DATE: May 26, 1998

SUBJECT: Missouri Department of Social Services

Docket No. A-97-57
Decision No. 1661

DECISION

The Missouri Department of Social Services appealed a decision by the Office of Refugee Resettlement (ORR) disallowing $64,061 in federal funding provided under the State Legalization Impact Assistance Grants (SLIAG) program for federal Fiscal Years (FY) 1989, 1991, and 1992. ORR sought recovery of the funds on the ground that Missouri failed to meet SLIAG program requirements for reporting expenditures.

We sustain the disallowance in full. As discussed below, we find that Missouri failed to include the disputed amounts in reports required by the regulations to establish its reimbursable SLIAG costs prior to the program's final deadline for claiming funds.

Background

From 1988 through 1994, the SLIAG program helped defray states' and local governments' costs of providing public assistance, public health, and education services to "eligible legalized aliens," as required by the Immigration Reform and Control Act of 1986. Pub. L. No. 99-603, . 204, 100 Stat. 3359, 3405; 45 C.F.R. Part 402. SLIAG funds were allocated to states based on the number of eligible legalized aliens (ELAs) residing in the state, their percentage of the population, and the amount of expenditures the state was likely to incur providing the required services. The SLIAG program was temporary; states were obliged to obligate their allotted SLIAG funds by September 30, 1994 and expend them within 90 days thereafter. SLIAG funds remaining unspent after that time were reallotted to states which had expended their allotments and incurred unreimbursed expenses; those states in turn had until July 31, 1995 to expend the additional funds. 45 C.F.R. .. 402.11, 402.26, 402.34; see also 45 C.F.R. . 92.23 (a grantee must liquidate all obligations incurred under an award not later than 90 days after the end of the funding period, or as specified in a program regulation).

States received advances of SLIAG funds by submitting annual applications which estimated likely SLIAG-related costs for the coming fiscal year by program or activity and outlined the methodologies used to estimate costs. 45 C.F.R. . 402.41. At issue here, however, are two year-end reports states were required to submit after they had received funds. First, states were required to submit a program report which provided information on actual costs incurred during the federal fiscal year, for each program or activity identified in that year's application for SLIAG funds. 45 C.F.R. . 402.51(e). ORR's program instructions referred to this report as the end-of-year program report. Program Instruction, Module 17, ORR Exhibit (Ex.) 3. If a SLIAG program or activity which appeared in the application was missing from a state's end-of-year program report, ORR would assume that the state had no SLIAG-related costs for that program or activity, and would consider it deleted from the state's application. Id. States were permitted to modify their program reports at any time. Id. Next, states also had to submit a financial status report containing a fiscal report on the status of each year's funds (i.e., obligated, unobligated and carryover), for which states were required to use the form SF-269. 45 C.F.R. . 402.51(c); Program Instruction, Module 18, ORR Ex. 2.

The financial status reports and the end-of-year program reports were both to be filed within 90 days after the end of a federal fiscal year. 45 C.F.R. . 402.51(a)(1). Funds could be used only for SLIAG-related costs that a state listed in its annual reports by December 29, 1994 (90 days after the September 30, 1994 deadline for obligating funds) and that were accepted as allowable costs by March 15, 1995. 45 C.F.R. .. 402.11(p), 402.51. As noted above, funds remaining unspent were then reallocated to states which had exceeded their allotments.

Proper documentation is also required by basic principles of grants administration as set forth in 45 C.F.R. Part 92. The Board has long held that a grantee which receives federal funds bears the burden of documenting 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).

Analysis

On appeal Missouri asserted that its reports support additional SLIAG funds for three fiscal years: $40,842 for FY 1989, $2,818 for FY 1991, and $19,973 for FY 1992. ORR contended that for each of these years Missouri failed to submit required reports or that the reports failed to include the disallowed costs. Missouri argued that it submitted documentation sufficient to satisfy the regulations' reporting requirements. We address each year in turn.

FY 1989

The bulk of the disputed amount, $40,842, consists of SLIAG administrative costs for FY 1989. Missouri and ORR disputed whether Missouri timely reported this amount in its end-of-year program report. Specifically, Missouri and ORR disagreed over which of two different documents that Missouri submitted was the FY 1989 end-of-year program report required by the regulations. 45 C.F.R. . 402.51(e). ORR took the position that, in any event, neither document was sufficient to establish the claimed SLIAG administrative costs.
Missouri asserted that its end-of-year program report for FY 1989 was submitted under a cover letter dated September 29, 1989, which states that "Missouri submits its [SLIAG] final report for FY '89, and its application for FY '90." Missouri Ex. J. The letter goes on to state that the "[f]inal report for FY '89 shows that 598 [ELAs] were served with a total program cost of $478,860.01 and SLIAG administrative costs of $40,842.14." Id. Attached to the letter is an 11-page document, the first page of which is titled "SLIAG PROGRAM DATA WORKSHEET - FY 90 APPLICATION FOR MISSOURI / UPDATED ESTIMATE FOR FY 89." This first page states "Program: SLIAG Administration," and lists, under "SLIAG Cost Summary," $40,842.14 for SLIAG administration. Page "1a" is a breakdown of SLIAG administrative costs into 12 categories, for the four quarters ending on June 30, 1989. Missouri asserted that this correspondence cannot be characterized as anything other than a required annual report, especially considering the documentation attached, which Missouri argued was as detailed as any of its other documentation which was accepted for reimbursement.

