GAB Decision 370
December 28, 1982 Michigan Department of Social Services; Docket No.
82-72 Ford, Cecilia; Settle, Norval Teitz, Alexander
The Michigan Department of Social Services (State) appealed
$4,531,006 /1/ of $7,052,386 of federal financial participation (FFP)
determined to be unallowable by the Director, Division of Cost
Allocation for the Department of Health and Human Services (Agency).
The disallowance followed recommendations contained in an Agency audit
report (Audit Control Number 05-10214) for the period October 1, 1975
through September 30, 1978. The State in its Notice of Appeal appealed
the following four elements of the disallowance: (1) inappropriate
allocations to the Medicaid program, (2) unallocable child care
licensing costs, (3) unallocable summer camp licensing costs, and (4)
unallowable equipment costs. During the course of the proceedings
before the Board, the State withdrew its appeal of the $362,456 of
equipment costs, leaving in dispute $4,168,550 FFP for the remaining
three elements of the disallowance. The particulars with respect to the
remaining areas of dispute will be dealt with separately below.
For the reasons discussed below, we sustain the remaining
disallowance. This decision is based on briefings and documents
submitted by the parties, a telephone conference cal conducted by the
Board, an Order to Develop the Record issued by the Board, and the
parties' responses to the Order. The State had originally requested
that a hearing be held in this case, but subsequently decided that a
hearing would not be necessary. See, Board's November 10, 1982
Confirmation of Telephone Conversation, p.1.
(2) A. Inappropriate Allocations to the Medicaid Program
The Agency disallowed $3,124,835 FFP /2/ which represents the federal
share of administrative costs allocated to the State Medicaid (Medical
Assistance (MA)) program. The disallowance was based on an audit
finding that the State had inappropriately included MA cases related to
Supplemental Security Income (SSI) recipients in the case count base
used in allocating county offices' administrative costs to the MA
program. The Agency proposed that the cases should be included in the
case count on a weighted basis to reflect the "minimal" benefit the
cases received from county activities (see, p. 7. of decision). The
State argued that the cases should be included on an unweighted basis.
The audit report (State Ex. N, p. 6) stated that prior to January 1,
1974 eligibility determinations for Aid to the Aged, Blind, and
Disabled, and related MA benefits for each recipient were made by the
State's county offices. The report contended, however, that after
January 1, 1974, with the establishment of the SSI program, the MA
eligibility determinations for the SSI recipients (MA/SSI) were not made
at the county level, but instead were made at the State level. The
report found that since the county office costs were incurred primarily
for the eligibility determinations of income maintenance programs
remaining under county control and since the eligibility determinations
for the MA/SSI cases were being made at the State level after January 1,
1974, the MA program was receiving minimal benefit from county office
activities. The audit report cited the provisions of Federal Management
Circular (FMC) 74-4, Sec. C.2.a. which states, in part, that:
A cost is allocable to a particular cost objective to the extent of
benefits received by such objective . . . .
The audit concluded that including MA/SSI cases in the allocation
base resulted in overstating costs applicable to the MA program and
understating costs applicable to the other income maintenance programs,
thereby violating the directive of FMC 74-4. The audit report noted
that a similar finding was made for the period January 1, 1974 through
September 30, 1975 in a prior audit, ACN 05-80207. The parties
subsequently agreed to a settlement of this prior finding.
(3) The State conceded that the primary function of the county
offices is eligibility determinations and that those eligibility
determinations for MA/SSI cases are now made at the State level. State
Response to Order, p. 1. However, the State advanced a number of legal
and equitable arguments in support of its position that these costs
should be allowed. These arguments are addressed separately below.
1. Whether an approved cost allocaton plan (CAP) precludes the
Agency from disallowing these costs.
The State contended, and the Agency did not dispute, that it had an
approved CAP on file with the Agency for the years in question and
allocated the administrative costs in accordance with those approved
plans. The State argued, therefore, that the Agency's disallowance of
these costs constitutes a retroactive adjustment of the State's approved
CAPs which is highly inequitable and contrary to applicable law. State
Appeal Brief, p. 5.
