GAB Decision 352
September 30, 1982 Michigan Department of Social Services; Docket No.
82-69-MI-SS Ford, Cecilia; Garrett, Donald Teitz, Alexander
The Michigan Department of Social Services (State) appealed the
disallowance by the Social Security Administration (Agency) of $1,001 in
federal financial participation (FFP) claimed by the State under Title
IV-A of the Social Security Act. The disallowed funds were allocated to
Title IV-A by an indirect cost rate and claimed as expenditures for
training for the quarters ended December 31, 1979 and March 31, 1980.
For the reasons stated below, we reverse the disallowance. This
decision is based on the written record, including materials submitted
by the parties subsequent to a telephone conference conducted by the
Board.
Background
Section 403(a)(3)(A) of the Social Security Act calls for federal
payment to the states for 75% of the allowable expenditures made by the
states for training employees providing Aid to Families With Dependent
Children (AFDC).
The Department of Health, Education, and Welfare designated the
University of Alabama (University) as a management training institution
for the 27 states in Regions I, II, III, IV, and V, which includes
Michigan. The University was to provide training workshops for 220
state welfare managers operating programs under various titles of the
Social Security Act including AFDC. A financing agreement was arranged
between the participating states and the University. The agreement
called for the states to pay 25% less than the gross training costs
billed to the states by the University. The agreement also stated that
the purpose of the 25% reduction in the amount paid was to permit the
University to provide the states' 25% non-federal share for the costs of
training. The states would then claim expenditures under AFDC for the
gross amount billed by the University. The effect of this agreement was
that the Agency would pay 75% of the training costs, the University
would pay 25% of the training costs, and the participating states would
pay none of the training costs. Thereby, the Agency would pay $75 of
each (2) $100 in tuition for the training, with the University providing
$25. In effect, however, the Agency claimed here that it should pay
only $56.25 of each $100 of tuition (75% of the amount the State paid
the University ($75)).
The Agency's disallowance letter stated that the disallowance was
made because the funds were not paid by the State to the University and
were therefore not "expenditures" under the Act. In subsequent
briefing, the Agency argued that the reduction was a discount to the
State and, therefore, was an "applicable credit" under 45 CFR Part
74,
Appendix C, Part I, C.1 and 2.
Definition of Expenditure
The principal dispute between the parties is what is the
"expenditure" which, under section 403(a)(3) of the Social Security
act,
will be matched at 75% FFP. The Agency's position is that only the
actual amount paid by the State of Michigan to the University comes
within the definition of expenditure. The State's position is that the
entire cost of the training is the expenditure, including the 25% of the
cost that was contributed by the University. We construe the State's
position to be that the 25% of the total cost provided by the University
was an "in-kind" contribution of services; this characterization was
also made by the Agency at an earlier date (see below). /1/ Such an
in-kind contribution is not a discount and, therefore, is not an
applicable credit.
The State submitted an undated letter from the Director, Division of
Procedures, Office of Family Assistance, Social Security Administration,
to the University. The letter attached a memorandum, dated December 15,
1977, written by an attorney for the Agency which the Director stated
cleared". . . the proposed funding arrangement . . . for the University
of Alabama." A document entitled "Financing of Training Costs"
that was
sent to the Agency and was referred to by the Director and attorney and
was contained in the record stated in part, "(the) financing of training
costs will be on a 75% federal, 25% state matching basis. . . . The
University of Alambama will provide the 25% match. . . ." The "Financing
of Training Costs" stated that four training sessions would be provided
to each trainee at a cost of $3,600 ($900 per session) and also
indicated that "(when) each state receives the federal share ($675 per
training session) the University of Alabama will be reimbursed. . . ."
Therefore, it is clear that the Agency had notice that the University
proposed that the Agency would pay 75% of the total cost of training.(3)
The interpretation of the arrangement between the University on the
one hand, and the several states who sent employees to the University
Management Institute on the other was characterized as being an
"in-kind" contribution in the memorandum from the Agency attorney.
In
approving the arrangement, the attorney stated that he assumed that
there would be "no duplication in the use of these 'in kind'
contributions." /2/
Agency Approval
Now, the Agency's position on approval of the financing arrangement
is that: (1) no Agency employee could approve an arrangement which was
contrary to a statute; and (2) in any event, the approval was not by
any Agency official authorized to give such approval.
