GAB Decision 484
Docket No. 83-114
November 30, 1983
Oklahoma Department of Human Services;
Ballard, Judith; Settle, Norval Teitz, Alexander
The Oklahoma Department of Human Services (appellant, State) appealed
the disallowance by the Regional Administrator of the Office of Human
Development Services (respondent, Agency) of federal financial
participation (FFP) under Title XX of the Social Security Act in the
amount of $1,148,734. This amount represented an increase in prior FFP
claims by the State claiming expenditures of $315,210 FFP from the Work
Incentive program (WIN) and $833,524 under its Title XX program during
the fiscal year 1979 (FY 79). The basis for the disallowance was that
the claims were not timely filed under statutory requirements. This
decision is based on the entire record, including a telephone conference
on October 25, 1983.
Based on our analysis below, we sustain the disallowance on the
ground that the State did not file its claim for the particular
expenditures within the statutory claiming period.
Facts
The FFP claims of the State and their time sequence are vital to an
understanding of the issues in this case. The State had filed claims
for FFP for Title XX expenditures totalling $38,495,006. These were
reported on the quarterly statements of expenditures (QER, SRS-OA-41)
for FY 79 (Respondent's Exhibit B). /1/ These claims exceeded the
State's Title XX FFP allotment by $1,127,006. /2/
(2) Thereafter the State by forms dated May 1, 1981 adjusted the
total amount of FFP claimed for FY 79 downward by $824,092 to
$37,670,914. (Respondent's Exhibit C, p. 1, line 14) This left the
amount of FFP claimed as $302,914 in excess of the "allotment
limitation" or cap (Id., line 16).
On October 23, 1981 the State filed a QER for the quarter ended
September 30, 1981 in which it again adjusted downward the amount of FFP
claimed for FY 79 by $767,030. This amount represented expenditures in
1979 which had been previously reported as Title XX expenditures but
which were now being transferred out of Title XX and claimed as expenses
under Title XIX, or Medicaid. (Respondent's Exhibit D, p. 2) /3/
Since the State had previously claimed $302,914 in excess of its
Title XX cap, this decrease in the amount claimed for FY 79 by $767,030
meant that the State's FFP claim was now $464,116 less than its cap,
which it had already received. The Agency then notified the State that
it should return this amount of $464,116. (Appellant's Exhibit B)
The State, now realizing what had happened, filed another revised QER
on November 22, 1982. /4/ This revision for the quarter ended September
30, 1981 increased the prior claims for FFP for FY 79 by $1,148,734.
This amount represented expenditures of $315,210 FFP from the Work
Incentive program (WIN) and expenditures of $833,524 FFP from the Child
Welfare Services program (CWS), which were now transferred to Title XX
expenditures for FY 79. It is this amount of FFP claimed, $1,148,734,
which was disallowed for untimely filing and is the subject of this
appeal.
Statute and Regulation
The sole issue in this appeal is whether the claim for FFP filed by
the State of Oklahoma for FY 79 was filed within the statutory (3)
limitation on claiming. The statute is section 1132 of the Social
Security Act, added by Pub. L. 96-272, section 306:
(a) (Any) claim by a State for payment with respect to an expenditure
made during any calendar quarter by the State --
(1) in carrying out a State plan approved under title I, IV, V, X,
XIV, XVI, XIX, or XX of this Act, or
(2) under any other provision of this Act which provides (on an
entitlement basis) for Federal financial participation in expenditures
made under State plans or programs,
shall be filed (in such manner and form as the Secretary may by
regulation prescribe) within the two year period which begins on the
first day of the calendar quarter immediately following such calendar
quarter; and payment shall not be made under this Act on account of
such expenditure if claim therefor is not made within such two-year
period; . . . .
(b) (1) The amendent made by subsection (a) shall be effective only
in the case of claims filed on account of expenditures made in calendar
quarters commencing on or after October 1, 1979.
