GAB Decision 759
June 13, 1986
New York State Department of Social Services;
Docket Nos. 85-264 through 85-271; 86-62
Garrett, Donald F.; Settle, Norval D. Ballard, Judith A.
The New York State Department of Social Services (State or New York)
appealed a series of decisions by the Social Security Administration
(Agency or SSA) disallowing $5,097,130 in federal financial
participation (FFP) claimed by the State under section 403(a) of the
Social Security Act (Act) for the period January 1, 1982 through
September 30, 1985. /1/ The Agency found that the costs at issue were
provided in connection with "social services" as defined at section
2002(a)(1) of the Act. The Agency based the disallowance on section
403(a)(3) of the Act which prohibits federal reimbursement under Title
IV-A for costs associated with the provision of such social services.
New York asserted that the disallowed costs were properly charged
to
Title IV-A based on an approved cost allocation plan (CAP). New
York
also maintained that these claims were allowable under
statutory
exceptions in section 403(a)(3)(C). Finally, New York argued
that at
least part of these claims were attributable to income
maintenance
functions and therefore were allowable under section
403(a)(3).
Based on our analysis below, we conclude that --
* The State has not shown that it had approval for allocating these
costs
to Title IV-A. The State has failed to show that CAP provisions
were
approved, when they were effective, and how the provisions
submitted here are
consistent with what the State actually did. In any
event, approval of
the general allocation methodology contained in the
State's CAP did not(2)
preclude the Agency from disallowing specific
costs associated with the
provision of a social service and not within
one of the exceptions
specifically enumerated in section 403(a)(3)(c) of
the Act.
* While the State has not shown that all of the costs are allowable
under
the statutory exceptions, we have determined that the State should
have a
brief opportunity to show on remand what part of the costs relate
to one of
the exceptions (the CWEP program described below), given that
this program
was not initiated until after the beginning of the
disallowance period and
since the parties focused here on legal issues
rather than identification of
specific amounts associated with the
various programs.
* Finally, while we conclude that the State has not shown that its
claims
include some income maintenance functions for all Title IV-A
recipients
involved, the State's evidence submitted with its reply brief
(as well as
arguments the State made earlier) raise the issue whether
some of the costs
may be allowable because they were incurred in
connection with payments made
as part of income maintenance for certain
recipients, rather than in
connection with provision of a social
service. We conclude that a remand is
appropriate because the Agency has
not made a determination on this
issue. If the Agency determines this
issue in favor of the State, the
State would be required to document
what amount is allowable on this
basis.
Accordingly, we uphold the disallowance, subject to reduction to
the
extent the State can show what part the disallowed amount is
allowable
in accordance with this decision or a further determination on
remand.
I. General Background
A. Title IV-A and Title XX
Title IV-A of the Act provides for grants to states with approved
state
plans for aid to families with dependent children (AFDC).
Effective
October 1, 1975, Public Law 93-647 established a new Title XX of
the Act
for financing social services for low-income children and
families,
including AFDC children. Title IV-A retained as its primary
purpose the
provision of maintenance payments for families with dependent
children.
Public Law 93-647 included a provision amending section 403( a)(3),
the
authority for(3) paying states for administrative expenditures
under
IV-A. Section 403(a)(3)(C) /2/ of the Act now provides --
. . . no payment shall be made with respect to amounts expended
in
connection with the provision of any service described in section
2002(
a)(1) of this Act. . . .
Further, section 403(a)(3)(C) contains four exceptions to the
general
prohibition against claiming FFP in administrative costs under
Title
IV-A for Title XX social services. Under the exceptions,
costs
associated with social services are allowable when the services
are
provided in connection with --
1. an employment search program as outlined by section
402(a)(35)B)
of the Act;
2. a work incentive (WIN) program as described in section
402(a)(
19);
3. a community work experience program (CWEP) under section 409;
4. a work supplementation program under section 414.
