DEPARTMENTAL APPEALS BOARD
Department of Health and Human Services
SUBJECT: New York State DATE: August 14, 1989
Department of Social Services Docket No. 88-247 Decision
No. 1086
DECISION
The New York State Department of Social Services (State or New York)
appealed a disallowance by the Family Support Administration (FSA) of
$134,868 in federal financial participation (FFP) claimed under Title
IV-A (Aid to Families with Dependent Children or AFDC) of the Social
Security Act (Act) for the period July 1, 1982 to September 30, 1985.
The disallowance was based on a review finding that New York had
improperly included in an Eligibility/Income Maintenance (E/IM) cost
pool (allocated in part to AFDC) the costs of four organizational units
in Onondaga County which performed employment and housing activities, on
the grounds that the costs were not allowable under the AFDC program.
Although we find most of the costs appear to have been properly included
in the E/IM cost pool, we remand the disallowance because we find that
the record is not fully developed on some issues. In particular, we
find that:
o including these costs in the E/IM pool was consistent
with the approved cost allocation plan;
o the State identified substantial employment-related
activities allowable under the AFDC program (and not costs of
the Work Incentive (WIN) program), if authorized by the State
plan during the disputed period;
o the State identified substantial housing-related
activities allowable under the AFDC program (and not social
services);
o the record does not contain a method to quantify the
costs of any activities that are unallowable under AFDC so that
those costs can be removed from the cost pool.
On remand, New York should submit any State plan provisions which
authorized the employment-related activities during the disallowance
period (to the extent that the activities were not authorized, we
sustain the disallowance), and identify any unallowable costs which
should be removed from the cost pool.
Background
The disputed costs were incurred by the Onondaga County Department of
Social Services (County) which administers the AFDC program in Onondaga
County. The County also administers other public assistance programs,
including wholly State-funded programs, and performs functions such as
eligibility determination jointly for the various programs. The County
used a cost-pooling method as a basis for allocating costs associated
with eligibility and income maintenance functions between benefitted
programs. Under the County's allocation method, costs of units related
to eligibility and income maintenance were accumulated in the E/IM cost
pool. The County then distributed the E/IM cost pool among several
federal-state and state-only public assistance programs based on the
relative numbers of open cases under each program. All but a small
amount in the cost pool was allocated to either the AFDC program or the
State's Home Relief Program.
The organizational units in dispute were the Housing Unit, the
Employment and Training Unit, the Work Relief and Work Referral Unit,
and the Rehabilitation Training Coordinator. (New York stated that the
three employment-related units were consolidated in practice and
supervised by a single individual, but we conform to the formal
administrative structure by referring to them separately.) The costs
disputed here were administrative costs (for example, the salaries and
overhead expenses of the employees in the units).
New York asserted, and FSA did not deny, that the employment-related
units administered several employment-related AFDC eligibility
requirements, including registration for the Work Incentive (WIN)
Program, and operated two employment programs: an employment search
program and a work supplementation program. New York asserted that the
housing unit determined if individuals were eligible for supplemental
shelter payments because of "special needs" related to housing.
FSA raised issues involving both the allocation of the costs (whether
the costs were properly attributed by the cost pool method to the AFDC
program) and the allowability of the costs (whether the costs were
within the authorized scope of the AFDC program). FSA contested the
allocation of the costs on the grounds that the State's cost allocation
plan (CAP) did not permit the State to include these particular costs
in the E/IM cost pool and, if it did, FSA argued that the CAP was not
valid because the allocation method did not account for the fact that
the costs were not allowable under the AFDC program. FSA did not
contest the State's general method for allocating E/IM costs. FSA
Brief, p. 4.
On the issue of allowability, FSA argued that the costs were not
allowable because: 1) the activities of the employment-related units
were expressly within the scope of the State's Work Incentive (WIN)
program under Title IV-C of the Act and their costs could not be claimed
under the AFDC program; and 2) the activities of the housing unit were
within the scope of Title XX (Social Services) so that section 403(a)(3)
of the Act precluded reimbursement for their cost under AFDC.
Discussion
I. Allocation Issues: Was the State's practice consistent with the
approved CAP?
