions to caseworkers who also perform assistance payment and social services functions under TANF. Second, New Jersey complained that DCA did not act to disapprove New Jersey's RMS methodology until more than three years after it was submitted. DCA's position was that its response was timely, given the context of major policy reviews during that time and that New Jersey should have been aware that its proposal would be unapprovable under existing regulations. DCA Br. at 12-14.

New Jersey further argued that DCA mistakenly treated as broadly unallowable all costs involving any caseworkers under title IV-D. Further, according to New Jersey, DCA had neither alleged nor proven that the county income maintenance workers in question here were performing any such functions under the IV-D plan within the meaning of section 303.20(e). Id. at 20-21. The relevant IV-D functions, according to New Jersey, are only those listed in section 303.20(c). Thus, in New Jersey's view, these individuals' costs were eligible for FFP under section 304.23(f). DCA disputed New Jersey's reading of the regulations. DCA Br. at 6-9.

New Jersey also argued that the revision of its allocation methodology was required by Office of Management and Budget (OMB) Circular A-87, Att. A, � C.3.a., and by Department of Health and Human Services (HHS) Action Transmittal No. OGAM AT 98-2, dated September 30, 1998. The latter states in relevant part:

The Office of Management and Budget Circular A-87 and the HHS ASMB C-10 require that costs be allocated to all benefitting programs based on relative benefits derived. This means that if any program benefits from an activity or cost, then costs must be allocated to each program.

DCA took the position that the requirement to allocate costs to benefitting programs did not supersede the specific limitations on FFP and the prohibition on delegation of functions in the IV-D regulations. DCA Br. at 9. Hence, according to DCA, FFP should not be available for activities performed by caseworkers in violation of the delegation bar.

Finally, New Jersey raised an argument that one county met a regulatory exception for certain sparsely populated geographic areas which is discussed in more detail later in this decision. See N.J.A.F. at AA51.

We consider as a preliminary matter the questions raised by New Jersey about continued meaningfulness and applicability of the regulations here in light of the restructuring of the welfare assistance systems in recent years. We next consider New Jersey's contention that, even if they still apply, the regulations do not bar the costs of the activities of its caseworkers here, because they do not perform "functions under the state plan" for Title IV-D. We then address New Jersey's position that its allocation methodology is compelled by the OMB Circular. Finally, we deal with the asserted applicability of the exception to one county.

1. The regulations cited by DCA have been in effect and applicable throughout the period at issue.

As explained in more detail above, the regulations concerning costs of activities performed by certain caseworker were designed to limit cost-shifting to title IV-D. However, New Jersey argued that the purpose of these regulations no longer made sense because the title IV-A AFDC program in existence when they were adopted was replaced by TANF. In explaining the proposed changes to the RMS, New Jersey itself recognized that the change from AFDC to TANF actually increased the incentive to allocate costs to programs other than title IV-A. Thus, New Jersey stated that using the "primary" program approach was no longer "equitable," because, due to the cap under TANF, New Jersey might be unable to recoup FFP in all of the costs that would be attributable to title IV-A under the primary program approach. N.J.A.F. at Aa7. By contrast, no equivalent cap would limit expenditures charged to its title IV-D program. In this context, we must consider whether these regulations continue to be relevant and applicable generally, as well as whether New Jersey's proposed RMS would effectuate the kind of cost-shifting against which they are directed.

New Jersey did not present any evidence that either section 304.23(f) or section 303.20(e) has been withdrawn or altered. On the contrary, New Jersey emphasized that section 303.20(e) has been unchanged since 1975, but characterized it as having become effectively obsolete as a result of changing law and practice. N.J. Letter to Board dated Nov. 28, 2000, at 2. New Jersey instead argued the adoption of TANF and welfare reform had somehow caused the concepts underlying the cost shifting provisions to lose meaning.

Moreover, New Jersey offered no evidence that HHS has proposed any revision to these provisions or otherwise acted in any manner suggesting that the regulations should no longer be enforced. As DCA noted, a comprehensive revision of the title IV-D regulations intended to conform them to the TANF legislation left untouched the provisions at issue here, making it unlikely that they should be read as obsolete provisions no longer applicable under TANF. See DCA letter to Board, dated Dec. 15, 2000, at 1, citing 64 Fed. Reg. 6,237 (Feb. 9, 1999). Moreover, the Acting Commissioner of the Office of Child Support Enforcement issued a memorandum to ACF Regional Administrators on March 13, 1998 specifically alerting them to the potential for "cost-shifting" of caseworker costs previously charged to the IV-A program to the IV-D program by means of revisions in state RMS plans and stating that:

Some State staff advocate that [PRWORA] now permits the charging of caseworkers to IV-D and that the regulation will be changed to specifically allow this. Our research of the law does not support this position. Also, at this time actions to revise the regulations have not been initiated.

