Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Washington
State
Department of Social and Health Services
Docket No. 90-48
Decision
No. 1214
DATE: December 17, 1990
DECISION
The Washington State Department of Social and Health Services
(State)
appealed the decision of the Administration for Children, Youth
and
Families (ACYF) disallowing $160,710 of $171,562 claimed by the
State
for services performed in 1988 by the Institute for Human
Services
Management (IHSM) under a contract with the State. The State
charged
75% of the contract costs to title IV-E of the Social Security Act
(Act)
under section 474(a)(3)(A), which provides for the reimbursement
of
training expenditures at the rate of 75% federal financial
participation
(FFP). FFP is available at the rate of 50% for other
administrative
expenditures which are necessary for the proper and
efficient
administration of the State plan. Section 474(a)(3)(B).
ACYF found that the State had contracted for a management study
rather
than for training and that the State had not obtained prior approval
for
a management study as required by Office of Management and Budget
(OMB)
Circular A-87, Attachment B, Section C.5. ACYF also found that
the
costs should not have been charged directly to title IV-E, but
should
have been allocated among benefitting programs through the State's
cost
allocation plan. 1/ Based on these findings, ACYF determined that
no
FFP was available under the contract, except for $10,852 incurred
for
the direct training of State eligibility workers. 2/
Below, we summarize the issues presented and our conclusions.
The
record for our decision includes the parties' written briefs,
their
written responses to a Preliminary Analysis and Order to Develop
Record
issued by the Board, and a telephone conference held to clarify
these
responses.
I. Summary of Decision
A principal issue in the case is whether the contract was for a
management
study or for training. We conclude that neither the
underlying purpose
of the contract nor the contractual language are
entirely dispositive but
that the nature of each activity under the
contract ultimately determines
whether or not it constituted training.
Specifically, we find that ACYF
should have considered whether
activities identified by IHSM as curriculum
development constituted
training, and remand the case to ACYF for further
consideration of this
issue. We further find that case reviews
identified by the State as
delivery of training instead constituted
curriculum development which
was properly treated as a training cost under
the regulation. In
addition, we find that ACYF properly determined that
activities which
IHSM identified as delivery of training but described as
meetings,
conversations, or conferences did not constitute training since
the
State failed to provide more specific information regarding
these
activities. We also find that ACYF correctly determined that
the
administration of the contract was not a training activity.
Also at issue is the allowability of the costs associated with
activities
which are determined to constitute training. The parties
agreed that
allowable training costs are limited to those types of costs
specified in 45
C.F.R. 235.64(b)(3) and (b)(4). Tape recording of
10/31/90 telephone
conference. However, the State argued that all of
the costs included in
the daily rate specified in the IHSM contract were
allowable under the
regulation, while ACYF took the position that
general and administrative (G
& A) costs as well as profit were
unallowable. We conclude that
ACYF properly excluded these costs from
the daily rate since it cannot be
determined precisely what G & A costs
correspond to the types of costs
specified in the regulation and since
there is no provision in the regulation
for profit.
Another issue is whether the State properly charged the costs
of
activities involving the revision of its cost allocation plan and
both
State agency and institutional time studies directly to title IV-E.
3/
ACYF took the position that the costs were allocable to programs
in
addition to title IV-E and should not have been charged solely to
title
IV-E. The State argued that the costs were chargeable solely to
title
IV-E because the purpose of these activities was to enable the State
to
better identify title IV-E costs. We conclude that, regardless of
this
purpose, the activities involving the cost allocation plan and the
State
agency time study benefitted other programs in addition to title
IV-E
and should have been allocated to them as well. However, we remand
the
appeal to ACYF to consider whether the institutional time
study
activities constituted "rate setting" within the meaning of
the
regulation which provides that rate setting is an
allowable
administrative cost under the title IV-E program.
The contract activities allocable to title IV-E which do not
constitute
training may nevertheless be reimbursable at the normal 50%
rate. We do
not address this matter here, however, since it may be
resolved when
ACYF considers the State's request for retroactive approval of
the IHSM
contract as a management study. 4/ We provide a detailed summary of
what
ACYF needs to do to implement our decision on pages 19 - 20 below.
