DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: New York State Department of Social Services
Docket No. 87-89
Decision No. 932
DATE: January 27, 1988
DECISION
This case arises from a remand ordered by the Board in New York
State
Dept. of Social Services, DGAB No. 759 (1986) and in seven
subsequent
decisions based on DGAB No. 759. In those decisions, the
Board reviewed
a series of determinations by the Social Security
Administration
(Agency) disallowing federal financial participation (FFP)
claimed by
New York under section 403(a) of the Social Security Act
(Act). The
Agency found that the State had claimed FFP under Title IV-A
of the Act
(Aid to Families with Dependent Children or AFDC) for
administrative
costs incurred in connection with the provision of child care,
which is
a "social service" described in section 2002(a)(1) of the Act.
With
certain exceptions, section 403(a)(3) prohibits reimbursing such
costs
with Title IV-A funding. The Board upheld the disallowances in
general
but remanded for two purposes: (1) to permit the State an
opportunity
to document to what extent the costs fell within one of the
exceptions
to the section 403(a)(3) prohibition (for costs incurred in
connection
with a Community Work Experience Program); and (2) to permit the
Agency
to consider the State's argument that some of the costs were
allowable
because they were associated with child care paid by Title IV-A as
an
"expense incidental to employment" and the State to show to what
extent
the costs related to such child care.
On remand before the Agency, the State failed to present evidence that
any
of its costs were related to the Community Work Experience Program,
so this
is no longer an issue. Also, the parties agreed to adjust
the
disallowance amounts to reflect an inadvertent error the Agency made
in
calculating four of the disallowances. (For a list of the
eight
disallowances and the amount currently in dispute, see the
attached
Appendix.)
With respect to the issue concerning "expenses incidental to
employment,"
the State took the position that all the costs it had
claimed were incurred
in connection with the provision child care (for
recipients engaged in
employment-related activities) as a Title IV-A
benefit, not as a social
service under Title XX of the Act, and that,
therefore, FFP was available for
the costs under Title IV-A. As
discussed below, many of the arguments
the State made in support of this
position were, or could have been, made in
the previous Board
proceedings. Thus, in effect, they amount to a
request for
reconsideration of DGAB No. 759. The Agency initially took
the position
that none of the costs claimed were allowable, but later
conceded that
three limited areas of costs might be reimbursable under Title
IV-A and
not subject to the funding prohibition.
For the reasons explained below, we affirm our previous decisions
and
reject the arguments the State made here. Accordingly, we uphold
the
disallowances, except to the extent the State meets its burden to
show
to what extent the costs were within the three areas where the
Agency
agreed to review further documentation. (See Agency Brief, pp.
18-21.)
The State has not established that the remaining costs were not
subject
to the prohibition.
Below, we first provide background information and summarize our
holding
in DGAB No. 759. We then summarize the State's arguments on
remand and
explain why we reject them.
The Costs Involved
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). During the prior proceedings, the State seemed to
be saying that
it had allocated a percentage of the total costs incurred by
ACD to
Title IV-A according to the percentage of IV-A recipients who
applied
for publicly funded day care from ACD and who did not participate in
the
Work Incentive Program (WIN).
On remand, the State clarified that it recognized four
different
categories of need which may serve as the basis for day
care
eligibility: self-support, self-sufficiency, an approved plan
of
service, and the reduction or prevention of institutional care. New
York
Ex. 3, pp. 2-3. (These categories of need also constitute the
stated
goals of Title XX. See section 2001 of the Act.) The
State further
clarified that it allocated to Title IV-A only costs associated
with
Title IV-A recipients seeking day care under the self-support
category.
New York Ex. 3, p. 3. The State said that ACD allocated
administrative
costs among various programs (Title IV-A, Title XX, and WIN)
according
to the number of children "registered in" each particular
program. The
State explained this as meaning that, if 12 percent of the
total number
of children in receipt of child care receive such care as part
of a
program to help parents become self-supporting and independent, then
the
State claims through Title IV-A 12 percent of ACD's total costs for
all
the functions it performs. New York Ex. 1, pp. 5-7.