DCA Ex. 2, at 1.

Furthermore, New Jersey did not cite any specific language in PRWORA that invalidated these regulations, stating rather that section 303.20(e) is "simply outdated" because DCA's interpretation is "predicated on the concept of `title IV-A caseworkers'" which is "invalid." This part of the dispute is largely semantic, arising from DCA's occasional use of the short-hand term "Title IV-A and Title XX caseworkers." See, e.g., DCA letter to Board, dated Oct. 27, 2000, at 1. New Jersey seems to have equated this term to "AFDC caseworkers" such as the states previously employed under that program, and hence concluded that, since that program was repealed, "there no longer is such a concept as a 'IV-A caseworker'." N.J. Letter to Board dated Nov. 28, 2000, at 2. New Jersey also characterized "today's welfare environment" as one in which caseworkers simply no longer have duties within one program but rather perform myriad activities benefitting various programs. Id. We find nothing in New Jersey's arguments that convinces us that caseworkers are no longer performing income maintenance and social services functions under title IV-A, no matter how many other diverse roles they may have undertaken as well.

New Jersey also complained that a good deal of time elapsed before its CAP amendments proposing the new RMS methodology were formally disapproved. New Jersey never clearly explained what relief it was seeking in this regard. To the extent that it sought, in effect, to have its CAP amendments deemed approved because DCA did not issue an earlier decision, both court and prior Board decisions make clear that no such remedy is permissible under the regulations. Missouri v. Bowen, 813 F.2d 864, 872-73 (8^th Cir. 1987); Illinois Dept. of Children and Family Services, DAB No. 1530, at 8, n.7 (1995); State of Missouri, DAB No. 844, at 5, n.2 (1987). Further, New Jersey did not identify how it would have acted differently if the disapproval had come earlier. New Jersey was aware of the nature of the federal concerns at several points in the consideration process.⁽⁶⁾ Furthermore, New Jersey knew that the allocation of these costs to the IV-D program based on the RMS in the proposed CAP amendment was undertaken and continued at its own risk, since New Jersey's revision proposed a methodology that might not be approved. See, e.g., Letter from David C. Heins, Acting Dir., Dept. of Human Serv., N.J.D.H.S., to Ms. Higgins at ACF, dated Dec. 4, 1998 in N.J.A.F. at Aa48-Aa54. The effect of the disapproval is that FFP previously claimed by New Jersey for these unallowable costs may indeed be disallowed, but only because the costs were unallowable ab initio. Earlier action by DCA would not have altered that situation.

We conclude that it does not follow from any changes that New Jersey recounts in how it utilizes caseworkers that title IV-D must share in those costs. We further conclude that the regulations forbidding charging to title IV-D the costs for caseworkers who perform title IV-A functions remain effective and applicable today. In addition, we conclude that the timing of DCA's disapproval action is immaterial to the merits of the dispute before us.

2. The caseworker costs at issue are not chargeable to title IV-D even under New Jersey's construction of section 304.23(f).

We turn next to the central question of whether the regulations prohibit charging the specific costs of these caseworkers' activities in New Jersey to the IV-D program. As we have discussed, New Jersey argued that the costs of caseworkers for which FFP is proscribed by section 304.23(f) are only those costs of title IV-A caseworkers who are performing specific "functions under the State plan" within the meaning of section 303.20(e). Id. at 19. DCA appeared at times to take the position that no costs of any activities by caseworkers could be charged to the IV-D program, although elsewhere DCA described the restriction on FFP more narrowly as applying to costs of non-delegable activities by caseworkers outside the title IV-D agency. We consider here the parties' arguments on which interpretation of the regulatory language should control. We conclude that the regulations are susceptible of more than one reasonable interpretation. The distinction between the proposed interpretations is of practical significance, however, only if New Jersey were to show that the costs of these caseworkers captured by its RMS methodology and assigned to title IV-D benefitted title IV-D but did not fall within the "functions under the State plan" for IV-D. We find that New Jersey failed to show that the costs in question met this test. Further, we find that New Jersey failed to demonstrate that the caseworkers involved were not those who also performed income maintenance and social services functions under title IV-A.