II. Background
The State awarded the contract in question to IHSM after finding
IHSM's
proposal responsive to the State's Request for Qualifications
(RFQ).
The RFQ specified as the project title "Title IV-E Consultation
and
Training" and stated that bidding was open to "management
consulting
firms." State's ex. 3, p. 1. The RFQ described the
general purpose of
the contract as the provision of "in-depth management
consultation,
technical assistance and staff training on cost allocation
plans for
Child Welfare Services and implementation of the Title IV-E Foster
Care
Program." Id., p. 2.
The contract between the State and IHSM incorporated IHSM's proposal
(with
some modifications not pertinent here). State's ex. 13, p. 3.
The
introduction to the proposal stated in part that --
the major task for the successful bidder is to design
and
implement a Title IV-E policy and procedure system
that
maximizes Federal Financial Participation (FFP) . . . .
This
technical assistance proposal will address the problems known
to
exist in the Title IV-E program and will define an approach
to
resolving those problems through changes in policy
and
procedures, training, and the development of a more
responsive
management information system.
State's ex. 4, pp. 2-3. The proposal also stated that IHSM "proposes
to
provide training for staff of Washington's Department of Social
and
Health Services (DSHS) to effect improvements in the management of
the
Title IV-E program. . . ." It further specified that "IHSM will
provide
training to designated State agency staff in a number of Task
Areas
where improvements in the state's management capability are deemed
both
desirable and necessary." State's ex. 4, page 57 of
proposal. The
proposal identified seven training areas, or modules, as
follows:
Training module 1: Development of a charge structure and
a
revised cost allocation plan
Training module 2: The development of time measurement systems
Training module 3: Develop institutional time study
Training module 4: Assessing current state practice in
IV-E
eligibility policy and procedure
Training module 5: Develop accurate and clear policy
material
for the IV-E program
Training module 6: Develop organizational structures
and
procedures to support the IV-E program
Training module 7: Statewide training on new IV-E
eligibility
policy and procedures
Each module is described in detail in the proposal. The record
also
includes a log kept by IHSM of the hours charged under the
contract
which breaks down each module into a number of different activities,
for
a total of several hundred activities. State's ex. 13, pages 8 -
27
(unnumbered). (Another version of the log which sorts the
activities
differently and includes the codes referred to below appears in
the
State's submission dated 10/5/90 at pages 33-48.) The log gives
the
date of each activity, the number of hours devoted to the activity,
and
a one-line description of the activity. In addition, the log shows
a
letter code for each activity, explained in the key as follows: A
=
administrative activities supporting training; C =
curriculum
development: preparation of content, materials, procedures; and T
=
delivery of training in verbal, written or practicum form.
III. What contract activities constituted training
ACYF took the position that since the purpose of the contract was
to
improve the management of the State's title IV-E program, it
was
properly considered a contract for a management study except for
time
spent in the actual delivery of training. ACYF allowed as training
only
those activities which were both specifically described in
the
contractor's log as "training" and coded in the log as training. 5/
The State acknowledged that the purpose of the contract was to improve
the
management of the State's title IV-E program, but took the position
that the
contract was entirely for training because it provided for
achieving this
purpose by training State staff. Citing several
references to training
in the IHSM proposal, the State argued that the
"contractual agreement was
clear and should prevail." State's
submission dated 10/1/90, p.
3. The State also noted in this regard
that it had received a bid
protest objecting to the award of the
contract to IHSM on the ground that
IHSM's proposal was limited to
training. The State argued further that
training should not be limited
to activities which were both coded and
described in the log as training
since the log was intended by IHSM only for
internal purposes.
Specifically, the State argued that activities coded as
curriculum
development constituted training because they involved preparation
for
delivery of actual training. The State also argued that
activities
described as discussions, meetings and conversations involved
delivery
of training because training can take place outside of a
formal
classroom setting in small group sessions or on a one-to-one
basis.
Finally, the State argued that activities coded as
administration
constituted training because "the management of . . . any
contract
necessarily involves administrative activity." Id., p. 5.
We conclude ACYF was not justified in concluding that the contract
was
primarily for a management study simply because its purpose was
to
improve the management of the State's title IV-E program. ACYF
relied
on Attachment B, section C.5., of OMB Circular A-87, which
requires
prior approval of "[t]he cost of management studies to improve
the
effectiveness and efficiency of grant management for ongoing programs.