ORR, however, argued that Missouri's FY 1989 end-of-year program report was submitted with a January 30, 1990 letter that states, "[w]e are submitting the SLIAG, End of the Year Report for the period ended December 31, 1989." Missouri Ex. O. Attached is a page that says "SLIAG End of the Year Report" for the Department of Social Services, which reports SLIAG administrative costs of $80,061, for a different time period than the earlier putative report.

The record thus contains two different documents, both submitted by Missouri, which purport to be Missouri's end-of-year program report for 1989. We find that both documents raise significant questions about Missouri's SLIAG administrative costs for that year and that neither was sufficient to fulfill the regulations' reporting requirements. The document attached to the September 29, 1989 letter, which Missouri argued was its end-of-year program report for FY 1989, is entitled "updated estimate" for FY 1989, and is by its terms inconsistent with the cover letter's promise of a "SLIAG final report." The September 29, 1989 document also does not cover all of FY 1989, the period for which Missouri asserted that it filed a final report showing the $40,842 in SLIAG administrative costs. Whereas FY 1989 ended on September 30, 1989, the report instead displays costs for the four quarters ending June 30, 1989, i.e., the last quarter of FY 1988, and the first three quarters of FY 1989. It fails to meet ORR's instruction that end-of-year program reports show only costs actually incurred between October 1 and September 30. End-Of-Year Program Report Checklist, ORR Ex. 4. Missouri acknowledged but offered no explanation for this discrepancy in the time periods covered by the September 29, 1989 report. Missouri Appeal File Index 2. These obvious failings belie Missouri's assertion that the September 29, 1989 letter "substantially complied" with the requirements of section 402.51. We find it reasonable for ORR to have concluded that a document labeled "updated estimate," which was submitted before the actual end of the fiscal year, and which did not report costs for the last quarter of the fiscal year, was not Missouri's final end-of-year report for FY 1989, but was instead a partial estimate of FY 1989 costs, submitted along with Missouri's application for FY 1990 funds.

The matter is further confused by Missouri's later submission of the second document, labeled "SLIAG, End of the Year Report," by cover letter dated January 30, 1990, the deadline for FY 1989 program reports. Missouri Ex. O. The January 30, 1990 report is also defective on its face, as it reported alleged costs for the calendar year ending December 31, 1989, instead of for the actual 1989 fiscal year. The January 30, 1990 report listed $80,061 in administrative costs for Missouri's Department of Social Services. ORR argued that this report was not acceptable because it failed to indicate whether the administrative costs were SLIAG administrative costs or program administrative costs, which are different cost categories under the SLIAG regulations. 45 C.F.R. . 402.2.

ORR provided Missouri with several opportunities to clarify its SLIAG administrative costs for FY 1989, but Missouri failed to respond. In correspondence to Missouri dated February 23, 1990 regarding the January 30, 1990 annual report, ORR noted that "you have not included costs for SLIAG administration in this report. Please indicate whether or not you intend to claim costs for that program." Missouri Ex. P, Attachment C. An "actual cost summary report" for FY 1989 enclosed with this correspondence, while showing the $40,842 in the category "updated FY costs," also shows "0" SLIAG administrative costs in the category "actual FY 89 costs." Missouri Ex. P, Attachment A. The record contains no Missouri reply to this letter respecting the $40,842. Subsequent correspondence from ORR continues to report that there were no SLIAG administrative costs for FY 1989. "Cost table reports" which ORR sent Missouri in March and April 1991 and in June 1992 contain a category showing "actual" SLIAG administrative costs as "0" for FY 1989. Missouri Exs. Y, BB, FF. Finally, a Monitoring Report dated July 13, 1992 from the Administration for Children and Families (ACF), the departmental agency which oversees ORR, states that no costs for SLIAG administration were reported for FY 1989 in the "1/31/90" FY 1989 "end of year report" (which presumably refers to the January 30, 1990 annual report). Missouri Ex. GG.

