New York Department of Social Services, DAB No. 908 (1987)

DEPARTMENTAL GRANT APPEALS BOARD

Department of Health and Human Services

SUBJECT:    New York Department of  Social Services

Docket No. 87-54
Decision No. 908

DATE:  October 15, 1987

DECISION

The New York Department of Social Services (State) appealed a
determination by the Office of Family Assistance (OFA, Agency)
disallowing $883,198 in federal financial participation (FFP) claimed
under Title IV-A of the Social Security Act (Act).  These costs had been
initially allocated to the State's Work Incentive Program (WIN) but had
been shifted to Title IV-A after the State exceeded its WIN
appropriation ceiling for the 1981 and 1982 federal fiscal years.

The Agency disallowed the costs on two bases.  The first was that
section 403(d) of the Act imposes a ceiling on the amount of federal
funds that can be used to match the social and supportive services
provided by the State under the WIN program.  The second was that the
cost principles for state and local governments in Office of Management
and Budget (OMB) Circular A-87 preclude the State from shifting costs
allocable to a particular grant or cost objective to another grant
program in order to overcome fund deficiencies or avoid restrictions
imposed by law and further provide that any excess of cost over the
Federal contribution under one grant agreement is unallowable under
other grant programs.  OMB Circular A-87, Attachment A, section C.2.b.,
and Attachment B, section D.9.

As explained more fully below, we uphold the Agency's disallowance.

General Background

Title IV-A of the Act provides for grants to states with approved state
plans for aid to families with dependent children (AFDC). Under the
provisions of Title IV-A, each state is required to include in its State
plan provision for a Work Incentive (WIN) program.  Section
402(a)(19)(A) of the Act.  Specifically, the State plan must provide
that, as a condition for the receipt of AFDC benefits, each eligible
individual must "register for manpower services, training, employment,
and other employment- related activities . . . with the Secretary of
Labor as provided by regulations. . . ."  Section 402(a)(19)(A) of the
Act.  The statute also provides that a state supply social and
supportive services necessary to enable recipients to prepare for,
secure, and retain gainful employment.  Section 402(a)(19)(G) of the
Act.

The crux of this dispute involves the interpretation of sections
403(a)(3)(C) and 403(d) of the Act.  Section 403(a)(3) provides:

       (a)  From the sums appropriated therefor, the Secretary of the
       Treasury shall pay to each State which has an approved plan for
       aid and services to needy families with the quarter commencing
       October 1, 1958--

       (3) in the case of any State, an amount equal to the sum of the
       following proportions of the total amounts expended during such
       quarters as found necessary by the Secretary for the proper and
       efficient administration of the State plan--

          (C)  one-half of the remainder of such expenditures . . . ,

       except that no payment shall be made with respect to amounts
       expended in connection with the provision of any service
       described in section 2002(a) of this Act . . .  other than
       services the provision of which is required by section 402(a)(19)
       to be included in the plan of the State, . . . .

Section 2002(a) covers social services such as child care services,
employment services, training and related services, to list a few.

Under section 403(d), federal financial participation is provided for
the costs of social and supportive services expended for purposes of the
WIN program at the rate of 90 percent. Specifically, section 403(d) of
the Act provides:

       (1)  Notwithstanding any provision of subsection (a)(3), the
       applicable rate under such subsection shall be 90 per centum with
       respect to social and supportive services provided pursuant to
       section 402(a)(19)(G). . . .

       (2)  Of the sums authorized by section 401 to be appropriated for
       the fiscal year ending June 30, 1973, not more than $750,000,000
       shall be appropriated to the Secretary for payments with respect
       to services to which paragraph (1) applies.

Parties' Arguments

The State argued that, notwithstanding the appropriation restrictions
applicable to the WIN program, the appellant is legally entitled to
receive federal funding under Title IV-A for otherwise eligible
expenditures which were initially allocated to the WIN program.  The
State contended that the appropriation restriction merely limits the
amount of FFP available under the WIN program at the enhanced rate of 90
percent.  The State argued that after the funding cap is reached,
federal funding at the rate of 50 percent is available under Title IV-A
for the remainder of costs incurred under the WIN program.  The State
further reasoned that section 403(a)(3)(C) of the Act clearly provides
that Title IV-A funding is available for expenditures incurred under the
WIN program.  Thus, the cost principles cited by the Agency as the basis
for this disallowance may not be applied as they are inconsistent with
the statutory provision. The State maintained that it would be
incongruous for Congress on the one hand to allow for such funding under
section 403(a)(3)(C), and on the other to prohibit reimbursement in
cases where a grantee exceeded its WIN appropriation limit under section
403(d).

The Agency argued that while the exception language in section 403(a)(3)
of the Act permits Title IV-A funds to be used for those social and
supportive services mandated by the WIN program, the amount to be
claimed is limited by section 403(d).  The Agency argued that principles
of statutory construction provide that where two statutes are in pari
materia (statutes which relate to the same thing or having a common
purpose) each must be regarded as effective.  The Agency contended that
the plain and unambiguous language of section 403(d)(1) is that costs
expended for social and supportive services unique to the WIN program
will be reimbursable only at 90 percent FFP and only up to the specified
amount of the appropriation.  The Agency claimed it would be illogical
for Congress to establish a program with a cap on appropriations and
fixed FFP rate yet allow all costs to be shifted to an uncapped program
in order to defeat the cap. 1/ Analysis

We reject the State's arguments and find that the State is limited by
appropriation restrictions to the amount of FFP it may receive for costs
associated with the WIN program.