.
. ." However, this purpose can also be achieved through training,
as
indicated by the regulation defining a "training program" as "the
method
through which the State agency carries out a plan of educational
and
training activities to improve the operation of its programs."
45
C.F.R. 235.61. 6/ Thus, the overall and general purpose of the
contract
is not determinative of whether specific contract activities
constituted
training or a management study.
We further conclude that the contractual language does not establish
that
all of the contract activities constituted training, as the
State
contended. While the IHSM proposal, which was a part of the
contract,
referred to training, it indicated that IHSM would also engage in
other
activities. Similarly, the RFQ, to which the IHSM proposal was
deemed
responsive, requested management consultation and technical
assistance
as well as staff training. Moreover, the bid protest has no
probative
value since the State's response to the bid protest indicates that
the
State did not share the protester's view of the IHSM contract.
(The
State responded by stating that "[t]he fact that the . . .
[IHSM]
response focused on a training strategy does not suggest that they
are
unqualified to provide in-depth management consultation or
technical
assistance." State's ex. 6, p. 1.).
Thus, we must also look at the activities in which the contractor
actually
engaged, rather than only the contract language or the
underlying purpose of
the contract, in order to determine how the
activities should be
reimbursed.
A. Curriculum Development
As noted previously, the State claimed that all of the activities in
the
contractor's log, including those coded as curriculum
development,
constituted training. In the State's view, curriculum
development
consisted of all research, planning, and gathering and
organization of
material necessary for IHSM to deliver the training.
Tape recording of
10/31/90 telephone conference. ACYF did not dispute that
curriculum
development could properly be considered a part of training.
(Thus,
ACYF clearly did not regard the codes in the log as
dispositive.)
However, ACYF argued that curriculum development was limited to
the
development of training materials. Id. ACYF asserted that
there was no
evidence that training materials were developed here, noting
that the
State staff development manager had stated in response to ACYF's
request
that there were no written curricula developed under the
contract.
ACYF's submission dated 8/3/90, p. 3; tape recording of
10/31/90
telephone conference. 7/
We see no basis for requiring that written curricula be produced in
order
for an activity coded as curriculum development to be
considered
training. The applicable regulations do not refer
specifically to
curriculum development, but instead provide for FFP in
certain costs of
"experts engaged to develop or conduct special [training]
programs." 45
C.F.R. 235.64(b)(3) (emphasis added). This
authorizes development of
training as a reimbursable activity without regard
to whether
development results in written training materials.
We are not persuaded, however, that training includes all research
and
planning necessary to deliver the training. If training were
viewed
that broadly, title IV-E funds could be used to pay the "expert"
to
acquire expertise in the subject matter on which the expert is
engaged
to provide training. Thus, IHSM's efforts to acquire an
"understanding
[of] current DSHS operations," or to become "aware of OHDS
regional
offices' particular interpretations of IV-E rules" (State's reply
brief,
p. 10), cannot reasonably be considered training. Instead, an
activity
coded as curriculum development must contribute directly to the
training
actually delivered in order for the activity to be considered
training.
Moreover, although a written product is not required, ACYF is
clearly
entitled to evidence which establishes what each activity coded
as
curriculum development involved, to the extent that the description
in
the log is unclear.
As indicated previously, ACYF did not consider the specific
activities
coded as curriculum development because it believed that
written
curricula were required. Accordingly, we remand the appeal to
ACYF to
consider whether the activities coded as curriculum
development
constituted training, based on the descriptions in the log and
such
additional information as the State may provide.
B. Delivery of Training
As noted previously, ACYF determined that only the activities which
the
log both coded as delivery of training and described using the
word
"training" constituted training. 8/ Thus, ACYF declined to treat
as
training activities such as those described as meetings,
conversations
and conferences. This position seems justified to the
extent that ACYF
had only the log to rely on. We do not see any reason,
however, why the
lack of the word "training" in the description should be
fatal if there
is other evidence that the activity constituted
training. Nevertheless,
there is insufficient information in the record
to conclude that
activities coded as delivery of training but not described
as such
constituted training.
