1998.05.04 DAB1659 Maine Department of Administrative and Financial Services v. Division of Cost Allocation (DCA)

Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division

DATE: May 4, 1998

SUBJECT: Maine Department of Administrative and

Docket Nos. A-96-84, A-97-99
Control Nos. A-01-94-27891, A-01-95-36087
Decision No. 1659

DECISION

The Maine Department of Administrative and Financial

Maine did not challenge DCA's determination that it

The record in this appeal consists of the parties'

Applicable Law and Regulations

A state's employer contributions to pension plans for

To be allowable, costs must be necessary and reasonable Other provisions of Attachment A of OMB Circular A-87

. C.2.a. A cost is allocable to a particular

. C.2.b. Any cost allocable to a particular

A state must file a claim for reimbursement of pension

Background

The MSRS is an actuarially funded pension system

Retirement benefits are set by the Maine legislature.

To the extent that its employees work on federally-funded

During FYs 1992 and 1993, to make up deficiencies in the

Analysis

1. Maine received an overpayment of federal funds for

The cost principles of OMB Circular A-87 require that

Accordingly, we sustain the disallowance of federal funds

2. Maine is not entitled to offset the

a. Background: Maine's claim of

While not contesting the disallowance, Maine argued that

This unfunded liability continued to grow, as the Old

The supplemental contributions were not included in

Maine argued that the supplemental contributions

b. Analysis

We conclude that Maine was not entitled to offset the

1. Maine failed to claim federal funding for the

Maine has admitted that it never filed a claim for

2. Maine failed to show that the supplemental

Even if Maine had filed a proper and timely claim for the

Without a showing that Maine's demand for an offset is a

Furthermore, the Old System Teachers were all hired

Maine argued, however, that the supplemental

This argument does not demonstrate that the supplemental

Even if Maine could successfully document that the

Maine moreover failed to demonstrate that it is entitled

DCA distinguished these education grant programs from

Maine's cost allocation agreements state that charges to

Maine did not dispute DCA's description of the federal

That these programs may not address offsets does not

While all of the supplemental contributions were

In this respect, the instant case is analogous to West Maine argued that there was no cost shifting, merely a Maine's position that the appropriations clause and other

3. Maine's other arguments provide no basis to

Maine argued that its right to offset the disallowance by

We do not agree that the reconsideration decision

Moreover, the reconsideration decision applied the offset

Maine also argued that DCA was or should have been aware

Maine's argument assumes that the supplemental

DCA also did not concede, and Maine did not show, that

Maine also argued that it would have been able to claim

The record does not support this argument. First, this

Indiana pays its public workers partly in cash

Conclusion

Based on the analysis above, we sustain the disallowance

Donald F. Garrett

M. Terry Johnson
Presiding Board Member Financial Services Services (Maine) appealed two decisions of the Division of Cost Allocation (DCA) disallowing a total of $6,090,577 in federal funds that Maine claimed, under various federal programs, for contributions to the Maine State Retirement System (MSRS) during Fiscal Years (FYs) 1992 and 1993. The MSRS is the pension system that Maine maintained for state and municipal employees, and local educational employees. DCA determined that Maine charged federally funded programs at a higher rate for their employer contributions to the pension fund than the rate that Maine charged its state-funded programs. DCA determined that Maine overcharged federal programs for pension contributions by $4,660,169 for FY 1992 (Docket No. A-96-84) and $1,430,408 for FY 1993 (Docket No. A-97-99). overcharged federal programs for contributions to the MSRS. Instead, Maine argued that the overcharges to federal programs should be offset by other contributions that Maine made to the MSRS from 1982 through 1993 which, Maine asserted, benefited the federal government. These "supplemental contributions" were made to retire an unfunded liability associated with a category of retirees referred to as the "Old System Teachers" (Old System Teachers), who were incorporated into the MSRS in 1947. written submissions and the transcript of a hearing held by the Board. For the reasons discussed below, we sustain the disallowance in full. It is uncontested that Maine received an overpayment of federal funds for FYs 1992 and 1993 which must be returned to the federal government. We reject Maine's argument that the disallowance of this overpayment should be reduced to reflect the supplemental contributions that were made from 1982 to 1993. We find that Maine never met critical requirements associated with the filing and documenting of claims made under applicable federal programs and failed to establish that the supplemental contributions could have been eligible for federal reimbursement under these federal programs, or that these programs even retained funding to cover these contributions. As Maine failed to document that it is entitled to reimbursement for the supplemental contributions, there is no basis to grant an offset against the disallowance. employees who work on federally funded programs are allowable as employee benefits under Office of Management and Budget (OMB) Circular A-87, Attachment (Att.) B, . B.13.b. See California Dept. of Finance, DAB No. 1592 (1996). Such benefits must be granted under approved plans and be distributed equitably to grant programs and to other activities, and are subject to basic requirements affecting allowability of costs set out in the Circular. "Cost" is defined as cost determined on a cash, accrual, or other basis acceptable to the federal grantor agency as a discharge of the grantee's accountability for federal funds. Att. A, . B.3. for the proper and efficient administration of the grant program; be net of all applicable credits; be consistent with policies, regulations and procedures that apply uniformly to both federally assisted and other activities; and be accorded consistent treatment through application of generally accepted accounting principles. Att. A, .. C.1.a, d, e, g.