A. The funding arrangement was not contrary to the statute
The Board agrees with the Agency's position that no Agency official
has authority to authorize a violation of a statute. However, what we
have in this appeal is an interpretation that, in effect, a particular
funding arrangement constitutes an "expenditure" under the statute.
The
term is not specifically defined in either statute or regulations, nor
is it self-explanatory. Clearly, there must be an expenditure in order
for a state to receive FFP, but the Agency has not shown that the
statute requires that an "expenditure" can only be in the amount of
the
actual payment by the State. Here, it is in the form of a payment by
the State and as an in-kind contribution by the University. Together
they add up to the 100% "expenditure" for which 75% FFP is available.
We recognize that in this context, there may be more than one
supportable interpretation of the word "expenditure," and we do not
mean
to imply that the one upheld in this decision is the strongest, but the
Agency has failed to show that its original position is not a
supportable one and that the "applicable credit" regulations must
be
applied to these facts. Until tthe original position is specifically
withdrawn in this context, it should be upheld.
B. Specific authorization for approval was not necessary
The Board finds that the interpretation of the financing arrangement
in the approval by the Director of the Division of Procedures is
supportable and is not contrary to statute or regulation.
The Agency argued that the interpretation adopted by the Director is
of no effect because he was not authorized to make such an
interpretation. (4)
The Agency has provided us with delegations of authority but has not
shown us that the type of approval action here falls within the specific
authorities granted to these officials or that the designated officials
are the only ones who could approve this financial arrangement.
Another view is from the perspective of the University. It submitted
its financing proposal, that "HEW finance the total fixed cost for a
regional training center at the University of Alabama," to a SRS
official in Washington on May 10, 1977. The University specifically
asked for his approval of the arrangement. The official's title was not
given, but in a letter from the University to OFA in Atlanta dated
November 11, 1977, he is identified as "SRS Contracting Officer."
The
May letter in any event states that the University proposal also was
submitted to the person who was Director of Procedures in OFA. The
November letter also pointed out that before the SRS Contracting Officer
could answer, the Assistance Paymentts Division was transferred to the
Social Security Administrtion, that he had referred the letter to SSA,
and that the Director of the Division of Procedures had told the
University that the Procedure outlined in the May letter to the
Contracting Officer was acceptable. Although it was undated, the
memorandum of the Director of the Division of Procedures presumably
followed the Contracting Officer's inquiry. It thus appears that the
University submitted to the Agency in Washington a request for approval
of a particular financing arrangement. The request was passed along,
partly because of a reorganization, and it is reasonable to assume that
the Agency internally passed it to an appropriate official. The Agency
did not dispute that the Director's memorandum was in response to the
University's initial inquiry.
The Agency's argument, that the State should have inquired
specifically as to whether it could be party to the approved financing
agreement submitted by the University, also does not have merit. The
financing agreement made it clear that employees of a nubmer of states
would be enrolling in the training program conducted by the University.
Furthermore, the record indicates that the Agency wanted a regional
training center established at the University. Agency officials granted
approval to the University for the financing arrangement. Under these
circumstances, we find that there was no necessity for each
participating state to request approval because the Agency indicated
that the financing agreement would be acceptable for state employees
trained at the University.
The Agency's argument, that the State should have inquired as to
whether the two-year old approval was still valid, is also without
merit. The Agency had approved a general financing agreement for states
having employees in the training program at the University. In the
absence (5) of any change in the applicable section of the statute, or
in general Agency policies concerning reimbursable expenditures, during
the intervening two years, for a policy change to be effective, the
Agency should have notified at least the University and perhaps the
states involved if it decided to withdraw the approval.
Conclusion
For the reasons stated above, we reverse the disallowance of $1,001
made by the Agency. /1/ An example of in-kind contributions by other
public agencies or private organizations in other programs is
found in the Title XX regulations at 45 CFR 228.90(b)(7)(1979).
/2/ The Agency has not asserted that any of these costs were duplicately
claimed, and the record does not indicate any duplication.
OCTOBER 22, 1983