We note at the outset that the burden is on the State to establish
that
the activities constituted training. It is a fundamental principle
of
grants administration that the grantee has the burden of documenting
its
claim for federal funds. Florida Dept. of Health and
Rehabilitative
Services, DAB No. 1031 (1989); 45 C.F.R. Part 74, Subpart
H. Moreover,
as noted previously, title IV-E activities other than
training are
reimbursed at the rate of 50%. Since the 75% rate is a
special,
enhanced rate, it is appropriate to require that a state
affirmatively
show that activities constituted training in order to qualify
for
reimbursement at that rate. Cf. Missouri Dept. of Social
Services, DAB
No. 391 (1983), where the Board stated that "Congress, when it
set up a
separate funding category for training, did not intend to pay a
higher
than usual rate of FFP for every meeting in which the Title IV-A
program
is discussed."
The State clearly failed to carry its burden of proof here. In
response
to the Board's request for further information regarding the nature
of
the disputed activities, the State stated that it had no
information
other than the contractor's log and the affidavits of State staff
and
the contractor which it submitted with its initial brief.
State's
submission dated 10/1/90; tape recording of 10/31/90
telephone
conference. We find that the descriptions provided by the log
of the
activities in question are inadequate. The one-line descriptions
are
not in sentence format, and in some instances use abbreviations
which
are not explained, or refer to persons whose positions are
not
identified. Moreover, they simply do not provide the level of
detail
which the Board indicated in a prior decision was necessary to
establish
that an activity constituted training. In Missouri Dept. of
Social
Services, DAB No. 391 (1983), the Board listed the following as
factors
which might be determinative of whether an activity identified in
the
record as a "meeting" constituted training: (1) a written agenda
which
did more than simply set aside hours for open discussion; (2) the use
of
written materials; (3) trainees who came from more than one office;
(4)
a trainer who was qualified as an expert; (5) the exercise of
tight
control of the agenda by the trainer; (6) substantive information
rather
than purely managerial topics addressed; and (7) length in excess of
a
few hours. Many of these factors are simply not addressed by the
log.
Accordingly, the log does not establish that the activities in
question
constituted training.
The affidavits also fail to establish that the activities in
question
constituted training. The affidavit of the supervisor of the
State
agency's Federal Funding Unit, Dick Anderson, briefly describes
two
types of training provided by IHSM (training of child welfare
casework
supervisors regarding the new IV-E eligibility procedures, and
special
case review training), but does not relate the descriptions to
the
activities in IHSM's log. State's ex. A. (In any event, if
these
activities are described in the log using the word "training," then
they
were considered training by ACYF.) The affidavit of Gordon
McDougall, a
community services program manager with the State agency, deals
only
with the reasons for entering into the IHSM contract. State's ex.
B.
The affidavit of IHSM trainer Rocco D'Amico merely discusses the
general
approach used by IHSM. State's ex. C. The affidavit of
Marian Demas,
former supervisor of the State agency's Federal Funding Unit,
describes
the IHSM contract by module. State's ex. D. However,
the descriptions
are too general to relate to the specific activities in the
IHSM log. 9/
Finally, the affidavit of Junzo Nakagawa, also a community
services
program manager with the State agency, states that he received
training,
in both "one-on-one and lecture sessions by IHSM trainers," on
the
preparation of a cost allocation program and the development of
time
studies. State's ex. E. However, this affidavit too fails to
identify
the specific activities in the log to which it
pertains. The record
also includes several
agendas together with a copy of the log which is
annotated to show the
activities covered by each agenda. However, the
agendas do not clearly
correspond to the annotated activities and thus
cannot be used as evidence
that the activities in question constituted
training. 10/ For example,
in one instance, the agenda addresses a
subject matter different from that
involved in the training module with
which the log associates the
activity. (See agenda "a".) In other
instances, staff as well as
individual training activities are covered
by the same agenda. (See
agenda "d" and agenda "f".) In still other
instances, the date on the
agenda or the number of hours of training for
which it provides does not
match the dates or hours of the activities in
the log. (See agenda "g" and
agenda "h".) 11/
Since the State had ample opportunity to establish that the
activities
coded as delivery of training but not specifically described as
such in
fact constituted training, but failed to do so, we conclude that
these
activities were not properly claimed at the 75% training rate.