(2) In the case of claims filed prior to the date of enactment of
this Act (June 17, 1980) on account of expenditures described in section
1132 of the Social Security Act made in calendar quarters commencing
prior to October 1, 1979, there shall be no time limit for the payment
of such claims.
(3) In the case of such expenditures made in calendar quarters
commencing prior to October 1, 1979, for which no claim has been filed
on or before the date of enactment of this Act, payment shall not be
made under this Act on account of any such expenditure unless claim
therefore is filed (in such manner and form as the Secretary shall by
regulation prescribe) prior to January 1, 1981. (Extended to May 15,
1981; see, n.5 below)
(4) The provisions of this subsection shall not be applied so as to
deny payment with respect to any expenditure involving adjustments to
prior year costs or court-ordered retroactive payments or audit
exceptions.
(4) The implementing regulation is 45 CFR Part 95, Subpart A (1981).
Section 95.19, providing for exceptions to time limits, simply tracks
the statute.
The pertinent section for this appeal is 95.4, Definitions. It
includes the following:
Adjustment to prior year costs means an adjustment in the amount of a
particular cost item that was previously claimed under an interim rate
concept and for which it is later determined that the cost is greater or
less than that originally claimed.
Audit exception means a proposed adjustment by the responsible
Federal agency to any expenditure claimed by a State by virtue of an
audit.
Claim means a request for Federal financial paticipation in the
manner and format required by our program regulations and instructions
or directives issued thereunder.
The arguments of the parties
The position of the Agency was based on the statutory time limitation
on filing claims. The FY 79 expenditures which were originally under
the WIN and CWS programs had never been claimed for FFP under Title XX
until November 22, 1982. This, argued the Agency, was clearly too late.
/5/
The State in its Notice of Appeal to the Board dated June 14, 1983,
in addition to general grounds, gave the following as grounds for
reversal:
OHDS abused its discretion by not allowing an opportunity to file a
waiver to claim out of time prior to citing a disallowance;
in the alternative, the disputed amount was an adjustment to prior
year costs exempted from the time limitation as a matter of law.
(5) Neither of these grounds are relied on by the State in its brief.
In the telephone conference of October 25, 1983 the State said it was
not pressing the first ground. (Summary of Telephone Conference, dated
October 28, 1983) It is unnecessary to consider these two grounds in
detail, since even if the State has not waived them, they are clearly
inapplicable here.
There is nothing in the record to show that the State ever asked for
a good cause waiver from the Secretary on the statutory time limitation,
as spelled out in the regulation. 45 CFR 95.22 through 95.34. /6/
There is certainly no requirement that the Agency suggest to the State
that it could ask for a waiver. There is in the record nothing which
would in any way support a claim of abuse of discretion on the part of
the Agency.
Similarly, there is no basis for exempting the claim at issue here as
"an adjustment to prior year costs." The definition of this exception
in
the regulation is not attacked as either an unreasonable interpretation
of the statute or inconsistent with it. Clearly the claim here does not
come within the reglatory definition of this exception as "an adjustment
in the amount of a particular cost item that was previously claimed
under an interim rate concept."
In its brief, the State relied on the following arguments:
1. The revision of November 22, 1982 was not a claim for FFP but an
attempt to produce documentation for an audit exception.
2. The November 22, 1982 report fell within the statutory exemption
of an audit exception.
(6) The Agency position was that the submission of the quarterly QER
constituted the filing of a claim which did not meet the statutory
exemptions from the timely filing requirements.
Analysis
1. Audit Exception.
The statute provides that the time limitation for filing claims
"shall not be applied so as to deny payment with respect to any
expenditure involving . . . audit exceptions." Section 1132(b)(4).
There is no definition of an audit exception in the statute but the
regulation has one:
Audit exception means a proposed adjustment by the responsible
Federal agency to any expenditure claimed by a State by virtue of an
audit.
