DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: New York Department of Social Services
Docket No. 87-54
Decision No. 908
DATE: October 15, 1987
DECISION
The New York Department of Social Services (State) appealed
a
determination by the Office of Family Assistance (OFA,
Agency)
disallowing $883,198 in federal financial participation (FFP)
claimed
under Title IV-A of the Social Security Act (Act). These costs
had been
initially allocated to the State's Work Incentive Program (WIN) but
had
been shifted to Title IV-A after the State exceeded its
WIN
appropriation ceiling for the 1981 and 1982 federal fiscal years.
The Agency disallowed the costs on two bases. The first was
that
section 403(d) of the Act imposes a ceiling on the amount of
federal
funds that can be used to match the social and supportive
services
provided by the State under the WIN program. The second was
that the
cost principles for state and local governments in Office of
Management
and Budget (OMB) Circular A-87 preclude the State from shifting
costs
allocable to a particular grant or cost objective to another
grant
program in order to overcome fund deficiencies or avoid
restrictions
imposed by law and further provide that any excess of cost over
the
Federal contribution under one grant agreement is unallowable
under
other grant programs. OMB Circular A-87, Attachment A, section
C.2.b.,
and Attachment B, section D.9.
As explained more fully below, we uphold the Agency's disallowance.
General Background
Title IV-A of the Act provides for grants to states with approved
state
plans for aid to families with dependent children (AFDC). Under
the
provisions of Title IV-A, each state is required to include in its
State
plan provision for a Work Incentive (WIN) program.
Section
402(a)(19)(A) of the Act. Specifically, the State plan must
provide
that, as a condition for the receipt of AFDC benefits, each
eligible
individual must "register for manpower services, training,
employment,
and other employment- related activities . . . with the Secretary
of
Labor as provided by regulations. . . ." Section 402(a)(19)(A) of
the
Act. The statute also provides that a state supply social
and
supportive services necessary to enable recipients to prepare
for,
secure, and retain gainful employment. Section 402(a)(19)(G) of
the
Act.
The crux of this dispute involves the interpretation of
sections
403(a)(3)(C) and 403(d) of the Act. Section 403(a)(3)
provides:
(a) From the sums appropriated
therefor, the Secretary of the
Treasury
shall pay to each State which has an approved plan
for
aid and services to needy families
with the quarter commencing
October 1,
1958--
(3) in the case of any State, an amount
equal to the sum of the
following
proportions of the total amounts expended during
such
quarters as found necessary by the
Secretary for the proper and
efficient
administration of the State plan--
(C) one-half of the remainder of such expenditures . . . ,
except that no payment shall be made
with respect to amounts
expended in
connection with the provision of any
service
described in section 2002(a) of
this Act . . . other than
services
the provision of which is required by section
402(a)(19)
to be included in the plan of
the State, . . . .
Section 2002(a) covers social services such as child care
services,
employment services, training and related services, to list a
few.
Under section 403(d), federal financial participation is provided for
the
costs of social and supportive services expended for purposes of the
WIN
program at the rate of 90 percent. Specifically, section 403(d) of
the Act
provides:
(1) Notwithstanding any provision
of subsection (a)(3), the
applicable
rate under such subsection shall be 90 per centum
with
respect to social and supportive
services provided pursuant to
section
402(a)(19)(G). . . .
(2) Of the sums authorized by
section 401 to be appropriated for
the
fiscal year ending June 30, 1973, not more than
$750,000,000
shall be appropriated to
the Secretary for payments with respect
to services to which paragraph (1) applies.
Parties' Arguments
The State argued that, notwithstanding the appropriation
restrictions
applicable to the WIN program, the appellant is legally entitled
to
receive federal funding under Title IV-A for otherwise
eligible
expenditures which were initially allocated to the WIN
program. The
State contended that the appropriation restriction merely
limits the
amount of FFP available under the WIN program at the enhanced rate
of 90
percent. The State argued that after the funding cap is
reached,
federal funding at the rate of 50 percent is available under Title
IV-A
for the remainder of costs incurred under the WIN program. The
State
further reasoned that section 403(a)(3)(C) of the Act clearly
provides
that Title IV-A funding is available for expenditures incurred under
the
WIN program. Thus, the cost principles cited by the Agency as the
basis
for this disallowance may not be applied as they are inconsistent
with
the statutory provision. The State maintained that it would
be
incongruous for Congress on the one hand to allow for such funding
under
section 403(a)(3)(C), and on the other to prohibit reimbursement
in
cases where a grantee exceeded its WIN appropriation limit under
section
403(d).
The Agency argued that while the exception language in section
403(a)(3)
of the Act permits Title IV-A funds to be used for those social
and
supportive services mandated by the WIN program, the amount to
be
claimed is limited by section 403(d). The Agency argued that
principles
of statutory construction provide that where two statutes are in
pari
materia (statutes which relate to the same thing or having a
common
purpose) each must be regarded as effective. The Agency
contended that
the plain and unambiguous language of section 403(d)(1) is
that costs
expended for social and supportive services unique to the WIN
program
will be reimbursable only at 90 percent FFP and only up to the
specified
amount of the appropriation. The Agency claimed it would be
illogical
for Congress to establish a program with a cap on appropriations
and
fixed FFP rate yet allow all costs to be shifted to an uncapped
program
in order to defeat the cap. 1/ Analysis
We reject the State's arguments and find that the State is limited
by
appropriation restrictions to the amount of FFP it may receive for
costs
associated with the WIN program.