Our
conclusion does not apply, however, to the 22 hours the State
alleged
were spent on training in the use of software, which ACYF agreed
the
State should have a further opportunity to document. (See note
8.)
C. Administration
As noted previously, the State argued that all activities coded in the
log
as administration constituted training. We find no basis for
this
position. That administrative activities were required in order
for the
training to take place does not make administration part of
training.
The State's point that any kind of contract requires
administrative
activity clearly demonstrates the generic nature of
administration.
Accordingly, ACYF was justified in denying reimbursement at
the 75% rate
for activities coded as administration.
Our conclusion that administrative activities did not constitute
training
does not mean that there were no administrative costs which
could be
reimbursed at the 75% rate, however. As discussed below, the
State was
entitled to be paid for training activities at a daily rate
which included
some administrative costs.
IV. What costs of training activities are allowable
We discussed above whether certain activities constituted training.
There
is a further question, however, as to the allowability of the
costs
associated with the activities which constitute training.
Section
235.64(b) of 45 C.F.R. provides in pertinent part that for
agency
training sessions, FFP is available for --
(3) Salaries, fringe benefits, travel and per diem for
experts
outside the agency engaged to develop or conduct
special
programs; and
(4) Costs of space, postage, teaching supplies, purchase
or
development of teaching material and equipment, and costs
of
maintaining and operating the agency library as an
essential
resource to the agency's training program.
As noted previously, the parties agreed that allowable training costs
are
limited to those types of costs specified in the regulation. 12/
The State
took the position that all of the costs included in the daily
rate specified
in the IHSM contract were allowable under the regulation.
A letter from IHSM
to the State stated that the daily rate consisted of
salaries, travel,
overhead, general and administrative costs (G & A),
and profit.
State's submission dated 10/31/90, attached letter dated
12/2/88. In
calculating allowable training costs, however, ACYF
excluded G & A and
profit from the daily rate. See State's ex. 1,
attachments to letter
dated 1/29/90. (To calculate allowable training
costs, ACYF multiplied
the reduced daily rate by the number of 8-hour
days shown in the log which
ACYF determined represented training.)
We conclude that ACYF was justified in excluding G & A and profit
in
calculating an allowable daily rate for IHSM's activities. There is
no
provision in the regulation for profit. IHSM explained that G &
A
represented "general costs of doing business which are not
directly
related to our on-going projects," including "indirect labor,
fringe
benefits, rent, utilities, phone, equipment rental, repairs
and
maintenance, insurance, copying, postage and freight, etc."
Letter
dated 12/2/88. Of these costs, fringe benefits, rent,
utilities,
postage and freight correspond to the types of costs specified in
the
regulation. However, the State indicated that it had no
information
which would identify the amount of G & A costs represented by
these
costs. Tape recording of October 31, 1990 telephone
conference.
Accordingly, we cannot find that either profit or G & A costs
were
allowable. 13/
The problem here thus lies primarily with the way the State structured
its
reimbursement to IHSM under the contract. The State had notice of
the
training regulations and should have ensured that it could document
the
allowability of its costs, consistent with the regulation.
See
Connecticut Dept. of Human Resources, DAB No. 406 (1983). Had the
State
structured the contract differently, many of the costs in question
might
have been allowed.
Accordingly, we conclude that the cost of training activities
identified
in this decision or on remand should be calculated using a daily
rate
which excluded G & A and profit. In addition, we conclude that
ACYF
properly used this reduced daily rate to calculate the cost
of
activities which it identified as training prior to taking
the
disallowance.
V. Whether the costs are allowable as direct charges to the title
IV-E
program
In its disallowance determination, ACYF stated that the costs of the
IHSM
contract should not have been charged directly to the title IV-E
program,
regardless of whether the costs were incurred for training or
for a
management study, because other programs administered by the State
agency
benefitted from the IHSM contract. ACYF later conceded that the
costs
of modules 4 through 7 benefitted solely title IV-E and were
properly charged
directly to that program. Tape recording of 10/31/90
telephone
conference.