B. The Facts
This appeal involves claims for federal funding for administrative
costs
incurred by the New York City Agency for Child Development (ACD),
an
administrative branch of the City's Human Resources
Administration
(HRA). The ACD administers day care services and
provides technical
assistance to community-based agencies in New York
City. Among other
duties, ACD provides aid to community-based agencies
in establishing day
care centers and establishes and interprets policy
relating to child
care for the centers. However, ACD has no contact
with the children at
the centers and nominal, indirect responsibilities for
the delivery of
services. See New York Brief, p. 4.
In May 1981, the United States General Accounting Office (GAO) issued
a
report based on its review of Title IV-A CAPs in New York and
three
other states. The GAO Report noted that New York City had
been
allocating part of its day-care placement and purchase-of-service
costs
as AFDC administrative costs for a number of(4) years. The Report
found
that, except for receiving referrals from AFDC eligibility workers
to
provide day care services to AFDC recipients, ACD had little
connection
with AFDC program administration. The GAO concluded that
these costs
did not benefit AFDC administration and should have been charged
to
Title XX since they were for services covered by that program.
See
Agency EX. A, p. 9.
In June 1981, the Department of Health and Human Services Division of
Cost
Allocation (DCA) provided the State with a draft Conformance Report
based on
a review of various administrative costs claimed by HRA. DCA's
Report
noted that administrative costs associated with ADC's involvement
in day-care
activities were being improperly charged to Title IV-A. The
DCA draft
Report noted that the State would have to revise its CAP to
properly allocate
the ACD costs and that those costs were properly
chargeable to Title
XX. See Agency Brief, p. 5; Agency Ex. B, pp. 4-5.
HRA responded to the draft report indicating that the costs were
properly
allocated under its CAP as expenses incidental to employment
and therefore
properly chargeable to Title IV-A. In a separate
response, the State
said that there were provisions in its CAP which
justified charging these
costs to the Title IV-A program. DCA's final
Report reiterated its
finding that administrative expenses associated
with ACD's involvement in
day-care activities were improperly allocated
to Title IV-A, but said that
this issue was being referred to the
Agency's central office for a final
determination.
The Agency subsequently disallowed all ACD costs allocated to Title
IV-A
for the period January 1, 1982 through September 30, 1985. The
Agency
determined that the expenditures were not within the
exception
provisions in section 403(a)(3)(C) and that the costs provided a
Title
XX social service and therefore should be charged to Title XX.
II. Argument and Analysis
The State presented three arguments for reversal of this
disallowance.
Below, we address each argument, incorporating into our
analysis the
relevant aspects of the Agency's response.
A. The Administrative Expenses as Allowable Costs Under the
State's
Approved CAP
Citing our decision in New Jersey Department of Human Services,
Decision
No. 648, May 17, 1985, New York maintained that these (5) claims
were
submitted pursuant to an approved CAP and therefore the
disallowance
should be reversed. New York maintained that the Agency
granted the
State the authority to charge these costs to the Title IV-A
program when
it approved Local Cost Allocation Manual 143b (Manual 143b) in
1976,
more than one year after the enactment of Public Law 93-647. The
State
argued that it had not been properly notified of a defect in its
CAP.
The State claimed that it first received the GAO Report when the
Agency
submitted its brief in this case (April 3, 1986). The State
also
contended that this document provided inadequate notice of
deficiencies
in its CAP as the GAO Report was an internal document from one
federal
entity to another and not intended to be published for the
State's
benefit. Further, New York argued that the final Conformance
Report
left open the question of the proper allocation of these costs.
See
Agency Ex. E, pp. 5-6. New York argued that the lack of
formal
notification of deficiencies in the CAP along with the ambiguous
nature
of the GAO Report and the draft and final Conformance Reports did
not
provide an adequate basis for the Agency disallowance.
Additionally,
New York argued that this disallowance was improper since the
Agency had
not followed its own procedures for implementing CAP amendments
as
outlined at 45 CFR Part 95, Subpart E.