A. More than one reasonable interpretation of the regulations is possible.

The interpretation question hinges on the meaning of the brief clause in section 304.23(e) making FFP unavailable for "[a]ny costs of caseworkers as described in �303.20(e)." DCA emphasized the broad introductory phrase barring FFP under IV-D for any costs of "caseworkers," while treating the qualifying clause "as described in � 303.20(e)" as merely incorporating the definition of caseworker from that section.

The gravamen of New Jersey's position on interpreting the regulation is that the qualifying clause "as described in � 303.20(e)" modifies and limits the kinds of "costs" that are unallowable, rather than merely incorporating a definition of one term in a subsection of � 303.20(e). New Jersey also argued that the phrase "costs of caseworkers" incorporated the language in the first paragraph of section 303.20(e) prohibiting delegation only of certain "functions under the State plan" and only to those caseworkers also "performing the assistance payments or social services functions under title IV-A or title XX." Id. at 19-21. In support, New Jersey noted that section 304.23(e) uses "as described" rather than "as defined," implying that more than a bare definition was being imported, and that the caseworker definition was contained in a single subsection (whereas the whole of section 303.20(e) was referenced). N.J. Reply Br. at 2.

Further, New Jersey argued that DCA could make sense of its own interpretation only by including some material from the introductory paragraph of section 303.20(e) to limit the overarching definition of "caseworker" to those caseworkers who performed particular functions under two other federal programs. If DCA had not done so, the absurd result would have been to bar any costs of any caseworkers under IV-D.

DCA agreed that correct construction of the caseworker definition in section 303.20(e)(1) requires reading in the limitation in the introductory paragraph of section 303.20(e) to title IV-A and XX caseworkers. DCA letter to Board dated October 27, 2000, at 1. Nevertheless, DCA argued that it was unreasonable for New Jersey to "look to section 303.20(e) for any further determination of what costs are allowable or unallowable" because section 303.20(e) addresses staffing requirements while only section 304.23(f) addresses cost allowability. DCA Br. at 6.

However, as New Jersey responded, other provisions on allowability, like section 304.23(f), reference other regulatory sections to identify specifically the expenditures or activities being addressed. N.J. Reply Br. at 3, and examples cited therein. Indeed, the provisions defining nondelegable caseworker activities were originally proposed to be part of section 304.23(f) and were inserted instead in section 303.20 of the final Part 303 regulations, with the comment that the change was "to make the organizational requirements consistent with the provisions for [FFP] in Part 304." 40 Fed. Reg. 27,156, 27,157 (June 26, 1975); compare 40 Fed. Reg. 20,287 (May 9, 1975). The preamble to the final Part 303 regulation goes on to state the result succinctly: "The IV-D agency may not delegate any of the IV-D functions to IV-A caseworkers . . . ." Id.

We find that we do not need to resolve conclusively the correct reading here. New Jersey's argument that section 304.23(f) should be read to bar only those caseworker activities which do not correspond to "`functions under the State plan'" could prevail only if it could show, at a minimum, that the caseworker costs here do not serve a function under the New Jersey IV-D State plan but yet benefit the IV-D program in some way. N.J. Br. at 24. We find below that New Jersey has not made such a showing.

B. The costs at issue are unallowable.

Assessing whether the particular costs that are captured under New Jersey's proposed RMS and allocated to title IV-D serve functions under the title IV-D State plan requires us to consider (1) which activities of caseworkers fall within the nondelegable IV-D functions and (2) what activities of the caseworkers at issue would be assigned to IV-D under the disapproved RMS. As to the first question, the parties again disagree.

DCA's position contends that logic dictates that either the caseworker activities benefit a title IV-D function or they simply do not benefit the IV-D program at all, and in either case they are not allowable as title IV-D costs. New Jersey, on the other hand, reads "functions under the state plan" as meaning only the specific functions for which the title IV-D agency is required to provide adequate staffing and resources. As noted, those listed functions include intake, establishing the support obligation, locating parents, financial assessment, establishment of support owed, collection, enforcement, and investigation. 45 C.F.R. � 303.20(c). New Jersey contended that the caseworkers here performed generic, pre-intake functions that necessarily benefitted title IV-D along with the other programs to which the clients at issue were ultimately referred. New Jersey characterized the activities generally as "data gathering." N.J. Br. at 24. Since those activities are not on the list of specific IV-D functions, the regulations do not bar delegating them to these caseworkers and assigning the resultant costs to title IV-D, according to New Jersey.