The State maintained, however, that the costs of modules 1 through 3
were
also properly charged directly to title IV-E. Module 1 involved
the
development of a revised cost allocation plan to distribute the
costs
incurred by the Department of Social and Health Services to
benefitting
programs. Module 2 involved the development of a system for
measuring
the time spent by social service and other personnel on
various
programs. Module 3 involved the development of a time
measurement
system for out-of-home care providers.
In support of its position that the cost of these modules
benefitted
solely title IV-E, the State pointed out that the impetus for
revising
its cost allocation plan and the time measurement systems was the
need
to clarify what costs were reimbursable under title IV-E. The
State
argued that since it would not have been necessary to make any
changes
in the cost allocation plan or the time measurement systems but
for
title IV-E, the cost of these modules should be paid by the title
IV-E
program alone. The State also pointed out that the amount of
funding
received from federal programs other than title IV-E was
unchanged
despite the changes in the cost allocation plan and the time
measurement
systems.
We conclude that the cost of modules 1 and 2 should have been
charged
through the State's cost allocation plan because the modules
benefitted
programs in addition to the title IV-E program. The
applicable cost
principles provide that, in order for a cost to be allowable
as a grant
cost, it must be allocable to the grant. OMB Circular A-87,
Attachment
A, C.1.a. The cost principles further provide that "[a] cost
is
allocable to a particular cost objective to the extent of
benefits
received by such objective . . . ." Id., C.2.a. 14/ In a
prior
decision, the Board elaborated on the concept of "benefit" as it is
used
in the cost principles, stating that it "requires that there be
an
equitable relationship between the cost and the program or programs
to
which it is charged." New York State Dept. of Social Services, DAB
No.
1102 (1989), p. 8. An equitable relationship with multiple
programs
existed in the case of the cost allocation plan and the State
agency
time study since their sole purpose was to distribute costs
attributable
to more than one program.
Moreover, this relationship existed even if the revisions to the
cost
allocation plan or the State agency time study were prompted by
the
desire to identify title IV-E costs more accurately. The State
implied
that only title IV-E costs were affected by the revisions.
However,
assuming that the total costs distributed through the cost
allocation
plan remained the same, a change in the amount of title IV-E
costs
necessarily affected the amount distributed to other
programs
administered by the State agency.
While the State asserted that the amount charged to two other
federal
programs -- title IV-B and title XX -- remained unchanged,
it
acknowledged that this was due to the existence of a cap on the
amount
of federal funding available for these programs. Tape recording
of
10/31/90 telephone conference. Simply because a change in title IV-B
or
title XX costs may not have affected federal claiming does not mean
that
there was no change in the costs charged to those programs,
however.
.Accordingly, any allowable costs associated with modules 1 and 2 of
the
contract, whether for training or for a management study, must
be
allocated to title IV-E and other programs through the State's
cost
allocation plan.
Although the considerations discussed above also apply to
the
institutional time study activities in module 3, it is possible that
a
different result is required under 45 C.F.R. 1356.60(c)(1).
This
regulation provides that "rate setting" is an allowable cost of
the
title IV-E program and "may not be claimed under any other . . .
Federal
program." It is not clear from the record whether the
institutional
time study activities were related to rate setting. The
State alleged,
on the one hand, that "[t]he sole purpose [of the
institutional time
study] was to measure allowable IV-E maintenance costs in
group homes
and institutional placements," which would in turn permit the
State to
develop more accurate rates for these providers. On the other
hand,
however, the State asserted that it "is not the case" that
"the
Institutional Time Study and Cost Reporting procedure was developed
to
allow better rate setting." State's submission dated 10/1/90,
pp.
10-11. Neither ACYF nor the State specifically addressed
the
applicability of the regulation, to which the Board referred in
the
Preliminary Analysis and Order to Develop Record. Accordingly,
we
remand the appeal to ACYF to determine whether the activities in
module
3 constituted rate setting, within the meaning of the regulation,
so
that their costs were properly charged directly to title IV-E.
A
previously indicated, however, we conclude that the allowable costs
in
modules 1 and 2 should be allocated to benefitting programs through
the
State's cost allocation plan.