45 CFR 95.4
The State contended that the letter of July 28, 1982 from the Chief
of the Special Financing and Cash Management Section is an audit
exception under the statute and the regulation. (Exhibit B to the
State's Brief) The body of this letter is short enough to be set out in
full:
In reviewing your account (PIN 1918) we find the Social Services
Program (prior years) over-advanced by $464,116.00.
This results from the program agency deobligating $464,116.00 from
DFAFS document number 01-81010K1138.
In order that this debt might be satisfied, kindly remit a check
payable to the Department of Health and Human Services in the amount of
$464,116.00 to this office to my attention.
Your cooperation will be appreciated.
The State claimed that this letter "may not have had all the
trappings of a formal audit", but that the bottom line of "kindly
remitting" certainly had the appearance of an audit exception. State's
Brief, p. 3.
The Agency's answer was that this clearly does not come within the
definition of an audit exception. The letter conveyed the information
that since the State had "inexplicably" withdrawn so much of the Title
XX costs that the remainder was insufficient (7) to support the FFP
previously paid the State, the State had been "over-advanced" FFP
in the
amount of $464,116 and the Agency wanted this money back.
To have an "audit exception" we need first to have an "audit".
There
is no definition of an "audit" in either section 1132 of the Act or
in
45 CFR Part 95, Subpart A. However, there is a description of one type
of audit in the section on Public Assistance Audits in 45 CFR 201.12;
another type is described in Attachment P of OMB Circular A-102; still
another is in the OHD Grants Administration Manual at 1-3-8.
The "kindly remit" letter did not arise by virtue of an "audit",
either as described in the references above, or in the everyday use of
the term. /7/ It was based on simple arithmetic. The State had been
paid a certain amount of FFP, which was its Title XX cap. All the
Agency had to do was look at the revised expenditure report, and see
that the State's total claim for FFP was less than that. There was no
need for any detailed analysis of records. In this case there is no
contention that the State had used any funds for Title XX improperly.
The only problem was that the State's FFP claim under Title XX was less
than its cap, which it had already received. To determine this required
simple arithmetic. The State referred to the cause of the problem as an
"addition error." State's Brief, p. 2. The Agency said the
determination could be accomplished "by the basic arithmetic function of
subtraction." Respondent's Brief, p. 8. In any case, the "kindly remit"
letter is not based on an audit.
Even if the "kindly remit" letter were considered as based on an
audit, it would not come under the definition of an "audit exception."
It is not "a proposed adjustment" by the Agency "to any expenditure
claimed by a State by virtue of an audit." The State's new claim here in
November 1982 was not an adjustment to previously claimed Title XX
costs, but a wholly new category of costs (WIN and CWS). The State's
revised QER did not disprove any "audit exception"; it simply added
substantial expenditures from other programs.
Here the QER the State submitted showed it had received more FFP than
it had claimed. The Agency looked at it and asked for the difference.
The State did not dispute the Agency's reply to the State's computation.
Instead, it submitted a new QER with (8) unrelated expenditures from
other programs. This is certainly not a claim "involving" an "audit
exception."
2. Whether the revised expenditure report is a claim.
The State in its brief stresses that the revised expenditure report
of November 22, 1982 was "not a claim for money." It was instead "an
attempt to produce documentation for an audit exception" raised by the
letter requesting the return of the $464,116. Oklahoma's Brief, pp.
1-2. We have already found that this letter was not an "audit
exception" within the statute or the regulation.
The State further contends that the November 1982 revision was not a
claim as defined in the regulation. The definition is in 45 CFR 95.4:
Claim means a request for Federal financial participation in the
manner and format required by our program regulations, and instructions
or directives issued thereunder.
The State's argument is that the expenditure statement of November
22, 1982 was not a request for financial participation, "since the FFP
had long since been received and spent but was justification to keep
from having to make a refund." Oklahoma Brief, p. 2.