It is indeed difficult to conceive of an activity "benefitting" title IV-D, but yet not serving a function among those undertaken by the State as part of implementing its IV-D plan. In this case, however, we need not resolve the question of whether such an activity can ever exist, since we find that here none has been identified. New Jersey repeatedly argued that neither DCA nor ACF proved or even alleged that one of the eight listed title IV-D functions had been delegated to income maintenance caseworkers. See, e.g., N.J. Br. at 20-21. New Jersey contended that it was undisputed that the caseworker activities "which benefit the Title IV-D program fall within the area of data gathering and other activities which do not correspond to `functions under the State plan'." N.J. Br. at 23.

The onus, however, was on New Jersey to support the allowability and allocability of the costs it proposed to charge to title IV-D. It is well-established that fundamental principles of grant administration place the burden on the grantee, here New Jersey, to document its claim for federal funds. See, e.g., Washington State Dept. of Social and Health Services, DAB No. 1214 (1990), citing Florida Dept. of Health and Rehabilitative Services, DAB No. 1031 (1989). Therefore, New Jersey was responsible for documenting that all costs which it could charge to title IV-D under the proposed RMS methodology fell outside of title IV-D functions, even were we to accept New Jersey's premise that the regulations barred only those costs of activities serving the specifically-listed title IV-D state plan functions. This New Jersey failed to do on the record before us.

It has been difficult to pin down the precise actions taken by caseworkers which might be charged to title IV-D under the several revisions of the RMS (and in practice as found during the audit).⁽⁷⁾ New Jersey has simply failed to identify among those actions any activities which would benefit title IV-D without being subsumed in one of the specifically listed title IV-D functions. New Jersey officials described the county income maintenance workers in question here as performing "certain preliminary tasks," including (1) obtaining client information, (2) explaining program requirements, (3) entering information on the Universal Application, and (4) performing client interviews. N.J.A.F. at Aa52 (N.J. letter to ACF, dated Dec. 4, 1998). In response to a Board question about whether these "preliminary tasks" were the same as those activities that the RMS would identify as benefitting both title IV-A and title IV-D, New Jersey identified 12 enumerated activities from the RMS and stated that each could be assigned as related to one of the four tasks listed in the letter. N.J. letter to Board, dated Oct. 26, 2000, at 1-2.

The Board further inquired why these four tasks should not be considered intake, one of the listed IV-D functions which New Jersey agrees are barred by the regulation from delegation to title IV-A staff. The intake function is defined in the regulations to comprise "[a]ctivities associated with initial support case opening." 45 C.F.R. � 303.20(c)(1). New Jersey responded that the four tasks should not be considered to be associated with initial support case opening. N.J. letter to Board, dated Oct. 26, 2000, at 3. According to New Jersey, the first contact of an applicant for services would be with a pre-screening worker who explains the various programs, including the requirements of cooperation with child support enforcement, and who gathers and enters such basic information as name, addresses, and family structure. Id. New Jersey contended that intake only starts when the applicant is sent to the IV-D agencies to see whether the applicant does comply with the cooperation requirements, or shows good cause not to, and whether the case is eligible for IV-D services. Id. Only then would a case be opened in the computer system and the applicant sent back to the workers who determine eligibility for TANF. Id.

Nothing in New Jersey's scenario explains why asking certain basic questions needed to identify a potential client and inputting the answers is "pre-screening" while other data collection and entry about the applicant is "intake." The regulations define intake quite broadly by including any actions "associated with" the opening of a title IV-D case. Certainly, finding out the name and address of a potential client and collecting the facts about the client's family seem quintessential activities associated with the initial stage of case opening. New Jersey did not point to anything in the regulations establishing a line between one stage of information collection and another, or setting up some trigger point at which enough information has been obtained to make further inquiries into true intake. We conclude that DCA reasonably considered the activities involving gathering basic applicant information as part of the intake function; and the function of intake into the title IV-D program simply may not be delegated to caseworkers also engaged in title IV-A functions. 45 C.F.R. � 304.23(f).