VI. Conclusion
For the foregoing reasons, we conclude that under the particular
contract
in question here:
curriculum development may constitute
training
under title IV-E if it contributes directly
to
the training actually delivered;
activities such as meetings, conversations
and
conferences may involve delivery of
training,
but the State failed to provide
specific
information about the activities in
question
which would establish this;
administrative activities do not
constitute
training even if they are necessary in order
for
training to take place;
profit is not an allowable training cost;
G & A costs which do not correspond to the
costs
listed in 45 C.F.R. 235.64(b) are not
allowable
training costs; and
the costs of revising a cost allocation plan
and
State agency time study are allocable to
all
benefitting programs through the applicable
cost
allocation plan.
As previously indicated, however, we are unable to resolve this
appeal
completely based on the record before us. We therefore remand
the
appeal to ACYF for further consideration in accordance with
our
decision. Specifically, ACYF should:
(1) determine whether any activities coded as
curriculum
development constituted training;
(2) determine whether the State's claim that 22 hours were
spent
on training in the use of software can be supported by
an
affidavit;
(3) determine the number of hours in module 4 spent
conducting
case reviews;
(4) determine the extent to which the costs associated
with
management study activities are allowable based on the
State's
request for retroactive approval of the IHSM contract; and
.
(5) determine whether the activities in module 3 constituted
rate
setting and were therefore properly charged directly to title IV-E.
ACYF should issue a new determination which explains the results of
the
remand and recomputes the disallowance. The recomputation should
take
into account the 115 hours of training referred to in note 2. The
State
may appeal any new issues raised by ACYF's determination, pursuant to
45
C.F.R. Part 16.
____________________________ Norval D.
(John)
Settle
_____________________________ Alexander G. Teitz
____________________________
Judith A. Ballard Presiding
Board Member.1. In his initial brief,
counsel
for ACYF asserted as
an additional basis for the
disallowance that the costs were not
necessary
for the proper and
efficient administration of
the title IV-E program. However, counsel
later
stated that the
project in question here was
necessary. ACYF's submission dated 10/18/90.
2. ACYF later determined that an additional 115 hours was spent
on
training which was reimbursable under title IV-E. ACYF's ex.
B.
However, ACYF did not reduce the disallowance to reflect
this
determination.
3. Although ACYF initially took the position that the costs of
the
entire contract should have been charged through the State's
cost
allocation plan, it later agreed that the allowable costs
associated
with some of the contract activities would be properly charged
directly
to title IV-E at whatever rate of FFP was determined
appropriate. Tape
recording of 10/31/90 telephone conference.
4. ACYF conceded that there were no substantive reasons for
denying
retroactive approval of the IHSM contract as a management study,
but
asserted that a written request for retroactive approval was
required
before it could determine the allowability of the contract costs
which
related to a study rather than to training. ACYF's submission
dated
10/18/90. The State agreed to submit such a request. Tape
recording of
10/31/90 telephone conference.
5. ACYF also argued initially that the IHSM contract could not
be
considered a training contract since the State did not
specifically
refer to the IHSM contract in its title IV-B plan. In
support of its
argument, ACYF cited the requirement in 45 C.F.R.
1356.60(b)(2) that
"[a]ll training activities and costs funded under title
IV-E shall be
included in the State agency's training plan for title
IV-B." The State
asserted that the regulation did not require the plan
to specifically
identify all training contracts, and argued that it complied
with the
regulation since its title IV-B plan referred generally to the type
of
training provided by IHSM. ACYF later acknowledged that the
regulation
did not require a specific reference to the IHSM contract,
although ACYF
maintained that one would expect a specific reference given the
level of
detail in the State plan regarding other contracts. Tape
recording of
10/31/90 conference. In any event, since ACYF was willing
to allow some
of the contract costs as training, it cannot reasonably rely on
any
failure to specifically identify this contract in the title IV-B plan
as
a basis for not treating the remaining costs as training.
6. The State asserted that "this regulation does not explicitly
apply
to the Title IV-E program . . . ." State's brief, p. 12, n.
33.
However, the parties did not dispute the observation in the
Board's
Preliminary Analysis and Order to Develop Record that section
235.61
appears to be applicable to title IV-E to the extent that it
defines
terms used in sections 235.63 through 235.66(a), which are
made
applicable to the title IV-E program by 45 C.F.R. 1356.60(b)(3).