The State argued that the Agency's position in this case would result
in a State never being able to rely on its approved CAP. The State
contended that the use of hindsight with regard to the CAP could always
result in a more precise method of allocating costs; however, that is
not the intended purpose of a CAP. The State noted that its position
was echoed by Agency personnel in comments on the recommended adjustment
of the MA/SSI costs contained in the earlier 1977 audit report. State
Brief, p. 6. The memorandum, dated August 3, 1978, from the Assistant
Regional Commissioner of the Office of Family Assistance to the Health
Care Financing Administration stated, in general, that it did not agree
with the recommendation and, more specifically, that:
The audit recommendation appears to be a refinement of an existing
approved cost allocation procedure. As such this recommendation may be
implemented in a revised plan but should not be retroactively applied as
the audit agency recommends.
The State also cited the Agency Handbook for Cost Allocation, April,
1973, Sec. 4, p. 4 in support of its argument. Id. at p. 5. The State
contended that the Handbook states that medical care costs do not have
to be precisely allocated "since legally these costs can be absorbed
under either the Public Assistance or Medicaid programs . . . ."
The State argued that there would be little point to developing and
having approved a cost allocation methodology where:
(4) HHS can say that upon second thought, the State's allocation of
costs should have been more precise even though it complies with the
plan. (State's emphasis.)
Id. at p. 6.
In addition, the State contended that the Agency's "retroactive
determination" is inequitable. The State argued that 45 CFR 205.150(
b)(1) requires as the "only" condition for FFP that a State's claim
be
in accordance with an approved CAP on file with the Agency. State Appeal
Brief, p. 5. The State claimed that it satisfied this provision and,
therefore, the costs should be allowed.
The Agency contended that the approval of a CAP does not constitute
prior approval of the State's charging costs in a manner contrary to
applicable statutes and regulations. Agency Response, pp. 7, 9. The
Agency argued that such a position ignores the fact that the Agency
necessarily approves CAPs on a prospective basis and that claims for FFP
are subject to appropriate documentation and subsequent audit. Id. at
pp. 8-9.
The Agency asserted that while the State had approved CAPs on file
with the Agency for the years in question, that approval was subject to
sepcifically stated conditions. The Agency cited to the Agency's letter
approving the State's FY 1978 CAP which included the following
conditions:
(2) the allocation methods proposed result in the equitable
distribution of cost to benefitting programs;
(4) the costs which are actually claimed by the State are available
under prevailing Federal Department cost principles, program regulations
and law . . . (Agency's emphasis.)
Agency Ex. 5.
The Agency argued, therefore, that there was no Agency approval of
the State's 1978 CAP to the extent that county offices' administrative
costs were allocated to the MA/SSI cases since the MA/SSI cases did not
benefit from the county services. Agency Response to Order, p. 1.
(5) The Agency asserted that, although such explicit language is
absent from the approval of the 1976 and 1977 State CAPs, the approval
of those plans was subject to the "governing principles as set forth in
the pertinent authorities." Id. at p. 2. The Agency contended that the
language contained in the 1978 approval was merely a restatement of
those authorities. The Agency concluded that:
to the extent that the CAPs in question contained sections which
contravened these principles there was no approval.
Id.
The Agency also contended that the regulations at 45 CFR 205(a)(2)
specifically require the State to revise its CAP to reflect
"organizational changes within the State agency, changes in Federal law
or regulations or other similar changes." Agency Response, pp. 13-14.
The Agency argued that the State failed to revise its CAP to reflect the
substantial changes resulting from the implementation of the SSI
program. Id.
With regard to the Handbook cited by the State, the Agency contended
that, while this document was accurate when it was published, tha major
administrative changes with the advent of the SSI program in January 1,
1974 rendered the document inappropriate. Agency Response, p. 15. The
Agency argued that the language relied on by the State:
no longer accurately reflected the possible or legal segregation of
costs and reliance thereon either then or now is misplaced.
Id.