Although FSA did not directly contest the overall CAP allocation method
for the E/IM cost pool, FSA argued that the State had not complied with
that approved CAP allocation method in including the disputed costs in
the cost pool. Alternatively, FSA argued that the approved CAP
allocation method should be given little weight in view of a 1982 review
report specifically requesting that the State modify its CAP to ensure
that costs which do not benefit the AFDC program are directly charged to
benefitted programs instead of being placed in the E/IM pool.
The State's CAP, contained in Bulletin 143b, stated in the initial
sentence that the E/IM function includes "all activities related to
determining and maintaining public assistance eligibility." Bulletin
143b specifically included in the E/IM function "[h]ousing [s]pecialists
responsible for meeting housing and relocation costs, moving of
families, payments of rents and deposits, and authorizations of payments
or other needs related to housing." Bulletin 143b also specifically
included "[e]mployment [s]pecialists identifying and registering
employable PA [public assistance] recipients, arranging for medical
exams to determine employability, identifying and registering
employables for WIN, arranging for carfare, lunches and case actions
related to Public Works Projects, and referral of eligible clients to ES
[presumably, employment services], Vocational Rehabilitation, or
Services as appropriate." State Ex. 1.
FSA asserted that the CAP description included only eligibility costs in
the E/IM cost pool. FSA argued that the initial sentence, quoted above,
limited the E/IM cost pool to costs of eligibility functions and did not
include costs of administrative functions not clearly related to
eligibility, such as some costs in dispute here. FSA argued that the
CAP description was internally inconsistent in later listing functions
of housing and employment specialists not clearly related to
eligibility, and that the initial narrower statement should control.
We find that the CAP description of the E/IM cost pool included both
eligibility and administrative functions related to income maintenance.
The initial sentence was not a general limitation on the overall
description; it had no limiting language and included both the narrow
function of determining eligibility, and the broad administrative
function of maintaining eligibility. Furthermore, the very next
sentence of the CAP states that "income maintenance and undercare case
actions related to assistance payments are included." The later
specific references to costs of housing and employment specialists
illustrate some of the types of units included in the cost pool. These
specific references would clearly include in the cost pool the costs
disputed here.
Thus, we conclude that the CAP description did not limit the E/IM cost
pool to eligibility costs, but provided that the E/IM cost pool could
encompass other administrative functions related to income maintenance.
In particular, the CAP description specifically provided that the E/IM
cost pool could include costs of employment and housing specialists,
such as those disputed here, to the extent that the costs were allowable
(as we discuss below).
II. Allowability Issues
The fact that the CAP permitted some employment- and housing-related
costs to be charged through the E/IM cost pool (as it appears to), does
not mean that the allocation method was automatically reasonable. An
approved CAP cannot make costs allowable and must ensure that a
particular program is not burdened with unallowable costs. In a prior
case involving the E/IM cost pool in New York City, the Board found that
the CAP method did not equitably allocate certain identifiable costs
which were not allowable under one program (AFDC) when the CAP method,
or the overall nature of the cost pool, did not operate to distribute
only allowable costs to the AFDC program. New York Department of Social
Services, DAB No. 1063 (1989).
The key question is whether the costs were, in fact, allowable under the
AFDC program, since New York did not allege that either the CAP method
or the overall nature of the cost pool operated to distribute these
costs away from the AFDC program. We examine below the two specific
categories of disputed costs to determine if they were allowable and
equitably allocated among the programs to which the E/IM cost pool was
distributed.
A. General Statutory Background
Title IV-A of the Act provides for grants to states for aid to families
with dependent children. Under section 403(a)(3) of the Act, FFP is
generally available in "amounts expended . . . as found necessary by the
Secretary for the proper and efficient administration of the State plan
. . ." at a 50 percent rate. Until 1975, FFP was available in the cost
of certain social services considered administrative activities under
Title IV-A. Effective October 1, 1975, Congress established a new Title
XX of the Act to finance social services for low-income children and
families, including families receiving AFDC. At the same time, Congress
enacted the following preclusion on federal funding of social services
under Title IV-A:
. . . no payment shall be made with respect to amounts expended
in connection with the provision of any services described in
section 2002(a) [Title XX] of this Act other than services
furnished under section 402(a)(35)(B) . . . other than services
the provision of which is required by section 402(a)(19) to be
included in the plan of the State, or which is a service
provided in connection with a community work experience program
or work supplementation program under section 409 or 414 . . . .