7. The State contended that written curricula had not only
been
developed, but had also been forwarded to ACYF, and provided copies
of
the documents previously furnished to ACYF. State's submission
dated
10/5/90. However, these documents are agendas which
allegedly
correspond to activities coded in IHSM's log as training, not
as
curriculum development. In any event, the agendas list only topics
to
be addressed and do not reflect the effort which was required to
develop
these topics. Accordingly, they do not establish that
curriculum
development took place.
8. The State noted that ACYF had overlooked one activity which
was
coded as training and described in the log as follows: "Install WA
IV-E
database system and train users dev/mod F." (Emphasis
added.) ACYF
identified this activity in its own codes as "I" for
"install database,"
and concluded that it did not constitute training.
ACYF's ex. B.
However, the State subsequently asserted that of the 24 hours
spent on
this activity, two hours were for installing the system on the
State's
personal computers, and 22 hours were for training in the use of
the
software, which was developed by IHSM for the State of Maryland
for
managing IV-E time studies and was provided to Washington at no
cost.
State's submission dated 10/1/90. ACYF stated that, although it
was not
apparent from the log that 22 hours were spent on training, ACYF
would
accept an affidavit to this effect from the State. Tape recording
of
12/31/90 telephone conference. Thus, ACYF should on remand give
the
State an opportunity to provide a supporting affidavit and increase
the
number of hours of training accordingly.
9. One exception involves activities in module 4 which the
log
describes as case reviews or special case reviews. According to
the
Demas affidavit, in module 4, "IHSM trainers spent extensive time
with
DCFS staff reading sample case records to identify problems
encountered
by DCFS in determining eligibility procedures." Id.
It is clear from
the description in the affidavit that the case reviews
themselves did
not involve the delivery of training despite the fact that
they are
coded in the log as training. However, since actual training
was based
directly on the case reviews, we conclude that the case
reviews
constituted curriculum development and can properly be reimbursed at
the
75% training rate. There is some discrepancy in the record with
respect
to the number of hours which correspond to the case reviews described
in
the Demas affidavit. Compare State's ex. 13, 10th unnumbered page,
and
State's submission dated October 5, 1990, p. 40. We therefore
remand
this matter to ACYF to determine the number of hours involved.
10. The State did not submit the agendas to the Board for
this
purpose. Instead, the State's letter dated 10/5/90 stated that
the
agendas were being submitted as evidence that written curricula
were
developed under the IHSM contract.
We do not consider the agendas which pertain solely to activities
which
ACYF determined constituted training.
11. We assume that agenda "h" is the unmarked agenda between
the
agendas marked "g" and "i".
12. This view is amply supported by prior Board decisions
involving a
similarly worded provision applicable to the old title XX
social
services grants. See New York State Dept. of Social Services,
DAB No.
520 (1984), and Pennsylvania Dept. of Public Welfare, DAB No.
451
(1983). The State had argued in its initial brief that all of the
costs
of administering a training contract were allowable pursuant to an
ACYF
policy issuance, ACYF-PIQ-82-17. However, the State did not pursue
this
argument following the issuance of the Board's Preliminary Analysis
and
Order to Develop Record, in which the Board stated that --
Since the PIQ was issued after the regulations, it is
arguable
that the PIQ, which is general in nature, must be read in
light
of the more specific regulations. In any event, to the
extent
that the PIQ is inconsistent with the regulations, it
appears
that the regulations should govern since they were
clearly
binding on the State.
Preliminary Analysis, p. 13.
13. IHSM stated that overhead included the same types of costs as
G &
A, except that the former was "specific to all on-going
projects."
Letter dated 12/2/88. ACYF did not explain why it allowed
all overhead
costs as part of the daily rate while disallowing G & A
costs if they
involved similar costs.
14. In addition, the allocation of certain title IV-E costs
is
specifically required by an ACYF issuance, ACYF-PA-87-05, which
states
in part --
Allowable administrative costs for activities . . . that are
not
linked directly to the eligibility of children must be
allocated
to title IV-E, State foster care, and other
State/Federal
programs in such a manner as to assure that each
participating
program is charged its proportionate share of the
costs.
State's ex. 12, pp.