This semantic differentiation loses sight entirely of the manner in
which FFP is paid to the states in the various public assistance
programs. The states are not expected to put up in advance the federal
share of expenditures by the states. The states estimate each quarter
how much federal money they expect to need in each program. This
estimate may be reduced or increased when a grant award is made to a
state. The state may then draw down the grant award funds on a letter
of credit system. After each quarter a state submits a quarterly
statement of expenditures for each of the public assistance programs,
and an adjustment is made by comparing what the state has expended with
its grant award. The quarterly expenditure report determines how much
FFP the state will finally receive in each program; the grant award is
not determinative of how much FFP the state should receive. See,
section 2002(b)(1) and (b)(2) of the Social Security Act and 45 CFR
201.5.
So here the State's revised expenditure report of November 22, 1982
is definitely "a request for federal financial participation." The
fact
that the State had received the full amount of its Title XX cap did not
mean it could automatically keep it. The State would have to show a
sufficient amount of allowable Title XX expenditures to justify
retention of the money it had received. The State could (at least until
the time of any limitation) (9) transfer expenditures in and out of its
claim for Title XX FFP by adding to or subtracting expenditures on
revisions of the quarterly reports. But here each revised expenditure
report was a separate "claim" for payment. Even though it may have
been
a claim for less money than the State had actually received, it was
still a claim. The State originally claimed an amount far in excess of
its cap; it then chose to claim for much less by revising its
expenditure report to take out certain Title XIX expenditures. This was
still a claim for FFP, but in a reduced amount. The later revision
added in different expenditures for which the State had not previously
requested FFP under Title XX. Therefore, we find that the revised
expenditure report of November 1982 constituted a "claim" within the
meaning of the time limitation provisions.
3. Does a claim have to be filed on time in a particular program?
The issue of whether the State claim was filed within the statutory
limitation turned out to depend on whether the statutory (and
regulatory) time limitations are program-specific. That is, must a
claim be filed timely in a particular public assistance program to be
eligible for FFP in that program, or is it enough if the expenditures
were claimed in some program before the time runs out? The issue is
vital here because presumably the expenditures in the CWS and WIN
programs were in fact claimed in those programs before the time for
filing had expired. However, these expenditures were clearly not
claimed in the Title XX program within the time limitation.
The language of the statute is helpful but not necessarily
determinative. Section 1132(a) of the Act provides in part:
(Any) claim by a State for payment with respect to an expenditure
made during any calendar quarter by the State --
(1) in carrying out a State plan approved under title I, IV, V, IX,
X, XIV, XVI or XIX or XX of this Act . . . shall be filed. . . .
It is certainly a reasonable interpretation of this language that a
claim for FFP under Title XX has to be for an expenditure "in carrying
out a State plan approved under Title . . . XX of this Act."
The language of the implementing regulation, 45 CFR Part 95 (1981),
supports the interpretation that a claim must be filed within the time
limit in a particular program, by listing each title separately.
(10) Sec. 95.1 Scope
(a) This subpart establishes a two year limit (15 months in some
cases) for a State to claim Federal financial participation in
expenditures under State plans approved under the following titles of
the Social Security Act:
Title I - Grants to States . . .
* * *
Title XX - Grants to States for Services.
The language of the regulation carries this differentiation among
programs further by specifying that claims in different programs are to
be made to different components of the Department of Health and Human
Services. 45 CFR 95.10, the time limitation applicable here, provides:
Under the programs listed in Sec. 95.1, we will pay a Store for a
State Agency expenditure made before October 1, 1979, only if the State
filed or files a claim with us for that expenditure before January 1,
1981. . . .
In Sec. 95.4, "us" is defined as referring to:
HHS's Health Care Financing Administration, Office of Child Support
Enforcement, Office of Human Development Services, or the Social
Security Administration, depending on the program involved.