This preclusion contains three exceptions relevant here: an exception
for employment search costs (under section 402(a)(35), an exception for
costs related to the Work Incentive (WIN) Program (under section
402(a)(19)), and an exception for work supplementation program costs
(under section 414).
WIN-related social and supportive services only are also subject to an
additional limitation contained in section 403(d) which states in
pertinent part:
(1) Notwithstanding any provision of subsection (a)(3)
[including the preclusion cited above], the applicable rate [of
federal funding] 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 . . . not more than . . .
[the annual WIN-related limitation] shall be appropriated to the
Secretary for payments with respect to services to which
paragraph (1) applies.
In light of this statutory background, we address the employment and
housing units separately below.
B. Were employment-related costs properly included in the E/IM cost
pool?
FSA raised two issues with respect to employment-related costs: 1) FSA
suggested that the costs were the same as those claimed under the WIN
program; and 2) FSA argued the claims were either within the statutory
preclusion on federal funding under Title IV-A of costs for social
services within the scope of Title XX or within the limitations on
funding for costs of the WIN program.
a. Duplication of WIN claims
First, we address FSA's allegation that the State may have claimed the
costs under both the AFDC and WIN programs. We find no evidence to
support FSA's allegation of duplication; we note that FSA provided no
affirmative evidence that the costs had been claimed as WIN program
costs as well as AFDC program costs. For its allegation, FSA apparently
relied on the bare fact that the units performed employment-related
functions. FSA provided no evidence that these units administered a WIN
program or were part of a separate administrative unit providing social
and supportive services to the WIN program. Nor did FSA specify
particular activities which had been charged both to the AFDC program
and to a separate WIN cost pool. Of course, FSA is not precluded from
examining the State's claims and disallowing any particular costs which
it can establish are duplicative.
b. Limitations as social services or WIN costs
Second, we address FSA's allegation that the costs of the activities
were not allowable under the AFDC program because they were either
social services within the preclusion at section 403(a)(3) of the Act,
or were activities within the scope of the Work Incentive Program. FSA
Brief, p. 8. FSA cited no other specific preclusions on claims under
Title IV-A for activities related to employment or to the WIN program in
the statute, applicable regulations, or other guidance documents.
The State did not contest that, if the costs were WIN costs or
WIN-related social services, then the costs were not properly included
in the E/IM cost pool and should be claimed separately against limited
WIN funds. The record indicates that the E/IM cost pool was not
distributed in part either to the WIN program or to WIN-related social
and supportive costs. New York asserted, however, that the costs were
properly included in the E/IM cost pool because the units did not
perform WIN functions. New York alleged that the units instead
administered AFDC eligibility requirements and operated two
employment-related programs authorized by Title IV-A separately from the
WIN program and separately excepted from the general preclusion on
federal funding for social services under Title IV-A.
The State cited section 402(a)(8)(B) which provides that states
consider, in determining the amount of any AFDC payment, whether the
applicant terminated or refused employment, reduced earned income, or
failed to report earned income in a timely manner, without "good cause."
See State plan attachment 2.3, p. 7, attachment 2.3-E, pp. 1-1A; State
Exs. 3, 4. The State also cited section 402(a)(19) of the Act, which
requires that AFDC recipients, except those meeting specific exceptions,
register for the WIN program (or equivalent services under the WIN
regulations) as a condition of eligibility. Finally, the State cited
section 402(a)(35) of the Act, which provides that states may require,
as a condition of eligibility, that recipients participate in a program
of employment search for certain limited time periods.