The Agency also argued that, while it agreed that CAPs are not
expected to be "exact" to the penny, the CAPs are subject to the
requirements of FMC 74-4 that costs be allocated "to the extent of
benefits received" and are, therefore, neither "random, haphazard,
nor
imprecise." Agency Response, p. 15. The Agency stated that to allow
these costs would render FMC 74-4 meaningless and would result in
excessive charges to the Agency. Id. at p. 7. The Agency contended
that no Agency official has authority to approve FFP for such
unallowable costs. Id. at p. 11.
With regard to the State's contention that the Agency's disallowance
of these costs is "inequitable", the Agency asserted that prior approval
of the State's CAP is only "one" of several requirements necessary
for
the receipt of FFP. Agency Response, p. 12. The Agency argued that 45
CFR 205.150(a)(1) requires that a State Plan must provide that (6) the
plan is in compliance with FMC 74-4 and other governing authorities.
Id. The Agency argued that the submission of a CAP that does not
conform to the governing regulations, even if approved by the Agency,
violates the State Plan and is, therefore, invalid. Id.
The Board has previously stated that a cost allocation plan
represents a general method of allocation and does not represent an
approval of the individual costs charged under the plan. See, New
Mexico Department of Human Services, Decision No. 211, August 31, 1981;
California Department of Benefit Payments, Decision No. 160, March 31,
1981. The Board has stated further that the Agency's approval of a CAP
does not constitute an approval for the charging of costs in a manner
inconsistent with applicable statutes and regulations. See, Washington
Department of Social and Health Services, Decision No. 336, June 30,
1982; Massachusetts Department of Public Welfare, Decision No. 335,
June 30, 1982.
The Board requested the parties in an Order to Develop the Record to
discuss why the Board's decisions in the Washington and Massachusetts
cases, supra, should not control the Board's finding in this case. The
State responded that it agreed that the Board's findings in those cases
control this case; however, the State contended that, for reasons
previously stated in its briefs, the Board's legal conclusions in those
decisions were incorrect. State's Response to Order, p. 1.
The Board concludes that its legal reasoning in the Washington and
Massachusetts cases, supra, was correct and should, therefore, control
the finding in this case. The CAP, by its nature of being a guide to
the allocation of costs, is approved on a prospective bases. Since it
is not possible for the Agency to anticipate changing circumstances in
programs or how a state will ultimately interpret a CAP in charging its
costs, it is reasonable for the Agency to rely on regulatory constraints
to assure that federal programs are ultimately charged only for the
costs properly allocable to them. The State has not presented any
compelling legal arguments that demonstrate why the Board's earlier
decisions were incorrect. Therefore, the Board reaffirms its earlier
determination that an approved CAP does not constitute prior approval to
deviate from applicable statutes and regulations.
In finding against the State on this issue, it is unnecessary for the
Board to address the State's supporting arguments for its major premise
that the Agency cannot disallow costs charged in accordance with an
approved CAP. Since the Board found, above, that an approved CAP does
not constitute approval to charge costs in a manner inconsistent with
applicable statutes and regulations, it necessarily follows that the
State's collateral arguments supporting a contrary finding must fail as
well as the State's major premise.
(7) 2. Whether the county office activities benefitted the MA/SSI
cases.
The State contended that the Agency presented no "substantial"
evidence that the county level activities provided only minimal benefit
to the MA/SSI cases while the State offered evidence of activities
performed at the county level which benefitted MA/SSI cases. See, State
Ex. Q.
The State alleged that these activities included redeterminations of
eligibility of SSI recipients. The State argued that the burden of
proof should be on the Agency where the Agency attempts to contravene
the terms of an approved CAP. State Appeal Brief, p. 4. Apparently,
the State is arguing that we should assume that the county offices
provided sufficient services to the MA/SSI cases to include them in the
base for allocation purposes, unless the Agency is able to show
otherwise.