address the requirement of allocability more specifically: cost objective to the extent of benefits received by such objective. grant or cost objective under the principles provided for in this Circular may not be shifted to other Federal grant programs to overcome fund deficiencies, avoid restrictions imposed by law or grant agreements, or for other reasons. costs under a particular federal program in order to receive funding under that program. The various programs in question here have different regulations governing procedures and deadlines for claiming reimbursement. Regulations governing the Social Security Act programs administered by this Department, for example, define "claim" as a "request for Federal financial participation in the manner and format required by our program regulations, and instructions or directives issued thereunder." 45 C.F.R. . 95.4. Regarding deadlines for claiming federal funding under HHS programs, the Board has held that the statutory timely filing requirements are program-specific, and that a claim must be filed timely in a particular public assistance program to be eligible for federal funding in that program. Oklahoma Dept. of Human Services, DAB No. 484 (1983) (applying the two-year claiming deadline in section 1132 of the Social Security Act). Additionally, a state must claim federal reimbursement for costs associated with a program only in accordance with its approved cost allocation plan. 45 C.F.R. . 95.517. See Colorado Dept. of Social Services, DAB No. 1239 (1991), aff'd, Colorado Dept. of Social Services v. U.S. Dept. of Health and Human Services, 29 F.3d 519 (10th Cir. 1994). established by the Maine legislature in 1942 which provides retirement benefits for state and municipal employees, and local educational employees, and their beneficiaries. The MSRS maintains a reserve fund which generates investment income and enables the MSRS to pay benefits to retirees and current employees who will retire and claim pension benefits in the future. A sufficient reserve fund benefits the employees and contributing programs by allowing lower contribution rates than would otherwise be required. The amount of funds that the pension system will have to pay out in future benefits is an actuarial determination based on assumptions concerning variables such as the number of employees who will be eligible for benefits, the periods when they will begin receiving benefits, their life expectancies, and the level of future salaries and pension benefits. Since its inception, the MSRS has carried a measure of unfunded liability, the amount by which expected future obligations for pension benefits exceed current fund assets. The unfunded liability is considered in setting the annual pension contribution rates paid by both Maine and participating employees. Maine state employees contribute a percentage of their salaries, at a rate fixed by statute. The state of Maine, as their employer, contributes to the MSRS pension fund at a rate, expressed as a percentage of payroll, that is set, based on actuarial recommendations, by a board of trustees, subject to limits imposed by the state legislature. programs, Maine may receive federal reimbursement for a portion of its contributions to the MSRS made on behalf of those employees; the amount of federal funding Maine receives for this purpose is based on the amount of its pension contributions. state's budget, the Maine legislature deappropriated a portion of the funds that were meant to pay Maine's employer contributions to the MSRS for those years. Maine, however, continued to claim federal reimbursement in its pension contributions at the rates established prior to the deappropriation, as though it had made its full employer contribution to the MSRS. It is undisputed that federal funding sources were thus charged for Maine's employer pension contributions at a higher rate than were non-federal, state funding sources. DCA reported that for FY 1992 it initially disallowed $5,563,362; this amount was reduced to $4,660,169 in consideration of Maine's claim that the disallowance should be offset to reflect a category of MSRS contributions for which it reported that it had failed to claim federal funding. DCA Brief (Br.) 1; DCA Ex. A-1. DCA disallowed $1,430,408 for FY 1993, and declined to apply any offset to the disallowance for that year. DCA Ex. A-2; Simard Supp. Affidavit (Aff.). FYs 1992 and 1993 which must be returned to the federal government. costs charged to federal grants be consistent with policies, regulations and procedures that apply uniformly to both federally assisted and other activities, and be accorded consistent treatment through application of generally accepted accounting principles. The Board has held, and a court has affirmed, that a state violates these consistency principles when the federal government has been charged at a higher rate than the state paid on similar cost items, such as retirement benefits or pension funds. West Virginia Dept. of Administration, DAB No. 1465 (1994); Indiana Public Employees' Retirement Fund, DAB No. 314 (1982), aff'd, Board of Trustees of the Public Employees' Retirement Fund of the State of Indiana v. Sullivan, 936 F.2d 988 (7th Cir. 1991), cert. denied, 502 U.S. 1072 (1992). As the court stated in Indiana, the applicable law provides that a state "may not allocate to federal programs costs greater than those the state charges to itself for an equivalent slice of the employee's time." 936 F.2d 990. The facts here are similar to those in West Virginia, where the state used a portion of its required employer contribution to its public employees retirements system to pay unrelated health insurance premiums, with the result that the state contributed to the pension system at a rate of 1.68% of payroll, but charged the federal government at the rate of 9.5%. Like West Virginia, Maine here did not contest DCA's determination that it received an overpayment of federal funds, as a result of charging federal funding sources at a higher rate for pension contributions during FYs 1992 and 1993 than was paid by non-federal, state funding sources. Transcript of Hearing (Tr.) 12, 123-24, 132-33; Nicholas Aff. . 