DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: New Jersey Department of Human Services
Docket No. 87-51
Decision No. 894
DATE: September 1, 1987
DECISION
The New Jersey Department of Human Services (State) appealed a decision
of
the Office of Family Assistance, Family Support Administration
(Agency),
disallowing $54,340 claimed under title IV-A (Aid to Families
with Dependent
Children, or AFDC) of the Social Security Act (Act). The
Agency
disallowed maintenance in lieu of rent (MLR) charges attributable
to
county-owned buildings for calendar year 1982 and the first two
quarters of
calendar year 1983. 1/ The costs were claimed as increasing
adjustments
on the State's quarterly statement of expenditures for the
quarter ending
March 31, 1985, which was submitted on July 9, 1985. The
disallowance
was taken on the ground that the State's claim was not
filed within the
two-year time limit imposed by section 1132 of the Act
and the implementing
regulations. The State took the position that the
claim fell within the
exception to the time limit for adjustments to
prior year costs. For
the reasons discussed below, we uphold the
disallowance.
Applicable Law
Section 1132 of the Act requires claims by states for expenditures
in
calendar quarters beginning on or after October 1, 1979 under
the
various public assistance programs, including AFDC, to be filed
"within
the two year period which begins on the first day of the
calendar
quarter immediately following such calendar quarter," or payment
will
not be made. Subsection (a) states in part that this provision is not
to
be applied so as to deny payment with respect to any
expenditures
involving, among other things, "adjustments to prior year
costs." The
statutory provisions were implemented by 45 CFR Part 95, Subpart
A
(1981). The regulatory provisions on time limits in general track
the
statutory requirements. The regulation also defines "adjustment
to
prior year costs" as--
. . . an adjustment in the amount of a
particular cost item that
was previously
claimed under an interim rate concept and
for
which it is later determined that
the cost is greater or less
than that
originally claimed.
45 CFR 95.4.
Parties' Arguments
The State acknowledged that the MLR costs were not claimed by the
two-year
filing deadline. It took the position, however, that the costs
fell
within the exception for adjustments to prior year costs. In
support of
its position, the State cited a prior Board decision which
stated that the
"classic example" of this exception involved a
retrospective rate
reimbursement system where providers of medical
services are paid an
"interim" rate based on the prior year's costs and
the rate is subsequently
adjusted based on actual costs. New York State
Department of Social
Services, Decision No. 521, March 6, 1984. The
State asserted that its
MLR charges--
generally are provisional in nature,
since a retrospective rate
reimbursement
system is employed in claiming these
charges.
Under this system the quarterly
information submitted reflects a
pro-rata figure based, not on current actual cost, but
rather
comprises an estimate based on
the most recent report of actual
MLR
cost which is subject to retrospective revision upon
receipt
of actual cost figures.
(State's brief, pp. 3-4) The State also relied on New York
State
Department of Social Services, Decision No. 818, December 12, 1986,
in
which the Board found that a claim for MLR costs constituted
an
adjustment to prior year costs.
The Agency contended that the State's claims were not properly
considered
adjustments to prior year costs within the meaning of the
exception to the
filing limit. Although it found that there had been
earlier, timely
claims for MLR costs covering the same facilities for
the same quarters, it
disputed the State's contention that the earlier
claims were for payments
made at an interim rate subject to
retrospective adjustment. It
contended instead that the State had
merely recalculated the amount of MLR
costs without any prior
arrangement that the original costs were subject to
retrospective
adjustment. The Agency argued that--
. . . if it were possible for a State to
invoke the exception for
adjustments to
prior year costs merely by labeling a
claim
"provisional" and declaring that
it was subjection to revision,
then any
cost, once claimed, would be subject to revision for
an
indefinite period of time.
(Agency's brief, pp. 9-10)
The Agency also argued that the exception was intended to apply only
to
situations in which subsequent adjustments are both unforeseen
and
unavoidable, relying on language in the preamble to the
implementing
regulations. It contended that the State had not shown
that this was
the situation here. The Agency noted that final cost figures
are
typically available to the State within ample time to permit a
timely
claim and stated that it appeared that what was involved here was
"a
routine case of avoidable delay by the State in assembling the
necessary
information in a sufficiently timely manner." (Agency's
brief, p. 7)
Finally, the Agency asserted that Decision No. 818 did not require
that
the disallowance here be reversed since the Agency did not in that
case
raise the arguments discussed above. 2/
Discussion
We are not persuaded that the MLR costs were originally claimed based
on
an interim rate. Accordingly, we conclude that the additional MLR
costs
claimed subsequent to the filing deadline did not constitute
an
adjustment to prior year costs within the meaning of the exception
to
the filing deadline as defined in 45 CFR 95.4.
The State based its allegation that the original MLR charges
were
provisional on an unsworn statement to that effect by a state
official,
prepared for purposes of this appeal. (PA 8-10) We do
not give that
statement much weight, however, in view of the circumstances
under which
it was prepared and the fact that it is contradicted by other
evidence.