ACD's functions include administering day care services and
providing
technical assistance to community-based agencies in New York
City. ACD
also provides aid to the community-based agencies in
establishing day
care centers, establishes and interprets policy relating to
child care
for the centers, and inspects and licenses centers. However,
ACD has no
contact with the children at the centers and nominal,
indirect
responsibilities for the delivery of services. See DGAB No. 759,
pp.
3-4.
In addition, ACD determines the eligibility of all applicants for
publicly
funded day care programs. See New York Exs. 3-5. Consequently,
ACD
performs all administrative functions associated with publicly
funded day
care, regardless of the basis of providing such day care.
New York Ex. 3, p.
7.
Thus, the costs at issue here are a percentage of the costs ACD incurs
in
performing all of the foregoing functions.
What We Held in DGAB No. 759
In DGAB No. 759, the State argued that the disallowed costs were
properly
charged to Title IV-A under an approved cost allocation plan
(CAP).
Further, New York maintained that its claims were allowable
under the
statutory exceptions in section 403(a)(3)(C). New York
advanced a general
argument that child care provided in the context of
employment-related
activities is reimbursable under Title IV-A even if
not within the specific
exceptions of section 403(a)(3)(C). At that
time, New York asserted
that at least part of its claims were
attributable to income maintenance (IM)
functions and, thus, allowable
under section 403(a)(3).
In DGAB No. 759, we found that the State had not shown that it had
an
approved CAP which allowed it to charge the costs at issue to
Title
IV-A. Further, we found that only one of the four section
403(a)(3)(C)
exceptions, that relating to the Community Work Experience
Program
(CWEP), might apply to the State's claims. Accordingly, we
determined
that the State should have a brief opportunity on remand to
demonstrate
what part of the costs claimed were attributable to the
CWEP. Rejecting
the State's argument concerning the general
allowability of child care
costs under Title IV-A, we concluded that --
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
Congress intended funding for the costs of providing child
care
to be available 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.
DGAB No. 759, p. 10.
We rejected the State's argument that some of ACD's costs were
allowable
because ACD's process of determining eligibility for publicly
funded day
care provided a benefit to Title IV-A. The State's evidence
showed that
ACD entered into a computer system information which could be
used by IM
workers determining eligibility for income maintenance payments
under
Title IV-A, but did not establish that this function was not
performed
for purposes of determining eligibility for Title XX day
care. Evidence
submitted late in the proceedings, however, suggested
that some of the
child care was not a Title XX social service but was paid as
part of a
IV-A income maintenance payment as an "expense incidental
to
employment." Since the Agency had not had an opportunity to
consider
the effect of this evidence, we determined that a remand would
be
appropriate. However, the remand was based on the condition that
should
the Agency conclude that costs associated with child care paid as
an
"expense incidental to employment" were not subject to the
prohibition,
the State would be required to document the amount of allowable
costs.
DGAB No. 759, pp. 13-15.
The State's Arguments on Remand
On remand, the State took the position that the ACD costs it had
allocated
to Title IV-A were all incurred in connection with child care
paid as
"expenses incidental to employment." The State's arguments on
remand
concerning these costs and why they are reimbursable under Title
IV-A may be
summarized as follows:
o That various provisions in Title IV-A and the legislative history
of
Title IV-A demonstrate that Congress intended to encourage
AFDC
recipients to engage in employment-related activities and
recognized
that providing child care was necessary to this goal.
o That income an AFDC recipient receives from employment is
disregarded
in calculating an AFDC income maintenance payment when used to
pay for
child care (up to a maximum of $160 per month), and, therefore,
such
child care is a Title IV-A benefit.
o That a recipient engaged in employment-related training receives,
as
part of an AFDC income maintenance payment, a special needs allowance
to
pay for child care, and, therefore, such child care is a Title
IV-A
benefit.
o That such recipients are not eligible for Title XX child
care
(although the State conceded that Title XX would pay for child
care
costing in excess of the $160 disregard amount).