7; Memorandum of Law, Maine Ex. 12, at 1-3. paid to Maine as reimbursement for employer contributions to MSRS for those years that were in excess of the rates paid for state contributions. disallowance. offset the federal overpayments for MSRS contributions in FYs 1992 and 1993 should be offset by a series of supplemental contributions to the MSRS that Maine made from 1982 to 1993 to reduce an unfunded liability associated with a distinct group of MSRS beneficiaries referred to as the Old System Teachers, for which Maine had not claimed federal reimbursement. The Old System Teachers all began working for Maine prior to 1924 and participated in a noncontributory retirement plan established in 1913. Perrier Aff. . 4. The Old System Teachers (along with their beneficiaries) were incorporated into the MSRS in 1947, and the MSRS assumed an unfunded liability associated with the Old System Teachers, which, along with other information relating to the Old System Teachers, was addressed separately in state budgetary documents. Maine Br. 3-4; Memorandum of Law, Maine Ex. 12, at 5-13; Perrier Aff. . 5; Tr. 14, 65-66. System Teachers retired during the 1950s and 1960s, and as the Maine legislature increased pension benefits during the 1970s. Maine reported that it made periodic MSRS contributions for the purpose of retiring the unfunded liability associated with the Old System Teachers beginning with their MSRS enrollment in 1947, but that these efforts to remove the unfunded liability were largely unsuccessful. It was not until 1982, Maine reported, that the Governor made a commitment to discharge the unfunded liability associated with the Old System Teachers, and the legislature authorized the supplemental payments at issue here, which were made from 1982 through 1993. Memorandum of Law, Maine Ex. 12, at 5-13. During that period, Maine reported making supplemental contributions to the MSRS for the purpose of reducing that portion of the unfunded liability traceable to the Old System Teachers, ranging from approximately $12 million in 1982 to over $30 million in 1993. Perrier Aff. . 6. Maine's overall pension contributions that were used to calculate the contribution rates that Maine used to claim federal reimbursement. Had the supplemental contributions for those years been considered in determining its MSRS contribution rates for FYs 1982-1993, Maine argued, it would have received additional federal reimbursement. Maine calculated this additional reimbursement it alleged was due and asserted that it should be applied as an offset to the acknowledged federal overpayments for FYs 1992 and 1993. benefited federal funding sources by lowering the overall MSRS unfunded liability, thus reducing the MSRS contribution rates used to claim federal reimbursement. Maine argued that DCA conceded the theoretical basis for an offset by acknowledging that the supplemental contributions reduced the MSRS unfunded liability. Tr. 191, 201-02. Maine also argued that offset was appropriate because the HHS Regional Director had granted a partial offset of the disallowance for FY 1992 to reflect supplemental contributions made during that year. disallowance because Maine failed to establish that it was entitled to federal reimbursement for the supplemental contributions. Maine failed to claim federal reimbursement for the supplemental contributions under the appropriate programs, and failed to demonstrate that federal funding would have been available under those programs. While it is conceivable that a state's debt to a federal program could be offset against a countervailing debt to the state, Maine did not establish the existence of any such countervailing debt here. supplemental contributions. reimbursement in the supplemental contributions with the appropriate program agencies in the manner and form required by applicable regulations. Tr. 13; See Tr. 184-85; Simard Aff. . 7, DCA Ex. A. We do not consider a letter that counsel for Maine sent to DCA counsel after this appeal was filed stating that the letter should be considered a claim for the offset to have been a claim to the responsible agencies under the specific programs which might have provided funding for the supplemental contributions. Maine Ex. 9. The letter was filed in the context of the parties' attempt to mediate this dispute, which was ultimately unsuccessful. The letter fails to identify allowable costs and the specific federal programs under which reimbursement of allowable costs could be received, and provides no basis for the federal agencies which administer such programs to determine if the purported claim was timely and allowable. A letter seeking offset of a disallowance which fails to identify the specific programs under which funding would have been available provides no basis to determine whether the costs are allowable and meet any conditions imposed by the particular federal programs which would provide reimbursement. In fact, the State Budget Officer admitted that no claim for grant funds would likely be forthcoming, "because we know ... that probably there are no grant funds available in those years." Tr. 141. As the Board noted in West Virginia, granting an offset against the disallowance in the absence of a claim could potentially allow a grantee to circumvent time limits and recover costs which it would otherwise not be entitled to receive. See also North Carolina Dept. of Human Resources, DAB 1025 (1989) (permitting offset in the Medicaid program may allow a state to circumvent requirements establishing a two-year time limit in which claims can be submitted). Additionally, there is no indication in the record that the cost allocation plans in effect for the relevant period of time contained provisions that would have permitted claims for the supplemental contributions. DCA's rejection of Maine's claim of offset for supplemental contributions made during the years 1982 through 