GAB Decision 283
April 28, 1982 Indiana Office of Social Services; Docket Nos.
81-85-IN-HD, 81-151-IN-HD Ford, Cecilia; Garrett, Donald Teitz,
Alexander
The Indiana Office of Social Services (State) appealed two
disallowances issued by the Office of Human Development Services
(Agency), totalling $1,716,441 in federal financial participation (FFP)
claimed under Title XX of the Social Security Act. The State claimed
Title XX funds for services provided at its Reception and Diagnostic
Center (RDC). The RDC is run by the Indiana Department of Correction.
The stated purpose of the facility is to accept, evaluate, classify, and
assign all of the felony offenders committed from any of the counties in
Indiana to various facilities within the State correction system.
The Agency determined that the RDC was a prison under the regulatory
definition of that term. The Agency noted that Title XX services
provided at prisons are subject to specific regulatory criteria to
qualify for FFP. The Agency maintained that services provided at the
RDC did not comply with those regulations. Thus, FFP claimed for those
services was disallowed.
The State argued that the RDC was not a prison, and, therefore, the
regulatory criteria relied upon by the Agency were inapplicable.
Further, the State claimed that since funding for the RDC has been
previously approved, when the Agency approved the State's Comprehensive
Annual Services Plan (CASP), the Agency was estopped from taking these
disallowances.
Both disallowances involved identical issues of law and fact and have
been considered jointly by the Board without objection by the parties.
The Board issued an Order to Show Cause in these cases on February
25, 1982. In that Order, we directed the State to show cause why we
should not uphold the disallowances based on the following preliminary
findings:
(1) The RDC is an integral part of the State's correctional system,
so much so that it is a prison by reasonable interpretation of 45 CFR
1396.44(c)(1).
(2) Services provided at the RDC do not comport with the guidelines
set out at 45 CFR 1396.44(a) and (b), which provides (2) FFP for Title
XX services in prisons under certain limited circumstances, and,
therefore, FFP is not available for their cost.
(3) The State has not demonstrated sufficient knowledge on the part
of the Agency, coincident with its approval of the State's CASP plan, to
estop the Agency from disallowing the FFP in question.
Responding to our Order, the State argued that simply because the RDC
was an integral part of the correction system it was not necessarily
excluded from eligibility for FFP. The State argued that just as
half-way houses and community corrections facilities are not excluded
from FFP eligibility, the RDC should not be excluded because it does not
serve as a prison. The State then indicated that since there was not a
clear definition of a prison available, its classification of the RDC
was reasonable.
We do not accept the State's argument. The regulation specifically
excludes community-based residential service facilities, such as
half-way houses from the definition of a prison. The State has produced
no evidence to persuade us that the RDC should be categorized with such
facilities. The RDC performs centrally-located administrative services
integral to the State-wide confinement of convicted felons.
Community-based facilities generally readjust their occupants for
transition into society, while the RDC, based upon the evidence,
prepares felons for placement within the correction system. We believe
the classification of the RDC as a prison was reasonable.
The State also responded that the Board's finding that the services
provided at the RDC do not comport with regulatory guidelines was
irrelevant.Further, the State asserted that our finding on the question
of estoppel ignored the facts of the situation. The facts developed in
the record and the reasons for the Board's preliminary conclusions are
set out in the Order. The State added no facts or argument to the
record. Therefore, we confirm those conclusions.
Conclusion
The State has presented no new evidence or argument which would cause
us to alter any of the findings proposed in our Order to Show Cause.
Therefore, we incorporate our analysis set out in that Order into our
(3) decision. Accordingly, we uphold the disallowances for the reasons
stated above and in the Order. (4) DATE: February 25, 1982
ORDER TO SHOW CAUSE
The Indiana Office of Social Services (State) has appealed two
disallowances issued by the Office of Human Development Services
(Agency) in connection with certain amounts of federal financial
participation (FFP) claimed by the State under Title XX of the Social
Security Act. /1/ The disallowances arose in connection with claims for
services provided through the Reception and Diagnostic Center (RDC) of
the Indiana Department of Correction. Both disallowances involve common
issues of law and fact, and are being considered jointly by the Board
without objection by the parties.
This Order is designed to identify the issues in the appeals and to
provide an opportunity for additional briefing by both parties before
the Board proceeds to decision. This Order is based upon the State's
applications for review, and on briefing and documentation submitted by
both parties.
I. Background
The disallowances appealed here result from the provision of
diagnostic services to offenders at the RDC under the State's Title XX
Comprehensive Annual Services Plan (CASP). The Agency maintains that
the rDC is a prison within the regulatory definition of that term found
at 45 CFR 1396(c)(1):
. . . any State or local correctional institution or facility for the
confinement of individuals charged with or convicted of criminal
offenses. The term does not include separate juvenile correctional
facilities nor community-based residential service facilities, such as
half-way houses. (5) Having made this initial determination regarding
the nature of the RDC, the Agency alleged that the State violated the
regulation found at 45 CFR 1396.44, /2/ which limits the availability of
services to individuals living in hospitals, skilled nursing facilities,
intermediate care facilities or prisons. That regulation states in
part:
(a) FFP is available for services to individuals living in . . .
prisons only under the following conditions:
* * *
(2) Such services are provided by other than the facility in which
the individual is living. This requirement is not met if the services
are provided by:
(i) Staff or contractors who are under professional direction or
direct supervision of the facility . . . .