The fact that claims for different programs are handled by different
components of HHS is another reason why claims for FFP in a particular
program should be filed in that program within the time limit
prescribed. Otherwise, at the end of the statutory period, one
component will not know if other claims may come in later from another
component. For example, here the Office of Human Development Services
(OHDS) had no way of knowing, when the time for filing claims had run,
whether other claims might come in later transferred from other
programs. On the last day for filing, Oklahoma's FFP claim was some
$464,000 short of its ceiling. OHDS might be surprised that Oklahoma
did not claim up to its cap, but there is no requirement that a state do
so.
(11) So also the CWS and WIN programs, from which Oklahoma tried to
transfer expenditures to Title XX in November 1982, would not have a
fixed figure when the time limitation ran. /8/
Another reason why expenditure claims should be made timely in the
particular program is that there are different provisions for
determining when expenditures are made in a particular program for
limitation purposes. 45 CFR 95.13. The only program which has an
entirely different rule for the date of expenditure is Title XX.
Section 95.13(c), referring to 45 CFR 1396.52(d). /9/ The fact that a
separate section in another regulation fixes the date of expenditures is
one more illustration that filing was intended to be timely in a
particular program.
Another separate regulation illustrating the same point is 45 CFR
201.5, providing for grant awards based on estimates and for adjustments
based on expenditure reports. This includes the following provision:
The State agency must also submit a quarterly statement of
expenditures for each of the public assistance programs under the Act.
(emphasis supplied)
Section 201.5(a)(3)
The procedure for making grants to states in Part 201 is specifically
made applicable to Title XX grants by 45 CFR 1396.52(e). (See n. 9)
Therefore expenditures to be claimed under Title XX (12) must be filed
under that program. The States are allowed to transfer expenditures
from one program to another while the statutory time limitation is
running. But once that has run, they may no longer transfer
expenditures from another program.
That is entirely in line with the purpose of the statute, to enable
HHS to know at a certain period in time what its total FFP obligations
were. And it was not enough for HHS to know what its total obligations
were in all public assistance programs; it needed to know what was its
maximum possible obligation in each program. This was not only because
different programs are administered by different components of HHS.
More important, the same financial considerations do not apply to all
public assistance programs. Medicaid, for instance, is open-ended while
Title XX has a cap. A transfer from Title XX to Title XIX, which still
leaves the State up to its cap in Title XX, would mean the federal
agency would be responsible for paying that many more dollars in FFP
than it originally planned.
This is brought out in the case of Connecticut v. Schweiker, 684 F.
2d 979, 982 (D.C. Cir. 1982):
For a number of reasons, the states have regularly included in their
quarterly reports previously unreported expenditures incurred in earlier
quarters. Known as prior-period adjustments, these are, in effect,
claims for reimbursement for earlier expenditures. Until 1980, the
Social Security Act contained no time limits for submitting claims for
prior-period expenditures. The absence of any time limits apparently
made it more difficult for HHS to plan and administer the budget for the
various Social Security Act programs. . . . (emphasis supplied)
Although the particular issue here is one of first instance before
the Board, there is a Board decision which is analogous in some
respects. In New Mexico Human Services Department, Decision No. 223,
October 29, 1981, the State appealed a disallowance of FFP under Title
XX for child day care services. The State admitted the amount was not
allowable under Title XX but argued that it had effectively claimed FFP
under Title IV-A and was entitled to a pro-rata share under Pub. L.
95-291. This Act provided for partial reimbursement to the State for
social services rendered prior to the beginning of Title XX programs in
1975. Section 2 of the Act refers to a claim as one:
That the Secretary determines was asserted against the United States,
in the form and manner prescribed by the Secretary with respect to the
filing of claims (13) under titles I, IV-A, V, VI, X, XIV, and XVI of
the Social Security Act. . . .
The Board upheld the disallowance since "a Title IV-A claim was not
made by the State in the form and manner prescribed by the Secretary" as
required by Pub. L. 95-291. The Board relied on the requirements in 45
CFR 201.5(a), supra, saying that "these regulations required that the
State agency submit 'a quarterly statement of expenditures for each of
the public assistance programs under the Act.'"