Notably, the transmission of information to title IV-D workers is in itself a necessary part of opening a title IV-A case under TANF, because the determination by the title IV-D agency that an applicant will or will not cooperate with child support enforcement efforts is a prerequisite for title IV-A eligibility. Obtaining such a determination of cooperation from the title IV-D staff is a program requirement of title IV-A, not of title IV-D. Section 454(29)(D) of the Act. The Board relied on this point (which was true under AFDC as well as under the present TANF system) in finding that a state may not charge to title IV-D costs relating to certain information on its title IV-A intake forms even though the information collected thereby is transmitted by carbon copy to title IV-D workers and used in documenting assignment of support rights by the client. Indiana Dept. of Public Health, DAB No. 150 (1981). The Board found that the IV-A program "must provide certain information to the IV-D program" and therefore use of the forms must be charged to Title IV-A, even though the same expenditures would be eligible for funding if the forms were used directly by IV-D staff in its intake activities. Id. at 2.

We conclude that the RMS improperly charges to title IV-D costs of intake activities of caseworkers also performing income maintenance and social services functions under title IV-A.

C. The result here does not impose additional or duplicative costs on New Jersey.

According to New Jersey, when intake staff enter client information into a personal computer, the information "directly populates fields in the TANF benefit and Food Stamp management information system (FAMIS), the work activity system (OMEGA) and the CSP system (ACSES)." N.J.A.F. at Aa50 (N.J. letter to ACF, dated Dec. 4, 1998). This centralized data gathering by income maintenance staff, according to New Jersey, is more efficient, reduces inconvenience to clients, and benefits IV-D as well by making the client information immediately accessible without use of a second set of intake personnel. Id. By contrast, New Jersey characterized DCA's interpretation of the regulations to continue to prohibit allocation of these caseworker costs to IV-D as "counterproductive," given today's tight budgets and staff reductions in welfare agencies and given the technological advances facilitating data sharing. N.J. letter to Board dated Oct. 26, 2000, at 4. According to New Jersey, this interpretation would have the effect of "sanctioning inefficiency and duplication of effort," by forcing child support enforcement staff to obtain "every bit of information" used in the intake process themselves. Id.

DCA did not argue that the collection of basic information about a potential client by caseworkers before referral to title IV-D staff is improper or that the IV-D staff must ignore the intake information already entered in a shared computer system. Nor is there any impropriety alleged in having general caseworkers identify and screen applicants in order to determine where to refer them. Nothing in DCA's position requires New Jersey, as it intimated, to collect the same information twice, first by a general caseworker and then again on referral to the child support program. Title IV-D workers are not barred from using data from any available sources as part of performing their intake activities. What the regulation prohibits is using title IV-D funds to subsidize actions taken by caseworkers as part of intake and eligibility screening for income maintenance and social services programs even if the title IV-D workers later have access to the resulting information in an applicant's computer file.

We conclude that (1) intake reimbursable under title IV-D begins only when the IV-D agency staff begin intake for a new child support case; (2) prior activities of caseworkers who handle financial assistance or social services cases are not and may not be financed as any part of the IV-D program; and (3) even if such earlier information-gathering activities streamline the IV-D intake process, FFP for those activities may not be charged to title IV-D. This result is compelled by the regulations and does not require duplication of efforts. It is also equitable given that, in some sense, the provision of information gathered in opening an application for financial assistance to the title IV-D agency benefits the IV-A program rather than the IV-D program. That is, because the IV-A agency requires a cooperation determination from the IV-D agency in order to act on an application, the IV-A program has an independent "need" to have a IV-D case opened, and therefore to provide information for that purpose.

4. The OMB Circular does not compel charging unallowable costs to title IV-D.

New Jersey relied heavily on the argument that its allocation of these costs to title IV-D was compelled by applicable federal requirements. N.J. Br. at 21-24. New Jersey contended that the federal government required states to change from charging all costs of an activity to the primary federal program receiving a benefit to instead allocating the costs among benefitting programs. New Jersey relied in part on the issuance on September 30, 1998 of Transmittal No. OGAM AT 98-2 by the Office of Grants and Acquisition Management on compliance with the benefitting programs methodology, quoted above, stating that OMB Circular A-87 and HHS policy require that "if any program benefits from an activity or costs, then costs must be allocated to each program." N.J.A.F. at Aa90. New Jersey also quoted the following statement from the action transmittal:

While the former AFDC program allowed . . . an exception, the TANF legislation that replaced AFDC does not permit it being designated as the sole benefitting or primary program. Therefore, the TANF program is subject to the cost allocation principles of A-87.