1991 was therefore proper. contributions were allowable charges to federal grant programs. supplemental contributions that was consistent with an approved cost allocation plan, it here failed to demonstrate that the supplemental contributions were allowable charges to the federal grant programs that were the subject of the disallowance. Maine has failed to meet its burden in several respects. A state is not necessarily entitled to federal reimbursement for all of its employer pension contributions on behalf of state employees; rather, the contributions are allowable only to the extent that the employees work on federally-funded programs. This is apparent from the cost principles' requirement that costs must be allocable to the particular federal grant programs under which reimbursement is sought, and that employee benefits such as pension contributions be distributed equitably to grant programs and to other activities. OMB Circular A-87, Att. A, . C.2.a; Att. B, . B.13.b. Maine here conducted no analysis to show that the supplemental contributions were allocable to particular federal programs or claimed in accordance with an approved cost allocation plan, or that additional reimbursement in the supplemental contributions would reflect the extent to which state employees or teachers perform federally-funded functions. As such, Maine failed in its duty to document the allowability of its costs. West Virginia Dept. of Health and Human Services, DAB No. 1257 (1991); New York City Human Resources Administration, DAB No. 1199 (1990); Florida Dept. of Health and Rehabilitative Services, DAB No. 1031 (1989); West Central Wisconsin Community Action Agency, Inc., DAB No. 861 (1987). proper claim based on statutes and regulations authorizing payment, the Board is without power to grant the offset. Moreover, as DCA argued, such payments would be in violation of the appropriations clause of the Constitution, which limits payments of money from federal funds to purposes authorized by statute. Alabama Dept. of Human Resources, DAB No. 1621 (1997), citing Office of Personnel Management v. Richmond, 496 U.S. 414 (1990). DCA is thus not relying on mere "technical provisions" in denying the offset, as Maine argued. Tr. 12. The Board is bound by all applicable law and regulations. 45 C.F.R. . 16.14. The authorities supporting DCA's position here include the cost principles, the appropriations statutes and substantive statutes authorizing federal funding and indeed the appropriations clause of the Constitution. before 1924. The former MSRS executive director testified that he was not aware of whether or not there were any federal programs providing federal funding even as late as 1947, when the Old System Teachers were enrolled in the MSRS. Tr. 32-33. Maine therefore failed to establish that the Old System Teachers worked on any federally-funded programs. The supplemental contributions, which were authorized to retire the unfunded liability associated with the Old System Teachers, were thus not shown to be allocable charges to federal funding programs. contributions were not attributable solely to the Old System Teachers (and could thus be allocated to federal funding sources) because the Old System Teachers had ceased claiming pension benefits before Maine began making the supplemental contributions; these benefits, Maine argued, had already been paid with other MSRS funds. Maine also asserted that unfunded liability figures attributable to the Old System Teachers that were recorded separately in the MSRS annual reports were not the true actuarial liability to the Old System Teachers, but were instead "negative assets" representing the total liability that had accrued to the Old System Teachers over time, but that failed to reflect the fact that their actual pension obligations had been satisfied. Tr. 64-66. Maine asserted that the supplemental contributions benefited federal funding sources by lowering the MSRS' overall unfunded liability and reducing claims for federal funding in pension contributions. contributions were allowable charges to federal funds. While DCA agreed that the supplemental contributions did have an effect on the calculation of the employer's share of pension costs, it also maintained that the federal government bore no responsibility for the circumstances that made those supplemental payments necessary. DCA Closing Br. 10-12. The history of the supplemental contributions in the record makes clear that they were intended to address the liability associated with the Old System Teachers. See Memorandum of Law, Maine Ex. 12, at 5-10 and MSRS Annual Reports cited therein, Maine Ex. 17; Monk's Report, Maine Ex. 16, at 18. While the unfunded liability attributable to the Old System Teachers might have been "rolled over" into the MSRS liability, as Maine argued (Tr. 14), the enrollment of the Old System Teachers required the MSRS to carry a larger unfunded liability into the time period relevant to this disallowance than would have been the case had they not been enrolled, or had Maine taken steps to address the unfunded liability in a timely fashion. It was Maine's enrollment of the Old System Teachers into the MSRS and its failure for many years to make contributions to retire their unfunded liability that made the supplemental contributions necessary. supplemental contributions were not attributable to the Old System Teachers, the record establishes that they could only be attributable to the Teachers Retirement Plan within the MSRS. Teachers, who are employees of local school districts, participate in a different pension plan within the MSRS than Maine state employees. The former MSRS Executive Director testified that, within the MSRS, the State Employee Plan and the Teacher Retirement Plans are distinct, separate plans, each with its own benefit provisions, and each funded separately at different contribution rates. He described the MSRS as an "umbrella organization" that administers retirement plans for state employees, teachers and various municipal groups. Tr. 32; see