The State's argument based on its CAP is wholly unpersuasive since
the
State has failed to show what CAP provisions were approved, when
they
were effective, how the provisions submitted are consistent with
what
the State actually did, and how approval of the CAP in any event
would
preclude the Agency from disallowing costs not allowable under
the
statute.
The Agency letter which the State alleged approved the CAP in 1976
(New
York Exhibit 7) was not an unqualified approval of whatever the
State
put into its Manual 143b. The approval is limited to specific
State
instructions (identified by transmittal numbers) informing
local
districts concerning cost allocation. The first transmittal
is
identified as Manual 143b and the others as amendments. The
approval
letter indicates that those instructions were in effect during
the
period July 1, 1974 to December 31, 1975 (most of which is prior to
the
enactment of Public Law 93-647). The letter does not
specifically
approve the State's use of those instructions for a later time
period.
Although the Board specifically asked the State to submit the
plan
provisions on which it relied, the State submitted a version of
Manual
143b which bears effective dates of 1984 and 1985. The State did
not
explain how the provisions submitted were relevant or how they
supported
the State's position. While these provisions show some
allocation of
purchase of service costs to the ADC program, they also
indicate that
costs related to ADC were,(6) at least in some instances,
considered to
be a subcategory of Title XX costs. See New York Ex. 6
(Manual 143b),
pp. 9-2, 9-12. We found nothing on the face of the
provisions submitted
which clearly indicates that the State intended to
allocate to Title
IV-A costs associated with the provisions of social
services and not
within the exceptions in section 403(a)(3)(C).
The most complete statement given by the State concerning how it
actually
implemented the CAP appears in the State's (HRA's) response to
the HHS
Conformance review, Agency Exhibit C. This document states that
the
portion of the ACD day-care administrative expense charged to the
IV-A
program under the CAP "represents the portion of expenses
proportionate to
the percentage of children in day care whose expenses
are paid for under the
ADC program as an 'expense incidental to
employment.'" Agency Ex. C, p.
3. The GAO and Conformance Reports
suggest, however, that the State was
allocating ACD costs to Title IV-A
based on the recipients' eligibility for
Title IV-A benefits in general,
rather than on the basis that the child care
was paid as an "expense
incidental to employment" (which arguably could be
considered part of a
IV-A maintenance payment -- see below) instead of being
provided as a
social service (which then should have been allocated to Title
XX).
While the State submitted with its reply brief two affidavits which
talk
about ACD activities associated with determining eligibility of
ACD
recipients for child care payments as an "expense incidental
to
employment," we consider these affidavits to be an insufficient
basis
for finding that none of the costs here related to IV-A recipients
whose
day care was (or should have been) provided as a social
service
claimable under Title XX. Indeed, one of the affidavits
indicates that
ACD was providing day care not only to IV-A recipients
in
employment-related programs, but also to IV-A recipients in
programs
designed to reduce or prevent institutional care for children
and
protective service programs for children. See New York Ex. 12, p.
3.
Additionally, New York City's IM Operational Handbook at part IV,
page
133, indicates that child care services are also available from ACD
to
Title IV-A parents engaged in vocational or rehabilitative programs
or
seeking their high school degrees. See New York Ex. 11.
As we discuss in the next section, to the extent ACD costs are
associated
with the provision of a social service as defined in section
2002(a)(1) of
the Act, they are reimbursable as Title IV-A
administrative costs only if
they meet one of the exceptions in section
403(a)(3)(C).
Thus, the problem appears to be not with the State's methodology but
in
how it categorized certain individuals. Given this, we cannot
conclude
that the State has demonstrated any inconsistency(7) between
approval of
the CAP in 1976 and the disallowances here. Moreover, even
if the
State's intent to claim under Title IV-A costs associated with
the
provision of social services not meeting the exceptions were clear
on
the face of the CAP, the State could not have reasonably relied
on
approval of the CAP as a basis for its claims.