The State's argument is based solely on the effect of the exception
provision in section 403(a)(3) of the Act. Consequently, our analysis
must begin at that point.  The legislative history of the exception
provision indicates that this provision was added to the Act as a result
of Congress' intention to remove social services from Title IV-A and
instead to include the provision of social services to welfare
recipients in a new Title XX.  S. REP. NO. 1153, 93rd Cong., 2nd Sess.
(1974) describing legislation subsequently enacted as Pub. L.  93-647,
sections 3(a) and (b), January 4, 1975.  As a result, section 403(a)(3)
of the Act was substantially amended to include the exception provision
language.  This exception language precluded reimbursement under Title
IV-A for administrative costs expended in connection with the provision
of any service described in section 2002(a)(1) (Title XX) of the Act
other than certain services, one of which is the provision of WIN
services required by section 402(a)(19) to be included in the plan of
the State.  The result of these amendments was a capped comprehensive
program for social services under Title XX, the simultaneous repeal of
nearly all of the social services authorizations under Title IV-A, and
removal of the cap from Title IV-A to Title XX. The only funding
provisions for social services remaining under section 403(a)(3) of the
Act by Congress were WIN, which was already capped, certain other
employment programs, and emergency assistance for needy families.

The Senate Report, however, indicated that although provision was made
for limited social service funding under WIN, Congress intended to
continue to keep these expenditures strictly limited. The Senate Report
explained that while social services necessary to enable an AFDC
recipient to participate in WIN were not subject to the exclusion for
funding, these services "continue under prior law with 90 percent
Federal matching and with funding of these services limited to the
amounts appropriated."  S. REP.  NO. 1153, 93rd Cong., 2nd Sess. (1974).

Thus, the legislative history is clear; while recognizing that certain
social and support services must necessarily be provided under the WIN
program, Congress intended that the costs of these services be
reimbursable under IV-A in accordance with section 403(d) at 90 percent
FFP and limited to the amount appropriated under that section of the
Act.

Moreover, the general principles of statutory construction dictate that
statutes having the same purpose or object (in pari materia) should be
read together as complementary, not contradic- tory.  Here, the
exception provision of section 403(a)(3) must be read together with
section 403(d).  It is indisputable that these provisions relate to the
same purpose.  The logical consequence of reading these two provisions
together is that the provisions of section 403(a)(3) are explicitly
qualified by the language of section 403(d).  The result is that section
403(a)(3) will allow the limited provision of social and supportive
services applicable to the WIN program under Title IV-A but that the
rate of reimbursement for those services and the amount appropriated for
those services is specified and limited by section 403(d).

Furthermore, this conclusion about the correct statutory interpretation
of these provisions is supported by additional evidence that these
provisions have been consistently interpreted by the Agency charged with
administering them in this manner. For example, the Agency published
notices establishing the annual limits of entitlement for states for FFP
in expenditures under WIN pursuant to section 402(a)(19)(G) and 403(d)
of the Act. These notices contained language such as the language
included in the notice published on September 8, 1976 referring to
fiscal year 1977 which stated:

       Upon promulgation of these limits, request for federal financial
       participation in expenditures incurred pursuant to section
       402(a)(19)(G) during Fiscal Year 1977 will not be honored to the
       extent they exceed promulgated limits.

41 Fed. Reg. 43221 (September 30, 1976).  See also 41 Fed. Reg 12733
(March 26, 1976); and 41 Fed. Reg. 22975 (June 8, 1976). This language
evidences that the Agency consistently interpreted that reimbursement
for WIN expenditures are limited by the amount appropriated pursuant to
section 403(d).

The legislative history, the principles of statutory construction, and
consistent interpretation of these provisions by the Agency lead us to
conclude that the costs of social and supportive services of the WIN
program are limited by appropriation restrictions and cannot be charged
instead as administrative costs reimbursable at 50 percent under Title
IV-A. We disagree with the State that this leads to an incongruous
result.  Congress excepted WIN social and supportive services from the
prohibition on reimbursement for social services under Title IV-A, but
all this was intended to do was to allow these costs to be funded under
Title IV-A, unlike the social service costs which now were to be funded
under Title XX.  This section, however, does not specify the rate of
reimbursement for those costs nor does it establish the limits on those
reimbursements.

OMB Circular A-87, Attachment A, paragraph C.2.b. provides that costs
allocable to a particular grant or cost objective may not be shifted to
other grant programs in order to avoid restrictions imposed by law.  The
State argued that the cost principles do not apply here because they are
inconsistent with section 403(a)(3)(C) of the Act.  The cost principles
are not inconsistent with section 403(a)(3)(C) because this section must
be read together with the funding restrictions in section 403(d). Thus,
the State's transfer of the amounts in excess of this limitation to its
claim for Title IV-A administrative costs is contrary to the cost
principles.  .Conclusion

For the reasons indicated above, we sustain the disallowance in the
amount of $883,198.

 


                            ________________________________ Cecilia
                            Sparks Ford

 


                            ________________________________ Norval D.
                            (John) Settle

 


                            ________________________________ Alexander
                            G. Teitz Presiding Board Member

 


1.   The parties both cited New York State Department of Social
Services, Decision No. 759, June 13, 1986, which dealt with whether
certain activities should be funded under WIN as opposed to Title XX.
That decision, however, is not applicable here because it does not
address the specific issue raised here of whether social services
allocable to WIN could be funded under Title IV-A at the 50 percent FFP
rate after the WIN appropriation limitation has been exceeded.  For the
same reasons, we did not address Wisconsin Department of Health and
Social Services, Decision No. 696, October 16, 1985, relied on by the