DAB Decision 77
January 31, 1980 Michigan Department of Social Services; Docket No.
78-158-MI-SS; Decision No. 77 Kelly, Bernard E.; Malone, Thomas Mason,
Malcolm S.
SUMMARY
(The following summary is prepared on the responsibility of the
Executive Secretary of the Board as a convenience to the interested
public. It is not an official part of the decision and has not been
reviewed by the Panel. Similar official summaries of earlier cases
appear in 45 CFR Part 16, Appendix.)
This decision and our Decision No. 76 involve parallel issues - whether
non-expendable personal property must first be capitalized and
depreciated before it is subject to the appropriate rate of FFP. For
the reasons stated fully in Decision No. 76, the Board affirmed the
disallowance.
DECISION
Both this decision and the one in Docket Nos. 78-70-MI-CS and
79-159-MI-CS (our Decision No. 76 ) involve parallel issues--whether
nonexpendable personal property must first he capitalized and
depreciated before it is subject to the appropriate rate of Federal
financial participation (FFP).
Procedural Background
By letter dated November 13, 1976, the Associate Commissioner, Office of
Family Assistance, Social Security Administration (SSA), notified the
Michigan Department of Social Services (055) of a disallowance of
527,322 incurred for the cost of equipment and furnishings in excess of
5300 per unit purchased during the quarters ended December 31, 1977
($9,663), March 31, 1978 ($5,398), and June 30, 1976 ($12,261). The 055
filed a timely application for review on December 6, 1976. Since there
had not been a request for reconsideration before March 6, 1978, the
disallowance having been made after that date, the appeal proceeded
under 45 CFR Part 16 (197,).
On January 8, 1979, the Executive Secretary requested that a response to
the appeal be filed within 30 days by SSA. On February 2, 1979, in
response to a request for an extension of time for filing a response, an
extension was granted, making the response due by March 9, 1979. A copy
of the record compiled by SSA was submitted on February 9, 1979. The
SSA response was submitted on March 9, 1979.
An Order to Show Cause was issued on August 23, 1979. At the invitation
of the Board, both parties asked that their responses to the Order
issued in 78-70-MI-CS be incorporated into the file in this case.
Relevant Statutory and Regulatory Provisions
Title IV-A of the Social Security Act (Sections 401 through 411)
established the program for providing assistance to families with
dependent children. Section 403(a) states:
From the sums appropriated therefor, the Secretary of the Treasury
snaIl pay to each State which has an approved plan . . . for each
quarter ... (3) an amount equal to the sum of
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the following proportions of the total amounts expended during
such quarter as found necessary by the Secretary of Health,
Education, and Welfare for the proper and efficient administration
of the State plan ... (il) one-half of the remainder of such
expenditures
The general implementing regulations for Title IV-A of the Social
Security Act can be found at 45 CFR 201 et seq. (October 1, 1977).
Section 205.166 addresses the treatment of non-expendable personal
property. 45 CFR 205. 160(a) (1) states that items of non-expendable
personal property costing less than $5000 per unit may be subject to FFP
in full at the option of the IV-A agency in the State. This is subject
to an exception in Section 205.160(a)(3) which concerns the treatment of
property acquired by organizational elements treated as indirect cost
centers or pools in an SRS cost allocation plan. In these situations,
non-expendable personal property costinf over $300 must first be
capitalized and depreciated (or be subject to a use allowance). The
grantee receives EFP at a rate equal to 50% of the depreciation expense.
45 CFR 74.132 defines non-expendable personal property as:
"tangible personal property having a useful life of more than one
year and an acquisition cost of $300 or more per unit..."
45 CFR 201.5(e) states that 45 CFP Part 74, except for Subparts G
(Matching and Cost Sharing) and I (Financial Reporting), are applicable
to all AFDC grants.
Both the statutory and regulatory provisions relevant in this case
enunciate the same basic principles as those provisions relevant to our
decision in 78-70-Ml-CS and 79-159-MI-CS (Decision No. 76 ). The
arguments raised by both parties parallel those raised in the OCSE
cases.
Conclusion
It is our opinion, for the reasons stated more fully in Decision No. 76
that 45 CFR 205.160(a)(3) does not contradict the wording of Section
403(a) of the Social Security Act and that the regulation imposes a
common sense method for payment of the appropriate federal share of
costs for non-expendable personal property.
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Accordingly, we deny the appeal and affirm the disallowance of $27,322.
This decision constitutes the final administrative action on this
matter. D11 May 15, 1992