Id. New Jersey reasoned that "[i]f the Federal government desires to mandate that costs must be allocated to all benefitting programs, as it has done, it is improper for the IV-D auditors to unilaterally decide that their program is exempt from this requirement." Id.

New Jersey misunderstands the nature of the change in allocation practice to which this action transmittal alludes. The general cost allocation principles provide for costs to be allocated in accordance with benefits received. States nevertheless had been permitted to charge certain administrative costs solely to the AFDC program, even though the activities involved did benefit other programs such as Food Stamps and Medicaid. See generally HCFA Ex. 8, at 1 (HHS Memorandum of John J. Callahan, Assistant Secretary for Management and Budget, dated Oct. 14, 1998). As DCA explained, this practice had been allowed under prior interagency agreements to facilitate having AFDC workers determine eligibility under all these means-tested programs. See DCA Br. at 11, and sources cited therein. Title IV-D never was a means-tested program and did not share in this practice. Id. These regulations long barred charging title IV-D for such caseworker costs.

When TANF legislation was adopted, the primary program practice that had been permitted under AFDC was no longer authorized. Hence, states could no longer treat title IV-A as the "primary" program and allocate all costs in a category to it alone, even if other programs also benefitted from those expenditures. Thereafter, general cost principles applied to allocation of the costs of the sort of eligibility and other activities of caseworkers previously charged solely to title IV-A.

The general principles set out in the OMB Circular "are designed to provide that Federal awards bear their fair share of costs recognized under these principles except where restricted or prohibited by law." Id., Att. A, � A.1 (emphasis added). A cost is allocable to a particular program "if the goods or services involved are chargeable or assignable to such [program] in accordance with relative benefits received." Id., Att. A, � C.3.a (emphasis added).

The Board has interpreted these provisions generally to permit requiring the costs of services used in part by more than one program to be distributed among the benefitting programs on some equitable pro rata basis. See Oklahoma Dept. of Human Services, DAB No. 963 (1988). Where a cost fully benefits more than one program, the federal agency has discretion to require either allocating it among the benefitting programs or assigning it exclusively to one of the fully benefitting programs. Id.; see also Illinois Dept. of Children and Family Services, DAB No. 1530 (1995).

Nothing in DCA's policy or the OMB Circular, however, suggests that merely because a cost might be allocable to a program, in the sense that the program receives some benefit, the costs will always be allowable under that program. In this case, as we have noted, it is not clear that any of the costs can fairly be said to benefit title IV-D, but it is clear that the costs are unallowable under title IV-D regulations. OMB Circular A-87 expressly requires that, to be allowable, costs must not only be "allocable" to the program to which they are charged but must also "conform to any limitations or exclusions set forth in . . . other governing regulations as to types or amounts of cost items." Id., Att. A, � C.1.d. Further, the same Circular specifies that "[a]ny cost allocable to a particular Federal award . . . may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by law or terms of the Federal awards, or for other reasons." Id., Att. A., � C.3.c (emphasis added).

We conclude that nothing in OMB Circular A-87 makes allowable or permits allocation to title IV-D of costs for caseworker activities the delegation of which is prohibited by title IV-D regulations.

5. ACF has not yet determined whether to approve an exception for one county in New Jersey.

The regulation provides one exception to the bar on delegation of IV-D functions to caseworkers who also perform income maintenance or social services activities, and hence to the allocation of those caseworker costs to title IV-D:

In the case of a sparsely populated geographic area, upon justification by the IV-D agency documenting a lack of administrative feasibility in not utilizing staff of the IV-A agency, the Office may approve alternate arrangements that include sufficient reporting and cost allocation methods that will assure compliance with Federal requirements and proper claims for Federal financial participation.

45 C.F.R. � 303.20(e). In its December 4, 1998 letter to the ACF Regional Administrator in response to the ACF audit, New Jersey singled out one county in which it admitted that "the boundary between the IV-D Agency and IM [income maintenance] staff [is] somewhat blurred," but argued that the situation of that county met the regulatory exception. N.J.A.F. at Aa51. New Jersey explained that the title IV-D agency in that county has only one worker directly assigned to it and must therefore use IM staff as backups. Id. As a result, according to New Jersey, Hunterdon County is in compliance with the requirements for this exception.