As the Agency noted, this Board has previously held that approval of
a
cost allocation plan does not constitute approval for charging any
item
of cost to a particular program since a plan functions to delineate
the
proper cost allocation procedures and by its nature does not address
all
the substantive aspects of a particular program. Joint
Consideration:
Reimbursement of Foster Care Services, Decision No. 337,
June 30, 1982.
We have also found that Agency approval of a CAP does not
allow a state
to charge costs in a manner inconsistent with federal
law. See Michigan
Department of Social Services, Decision No.
370, December 28, 1982, and
cases cited therein. Further, as New York
is aware, a cost allocation
plan cannot be viewed as a policy judgment by the
Agency regarding cost
allowability and is not binding on the Agency where the
plan is contrary
to a controlling statute. New York State Department of
Social Services,
Decision No. 449, July 29, 1983; Joint Consideration,
supra.
Additionally, New York has taken our decision in New Jersey
Department
of Human Services, supra, out of its proper context. In New
Jersey,
there was no dispute that the costs at issue were allowable
and
allocated pursuant to an approved plan. Rather, the issue was the
rate
of FFP available for those costs. Id. at 1. Thus,
Decision No. 648 is
irrelevant to our analysis here.
We also are not persuaded by the State's argument that the
disallowance
should be reversed because the State never received formal
notice that
its CAP was defective. As noted above, the record does not
show that
the difficulty was in the methodology set out in the CAP rather
than in
how the State was applying the CAP. Moreover, it should have
been clear
to the State that there was a question about what it was
claiming. The
record indicates that the State was asked to comment on
the GAO Report
before the Report was issued to the U.S. House of
Representatives
Subcommittee on Oversight, Agency Ex. A, p. 2. Further, both
the HRA and
the State Department of Social Services commented separately on
the
draft Conformance Review Report. Agency Exs. C and D.
Additionally,
Agency Exhibit E indicates that the final Conformance Report
was sent to
the State Commissioner of Social Services on or about June 15,
1982.
The State and HRA comments on the draft Report specifically addressed
the
issue currently at the heart of this appeal. See(8) Agency Ex. C,
p.
5; Agency Ex. D, p. 3. Additionally, we do not find that the
DCA
statement in the final Conformance Report, that the issue of
ACD's
administrative costs associated with day care was "open", rendered
the
final Report ambiguous in light of the GAO and draft Reports, so
that
New York could now claim it did not have sufficient notice of
the
Agency's position. The Conformance Report at page 45, item 4,
addressed
the comments to the draft Report regarding the Agency's position
that
Title IV-A contained no provision for reimbursement of ADC's
costs
associated with day care and that the CAP must be revised to
properly
allocate those costs to Title XX. DCA noted that the Agency
had been
consulted on this issue and had reiterated that --
. . . the subject day care administrative costs are not
allocable
expenses under Title IV-A but (we) are submitting the issue to
SSA/OFA
Central Office before a final decision is communicated to the
State.
Consequently this issue remains open until that decision is
reached.
Agency Ex. E, pp. 5-6.
Although this statement is not definitive, it is consistent with
the
Agency's position here, and our conclusion above, that this is not
a
matter of cost allocation but is a matter of cost allowability.
The
statement certainly was sufficient to inform the State that it could
not
rely on approval of its CAP as a basis for considering the
questioned
costs allowable.
Additionally, we find that the State's reliance on the cost
allocation
plan requirements of 45 CFR Part 95, Subpart E is misplaced.
The
regulation at 45 CFR 95.509(a)(2) provides in general that
upon
discovery of a material defect, a State shall promptly amend its
cost
allocation plan. Further, the regulation at 45 CFR 95.515(b)
indicates
that where a previously approved cost allocation plan is later
found to
violate a Federal statute or regulation, ". . . the same as the plan
or
plan amendment that contained the defect." These regulations
clearly
support a conclusion that mere approval of a CAP cannot preclude
a
disallowance of costs found to be unallowable under the relevant
federal
statute.