Maine Ex. 15. When the former Executive Director recalculated the MSRS contribution rates, which are expressed as a percentage of salaries, to show what those rates would have been had Maine included the supplemental contributions in its total state contributions, he used teachers' salaries only, and recalculated only the contribution rate for teachers, and not the rate for state employees. Id. While Maine argued that DCA agreed that the supplemental contributions reduced the MSRS unfunded liability, the DCA regional representative explained during the hearing that only the teachers' portion of the unfunded liability was reduced. Tr. 201-02. As charges to grant funds, therefore, the supplemental contributions would be allocable at most only to the education programs which fund teachers' salaries. to reimbursement under any federal education programs that might fund teachers' pensions for the period in which the supplemental contributions were made. DCA explained that the grant programs administered by the Department of Education (DOE) provide local school districts, through states, with fixed allotments, based on factors such as population, which must be expended within a specified period of time. Within its allotted funding, a state has discretion to determine which (allowable) expenses will be charged to the federal grant, and which will be paid with state monies. By charging certain costs to federal funds, a state may be forgoing the opportunity to spend those funds on other, potentially allowable expenses. Once a state's award has been spent, no further funds are available. At the end of the grant period (plus a carryover period specified in DOE regulations), funds remaining unobligated must be returned to the federal government. 34 C.F.R. . 76.709. "entitlement" programs such as Medicaid (Title XIX of the Social Security Act), where the amount of funds a state may receive is not fixed, and a state may receive federal reimbursement for whatever quantity of allowable services it provides to all eligible individuals, who are deemed to be "entitled" to such services. The state's award is limited only in the sense of Congress' overall appropriation for the federal program. Tr. 160-61, 177-79, 199-200. grants are subject to any statutory or administrative limitations, and apply to a given grant, contract or other agreement only to the extent that funds are available. Maine Ex. 7. In addition to failing to identify specific federal education programs to which the supplemental contributions would have been allocable, Maine failed to show that it had not already exhausted its allotments of federal education grant funds for the years in which the supplemental contributions were made, or that any such funds remained available from those grants to provide funding attributable to the supplemental contributions. education programs that fund Maine's education activities. Instead, Maine argued that these programs (as well as the cost principles) contained nothing that would bar an offset against overpaid funds already awarded. negate the cost principles' requirements that, to be eligible for federal reimbursement, all costs, such as higher recalculated rates attributable to the supplemental contributions by which Maine seeks to offset the federal overpayments, must be shown to be allowable and allocable to specific federal programs. As provided in Maine's cost allocation agreements, the reimbursement of allowable costs is also subject to the availability of funds under the programs to which costs are allocable, and to any limitations inherent in those programs. The cost principles do bar offset to the extent that they set out allowability requirements which Maine has not met here. Moreover, Maine cannot through the guise of an "offset" avoid its burden as a grantee to document the allowability of costs, discussed above, and place on DCA the obligation of demonstrating the unallowability of otherwise unsubstantiated claims. attributable to the Teachers' Retirement component of the MSRS and to education funding programs, Maine did not dispute DCA's testimony that the majority of the disallowance against which Maine seeks an offset relates to state employees who have had no involvement with those programs. Tr. 158-59. To the extent that the supplemental contributions could have been charged to federal education programs, granting the offset would result in shifting those costs to the non-education federal programs responsible for most of the disallowed overpayment. OMB Circular A-87 prohibits the shifting of costs among federal programs to overcome fund deficiencies, avoid restrictions imposed by law or grant agreements, "or for other reasons." Att. A., . C.2.b. Again, this prohibition is derived from basic constitutional and statutory appropriation restrictions. The provision clearly bars using federal overpayments by non-education grant programs to fund Maine's education expenses. Virginia, which sustained the disallowance of federal funds in pension contributions provided at a rate higher than the state's actual contribution rate. West Virginia argued that the overpayment was allowable because it used the funds for an alleged federal purpose, paying health insurance premiums for retirees. The Board noted that OMB Circular A-87 forbids shifting of costs allocable to a particular grant or cost objective to other federal grant programs, and that funds appropriated for a particular federal program may not be used to fund costs arising from another federal program. West Virginia at 6, citing Cayuga County Action Program, Inc., DAB No. 1151 (1990). The Board concluded that West Virginia therefore violated the cost principles and, most likely, the appropriation authority for individual programs, by diverting funds intended for pension costs and using them to pay health insurance premiums for its retired employees. Those principles apply here, and preclude Maine from charging contributions allocable to education programs to other federal programs charged with the bulk of the overpayment.