From the foregoing, the State concluded that ACD costs associated
with
children of AFDC recipients who are engaged in employment-
related
activities are "connected with provision of a IV-A benefit, not
with
provision of a Title XX social service" and, therefore, are not
within
the prohibition in section 403(a)(3), even if not within one of
the
specific enumerated exceptions to the prohibition. In support of
its
arguments, the State provided affidavits concerning ACD's role
with
respect to the income disregard and special needs allowance and
vendor
payments made to child care providers for services provided to
children
of Title IV-A recipients. New York Exs. 3-5.
The State also argued that the Agency was inconsistent in permitting
FFP
in the three conceded areas of cost, but not in the remaining areas.
Analysis
We first note that the State generally has the burden of documenting
the
allowability of costs claimed for federal funding. See, e.g., New
York
State Dept. of Social Services, DGAB No. 204 (1981); New York
State
Dept. of Social Services, DGAB No. 854 (1987); New Jersey Dept. of
Human
Services, DGAB No. 899 (1987). To show that a cost is an
allowable
administrative cost under Title IV-A, a state must identify the
specific
costs involved, show that each category of costs is necessary for
the
proper and efficient administration of the IV-A program, and show
that
the costs are not subject to the prohibition. The State's
evidence
presented here is directed to showing that some of ACD's costs
were
necessary to Title IV-A, but does not support a finding that the
costs
were not incurred "in connection with the provision of a
social
service."
On the whole, the State's affidavits reflected the same flaw which
is
apparent in the State's briefing. Throughout this proceeding, the
State
was imprecise in its use of terms, changing usage in a way
which
obscured rather than enlightened. For example, the State asserted
that
all these costs were related to child care as an "expense incidental
to
employment" (the term which caused us to remand to the Agency
for
further consideration). Yet, the State's arguments discussed child
care
it said was "employment-related," by which the State generally
meant
that the child care gave rise to an income disregard for an
employed
recipient or a special needs allowance for a recipient in an
approved
training program. In its reply brief, the State acknowledged
that the
costs also included those related to AFDC recipients receiving a
special
needs allowance because they were attending high school. 1/
We examined the State's evidence and argument in light of the
State's
burden to document the allowability of ACD's costs. The State's
general
lack of clarity and precision contributed to our overall conclusion
that
the State failed to meet that burden. We reject the State's
arguments
and evidence for the following specific reasons:
o The State'a position is fundamentally flawed because the
State
presumes that the question is an either/or proposition, that is,
that
the costs are either in connection with a Title IV-A benefit and
thus
reimbursable or that the costs are in connection with a Title XX
social
service and thus not reimbursable. As this Board has
previously
explained, however, the prohibition applies to costs which are
within
the scope of Title IV-A and would be reimbursable as IV-A
administrative
costs but for the prohibition. See Joint Consideration:
Reimbursement
of Foster Care Services, DGAB No. 337 (1982); New York State
Dept. of
Social Services, DGAB No. 449 (1983); New York State Dept. of
Social
Services, DGAB No. 552 (1984); and New York State Dept. of
Social
Services, DGAB No. 716 (1986). Our decision in DGAB No. 449
was
recently upheld by the U.S. Court of Appeals in New York State Dep't
of
Social Services v. Bowen, No. 87-5031 (C.A.D.C., Dec. 22, 1987).
See,
also, Oregon v. Heckler, Civil No. 83-1466 FR (D. Or., Jan. 31,
1984).
Thus, in order to be reimbursable under Title IV-A, the costs must
not
only be necessary and proper for the efficient administration of
Title
IV-A, but also must not be costs subject to the prohibition.
o The State wrongly presumes that the prohibition applies only if
the
costs are connected with a social service actually paid for by Title
XX.
The wording of the prohibition in section 403(a)(3) is broader,
however;
it encompasses any cost incurred in connection with "any
service
described in section 2002(a)" of the Act. Child care directed
at Title
XX goals, including self- support, is clearly such a service.
o As we found in DGAB No. 759, the fact that Congress
specifically
excepted from the prohibition social services provided in
connection
with certain specifically enumerated employment programs indicates
that
Congress did not intend Title IV-A to pay for costs connected with
such
services when related to programs not specifically enumerated.