We next turn to the issue of whether the costs associated with
the
provision of a social service are allowable under section
403(a)(3)(C)
of the Act solely on the basis that they are
employment-related
expenses. (9)
B. Costs Associated with the Provision of Social Services
1. Employment-related costs in general
As indicated above, the State presented nothing which directly
contradicts
the Agency's assertion that the claims at issue include
administrative
expenses associated with the provision of social services
to AFDC
recipients. Rather, New York took the position that child care
provided
in the context of employment-related activities are
reimbursable under Title
IV-A even if not within the specific exceptions
enumerated at section
403(a)(3)(C) of the Act. The State argued
generally that federal
programs are not designed to be all-embracing and
that it has a vested
interest in encouraging its citizens capable of
working to do so.
Citing the decision of the United States Supreme
Court in New York State
Department of Social Services v. Dublino, 413
U.S. 405 (1973), the State
reasoned that since federal work programs
cannot pre-empt state and local
work programs, these costs were properly
charged to Title IV-A.
New York's argument ignores the legislative history and development
of
Titles IV-A and XX. In Joint Consideration, supra, we were
presented
with a cogent summary of the congressional purpose in creating a
social
services program. There the Agency indicated --
Overall, P.L. 93-647 repealed most of the then existing
provisions of
the Social Security Act that provided for social services to
welfare
recipients and created instead a new Title XX. P.L. 93-647,
sections
3(a) and (b). In addition, section 403(a)(3) was substantially
amended
to include the language at issue in this case and to delete reference
to
the legislative cap on expenditures. Section 1130 itself (which for
the
prior 3 years had capped social services) was repealed by
section
3(e)(1) of P.L. 93-647, and all references to it deleted by section
3(
e)(2) of P.L. 93-647.
What resulted then was enactment of a comprehensive (albeit
"capped")
program for social services funding to each State on an allocation
basis
in Title XX, simultaneous repeal of nearly all of the social
services
authorizations under Title IV-A, and simultaneous removal of the
cap
from Title IV-A to Title XX.
The only uncapped, open-ended funding provisions for social
services
remaining under Section 403(a)(3) (after operation of the
exception)
were specifically included by Congress and(10) stated in
legislative
history: WIN and emergency assistance for needy
families. At least one
of those two programs was already effectively
capped by appropriations
limitations. There is no evidence that
Congress intended to uncap Title
IV-A and let foster care social services
(previously capped under Title
IV-A) explode, i.e., as soon as the cap of the
Title XX allocation was
used up.
Id. at 11-12 (emphasis in original).
It is clear from the legislative history of Public Law 93-647
that
Congress was deeply concerned about the prospect of unchecked
federal
spending for social services. See also, Revenue Sharing Act of
1972,
Pub. L. 95-512.
New York's contention that employment-related activities in addition
to
those enumerated by 403(a)(3)(C) are reimbursable from Title
IV-A
funding is unsupported by the Act, its amending legislation, or
its
legislative history. Title XX was developed to enable the
Federal
Government to maintain close control over its expenditures for
social
services. Except in limited instances, FFP for child care is
not
available as an administrative cost under Title IV-A. There is
no
evidence that the Congress intended funding for the costs of
providing
child care to be available under Title IV-A to any greater extent
than
that delineated by the exceptions at 403(a)(3)(C). Contrary to
New
York's contention, the Act and accompanying legislative history
support
a conclusion that funding for child care as an administrative cost
under
Title IV-A is limited to the exceptions specifically enumerated in
the
Act.
Finally, the State's allegation that federal employment programs do
not
pre-empt State or local employment programs is irrelevant. The
issue
here is not whether such programs are pre-empted, but whether funding
is
available under section 403(a) for costs associated with social
services
provided to AFDC children and not qualifying under one of
the
specifically enumerated exceptions to the funding bar in section
403(
a)(3)(C) of the Act.