cancellation of countervailing debts. We disagree. Granting the offset would result in the entitlement-style grant programs administered by non-education state employees bearing additional costs related to education employees and the fixed-amount grant programs they work on, which is in clear violation of the Circular prohibition. Further, as discussed above, Maine did not establish the validity of its claims under the specific programs administered by the DOE, the federal entity which would have provided funding for contributions related to the Teacher's Retirement Plan within the MSRS. We therefore agree with DCA that "none of the components used by the state to determine the size of the offset has been established as an item or amount over which the state has a legal right to receive payment from the government.... Pension contributions come from grants and contracts, specific grants and contracts." Tr. 19. Since Maine did not establish its claim for the supplemental contributions, no countervailing debt has been established.

authorities are not implicated because Maine seeks no further payment of federal funds is erroneous. The overpayment at issue here is not properly chargeable to federal funds and must be returned to the federal government. The payment of an offset would thus require the expenditure of federal funds in excess of the amount that Maine is entitled to receive from the overcharged programs. reduce the disallowance. the supplemental contributions was recognized by the HHS Regional Director when he granted a partial offset after Maine requested reconsideration of the disallowance, prior to its appeal to the Board. In the reconsideration decision, the Regional Director concluded that the cost of the supplemental contributions could be "allowable for the purpose of computing claims for reimbursement under Federal programs" and accordingly reduced the FY 1992 federal overpayment for pension contributions with respect to teachers. Maine Ex. 2; DCA Ex. A-1. requires further offset of the disallowance. DCA suggested during the hearing that the partial offset was granted upon reconsideration as a means of settling this dispute. Tr. 149. While the Board encourages parties to negotiate disputes, the decision to grant a partial offset to resolve this matter does not alter our conclusion that the additional offset sought by Maine is barred by the provisions of OMB Circular A-87 and the other authorities cited above. The Board is bound by all applicable statutes and regulations, including the provisions of the Circular, regardless of the decision rendered by the Regional Administrator upon reconsideration. 45 C.F.R. . 16.14; New York State Dept. of Social Services, DAB No. 1590 (1996). against the federal overpayment for teachers' pensions only, and not for state employees, and only with respect to supplemental contributions made during the fiscal year in which Maine received an overpayment of federal funds for teachers' pension contributions. Maine Ex. 2. The reconsideration decision is thus consistent with DCA's position and our holding here that the supplemental contributions are allocable at most only to education programs, and that federal funding in the supplemental contributions would be subject to those programs' funding limitations. of the supplemental contributions, as they were reported in the MSRS annual reports, and should have informed Maine that it could claim federal funding in the supplemental contributions, as part of DCA's duty to provide technical assistance to states. contributions were allowable charges at the time they were made. As noted above, Maine failed to show that the supplemental contributions met the basic rules of allowability including the basic rule that costs be allocable to particular federal programs. DCA's duty to "provide technical assistance" included the obligation to review the MSRS annual reports, which Maine argued contained information relating to the supplemental contributions, in order to uncover unclaimed costs which could be attributable to federal programs. It is also not clear that review of the