Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Ohio Department of
DATE: July 24, 1990
Human Services Docket No. 89-225
Decision No. 1177
DECISION
The Ohio Department of Human Services (Ohio or State) appealed a
decision by the Administration for Children, Youth and Families (Agency
or ACYF) disallowing federal funds claimed by the State for its foster
care and adoption assistance program under Title IV-E of the Social
Security Act (Act). The disallowed claim represented expenditures
claimed for the quarter ending June 30, 1986. 1/ The Agency disallowed
the claim because the claim was not filed within two years of the
quarter in which the expenditures were made, as required by section 1132
of the Act and implementing regulations.
For the reasons set forth below, we uphold the disallowance.
Background
On September 26, 1985, the State submitted an amendment to its cost
allocation plan (CAP) to change the method used in allocating certain
administrative costs under its Title IV-E program. The amendment
proposed allocating the costs of county social workers' activities based
on the results of a random moment time study. The results of the random
study in a given quarter would then determine the State's claim for
administration and training expenditures under Title IV-E. Under a
revised version of the CAP amendment submitted September 11, 1986, the
cost of a worker's activity identified to "Code 5.2" (Child Welfare
Services Administration-Non Custody), was considered unallowable for
Title IV-E reimbursement. Aside from two areas of disagreement not
relevant to this appeal, the DCA (Division of Cost Allocation) Director
subsequently approved the revised CAP amendment. See Agency Br., pp.
3-4.
Ohio later submitted a second amendment to its CAP. This amendment,
submitted September 29, 1987, sought to include "Code 5.2" activities
as
reimbursable administration costs under the State's IV-E program. It
was subsequently approved by the Agency with an effective date of July
1, 1985. 2/
On October 22, 1987, the Agency, in response to the Missouri decision
(see n. 2), issued Policy Announcement 87-05 (PA-ACYF-87-05), which set
forth new and revised policies with respect to the allowability of
claims for administration costs under Title IV-E. This policy
announcement superseded the earlier policy announcement at issue in
Missouri, and clarified that administrative activities such as those
included under "Code 5.2" may be allowable.
On September 30, 1987, one day after submitting its second CAP
amendment, the State began making claims for "Code 5.2" activities
for
individual quarters. The State, in its expenditure report for the
quarter ending March 31, 1988, included a prior-period adjustment
claiming federal funds for "Code 5.2" activities for the quarter ending
June 30, 1986. The Agency received the report on July 5, 1988 and
disallowed the claim as not timely filed. Relevant Statutory and
Regulatory Provisions
Section 1132(a) of the Act prohibits the payment of federal funds for
any expenditure that has not been claimed within two years after the
calendar quarter in which the state made the expenditure. The
provisions of section 1132(a) are implemented by the regulations in 45
C.F.R. Part 95, Subpart A. Under 45 C.F.R. 95.7, the Agency will pay a
state for an expenditure only if the state files a claim with the Agency
for that expenditure within two years after the calendar quarter in
which the State made the expenditure. Under 45 C.F.R. 95.13(d), the
Agency considers a state to have made an expenditure for administration
"in the quarter to which the costs were allocated in accordance with the
regulations for each program." (Emphasis supplied.)
The basis of the disallowance
On the basis of the foregoing statutory and regulatory provisions, the
Agency concluded that the State's claim for expenditures was not timely
because it was not filed within two years after the quarter to which the
expenditures were allocated, i.e., the quarter ending June 30, 1986. 3/
Although the Agency indicated in its disallowance notice that a claim is
"filed" for purposes of timely claims on the date it is received by
the
Agency, the Agency subsequently advised the State, in a letter dated
January 30, 1990, that a claim is "filed" on the date it is mailed.
Thus, the claim at issue had to be mailed, at the latest, on June 30,
1988, in order to be viewed as timely under the Agency's position. The
Agency argued that the State had mailed the claim on July 1, 1988 and
the Agency had received the State's claim on July 5, 1988. The Agency,
therefore, concluded that the State's claim was not timely.