2. Application of the 403(a)(3)(C) exceptions
Employment Search Program
Section 403(a)(3)(C) provides that FFP for section 2002(a) services may
be
available under section 403(a) if the social services for which FFP
is
claimed are provided in accordance with an employment search program
as
described at section 402(a)(35)(B). As the Agency noted, New
York's
State Plan indicated that the State did not operate an employment
search
program during the period(11) involved in this disallowance. New
York
Ex. 10, Sec. 2.7, p. 9. New York did not specifically challenge
the
Agency's position on this issue. Accordingly, we conclude that
the
403(a)(3)(C) exception for social services provided incidental to
an
employment search program is not available to the State.
Work Supplementation Program
Section 403(a)(3)(C) provides that FFP for child care may be
availabe
under Title IV-A if the child care is provided in connection with a
work
supplementation program as described in section 414 of the
Act.
However, New York's State Plan indicated that the State did not
operate
a work supplementation program during the period in question.
Id. at 6.
Accordingly, the 403(a)(3)(C) exception for social services
provided in
connection with this program is not available to the State.
Community Work Experience Programs
Section 403(a)(3)(C) provides that FFP for child care may be
available
under Title IV-A for services provided in connection with a CWEP
as
described in section 409 of the Act. The State did not have a
CWEP
prior to April 1, 1983. Id. at 2-2A. Thus, the State may not
avail
itself of this exception for the period January 1, 1982 through
March
31, 1983.
The Agency argued that for the period from April 1, 1983 onward,
the
State's expenses under this program exception would be minimal since
a
1984-1985 State Report on Employment Programs for Public
Assistance
Recipients indicated that individuals not requiring child-care
services
were targeted for CWEP. See Agency Exhibit G, p. 2. No
matter how
"minimal" the State's ultimate social service expenses in
connection
with CWEP might be, the State nonetheless has a right to FFP
for
allowable child-care costs incurred from the effective date of the
CWEP
as provided by the Act. However, the State has the burden to
document
its claims for FFP for costs associated with the CWEP. See
generally,
New Jersey Department of Human Services, Decision No. 688, August
26,
1985.
The position of both parties here has been complicated by the fact
that
the CWEP started during the period covered by the disallowance;
the
State had not been told how to revise its methodology with respect
to
CWEP (there was no CWEP during the exchanges of documentation
concerning
the Conformance Report). Moreover, if the State had
prevailed on its
general legal arguments here, there would have been no need
to relate
the costs to specific statutory exceptions. Thus, we have
determined
that the State should be given a limited opportunity to
identify
allowable child-care costs properly allocated to the CWEP
(see
below).(12)
Work Incentive Program
Section 403(a)(3)(C) provides an exception permitting Title IV-A
funding
for social service costs incurred in connection with a WIN
program.
Section 402(a)(19) establishes participation in the WIN program as
a
precondition to eligibility for AFDC. Section 402(a)(19)( G)
provides
that child care should be available to WIN participants.
The State's CAP indicates that State recognized this and allocated
child
care costs separately to WIN, presumably charging Title IV-C rather
than
Title IV-A. See New York Ex. 6. Indeed, the State did not
specifically
allege that any of the disallowed amounts were the costs of
child care
services to children of WIN participants. Rather, the State
used this
exception to argue by analogy that the costs of any work-related
child
care should be fundable under Title IV-A. Citing regulations
which
provide that WIN participants are entitled to child care services
(45
CFR 224.30(4)(C)(1) and 45 CFR 224.34(4)), New York argued
that
"(regulatory) authority supports the Congressional intent that
Title
IV-A recipients are entitled to child care services when they join in
an
employment search or employment related activities." New York Brief,
p.