As discussed in the disallowance letter (Agency Ex. 14, pp. 7-10),
the Agency reviewed the documentation submitted by the State and
conducted on-site discussions with State officials concerning the
activities performed at the county level. The Agency's finding based on
this information was that some benefit was received by the MA/SSI cases,
but that the State was unable to document "the frequency or actual
extent of effort expended on these cases." Id. at p. 9. The Agency also
found, contrary to the State's allegation, that redeterminations of SSI
eligibility are not prerformed at the county level. Id. at p. 10. The
Agency concluded that the functions shown by the State to be performed
at the county level:
would not appear to require, on an ongoing basis, the same level of
effort per case as an AFDC, GA or NPAFS case which requires eligibility
determination, redetermination as well as ongoing case maintenance
activities.
Id.
The Agency proposed, to account for the "minimal" benefit recognized
at the county level, to factor in a portion of the MA/SSI cases in the
allocation base using a weighted factor of 20%. /3/ This methodology was
previously used in resolving the prior audit.
(8) It is a basic principle of grants law that to be allowable under
a grant program, costs must be reasonable and necessary for the
administration of the program and be allocable to the program. The
regulations further provide that costs are allocable to a program to the
extent they benefit the program. 45 CFR Part 74, App. C., Sec. C. 1.
and C.2.a. (1977); see, also, Massachusetts Department of Public
Welfare, Decision No. 335, June 30, 1982.
The State's method of allocation did not comply with these
requirements. As was noted by the Agency, and not contested by the
State, the implementation of the SSI program resulted in a shift of the
eligibility determination process from the county office level to the
state level. With the occurrence of this change, however, there was no
change in the State's method of allocating these administrative costs.
This resulted in an overstatement of the amount of costs allocated to
the MA program. Since the State conceded that the eligibility
determinations comprise the primary function of the counties with regard
to these programs and that this process was shifted to the state level
for the MA program, the Agency was correct in concluding that the MA
program did not benefit from the county activities to the same extent as
the other three programs. Therefore, despite the Agency's approval of
the State's CAP, the State's allocation of administrative costs to the
MA program in an amount disproportionate to the benefit received is
contrary to the regulations and the resulting claim is, therefore,
properly disallowed.
In finding against the State on this issue, we find unpersuasive the
State's argument that the Agency has the burden of showing that the
county office activities provide only minimal benefit to the MA/SSI
cases. The regulations at 45 CFR 74.61(b), (f), and (g), require that
the State make and retain records of expenditures, and support these
records with source documentation. The Board has found that "(these)
provisions clearly place the burden of establishing the allowability of
costs on the grantee." Neighborhood Services Department, Decision No.
110, July 15, 1980, p. 3. In this case, the State has offered evidence
of the benefit MA/SSI cases receive from county activities. The Agency
acknowledged this benefit. However, the State, as the Agency indicated,
was unable to show that this benefit was in some manner equal to the
benefit provided to the other income maintenance programs and,
therefore, that the MA/SSI cases should be allocated the same proportion
of county administrative expenses. The State did submit to the Board a
list of county office activities which allegedly benefitted MA/SSI cases
(State Ex. Q); however, the State made no attempt to compare this list
of activities to those activities performed on behalf of the other
income maintenance programs. Therefore, we find that the State failed
to sustain its burden to document the allowability of any costs in
excess of what the Agency is allowing.
(9) 3. Whether it is sufficient for the State to document the
allocation of costs in accordance with its approved CAP.
The State asserted that is unable now to provide documentation to
support a different method of allocation of these costs because the
State kept records documenting the allocation of the costs in accordance
with its approved CAPs. The State argued that the regulations at 45 CFR
205.145 require only that the State document costs in accordance with
its CAP and, in any event, it would be highly inequitable to require a
State to keep documentation in anticipation of the Agency requiring a
different method of allocation.
The regulation at 45 CFR 205.145 (1976) provides that a state agency
must:
(maintain) an accounting systems and supporting fiscal records
adequate to assure that claims for Federal funds are in accord with
applicable Federal requirements.
Since, as we have found above, the State failed to allocate costs in
accordance with federal regulations, it follows that the State's records
supporting those costs are also inadequate. In addition, 45 CFR Part
74, App. C, J.1 provides that:
all costs included in the (cost allocation) plan will be supported by
formal accounting records which will substantiate the propriety of
eventual charges.