The
State's arguments related to the wording and legislative history
of
Title IV-A are essentially a request for reconsideration of our
holding
in DGAB No. 759. The Board may reconsider its own decisions
"where a
party promptly alleges a clear error of fact or law." 45
C.F.R. 16.13.
Here, the State is in large part simply reiterating
arguments made in
the previous proceedings or raising, in an untimely manner,
collateral
arguments it could have made there. In any event, these arguments
do not
show any error in DGAB No. 759, much less a clear error which
would
warrant modifying that decision. The State relied in part on the
fact
that Congress promoted employment-related activities for AFDC
recipients
in general; this does not alter the plain language of section
403(a)(3),
however, which prohibits funding for those activities when they
are
social services not within the enumerated exceptions. The State
also
argued that the exception to the prohibition for "a service required
by
section 402(a)(19)(G)" was not limited to individuals who
found
employment through WIN but covered child care services for
individuals
who found employment on their own (who may subsequently be listed
as
active WIN participants) or who were in any approved training
program.
Section 402(a)(19)(G) requires the provision of child care only
for
individuals registered for WIN when the child care "is necessary
to
enable such individuals to accept employment or receive
manpower
training" provided under the WIN program. Thus, the plain
language of
the statute is inconsistent with the State's interpretation that
any
employment-related child care falls within the exception. 2/
o The State would have us conclude that simply because a Title
IV-A
income maintenance payment may reflect an amount related to child
care
that child care itself is a IV-A benefit. This conclusion is
not
warranted. Title IV-A income maintenance payments are money
payments to
meet a recipient's needs. See section 406(b) of the
Act. The mere fact
that child care may be recognized as a need which
justifies a special
needs allowance does not render the child care itself a
IV-A benefit.
It is even more strained to consider child care a IV-A benefit
solely on
the basis that earned income applied by the recipient to child
care
expense is not considered (that is, is "disregarded") in
determining
what income an AFDC recipient has available to meet basic
needs. While,
at the recipient's request, part of the AFDC money
payment may be used
to directly pay the child care provider, there is still a
distinction
between the money payment, which is the IV-A benefit, and the
child care
itself. The danger inherent in the State's failure to
recognize this
distinction is particularly evident when considering some of
the ACD
costs not related to specific individuals, such as the costs
of
inspecting and licensing day care centers. Under the State's
rationale,
since shelter is a need recognized under AFDC which may be paid by
a
vendor payment to a landlord, costs of inspecting an apartment
building
could be allocated to AFDC to the extent AFDC recipients were
sheltered
there. This connection is simply too tenuous to warrant
reimbursement
under Title IV-A irrespective of the funding prohibition.
o The State's evidence that the ACD workers were performing
some
functions which an income maintenance worker would otherwise have had
to
perform does not establish that the costs were allowable
income
maintenance costs. This fact is irrelevant if the functions
were
performed "in connection with the provision of a social service."
o The State's briefs and affidavits repeatedly refer to
determining
eligibility for "publicly funded day care service." The State
would have
us infer that, when a IV-A recipient pays for day care through a
special
needs allowance or earned income which is disregarded in calculating
a
IV-A income maintenance payment, such day care is considered
publicly
funded. However, that inference is not warranted on this
record. The
State itself clarified that it used the term "publicly
funded" to
indicate that those who apply to ACD do not include those who have
been
able to find "affordable, private day care." New York Reply Brief,
p.
10. Thus, those who apply must not have been able to find day
care
within the $160 disregard amount or the special needs
allowance,
whichever is applicable. The State's documentation related
to applying
for or terminating eligibility for publicly funded day care
also
indicates that eligibility determination process is related to Title
XX
day care services. The application form identifies reasons for
needing
day care in terms of Title XX goals. See New York Ex. 3, Att.
A. The
day care termination notice states that --
Public day care services in the State of
New York are provided in
accordance with
requirements of the regulations of the
State
Department of Social Services and
the New York Comprehensive
Annual Social
Services Program Plan which conforms to Title XX
of
the Federal Social Security Act.