Missouri did not reply to any of these reports showing no actual SLIAG administrative costs for FY 1989. Missouri did not take issue with this determination, and raised no disagreement with ORR over Missouri's SLIAG costs until the HHS Division of Payment Management, in the process of closing out the SLIAG program, notified Missouri in a letter dated April 28, 1995 that Missouri's payment management system account showed total SLIAG cash advances and disbursements of $308,109, which exceeded its total reported SLIAG expenditures of $244,048, precipitating this disallowance. Missouri Ex. HH.

On appeal, Missouri argued that the reports it submitted were sufficient to satisfy the reporting requirements, but Missouri still did not explain the discrepancies concerning its annual reports for FY 1989. Instead, Missouri attempted to highlight minor errors in ORR's argument on appeal, and what it alleged were defects in ORR's correspondence to Missouri concerning SLIAG administrative costs for FY 1989. Missouri argued that the ORR actual cost table report enclosed with ORR's February 23, 1990 correspondence lists the $40,842 as an "updated cost" and not an "updated cost estimate" as ORR asserted in its brief. Missouri also argued that no reference to the September 29, 1989 letter (which reported the $40,842) could be found in any ORR correspondence.

The February 23, 1990 actual cost summary report and the subsequent cost table reports however, clearly report that there were "0" SLIAG administrative costs for FY 1989. Missouri Exs. P, Y, BB, FF. Since Missouri had ample, repeated notice that no SLIAG administrative costs had been accepted for FY 1989, its failure to amend its reports in a timely fashion to reflect the amounts it now disputes cannot be excused due to the minor points raised in its arguments.

Accordingly, we find that Missouri, by submitting defective reports and then failing to respond to ORR's inquiries regarding its FY 1989 SLIAG administrative costs, failed to report its costs in compliance with the SLIAG reporting requirements, and, moreover, failed to meet its burden of documenting the allowability of costs claimed under federal programs. 45 C.F.R. . 402.51.

Having failed to adequately report its SLIAG administrative costs for FY 1989 during the life of the SLIAG program, Missouri may not now receive federal reimbursement for any such costs. Under the SLIAG regulations, the amount of funds allocated to a state was determined based on prior years' costs listed in the state's end-of-year program reports, and states that failed to submit an approved report would have no costs included in the determination for that year. 45 C.F.R. . 402.31(b)(2). While ORR permitted states to amend their end-of-year program reports at any time, the SLIAG program was temporary, and funds could be used only for SLIAG-related costs that a state listed in its annual reports by December 29, 1994 and which were accepted as allowable costs by March 15, 1995. 45 C.F.R. .. 402.11(p), 402.51.

Here, ORR's notices to Missouri concerning its FY 1989 SLIAG administrative costs were all well within the life of the SLIAG program, during which Missouri was free to amend its FY 1989 report, had it so chosen. Missouri gave no explanation for why it failed to include the disputed amounts in its claim despite notice from ORR that it had accepted zero SLIAG administration costs. Even if the disputed amounts represent amounts actually expended for the SLIAG program, Missouri may not now perfect its claim because the deadline provided in the regulations for claiming SLIAG costs has passed.

Section 204 of the Immigration Reform and Control Act (which created the SLIAG program) required states to repay "amounts ultimately found not to have been expended in accordance with this section." Pub. L. No. 99-603, . 204(e)(2)(B); see also 45 C.F.R. . 402.23. Section 204 also required states to provide assurances that they had adequate accounting procedures which included the filing of the required annual reports. Id., . 204(d)(1)(B), (e). Missouri failed to clarify its annual program reports to support the claimed expenditures within the SLIAG program's final deadline for submitting annual reports. By failing to report the disputed amount as program expenditures within the statutory time frames, Missouri failed to comply with the terms of the SLIAG statute and regulations. The deadline for claiming SLIAG expenditures is part of the statutory structure and is no mere technicality.

In analogous cases, the Board has held that it has no authority to ignore such a deadline, nor to reverse a disallowance on general equitable grounds. See Alabama Department of Human Resources, DAB No. 1220 (1991); New Jersey Dept. of Human Services, DAB No. 1142 (1990). In cases involving the two-year claims deadline set by section 1132 of the Social Security Act applicable to some other programs (such as Medicaid and foster care), the Board observed that the purpose of a timely claims limitation is to prevent states from coming in many years after expenditures are made, because such delayed claiming makes it difficult for the federal funding agency to plan its budget. Alabama, DAB No. 1220; New York State Dept. of Social Services, DAB No. 521 (1984). Those considerations apply here (as well as to the disallowances for FY 1991 and 1992, below), where the deadline for receiving SLIAG funds has passed without Missouri adequately reporting its claim (and where funds not claimed by a state were to be reallocated to other states which had exhausted their SLIAG allotments). Additionally, in a time-limited program such as SLIAG, recognition of late claims would make it impossible to properly close out the program.