The County Welfare Agency Accounting Manual, also submitted as part
of
the State's appeal file, contains no indication that MLR charges
were
initially to be claimed based on an interim rate subject to
adjustment
when actual costs became available. The only reference to an
adjustment
of MLR costs is the requirement that the county welfare agency
(CWA)
submit a new Form PA-230 (Request for Monetary Allowance in Lieu
of
Rent) when "[t]he CWA wants to update its cost figures at the
DPW
central office, due to: i. Significant change (10% or more) in
previous
original costs submitted." (PA 15) This merely indicates
that MLR
costs may be adjusted, not that adjustment of MLR costs was
normally
expected.
In addition, the Agency found, based on documentation submitted by
the
State with its appeal, that the State's original claim for MLR costs
for
Monmouth County for calendar year 1982 was based on actual cost
figures
submitted to the State by the County on September 15, 1983.
According
to the Agency, the County later submitted revised actual cost
figures,
on which the claim before us was in part based. (Agency's brief, p.
5)
3/ The claim based on the actual costs submitted in 1983 was clearly
not
a claim based on an interim rate. The purpose of an interim rate is
to
provide some basis for reimbursement where actual costs will not
be
known at the time payment is due. Merely because a claim was
revised
does not mean that the original claim was based on an interim
rate.
Indeed, to consider any revised claim as an adjustment to prior
year
costs would be to make the exception so broad as to be meaningless.
On the other hand, the Monmouth County claim for the first two quarters
of
calendar year 1983 as well as the Essex County claim for the same
quarters
were originally based on estimates rather than actual costs.
(Agency's brief,
pp. 5-6) Even these claims are not properly considered
claims based on
an interim rate, however. The word "rate" implies that
there is some
predetermined basis for payment, such as the actual costs
for the prior
year. The absence of any mention in the Accounting Manual
of interim
rates for MLR costs and the fact that some of the MLR costs
in question were
based on actual costs make it unlikely that the State
had established any
interim rate for MLR costs. In any event, there is
no evidence in the record
that the estimates were made under any interim
rate policy. Thus, we
conclude that the claims in question were outside
the scope of the exception
for an adjustment to prior year costs.
We also agree with the Agency that the State's reliance on Decision
No.
818 is misplaced. That decision specifically notes that the Agency
"did
not dispute that an adjustment in prior year costs was involved here.
.
. ." (p. 5, n. 4) Moreover, in that case, the State's Local
District
Cost Allocation Plan provided for reimbursement of MLR costs on
a
estimated basis, with subsequent adjustment on the basis of actual
cost
figures. Thus, unlike this case, there was a formal provision
for
claiming MLR costs on an estimated basis subject to adjustment.
We note, moreover, that the Agency's contention that the adjustments
to
the MLR costs could have been avoided is supported by the record.
The
State offered no reason why the actual costs of maintaining
the
buildings in question could not have been determined soon after the
end
of the relevant year, or well within the two year period allowed
for
filing claims. Neither is there any apparent reason why
comparable
rentals could not have been obtained soon after the end of the
year.
The record shows that for a Monmouth County building the
comparable
rental for 1985 was given as $13.00 per square foot and was
submitted by
an appraiser on November 21, 1985. (PA 70-71) The
comparable rentals
for the years 1981 through 1984 were determined on April
25, 1986, and
were then derived by working backwards, using Consumer Price
Index
figures, from the 1985 figure. (PA 72-73) Clearly, these
comparable
rentals could have been done each year for the prior year.
However, in
view of our conclusion, discussed above, that the claim was not
made
based on an interim rate within the meaning of 45 CFR 95.4, we need
not
decide whether an adjustment which could have been avoided is
outside
the scope of the exception, as the Agency argued.
Conclusion
For the foregoing reasons, we conclude that the State's claim for
MLR
costs in the amount of $54,340 did not constitute an adjustment to
prior
year costs within the meaning of the exception to the filing limits
as
defined in 45 CFR 95.4. Accordingly, we uphold the disallowance on
the
ground that the claim was not timely filed under section 1132 of
the
Act.
_____________________________ Donald
F.
Garrett
_____________________________ Norval
D.
(John) Settle
_____________________________ Alexander
G.
Teitz Presiding Board Member
1. Maintenance in lieu of rent charges for
publicly-owned
buildings are the lower of the actual costs of servicing
and
maintaining the buildings or comparable rentals in the
community. See
Disallowance letter, Petitioner's
Appendix (PA) 1, citing OMB
Circular
A-87.
2. Decision No. 818 focused on the Agency's argument,
which the
Board rejected, that the exception applied only to claims for
services
or medical assistance and not to administrative costs. The Agency
stated
in this case that this continued to be its position but that the
case
could be decided on narrower grounds.
3. The State did not file a reply brief in response
to the Agency's
brief. Thus, we take these facts
as