MSRS annual reports would have given DCA any reason to believe that the supplemental contributions were eligible for federal reimbursement. The reports recorded information relating to the Old System Teachers including the supplemental contributions separately from the rest of the MSRS contributions on which Maine based the contribution rates used to claim federal reimbursement. DCA could have reasonably concluded (as DCA's regional representative testified he concluded) that the supplemental contributions were omitted from claims for federal reimbursement because they were intended to retire an unfunded liability associated with a group of employees who had not worked on federal programs. Tr. 166. The MSRS reports would not have put DCA on notice of Maine's position on appeal that the Old System Teachers unfunded liability had been subsumed into the overall MSRS liability, and that recording the Old System Teachers unfunded liability figures separately in the reports was essentially a bookkeeping fiction. Additionally, the federal education programs which contribute to the Teachers' Retirement System component of the MSRS provide states fixed amounts of funding, and Maine could presumably have elected to spend its limited allotment on education expenses other than the supplemental contributions. Thus, the MSRS reports would not have put DCA on notice that Maine was failing to claim its full share of federal funding. federal reimbursement for the supplemental contributions if it had been aware of what it called a "rule requiring cash basis accounting for cost allocation purposes." Maine Br. 4-5. Maine asserted that such a rule was established by the decision in Board of Trustees of the Public Employees Retirement Fund of the State of Indiana v. Sullivan, 936 F.2d 988 (7th Cir. 1991), cert. denied, 502 U.S. 1072 (1992)(and by the 1982 Board decision on appeal in Indiana). Maine argued that it was unaware of the rule until the Indiana case was brought to its attention during meetings with DCA to discuss this disallowance, after which it reviewed its records to see if there were costs it had failed to claim. Maine argued that DCA, however, was aware of this rule as early as 1982 and therefore should have informed Maine that it could include the supplemental contributions in its claims at the time DCA was made aware of them. argument assumes that DCA was contemporaneously aware that Maine could have included the supplemental contributions in its claims during the relevant time period. As discussed above, the record does not support this conclusion. Second, DCA did not accept Maine's request for admission that Indiana established a rule that states may only use cash accounting, and our review of that case and the prior Board decision does not reveal that they imposed such a rule. Instead, the court case, and the Board's decision below, hold that the consistency provisions of OMB Circular A-87 are violated when a state claims pension contributions for federally-funded programs at a higher rate than for state-funded programs, and where the federal programs were charged at an actuarially determined rate while the legislature ignored those rates and appropriated lower amounts for the state programs. The consistency principles of A-87 are not satisfied merely because the state used consistent rules to determine pension entitlements of all state workers. 936 F.2d at 993; see also Indiana Public Employees' Retirement Fund, DAB No. 314 (1982). The language that Maine cited as establishing the cash accounting rule ("[w]hatever the state actually pays to state workers is the benchmark for measuring the federal government's share") concisely describes the essence of the consistency provisions as they applied to the circumstances present in that case. 936 F.2d at 992. The court went on to say: and partly in promises. Indiana is free to make that choice for itself but may not claim 100% in cash up front from the federal government if it is unwilling to put the retirement program for other state employees on an equivalently well-funded basis. Id. in full. Judith A. Ballard