In addition to administering eligibility requirements, the State
asserted that the disputed units administered an employment search
program and a work supplementation program within the scope of Title
IV-A. Section 402(a)(35) of the Act permits states to require, as a
condition of eligibility, that applicants "participate in a program of
employment search." See 45 C.F.R. Part 240; State Ex. 5. Section 414
of the Act permits states to institute work supplementation programs
under which a state may make jobs available, on a voluntary basis,
instead of cash assistance. See 45 C.F.R. Part 239; State Ex. 5. The
State noted that each of these activities was excepted from the general
preclusion on FFP in social services under Title IV-A quoted above.
FSA responded generally that all these functions were within the scope
of the WIN program, but provided no support for its position in the
statute, regulations, or State WIN plan. FSA did not dispute either
that the eligibility requirements were contained in the AFDC program or
that the employment search and work supplementation programs were
authorized under Title IV-A separately from the WIN program in the Act
and in the applicable regulations at 45 C.F.R. Parts 239 and 240. FSA
also asserted generally that the functions were within the scope of
section 2002(a) of the Act, but FSA did not explain how eligibility
costs for the AFDC program could be a social service, nor did FSA deny
that the two activities were specifically excepted from the general
preclusion in section 403(a)(3).
We analyze first the eligibility costs. Clearly, the costs of
employment-related AFDC eligibility requirements other than those
related to WIN registration and WIN participants are not within the
scope of the WIN program. Similarly, validation of WIN registration and
participation for the purpose of establishing AFDC eligibility is
clearly a necessary cost allowable under the AFDC program. Actual WIN
registration functions apart from validation of AFDC eligibility,
however, are costs of administering the WIN program and should be
charged to that program. Section 402(a)(19) provides that WIN
registration shall be administered under WIN regulations and section
402(a)(19)(F) states that determinations of whether individuals have met
WIN requirements shall be made under the WIN program. Since funding for
the WIN program is limited and the statutory language does not authorize
separate funding under Title IV-A for this activity, we conclude that
FSA can reasonably require that states claim these WIN registration and
associated costs under the WIN program and not under Title IV-A.
Next we consider the employment search and work supplementation
programs. We are persuaded that the activities were allowable under
Title IV-A because of 1) the specific statutory authorizations in
sections 402(a)(35) and 414, 2) the specific regulatory authorizations
at 45 C.F.R. 239 and 240 (which provide for FFP in these programs), and
3) the specific exceptions from the statutory social services preclusion
in section 403(a)(3). Therefore, we must reject as unsupported FSA's
assertion that the costs of administering an employment search program
under section 402(a)(35) and a work supplementation program under
section 414 should not be included in the E/IM cost pool.
Therefore, we find that the State properly included in the E/IM cost
pool the costs of all cited activities, to the extent authorized by the
State plan, except any actual WIN registration and associated
activities. But we have no basis to determine how much, if any, of the
disputed costs were attributable to these WIN activities. In addition,
we find two issues, not fully addressed in the record, which are
necessary for a final determination of the correct disallowance, if any.
First, New York did not submit approved State plan provisions which were
effective during the disallowance period to show that the employment
search and work supplementation programs were authorized by the State
plan. State Ex. 5. The employment search and work supplementation
programs were optional activities and FFP was available for them only if
included in the State plan. (FSA did not deny that the two programs were
authorized by the State plan, but pointed out that the record was not
complete on the issue.) Second, it is not clear whether the
eligibility activities and two program activities discussed above were
merely examples of the activities of the employment units which New York
considered allowable under the AFDC program when the units also
performed other activities which were not allowable.
In light of these open issues, we remand the disallowance as a whole so
that New York may submit the following information: a) State plan
provisions, if any, which were effective during the disallowance period
and authorized the employment search and work supplementation programs
(to the extent that the activities were not authorized, we sustain the
disallowance); b) the amounts, if any, of WIN registration and the costs
of activities other than those discussed above. New York should submit
this information within 30 days or such longer period as FSA may permit.
FSA should consider any information the State submits and may require
the State to remove any unallowable costs from the cost pool and adjust
the disallowance to the extent warranted.