New York Ex. 3, Att. F.
The State did not establish that the ACD activities which the
State
describes as relating to determining eligibility for IV-A benefits
were
not performed here simply as an integral part of the State's process
of
determining eligibility for Title XX day care. 3/
We also reject the State's argument that the Agency's concessions
are
inconsistent with the Agency's position that the remaining costs
are
unallowable. The Agency here conceded in response to the State's
brief
that three areas of cost incurred by ACD were income
maintenance
activities which may be reimbursable under Title IV-A.
Those areas were
--
1. the completion of applications
for vendor payments to pay
for
day
care;
2. the transmission of the
applications for vendor payments
to
HRA's Office
of Data Processing; and
3. the determination by an ACD
worker of an
AFDC
applicant's/recipient's eligibility for a special
needs
allowance
to cover the cost of day care under the
approved
state
plan.
Agency Brief, p. 8.
These concessions were conditioned on several factors, however. The
Agency
said that it --
. . . required (1) further documentation
definitively
establishing that these
activities did not duplicate activities
of IM workers, and (2) a reasonable cost allocation
methodology
(i.e. time study) to
segregate these costs from the State's
total
claim.
Agency Brief, pp. 9-10. The Agency also pointed out that while
the
State said that IM accepts ACD's "eligibility determination" for
a
special needs allowance, the State had used "eligibility
determination"
to refer to the determination of eligibility for "publicly
funded day
care." Thus, the Agency said, "Only if IM accepts ACD's
determination
of eligibility for the special needs allowance without
further
verification, etc., would the activity qualify as an income
maintenance
function." Agency Brief, pp. 20-21.
The State argued that the Agency's concessions, that AFDC recipients
in
employment training programs may be entitled to a special
needs
allowance for day care or that employed recipients are entitled to
an
earned income disregard for day care, are equivalent to admitting
the
basis of the State's argument, i.e., that day care is
an
employment-related expense under Title IV-A. The State contended
that
the reality of a special needs allowance or an earned income
disregard
is that the money payment for each comes from Title IV-A
funds
specifically earmarked for day care as the result of the
recipient's
participation in an employment- related activity.
The State mischaracterized the Agency's position. As the Agency
noted,
by regulation at 45 C.F.R. 233.20(a)(11) AFDC recipients are entitled
to
have the first $160 of earned income disregarded in calculating
the
individual's eligibility for Title IV-A benefits. The disregard
is
provided in recognition of the necessity of the child care expense.
The
special needs allowance is a supplemental cash grant provided to
enable
recipients to finish high school or to participate in approved
training.
The special needs allowance is provided for in the approved state
plan.
In neither case does Title IV-A directly pay the child care
provider.
(Child care payments are the recipient's responsibility but may be
paid
through the use of vendor payments if the recipient authorizes
it.)
Agency Brief, pp. 6-7.
The Agency's concession of the possible allowability of the
three
enumerated areas of cost is not a broad-based finding of allowability
of
child care costs under Title IV-A. Rather, the Agency's
position
reflects a finding that the enumerated activities impact directly on
the
amount of a recipient's AFDC grant, as well as the actual payment
of
that grant. Agency Brief, pp. 18-19; Agency Response to the Order
to
Clarify, p. 3.
For the following reasons, we determine the Agency's concessions do
not
support the conclusion that any of the remaining ACD costs at issue
here
are allowable. First, not all of the costs are related to
determining
eligibility for an income disregard or special needs
allowance. Second,
even though the income disregard may affect the
amount of the AFDC
grant, the record indicates that there are differences
between the
special needs allowance and the income disregard and ACD's role
with
respect to determining their availability:
o A special needs allowance is actually a supplemental cash grant
paid
to the AFDC recipient (or to the vendor of services if authorized by
the
recipient); the amount of the allowance is determined by local
districts
so long as does not exceed maximum allowable under Title XX.
Agency Ex.