11. These regulations cannot be read to override the specific
language
of section 403(a)(3)(C). However that language makes it clear
that
Congress intended that FFP for child care services be available as
an
administrative cost under Title IV-A only within
well-prescribed
boundaries, i.e, when provided in connection with employment
activities
under the programs specifically listed. /3/
In summary, we conclude that, to the extent the costs here
were
associated with the provision of child care as a social service,
they
are not allowable unless meeting one of the specific exceptions
in
section 403(a)(3)(C). Moreover, it is not sufficient to show that
the
recipient was in a program related to employment. The State must
show
that the employment program is one of the (13)
C. The ACD Administrative Activities as Income Maintenance Functions.
In our Acknowledgement of Notice of Appeal (December 30, 1985), we
asked
the State to identify disallowed costs the State claimed
were
specifically attributable to income maintenance functions. We did
this
because the Agency has recognized that a disallowance of this nature
may
contain costs allowable as purely Title IV-A administrative
functions,
associated with income maintenance. See Joint Consideration,
supra at
2; also New York State Department of Social Services,
Decisions No.
449, July 29, 1983; No. 552, July 16, 1984; No. 614,
December 20, 1984;
and No. 716, January 7, 1986. (As recently as
Decision No. 716, the
Board recognized that under Title IV-A the State may be
reimbursed for
income maintenance activities or other allowable costs not
subject to
the claiming bar of section 403( a)(3). Id. at 2.)
Below, we first address the question of whether the State has shown
that
ACD activities for all Title IV-A eligibles included some
activities
which could be charged as administrative costs to Title IV-A on
the
basis that they were part of the process of determining or
redetermining
the recipients' eligibility for AFDC benefits in general.
We then
discuss the issue of whether some of the ACD costs might be allowable
as
administrative costs of Title IV-A on the basis that the child care
was
not provided to these recipients as a social service but was
instead
paid as an "expense incidental to employment" as part of the
recipients'
maintenance payments under Title IV-A.
1. Title IV-A eligibles in general
In its appeal submission, the State provided a "functional
analysis"
paralleling ACD and income maintenance functions (New York Ex. 8).
With
its reply brief, the State submitted excerpts from New York City's
IM
Operational Handbook (New York Ex. 11); and affidavits from
Assistant
Deputy Administrators at ACD and HRA (New York Exs. 12 and
13).
However, the State's documentation failed to identify the dollar
amount
attributable to the alleged income maintenance functions. Further,
we
find that the State has failed to demonstrate the extent to which
the
functions performed by ACD for AFDC eligibles in general are
anything
other than the type of functions ACD would be required to perform
in
connection with the Title XX program.
The State attempted to legitimize these claims as costs allowable
under
Title IV-A program based on the requirement that IV-A
participants
engage in various employment programs. However, the
affidavit of the
ACD official indicated that ACD(14) determined the
eligibility of "all
applicants" for publicly funded day care programs.
New York Ex. 12, p.
3. This would include day care provided to Title
IV-A recipients who
were not in employment-related programs within the
section 403(a)(3)
exceptions; this day care could not be reimbursed as
an administrative
cost of Title IV-A if the day care was provided (or should
have been
provided) as a Title XX social service (see discussion above).
Generally, the affidavits do not show how activities which
otherwise
relate to the provision of Title XX child care services are, in
this
context, income maintenance activities. Indeed, the
activities
described in the affidavits as "income maintenance activities"
are
described as being provided in connection with "Title IV-A day
care
services," not Title XX day care. It appears that income
maintenance
payments may have been made to AFDC recipients for child care
as
"expenses incidental to employment." While, as discussed below, this
may
mean that some ACD costs might be reimbursable under Title IV-A,
these
statements do not support a conclusion that ACD was performing
IM
functions for all recipients of child care who were Title
IV-A
eligibles.