The State did not dispute that its claim for the quarter ending June 30,
1986 was "mailed" on July 1, 1988 or that the date of mailing was
the
date of filing for purposes of section 1132. Indeed, the Agency, not
the State, provided the only evidence establishing a mailing date for
the claim. While this appeal was pending, the Agency's counsel advised
the Board during a telephone conference that it had located the envelope
in which the State's claim for the quarter ending June 30, 1986 had been
received. Counsel further advised that the envelope had a postmark of
July 1, 1988, and a State meter stamp of June 29, 1988. The envelope
also indicated that it was mailed "return receipt requested." The
Board
requested that a copy of the envelope be included in the record and
granted the State additional time to submit evidence with respect to its
mailing procedures or comment on the issue of when this and the other
claim then at issue were "mailed" to the Agency.
Although the State subsequently submitted additional evidence with
respect to the claim for the quarter ending December 31, 1986, which
caused the Agency to withdraw that part of the disallowance, it failed
to address the claim for the quarter ending June 30, 1986. By letter
dated May 17, 1990, the Board pointed out that no additional evidence
had been submitted with respect to the claim for the quarter ending June
30, 1986, and gave the State one further opportunity to provide
"evidence concerning its office procedures for placing claims into the
mail system" or "any explanation concerning the discrepancy between
the
two dates on the envelope" containing the claim. The State submitted no
additional evidence or comment in response to the Board's request.
We find that the Agency correctly concluded that the State's claim for
the quarter ending June 30, 1986 was "mailed" on July 1, 1988 based
on
the July 1, 1988 postmark on the envelope. The State's meter stamp,
which was necessarily applied by the State itself, does not demonstrate
that the claim was placed into the U.S. mail system by June 30, 1988.
Moreover, the State apparently mailed its claim by certified mail,
return receipt requested, but was unable to present any receipt
generated by the certified mail process for the Agency's consideration.
The Agency properly determined when the two-year filing period began.
The State's primary argument on appeal was that 45 C.F.R. 95.13(d)
requires that the two-year period in section 1132 begin only after the
Agency determined that the administration activities in question were
allowable under the IV-E program. The State argued that the Agency made
its definitive statement to that effect in PA-ACYF- 87-05 on October 22,
1987. The State reasoned that it should have two years from that date
to submit claims for these costs under its revised CAP. State's Br.,
pp. 10- 14. The State argued that it could not allocate the costs in
question until such time as the Agency determined through its policy
announcement that the costs were eligible for federal funds. The State
asserted that its claim for the June 1986 quarter was clearly filed
within two years of that date.
We conclude that there is no basis in the language of the regulations to
support the State's position. As applicable here, the regulations
provide a two-year time period beginning with the quarter following the
quarter to which the costs were allocated. There is simply no provision
in the regulations for expanding this time frame based on when the
Agency may clarify its position on the allowability of particular
expenditures in policy announcements, regulations or any other policy
making vehicles. Aside from lacking support in the language of the
regulation itself, such a position on its face would be confusing and
difficult to implement since it would require a modification in the
two-year period every time that the Agency modified or clarified its
position on the allowability of any category of cost.
Moreover, the regulations at 45 C.F.R. 95.19 specifically provide for
exceptions to the time limits for certain claims, including "[a]ny claim
for which the Secretary decides there was good cause for the State's not
filing it within the time limit." The regulations at 45 C.F.R.
95.22(b)(2) further defines circumstances justifying a good cause waiver
as "[d]ocumented action or inaction of the Federal government." Thus,
the regulations suggest that when a State believes that it has been
prevented from filing its claim within the two-year limit by actions or
inactions of the Federal government, the appropriate remedy is not an ad
hoc expansion of the two- year time period, but, rather, a written
request for a waiver documenting why there is good cause for a late
filing. See 45 C.F.R. sections 95.19 through 95.34. (In response to
questions by the Board, the parties indicated that the State had not
made a waiver request for the claim at issue.)
Finally, we should note that we are not dealing with a situation where
the Agency's actions made it impossible for the State to file a timely
claim. A state can always file a claim even if it believes that the
Agency will dispute the allowability of the claim. Here, the State did
not allege that it was unaware of the claims for the same category of
expenditure by Missouri and by other states that joined in Missouri's
appeal filed on October 11, 1985. In any event, the State had fifteen
months after the Board issued the Missouri decision to file its claim
and over eight months after the Agency's issuance of PA-ACYF- 87-05.