The provision requires the State to document more than just the
allocation of the costs charged in accordance with its approved CAP; it
requires the State to document the appropriateness of the method of
allocation itself. Therefore, the Agency's request that the State
document the actual amount of benefit to the counties was appropriate.
4. Whether the Agency should be estopped from disallowing these
costs.
The State contended that the Agency should be estopped from
disallowing these costs since the State claimed the costs in accordance
with its approved CAP. State Brief, p. 7. The State alleged that it
satisfied the elements of estoppel as recognized by the Board in
Michigan Department of Social Services, Decision No. 290, April 30,
1982. The State also alleged that it met the further requirement
recognized in Schweiker v. Hansen, 450 U.S. 785 (1981), of finding of
"affirmative misconduct" on the part of a government employee.The
State
argued that since the Agency issued the regulations requiring a State to
have an approved CAP, the Agency (10) issued the Handbook for Cost
Allocation, and the Agency approved the State's CAPs, "affirmative
misconduct" is clearly present. State Brief, p. 12.
We reject the State's argument. We find that the State failed to
show that a government employee engaged in affirmative misconduct with
regard to the approval of the State's CAP. The State did not identify
any particular incident of misconduct by a government employee, but
instead stated generally that the Agency was responsible for the
promulgation of the regulations governing the requirements concerning
CAPs. Without any evidence of specific "affirmative misconduct" by
a
government employee the State has not satisfied the "further
requirement" described by the Supreme Court in Hansen, supra, necessary
to estop the Agency from disallowing these costs. See, also,
Immigration and Naturalization Service v. Miranda, 51 U.S.L.W. 3358,
November 8, 1982. /4/
B. Unallocable Child Care Licensing Expenditures
The Agency disallowed $918,456 FFP of administrative costs incurred
by the State's Child Care Licensing Section in the licensing of child
care centers charged directly to the Title XX program during the period
October 1, 1975 through September 30, 1978. The audit report stated
that the State's Child Care Licensing Section was responsible for
licensing child care centers, as mandated by the State legislature. The
report stated further that the Section also certified child centers in
accordance with Title XX requirements.
The Agency stated that Title XX regulations at 45 CFR 228.42 require
a facility to be both licensed and certified prior to serving Title XX
recipients. The Agency concluded that the Section provided a direct
benefit to the Title XX program only to the extent that it licensed and
certified child care centers in accordance with Title XX requirements.
The audit report found, and the State did not contest, that 62.4% of
the centers licensed were not certified for providing Title XX services.
The Agency determined that 62.4% of the licensed centers were not
providing a direct benefit to Title XX and, therefore, the State
Licensing Section cannot receive FFP for administrative costs with
regard to those centers.
(11) The State did not dispute the Agency's contention that Title XX
regulations at 45 CFR 228.42 set as a condition for receiving FFP that a
facility both be licensed and meeth the Federal Interagency Day Care
Requirements (FIDCR), i.e., they must be certified for participation in
the Title XX program. The State asserted, however, that before a center
could be certified it had to be licensed as required by FIDCR. State
Brief, p. 13. The State asked rhetorically that if the Agency's
position, that FFP is available only to centers which are both licensed
and certified, is accepted:
How then is the State to recover licensing costs for facilities that
choose to wait 1 or 2 years to become Title XX certified.
Id. at p. 14.
The State concluded that "obviously, the allowance of FFP solely on
the basis of certification above is unworkable." Id.
The Agency asserted that the regulation requires a child care center
to be both licensed and certified to provide services to Title XX
recipients. The Agency stated that without meeting these two
requirements, a center "cannot even contract to provide such services"
to Title XX receipients. Agency Brief, p. 23. The Agency argued that:
The licensing function . . . only becomes a benefit to the Title XX
program when the licensing exists along with certification.
Id. at p. 24.
The Agency concluded that since there was no benefit to the Title XX
program if a facility is merely licensed, there can be no FFP.