C. Were housing-related costs properly included in the E/IM pool?
FSA alleged that the costs of the housing-related unit were not
authorized by the Act or the approved State plan and, even if
authorized, were within the preclusion at section 403(a)(3) of the Act
(quoted above) on federal funding under Title IV-A of activities which
could be considered social services as described in section 2002(a) of
the Act. FSA argued that Title IV-A does not authorize "housing
allowances, shelter costs, moving or relocation costs, or rent payments
. . . ." FSA Brief, p. 7.
New York asserted that the housing unit administered the provision of
cash payments to (or on behalf of) persons with special needs relating
to housing and that these payments were assistance payments within the
scope of Title IV-A and were authorized by the approved State plan.
Under Title IV-A, AFDC assistance payments are based on a determination
of need. The regulations require the State plan to set out the
"standard of need" upon which individual determinations will be based.
New York provided approved State plan provisions which included within
New York's standard of need an adjustment for special needs based on
individual circumstances. Some of these special needs related to
housing, including rent allowances for hotel or motel accommodations
(when no other suitable housing is available and the individual is
actively seeking other housing), moving expenses, and security deposits.
State Ex. 3. Moreover, New York asserted that the activities
administered by the housing unit were not within the preclusion for
services within the scope of section 2002(a), since that section does
not include cash payments for housing.
We find that the record supports New York's assertion that some, if not
all, of the disputed costs were allowable under the AFDC program (and,
thus, properly placed in the E/IM cost pool). We are persuaded by the
evidence that the State's AFDC program authorized the underlying
activity of providing assistance payments based, in part, on special
needs related to housing. FSA did not deny that housing costs can be a
permissible factor in establishing a standard of need on which to base
AFDC assistance payments. The determination of special needs and
calculation of assistance levels was thus part of the determination of
AFDC eligibility and the AFDC assistance amount, and not a social
service.
FSA did not allege that the underlying assistance payments related to
special housing needs were unallowable under the AFDC program. Nor did
FSA demonstrate that the payments were within the scope of section
2002(a). In general, section 2002(a) describes only services, not
monetary assistance to individuals. See generally sections 2001,
2002(a)(2)(A). We do not mean to suggest that, just because the unit
administered AFDC assistance payments related to housing needs, all
housing-related administrative activities performed by the unit were
necessarily allowable under the AFDC program. FSA suggested, without
providing any clear basis, that the unit may have also been involved in
locating housing and providing housing-related services, such as those
which might be provided by social workers. FSA Brief, p. 7. While New
York alleged only that the unit administered housing-related assistance
payments, New York did not clarify whether this was the sole function of
the housing unit. Without any firm evidence on this issue, we have no
basis to support a conclusion that the unit performed other activities
which were unallowable under the AFDC program, or to qualify the costs
involved in those activities.
In view of FSA's general allegation that this unit performed broader
functions such as locating housing, we remand this part of the
disallowance for further study by FSA to determine if the unit performed
other functions, and if those functions were unallowable. We note, that
a 1977 letter from the Regional Commissioner of the Social and
Rehabilitative Service, FSA's predecessor in overseeing the AFDC
program, appears to accept that some housing-related activities can be
considered allowable income maintenance activities.
Because the grantee generally bears the burden of establishing the
allowability of its costs, we find that, within 30 days after receiving
this decision (or such longer time as FSA permits), New York should
submit evidence that the activities discussed above were the sole
function of the housing unit. If the unit performed other functions,
FSA may require the State to submit a proposed method to quantify the
costs of any unallowable activities which should be removed from the
E/IM cost pool.
Conclusion
We remand the disallowance because it appears that most of the costs
were properly included in the E/IM cost pool, but the record is not
fully developed on some issues. On remand, New York should, within 30
days after receiving this decision (or such longer time as FSA permits):
o submit any State plan provisions which authorized the
employment-related activities during the disallowance period (to
the extent that the activities were not authorized, we sustain
the disallowance),
o identify any unallowable costs (either the WIN
registration costs, or costs of activities not discussed above)
which should be removed from the cost pool.
FSA should consider any information the State submits and may require
the State to remove any unallowable costs from the cost pool and adjust
the disallowance to the extent warranted.
________________________________ Norval D. (John) Settle
________________________________ Alexander G. Teitz
________________________________ Donald F. Garrett Presiding
Board