Indeed, the State began filing claims for "Code 5.2" activities for
quarters other than the quarter involved here in September, 1987, one
day after it submitted its second CAP amendment. Agency Reply Br. pp.
4-5.
Accordingly, we conclude that the applicable regulations do not support
the State's position concerning the beginning of the two-year time limit
for filing its claim.
The Agency is not estopped from disallowing the State's claim.
The State asserted that, should the Board rule that the two-year period
in which to submit its claim began as of July 1, 1986, the Agency is
equitably estopped from disallowing its claim. State's Br., p. 14. The
basis of the State's argument is that, if not for the policies contained
in the policy announcement under consideration in Missouri
(PA-ACYF-85-01), the State would have sought federal funding for "5.2"
activities at an earlier date. State's Br., pp. 14-15. In essence, the
State is claiming that the Agency's disallowance is barred by the
doctrine of equitable estoppel.
In Heckler v. Community Health Services of Crawford County, Inc., 467
U.S. 51 (1984), the Supreme Court held that the requirements for proving
estoppel against a private person were not present, let alone proving it
against the government. The Court pointed out that an essential element
of the defense of equitable estoppel is reasonable detrimental reliance.
Thus, the party claiming the estoppel must have relied on its
adversary's conduct in such manner as to change its position for the
worse, and the reliance must have been reasonable.
Although the State alleges that it would have sought federal funds
within the two-year limitation period of 1132 if not for PA-ACYF-85-01,
the evidence is to the contrary. First, the State made provision for
"Code 5.2" activities in its amended CAP submitted on September 29,
1987, while PA-ACYF-85-01 remained in effect. Thus, this policy
announcement clearly did not deter the State from submitting an
amendment to its CAP after it became clear through the Missouri decision
that "Code 5.2" activities might be allowable. Moreover, the State
began filing claims for "Code 5.2" activities beginning in September
1987, which was over nine months before the two-year time period had
expired. Agency Reply Br. pp. 4-5.
Finally, the State has always had the opportunity, even prior to
Missouri, to file its claim and appeal any disallowance to this Board,
or could have intervened in the Missouri case, as several other states
chose to do. Instead, the State awaited the outcome of the Missouri case
and filed its claim eight months after PA-ACYF-87-05 and fifteen months
after the Missouri decision had been issued. Thus, the State has failed
to demonstrate that it relied to its detriment on PA-ACYF-85-01 for the
two- year period at issue, or, assuming that it relied, that its
reliance was reasonable. 4/ We, therefore, conclude that the Agency's
disallowance is not barred by the doctrine of equitable estoppel in this
case. Conclusion
On the basis of the foregoing, we uphold the disallowance in the amount
of $2,215,056.
____________________________ Norval D.
(John) Settle
____________________________ Alexander G.
Teitz
____________________________ Donald F.
Garrett Presiding Board Member
1. The original disallowance totalled $4,090,963. The Agency
subsequently withdrew $1,808,724 of the disallowance for the quarter
ending December 31, 1986. The State withdrew its appeal in the amount of
$67,183 for non-voluntary foster care assistance payments for the
quarter ending June 30, 1986. Therefore, the remaining disallowance at
issue is $2,215,056.
2. The amendment was submitted as a result of the Board's decision in
Missouri Department of Social Services, DAB No. 844, which was issued in
March, 1987. The Missouri decision found that certain administrative
activities related to the eligibility determination process, such as
case plan and referral activities, may be "reimbursable administrative
costs".
3. It is undisputed that the administration costs at issue,
regardless of allowability issues addressed by the Missouri decision or
by PA-ACYF-87-05, would have to be allocated to the quarter ending June
30, 1986 under applicable program regulations.
4. Since we find that the facts would not be sufficient to estop a
private party here, we need not reach the question of whether there are
additional requirements to estop the government, such as "affirmative
misconduct." See INS v. Hibi, 414 U.S. 5 (1973) and Schweiker v. Hansen,
450 U.S. 785 (1981). We also need not address the question raised in
the recent Supreme Court case of OPM v. Richmond, 58 U.S.L.W. 4771 (U.S.
June 11, 1990), reversing 862 F.2d 294 (Fed. Cir. 1988), whether any
claimant for federal funds contrary to a statutory appropriation can
ever successfully estop the federal government, in view of the
Appropriations Clause of the United States