We agree with the Agency that the regulations are clear that for FFP
to be available for child care the facility must meet the dual
requirements of state licensure and FIDCR requirements. i.e.,
certification. The State did not contest the reading of this
regulation, nor did it show that the facilities met the requirements of
the regulation. Therefore, we find that the child care centers that are
merely licensed do not provide a direct benefit to the Title XX program
and the State Licensing Section cannot receive Title XX FFP for
administrative costs incurred with regard to those centers.
(12) In finding against the State on this issue, we make no attempt
to answer the State's question dealing with how the State is to recover
licensure costs for a facility that is not certified or to address the
State's claim that the regulation is unworkable. The Board is bound by
applicable laws and regulations. 45 CFR 16.14. The regulatory
requirements are clear, as the State does not dispute, and the State has
failed to show that it complied with them. Therefore, we find that the
State is not entitled to FFP under this program. While there may be an
answer to the State's questions, it should be developed through
rulemaking or policy channels, not by this Board.
The State also contended that Title XX regulations at 45 CFR 228.42
provide that non-certified providers could be used if a waiver was
requested and granted. Again, the State asked rhetorically:
How then would the State be expected to recover licensing costs years
later if licensed, but non-certified, centers were used under waiver.
State Appeal Brief, p. 14.
The Agency disputed the State's reading on the Title XX regulations
contending that:
the certification requirement may not be waived, although certain of
the standards for certification may be waived.
Agency Response, p. 23.
The Agency noted that the disallowance letter stated that the State
was contacted about whether the State contracted with any unlicensed or
non-certified facilities which had standards for certification waived
and that a negative response was received. See, State Ex. P, p. 13.
The State has made no attempt to show that any of the questioned
facilities requested and were granted waivers from the certification
requirements. Therefore, even if we were to accept the States's
interpretation of the regulation, there is no evidence in the record to
support a finding that the regulation can be favorably applied to any of
the questioned facilities.
The State also contended that the availability of child care centers
for Title XX contracts is dependent on sufficient numbers of licensed
centers. State Brief, p. 14. The State reasoned that, therefore, (13)
licensed child care centers are a resource, and as such, a proper charge
to Title XX as a resource development. Id. The State argued that this
view was expressed in a policy issuance, PIQ 79-47 (APS) dated October
1, 1979, by the Commissioner for Public Services. See, State Ex. R.
The Agency disputed the State's interpretation of PIQ 79-47 (APS),
which provided that Title XX regulations permitted FFP "to cover the
expense of licensing Title XX resources." The Agency stated that the
document provided further that:
Resources are interpreted to mean facilities that meet the child care
standards and are available for use by Title XX.
The Agency argued that this clearly means that FFP is available only
for facilities which are both licensed and certified. Agency Brief p.
24.
We find that the Agency is correct in its interpretation of PIQ 79-47
(APS). As the Agency noted, the document defines resources as
facilities "that meet the child care standards and are available for use
by Title XX." Id. Since we found that the child care centers in
question here were not certified and, therefore, were not available for
Title XX use, under the definition given in PIQ 79-47 (APS) they could
not be considered a resource.
C. Unallocable Summer Camp Licensing Expenditures
The Agency disallowed $125,259 FFP for Title XX administrative costs
claimed by the State for FY 1976 and FY 1977 for the licensing of summer
camps. The audit report stated that the questioned costs "were incurred
for camps that refused to accept welfare recipients." State Ex. N, p.
21. The Agency stated that Title XX funds are available only for
expenses connected with the provision of Title XX services, e.g.,
services to welfare recipients. The Agency argued, therefore, that
since some of the summer camps were found to refuse welfare recipients,
Title XX funds were not allocable to those camps.
The State does not contest the Agency's legal determination that
Title XX funds are available only where Title XX services are provided.
The State instead attacked the method used by the Agency auditors in
determining whether a summer camp would admit welfare recipients. The
State alleged that the sole basis for the Agency's determination was a
State survey letter dated February 4, 1975 (State Ex. A) which inquired
of the camps whether they could provide financial assistance to the
welfare recipients. State Brief, p. 16. The State contended (14) that
the letter did not concern the camps' policy on the admission of welfare
recipients and, therefore, the conclusions drawn by the Agency with
regard to the responses to the State's letter were incorrect. Id. at
p. 16. The State contended that this is supported by a subsequent
letter dated July 3, 1975 which listed the camps providing financial
assistance to welfare recipients, while noting that the list was not of
all camps but, only those providing "direct financial assistance or fee
reduction." See, State Ex. 13. The State argued that the Agency's basis
for the disallowance was clearly erroneous.