New York's Exhibit 8 is a "functional analysis" developed by the
State
which attempts to demonstrate that the ACD "provides a
reasonable
approximation of the effort required to comply with the Title
IV-A
eligibility requirements for day care." However, the analysis
indicates
that the majority of ACD functions listed are either not applicable
to
the AFDC program or that the Income Maintenance Unit is performing
an
equivalent function. (To the extent the activities might
be
duplicative, there is a further question about whether the costs
are
"necessary for the proper and efficient administration" of Title IV-A
as
required by section 403(a).) Exhibit 8 further indicates that at
least
some functions performed by ACD and relied upon by the
Income
Maintenance Unit were performed through computer entry and in any
event
would have been made for Title XX purposes. Thus, to the extent
any
benefit accrued to the Title IV-A program from information
sharing
between ACD and the Income Maintenance Unit, it is not clear that
the
benefit to the IV-A program is anything more than incidental.
The fact that child care services may have been provided to Title
IV-A
recipients does not detract from the fact that, when child care
service
is a social service as described in section 2002(a) of the
Act,
reimbursement for associated administrative costs is(15)
available
through Title IV-A only if one of the exceptions is met. /4/
2. Payments as an expense incidental to employment
There is one limited area where the State's evidence may provide a
basis
for reversing part of this disallowance. As mentioned above,
the
affidavits refer to child care payments for AFDC recipients included
in
income maintenance as an "expense incidental to employment." If
the
State properly considered these payments as income maintenance,
rather
than social services, as the State alleged it did, it is arguable
that
at least some of the related costs of determining eligibility for
the
payments would be reimbursable under Title IV-A. This issue is not
ripe
for decision, however. SSA's determination here was premised on
its
view that all ACD expenses were associated with child care which was
(or
should have been) provided as a Title XX social service. Although
the
State repeatedly alleged in its statements contesting the
Conformance
Report and the subsequent disallowance action that child care was
paid
as an "expense incidental to employment," the affidavits submitted
with
the State's reply brief for the first time clarified what the
State
meant by this and provided evidence that ACD incurred costs
for
activities such as determining eligibility for such payments. Since
SSA
has not responded to the State's reply brief and did not
previously
address the implications of the State's allegation, we do not
know
whether SSA would allow ACD administrative expenses associated
with
determining an AFDC recipient's eligibility for an income
maintenance
payment to cover child care costs as an expense incidental
to
employment. Accordingly, we remand to the parties for consideration
of
this issue. If the Agency determines that such costs are allowable,
the
State, of course, would have the burden of documenting the extent
to
which such costs are involved.
Conclusion
Based on our analysis above, we uphold the disallowance subject to
the
State's ability to document, within 30 days or such other
reasonable
time as determined by the Agency, what part of the disallowed
costs are
attributable to child care provided to CWEP participants and what
part
of the ACD costs were associated with child care paid as an
"expense
incidental to employment." If the(16) Agency determines that
ACD
administrative expenses associated with determining an AFDC
recipient's
eligibility for income maintenance payments to cover child care
costs as
an expense incidental to employment are allowable, the Agency
should
then reduce the disallowance to the extent the State has documented
what
amount of these costs were included in its claims. The Agency
should
also reduce the disallowance to the extent the State has documented
what
amount of ACD administrative costs were incurred in providing child
care
for CWEP participants. If the parties are unable to resolve
these
matters, they may return to the Board on those limited issues.
/1/ The
State received nine
notices of disallowance, and appealed each
to the Board. The parties
agreed to joint consideration of these
appeals. For convenience, we
generally refer to the total amount in
dispute as if there were one
disallowance. /2/ Formerly
section
403(a)(3)(B). /3/ SSA
argued that no FFP was available under
Title IV-A for WIN-related child care
since funding for WIN activities
is available at a 90% rate under Title
IV-C. This position would appear
to be contrary to the plain language
of section 403(a)(3)(C), but we do
not need to reach this issue since the
State did not specifically
alleged that any WIN costs were included in the
claims here, and New
York Exhibit 6 indicates that the State was separating
WIN costs from
ADC-non-WIN
/4/ As indicated on page 11 above, the State will
have an opportunity to show
the extent to which the costs fall within
the CWEP exception.
MARCH 28, 1987