During the proceedings in this case, the Board asked both parties whether New Jersey pursued a request for an exception for Hunterdon county and whether such an exception was approved. Letter from Board to parties, dated Oct. 16, 2000, at 2. DCA responded that the federal agency is "not aware of any request for an exception under 45 C.F.R. � 303.20(e) for Hunterdon County." DCA letter to Board, dated Oct. 27, 2000, at 3.

The regulation identifies criteria based on which the Office of Child Support Enforcement of ACF "may approve alternative arrangements" for allocating costs, if given sufficient justification. The language is plainly discretionary. DCA did not assert that Hunterdon County failed to meet the criteria or that New Jersey failed to offer adequate justification for an alternative arrangement there. Rather, DCA's position appears to be that approval has not been properly requested at this point. We thus do not have before us any ACF determination denying a request for an exception.

Nevertheless, the materials submitted by New Jersey in this matter suggest that New Jersey wished to request an exception. New Jersey asserted that its December 4, 1998 to ACF "sought to invoke" this provision, and that, in the absence of a direct response to that letter, New Jersey believed it had "initiate[d] the process of requesting an exception." New Jersey letter to Board, dated Oct. 26, 2000, at 6. Therefore, DCA should refer this issue to ACF for consideration and notify New Jersey as to what additional materials are required to perfect a request for approval and to whom they should be provided. This decision does not preclude DCA from considering any changes later proposed by New Jersey to its cost allocation methodology, if ACF should approve an exception for Hunterdon County.

Conclusion

For the reasons explained above, we sustain DCA's disapproval of New Jersey's proposed CAP amendments.

Donald F. Garrett

M. Terry Johnson

Marc R. Hillson
Presiding Board Member

1. An analogous provision prohibits claiming FFP under title IV-D for administrative costs related to, inter alia, titles IV-A and XX. 45 C.F.R. � 304.23(a).

2. That percentage has varied but has been historically higher than the percentage of expenditures reimbursed to the states under AFDC. Compare section 455(a)(2) with section 403, of the former Act, prior to amendment by PRWORA. Thus, the funding scheme presented some financial incentive to characterize activities that arguably overlapped as incurred under title IV-D rather than title IV-A.

3. The term "public assistance program" as defined in Part 95 includes title IV-D. 45 C.F.R. ��95.505 and 95.503.

4. Later revisions made changes not at issue here and are therefore not discussed.

5. There is no indication in the record that any costs have been disallowed.

6. For example, ACF warned New Jersey that states were "amending their [CAPs] to charge the cost of eligibility or income maintenance workers to the Child Support Enforcement program" and that charging such costs to title IV-D programs was prohibited under the regulations at issue here. Letter from ACF Regional Administrator, to N.J. official, dated Aug. 27, 1998, in N.J.A.F. at Aa45. ACF's letter specifically noted that New Jersey had been claiming costs "based on a proposed CAP which may include unallowable costs" of that type. Id. at Aa46. DCA wrote that New Jersey's CAP revisions had been "held in abeyance pending the outcome of policy decisions" relating to this issue. Letter from Mr. Bamundo, Director of DCA to N.J. officials, dated Jan. 1999, in N.J.A.F. at Aa65.

7. DCA illustrated its position, that the activities picked up by the RMS either constitute nondelegable IV-D functions or did not benefit title IV-D at all, by presenting audit findings of actual observations charged to title IV-D that were found not to benefit IV-D and by providing the most recent revision of the RMS list of caseworker tasks which DCA characterized as "more realistic." DCA letter to Board, dated Oct. 27, 2000, at 1-3. DCA attached the recent July 1999 RMS update to its submission. Id., Att. 1. New Jersey objected that the July 1999 update should be disregarded and excluded from the record, because the revisions there are not applicable until after the time periods in question in this case and have not been disapproved by DCA. N.J. letter to Board, dated Nov. 28, 2000, at 2-3. For purposes of a complete record, we accept the attachment as HHS Exhibit 9. In our discussion, however, we have not relied on the specific observations made in the audit or the items in the July 1999 task list. We have relied, instead, on New Jersey's own characterization of the nature of the activities captured by the RMS and charged to IV-D. Nothing in the audit findings or the various revisions contradicts the conclusions we reach based on New Jersey's own descriptions.