The State's argument is based solely on the effect of the
exception
provision in section 403(a)(3) of the Act. Consequently, our
analysis
must begin at that point. The legislative history of the
exception
provision indicates that this provision was added to the Act as a
result
of Congress' intention to remove social services from Title IV-A
and
instead to include the provision of social services to
welfare
recipients in a new Title XX. S. REP. NO. 1153, 93rd Cong., 2nd
Sess.
(1974) describing legislation subsequently enacted as Pub. L.
93-647,
sections 3(a) and (b), January 4, 1975. As a result, section
403(a)(3)
of the Act was substantially amended to include the exception
provision
language. This exception language precluded reimbursement
under Title
IV-A for administrative costs expended in connection with the
provision
of any service described in section 2002(a)(1) (Title XX) of the
Act
other than certain services, one of which is the provision of
WIN
services required by section 402(a)(19) to be included in the plan
of
the State. The result of these amendments was a capped
comprehensive
program for social services under Title XX, the simultaneous
repeal of
nearly all of the social services authorizations under Title IV-A,
and
removal of the cap from Title IV-A to Title XX. The only
funding
provisions for social services remaining under section 403(a)(3) of
the
Act by Congress were WIN, which was already capped, certain
other
employment programs, and emergency assistance for needy families.
The Senate Report, however, indicated that although provision was made
for
limited social service funding under WIN, Congress intended to
continue to
keep these expenditures strictly limited. The Senate Report
explained that
while social services necessary to enable an AFDC
recipient to participate in
WIN were not subject to the exclusion for
funding, these services "continue
under prior law with 90 percent
Federal matching and with funding of these
services limited to the
amounts appropriated." S. REP. NO. 1153,
93rd Cong., 2nd Sess. (1974).
Thus, the legislative history is clear; while recognizing that
certain
social and support services must necessarily be provided under the
WIN
program, Congress intended that the costs of these services
be
reimbursable under IV-A in accordance with section 403(d) at 90
percent
FFP and limited to the amount appropriated under that section of
the
Act.
Moreover, the general principles of statutory construction dictate
that
statutes having the same purpose or object (in pari materia) should
be
read together as complementary, not contradic- tory. Here,
the
exception provision of section 403(a)(3) must be read together
with
section 403(d). It is indisputable that these provisions relate to
the
same purpose. The logical consequence of reading these two
provisions
together is that the provisions of section 403(a)(3) are
explicitly
qualified by the language of section 403(d). The result is
that section
403(a)(3) will allow the limited provision of social and
supportive
services applicable to the WIN program under Title IV-A but that
the
rate of reimbursement for those services and the amount appropriated
for
those services is specified and limited by section 403(d).
Furthermore, this conclusion about the correct statutory interpretation
of
these provisions is supported by additional evidence that these
provisions
have been consistently interpreted by the Agency charged with
administering
them in this manner. For example, the Agency published
notices establishing
the annual limits of entitlement for states for FFP
in expenditures under WIN
pursuant to section 402(a)(19)(G) and 403(d)
of the Act. These notices
contained language such as the language
included in the notice published on
September 8, 1976 referring to
fiscal year 1977 which stated:
Upon promulgation of these limits,
request for federal financial
participation in expenditures incurred pursuant to
section
402(a)(19)(G) during Fiscal Year
1977 will not be honored to the
extent
they exceed promulgated limits.
41 Fed. Reg. 43221 (September 30, 1976). See also 41 Fed. Reg
12733
(March 26, 1976); and 41 Fed. Reg. 22975 (June 8, 1976). This
language
evidences that the Agency consistently interpreted that
reimbursement
for WIN expenditures are limited by the amount appropriated
pursuant to
section 403(d).
The legislative history, the principles of statutory construction,
and
consistent interpretation of these provisions by the Agency lead us
to
conclude that the costs of social and supportive services of the
WIN
program are limited by appropriation restrictions and cannot be
charged
instead as administrative costs reimbursable at 50 percent under
Title
IV-A. We disagree with the State that this leads to an
incongruous
result. Congress excepted WIN social and supportive
services from the
prohibition on reimbursement for social services under
Title IV-A, but
all this was intended to do was to allow these costs to be
funded under
Title IV-A, unlike the social service costs which now were to be
funded
under Title XX. This section, however, does not specify the rate
of
reimbursement for those costs nor does it establish the limits on
those
reimbursements.
OMB Circular A-87, Attachment A, paragraph C.2.b. provides that
costs
allocable to a particular grant or cost objective may not be shifted
to
other grant programs in order to avoid restrictions imposed by law.
The
State argued that the cost principles do not apply here because they
are
inconsistent with section 403(a)(3)(C) of the Act. The cost
principles
are not inconsistent with section 403(a)(3)(C) because this
section must
be read together with the funding restrictions in section
403(d). Thus,
the State's transfer of the amounts in excess of this
limitation to its
claim for Title IV-A administrative costs is contrary to
the cost
principles. .Conclusion
For the reasons indicated above, we sustain the disallowance in the
amount
of $883,198.
________________________________
Cecilia
Sparks Ford
________________________________ Norval
D.
(John) Settle
________________________________
Alexander
G. Teitz Presiding Board Member
1. The parties both cited New York State Department of
Social
Services, Decision No. 759, June 13, 1986, which dealt with
whether
certain activities should be funded under WIN as opposed to Title
XX.
That decision, however, is not applicable here because it does
not
address the specific issue raised here of whether social
services
allocable to WIN could be funded under Title IV-A at the 50 percent
FFP
rate after the WIN appropriation limitation has been exceeded. For
the
same reasons, we did not address Wisconsin Department of Health
and
Social Services, Decision No. 696, October 16, 1985, relied on by
the