D.
o The wording of the State plan with respect to the income
disregard
for child care indicates that such child care is provided as
a
combination of two possible methods (either "Cost of care expended
by
worker up to $160 per child" or "service provided or purchased
by
agency.") The plan specifies: "Cost of child care expended by
worker
up to $160 per child . . . as an ADC deduction or as a payment
under
Title XX." Agency Response to the Order To Clarify, Att., p.
1
(emphasis added).
o In answer to a specific question from the Board about whether
the
State charged payments to Title XX for IV-A recipients engaged
in
non-WIN employment-related activities, the State said:
Yes. The State Plan allows Title
XX payments for child care
costs in
excess of the $160 disregard permitted under Title
IV-A
for employed recipients.
New York Response to the Order To Clarify, p. 1. Thus, it is
clearly
integral to the process of determining eligibility for Title XX
child
care to determine availability and amount of the income disregard.
o The State admitted that IM workers not ACD workers actually
calculate
the amount of the income disregard but argued that ACD workers made
the
full eligibility determination with respect to the special
needs
allowance.
Considering these factors, we conclude that the Agency's
limited
concessions do not undercut its overall position.
Conclusion
For the reasons stated above, we uphold the disallowance of the ACD
costs
at issue here, subject to reduction to the extent the State meets
its burden
to show that the costs fall within the three areas of cost
which the Agency
indicated may be allowable as Title IV-A administrative
costs. The
Agency said that it would be willing to examine
documentation from the State
about a method for identifying the amount
of costs which are allowable based
on this decision. The Agency took
the position that further review by
the Board of such a methodology
would be inappropriate. The State took
the position that it would have
a right to further review if the parties
could not agree on a
methodology. The parties agreed, however, that the
Board did not need
to reach this issue in this proceeding since the parties
may be able to
resolve any questions regarding a cost allocation method on
their own.
Thus, this decision does not preclude the State from returning to
the
Board within 30 days of receiving a final decision from the Agency
on
the cost allocation method issue, nor does it preclude the Agency
from
taking the.position that further review by the Board is not
appropriate.
________________________________ Donald
F.
Garrett
________________________________ Norval
D.
(John) Settle
________________________________ Judith
A.
Ballard Presiding Board Member
1. While the State said it treated these
recipients as a subcategory
of those in an approved training program, the
State plan treats such
recipients as a separate category. See Agency Ex.
D. The State took the
position that finishing high school is essential
to a student
recipient's employability, so that ACD costs associated with
these
recipients were allowable. The State's point about employability
may be
correct, but the State's late acknowledgment about these costs
being
included demonstrates the lack of completeness in the
State's
presentation.
2. The record indicates that the State was allocating
part of the
ACD's costs to the WIN program. Indeed, we said in DGAB
No. 759, at
page 12, that the State had not alleged that any of the
disallowed
amounts were the costs of child care services to children of
WIN
participants. The State did not directly contest this here.
Thus, we
find disingenuous the State's implication that the
disallowances
unfairly distinguished between WIN participants who found
employment on
their own and other WIN participants.
3. In the prior proceedings, the State tried to show
how the Title
IV-A program benefited from information gathered by ACD as part
of its
process of determining eligibility for publicly funded day care.
We
found in DGAB No. 759 that the State had not shown that it
performed
activities which it would not in any event be required to perform
as
part of the process of determining eligibility for Title XX, nor
that
any benefit to IV- A was other than an incidental benefit from
those
activities. DGAB No. 759, pp. 13-15. It does not significantly
add to
the State's presentation to establish that some of the
information
provided might be used by IM to calculate an income disregard or
as
verification of eligibility for a special needs allowance.
APPENDIX
DGAB No. 759 (1986) $4,993,948 (original calculation $5,097,130)
DGAB No. 776 (1986) 573,842 (original calculation 801,195)
DGAB No. 797 (1986) 465,996 (original calculation 1,079,174)
DGAB No. 829 (1987) 549,924 (original calculation 2,131,998)
DGAB No. 864 (1987) 422,227
DGAB No. 877 (1987) 551,798
DGAB No. 906 (1987) 510,285
DGAB No. 928 (1987) 615,744
(TOTAL) $8,683,764