Considering the reason for the limitation in Pub. L. 96-272, and the
similarity of the language of the statute to Pub. L. 95-291, the same
reasoning must apply here. The statement of expenditures which has been
filed in final form within the statutory time limit must be for
expenditures in that program. It is not enough if expenditures were
made in another program before the time limitation went into effect and
then were transferred to Title XX after the time limitation.
CONCLUSION
We uphold the disallowance because the claim for FFP by the State in
the Title XX program was not filed within the statutory time limitation.
The amount of the disallowance was $1,148,734. However, since the State
received only $464,116 more in FFP than the Agency allowed, the State
obviously does not need to repay more than that amount. /1/ The Agency
refers to these QERs as being the claims "originally" filed by
the State for Title XX FFP for FY 79. An examination of the QERs shows
that one of the four in Exhibit B was "revised" and another is headed
"Revision #2." These revisions do not affect the controversy before
the
Board. /2/ Title XX program funding, as distinguished from a
public assistance program such as Medicaid, is not open-ended. There is
a statutory limitation on the amount of FFP for Title XX for each state,
commonly referred to as a "cap". /3/ The Agency in its brief
states that the effect of this decreasing adjustment was to remove
expenditures for FY 79 representing $828,993 FFP from total FY 79 Title
XX expenditures previously claimed. (p. 2) An examination of
respondent's Exhibit D shows that part of this amount was for FY 80 and
FY 81, and only $767,030 was for FY 79. /4/ The State's brief
referred to the cause of its problem as an "addition error." The record
does not show why the State decided to transfer expenditures claimed
under Title XX to Title XIX, but it presumably did not realize that the
transfer left it far short of its cap which it had already been paid.
/5/ Respondent's brief states that section 1132 requires that
expenditures made prior to September 30, 1979 be filed no later than
September 30, 1981. (p. 4) The statute itself requires such claims to
be filed by January 1, 1981. Under the waiver of the time limitations
for good cause permitted under the statute the Secretary extended the
time limitation to May 15, 1981. See, 45 Fed. Reg. 3528, January 15,
1981. /6/ In the State's Addendum to its brief, the statement is made
that HHS had granted an extension to October 1981 (p. 2) and an
attachment contains a memorandum by the State of a telephone call to
that effect. Since it is the November 1982 filing at issue here, we need
not consider whether the purported extension to October 1981 met the
waiver requirements. The State's brief also contains a hearsay on
hearsay statement that an employee in the regional office and advised in
August 1982 "that a subsequent revision would be appropriate if
additional expenditures could be found." The State offered this "for
whatever it is worth." (Id., p. 3) Clearly this could by no stretch of
the imagination constitute a "good cause" waiver under the statute
and
regulation. Presumably the State could still apply for a good cause
waiver under the regulations even after the Board has issued its
decision. Illinois Department of Public Aid, Decision No. 440, June 16,
1983. /7/ BLACK'S Law Dictionary, Fifth Edition, defines an
audit as "(Systematic) inspection of accounting records involving
analyses, tests, and confirmations." /8/ It appears that these
programs may not have been actually affected in this particular case.
The expenditures pulled out of the CWS program presumably did not alter
the amount of FFP to which the State was entitled in that program.
(See, Attachment No. 5 to addendum to State's brief) As for the WIN
expenditures transferred to Title XX, the State did not bother to deduct
them from the WIN expenditure report, again claiming that the amount of
FFP would not be affected. The fact that in this particular instance
two out of the three programs would know how much the State claimed when
the time limitation ran out should not affect the general principle.
/9/ The social services provisions of Title XX of the Social Security
Act were replaced by the Block Grants to States for Social Services in
the Omnibus Reconciliation Act of 1981. (Pub. L. 97-35, sections
2351-54) The references to sections of 45 CFR Part 1396 in 45 CFR Part
95 (1981 and 1982) are to Part 1396 as it appears in the 1980
codification.
NOVEMBER 14, 1984