FY 1991

ORR seeks to recover the difference between the total amount Missouri reported in its four quarterly SF-269s for FY 1991 ($33,478), and the amount that ORR accepted based on Missouri's end-of-year program report for FY 1991 ($30,660 in SLIAG educational assistance). Missouri Exs. S, EE, FF, GG. ORR informed Missouri that it had accepted $30,660 for FY 1991, in a cost table report and in the ACF Monitoring Report, dated July 13, 1992. Missouri Exs. FF, GG.

Missouri argued that the higher figure should be accepted because it was reported in Missouri's SF-269s, and that Missouri substantially complied with the SLIAG reporting requirements. However, that amount differed from the total SLIAG costs for FY 1991 contained in Missouri's end-of-year program report which, by definition, is intended to be a more detailed description of costs than the SF-269s. The SF-269s report only the total amount obligated for administrative or program categories and the disposition to be made of unobligated funds, whereas the end-of-year program reports list costs incurred broken down by each program or activity identified in a state's application for SLIAG funds, and describe the methodology used to determine actual SLIAG-related costs (if different from the description provided in the application). 45 C.F.R. . 402.51(e). Given the higher level of detail contained in the end-of-year program report, it was reasonable for ORR to rely on that document, instead of conflicting SF-269s, in determining Missouri's allowable SLIAG costs for FY 1991. Missouri did not explain how the submission of different cost figures for the same period in its required reports amounted to substantial compliance with the reporting requirements in the SLIAG regulations, as it argued on appeal.

As it did regarding Missouri's SLIAG costs for FY 1989, ORR informed Missouri well within the life of the SLIAG program of the amount of SLIAG costs that it accepted for FY 1991. Missouri did not take issue with that determination within the deadline for reporting SLIAG costs, although it could have amended its end-of-year program report during that time. As we discussed above, the time for Missouri to correct its annual report and receive additional SLIAG funds has passed. ORR's mere receipt of the SF-269s did not constitute its acceptance of the total cost figures reported in those documents. The correspondence from the federal agency put Missouri on notice that the lower dollar figure contained in the end-of-year program report (as adjusted upward by ORR) had been accepted as Missouri's total SLIAG expenses for FY 1991. Missouri was also put on notice by the SLIAG regulations that the program was temporary, and that SLIAG funds could be used only for SLIAG-related costs that it listed in its annual reports by December 29, 1994 (and which ORR accepted as allowable by March 15, 1995). 45 C.F.R. .. 402.11(p), 402.51.

In the absence of any disagreement from Missouri regarding its accepted costs, ORR was entitled to close out the SLIAG program and to award those funds to states which had exceeded their allotments. As discussed above with respect to the claim for FY 1989, there is no basis for permitting Missouri to correct its claim for SLIAG funds after the applicable time limit. Therefore, Missouri may not now retain the additional funds since it failed to adequately report SLIAG expenditures within the applicable time limits as required by the terms of the grant.

FY 1992

ORR did not accept any SLIAG expenses for Missouri for FY 1992 because Missouri failed to submit an end-of-year program report for that year. Missouri argued that it was entitled to receive the $19,973 in SLIAG expenses ($3,960 in SLIAG administration, $941 in medical assistance, and $15,072 in educational assistance) reported in SF-269s dated January 27 and March 16, 1992. Missouri Ex. S. Missouri argued that 45 C.F.R.. 402.51(d) recognized that the use of these SF-269s, in conjunction with an application for funds showing a state's cost reporting methodology, satisfied the SLIAG cost reporting requirements.

Missouri's argument has no merit. As discussed above, the SLIAG regulations and ORR's program instructions expressly required submission of an end-of-year program report, in addition to the SF-269 cost reports. Missouri was bound by the requirements of the regulations. ORR's program instructions warned that the failure to list in the end-of-year program report SLIAG costs for programs or activities which appeared in the application would result in ORR assuming that the state had no SLIAG-related costs for that program or activity. ORR Ex. 3. This warning put Missouri on notice that failure to submit the end-of-year program report would result in no SLIAG funds being awarded. Furthermore, the regulations provided that the amount of SLIAG funds awarded was based on the amount reported in the end-of-year program reports. In the absence of an end-of-year program report Missouri is not entitled to receive SLIAG funds for FY 1992, now that the program has expired and the deadline for reporting SLIAG expenditures has passed. As discussed above, Missouri is not entitled to the disallowed SLIAG funds because it failed to submit within the applicable deadline the documentation required by the regulations and program instructions as a condition of receiving funds.

Conclusion

For the reasons discussed above, we sustain the disallowance in full.

Judith A. Ballard

M. Terry Johnson

Cecilia Sparks Ford
Presiding Board Member