The Agency asserted that it notified the State by letter dated
January 15, 1982 of the Agency's position with regard to the summer camp
licensing costs. See, Agency Ex. 11. The Agency stated that the State
by letter (Agency Ex. 12), and in response to questions during an
on-site visit informed the Agency that it had no additional information
or data to provide. Agency Response, p. 27. The Agency argued that,
while the State claimed that the basis for the disallowance was
inapproriate, the State "has offered no information whatsoever to
support its claim for FFP." Id.
(15) The Agency argued that the State has an obligation to maintain
records to support its claims (see, 45 CFR 228.17) and, in the absence
of such documentatuion, the camps' willingness to accept welfare
recipients "cannot be presumed." Agency Response, p. 28. Therefore,
the
disallowance should be upheld.
The Agency also contended that the State's claim for FFP for FY 1977
is unallowable because:
the claim (was) not made in connection with a service specified or
included in the Comprehensive Annual Services Plan (CASP).
Id.
The Agency asserted that the governing regulations at 45 CFR 228.50
provide that the failure to include a "category of individuals" in
a
CASP means that:
FFP is not available for any expenditure, even if otherwise
allowable, for the provision of services to such category of
individuals.
Id.
The Agency contended that the State sumbitted a claim for FFP for
"camperships" but that "camperships" were not included in
the State's FY
1977 CASP. The State did not address this argument by the Agency.
Although the State may be correct in its claim that the Agency's
conclusions drawn from the State survey letter which appeared to form
the initial basis for the disallowance were incorrect, we find that the
State has failed to meet its obligation to maintain records to supports
its claims for FFP. The State did not contest the Agency's assertion
that for these summer camps to be eligible for Title XX funds they must
admit welfare recipients. However, the disallowance letter indicates
that when requested for information concerning the admission of welfare
recipients the State responded that it had none. State Ex. P, p. 14.
In addition, the State has provided no information in the record of this
appeal which shows that welfare recipients were admitted. As we have
previously stated (see, pp. 7-8 of decision), the State has an
obligation to document its claims for FFP. Failure to provide such
documentation is fatal to such a claim. Since there is no evidence in
the record that the summer camps admitted welfare recipients, we find
that the agency was correct in disallowing this claim.
Conclusion
For the reasons stated above, we sustain the Agency's disallowance of
$4,168,550 FFP. As we noted previously, the $3,124,835 FFP, disallowed
as unallocable to the MA program, is subject to modification as the
parties have agreed (see, no. 2 above). The Agency should refine the
amount of the disallowance and notify the State in writing of the
Agency's calculation of the disallowance. If the State disagrees, it
may then appeal this determination to the Board solely on the issue of
the proper calculation of the disallowance. The State's appeal must be
filed within 20 days of receipt of the Agency's notification of the
amount disallowed. /1/ The State subsequently appealed an additional
$1,979,659. However, the Board on September 30, 1982 rejected
this appeal because it was not filed within 30 days of the State's
receipt of the disallowance letter as required by the Board's
regulations, 45 CFR 16.3(b). /2/ The Agency noted that this is
not an exact figure but is subject to further refinement. The Agency
stated that the State was aware of this need. See, Board's November 10,
1982 Confirmation of Telephone Conversation, p. 2. /3/ Although
the State had previously rejected the use of the 20% weighting factor
(see, State Ex. P, p. 8) the State subsequently agreed that, if the
Board found that the State could allocate only a portion of the costs to
the counties, the State would accept the Agency's 20% factoring method.
Board's Confirmation of Telephone Conversation, p. 2. /4/ Since
we find that the State did not satisfy this further requirment, it is
not necessary for the Board to determine whether the State showed the
other elements of estoppel.
OCTOBER 22, 1983