(3) Such services are also provided to individuals who:
(i) Are not living in a . . . prison; and
(ii) Are residents of any part of a geographic area that is within
the catchment area of such facility.
Specifically, the Agency contended that the services for which FFP
was claimed were provided by the RDC staff, and further, the services
were provided to prisoners alone, and not to residents of any part of
the geographic area within the catchment area of the RDC.
The State interpreted the regulatory definition of a prison "as a
facility which has as its sole purpose the confinement of individuals
(6) charged with /3/ or convicted of criminal offenses." (State's Brief,
p. 3) The State indicated that, under Indiana law, the RDC was
establihsed as a facility having as its purpose the diagnosis,
evaluation and classification of individuals, charged with or convicted
of criminal offenses, regarding their proper placement in a penal
facility or program. (State's Brief, p. 3) Within that context, the
State contended, the act of confinement at the RDC, which is necessary
in order for the required diagnosis and classification to be effected,
is incidental and in no way set out as the basis for the offender having
been placed at the RDC. (State's Brief, p. 4) The State noted and
agreed with the limitations established in section 1396.44 which
prohibits a state from financing the cost of the detention function in
its prison system. However, the State argued, the regulation does not
prohibit states from having the latitude to fund activities not
considered part of the basic and traditional detention function. Since
the RDC was not a prison within the scope of the regulatory definition,
the State argued, 45 CFR 1396.44 did not apply and the FFP was
improperly disallowed.
The State further alleged that the Agency's approval of the CASP
budget and service description for fiscal 1978 estopped the Agency from
denying FFP for services delivered at the RDC.
There are two questions before the Board:
1. Is the RDC a prison within the meaning of 45 CFR 1396.44(c)(1)
and, if so, are the services provided at the RDC the kind for which FFP
would be available under 45 CFR 1396.44(a) and (b)?
2. Can the Agency be estopped from disallowing the FFP in question?
(7)$TII. Analysis
THE RDC
Based upon the facts currently before the Board, it appears that the
Agency's classification of the RDC as a prison was reasonable. The
Agency argued that it has always considered the RDC as a prison and that
the focus of its efforts, as well as the State's, regarding the
allowability of FFP, was on compliance with the regulations now at 45
CFR 1396.44(a)(2) and (3). This position seems supported by
documentation in the record. (See, Agency Exhibits 3 and 4) As the
Agency noted, if the facility was not a prison the regulation would not
apply.
The State's position, that a prison is a facility which has as its
sole purpose confinement, does not appear to be a reasonable
interpretation of the regulation. The State claimed that the regulation
draws a distinction between facilities whose sole purpose is confinement
and those which employ confinement as a means to an end. The RDC, the
State alleges, is this latter type of facility. While the regulation
does distinguish between what may be loosely termed formal correctional
facilities and community-based residential service facilities, we do not
see the hair-splitting distinction which the State has alleged.
The RDC appears to serve an administrative function of the State's
Department of Correction. The stated purpose of the facility is to
"accept, evaluate, classify and assign all of the felony offenders
committed from any of the counties in Indiana to the Department of
Correction." (Agency Exhibit 4) It does not appear that the RDC has an
existence distinct from the State prison system. Were there not
prisons, it does not appear the RDC would exist. Physically the RDC is
a maximum security building enclosed by a double fence. Time spent in
the RDC is credited against the individual's sentence. While the RDC
may not meet the rather stringent definition of a prison as argued by
the State, it appears that functions performed by the RDC, in spite of
being performed away from the more permanent residential correction
facilities, are such that, for purposes of this regulation, the RDC is
indistinguishable from a prison.
If the Board ultimately determined that the RDC is a prison, FFP for
Title XX services at the RDC would be available only if the services are
not provided by the staff of the RDC or the Department of Corrections
and are provided to residents of a geographic area within the catchment
area of the facility. Further, FFP is not available for (8) costs of
the facility's inherent responsibilities or for activities intrinsic to
the purpose of the facility. (See, 45 CFR 1396.44(b)(1) and (2))
The Agency alleged that services at the RDC are provided by the staff
of the facility and are not offered to individuals within the community
where the facility is located. This would, if true, be a violation of
45 CFR 1396.44(a) and (b) as well as contrary to the explicit intent of
Title XX. (See, Title XX, Section 2002(a)(11)(A))
The State has not contested these allegations. /4/ Rather, it has
relied upon the argument that the RDC is not a prison as well as its
claim of estoppel (discussed below). Absent evidence to the contrary,
our preliminary position is to uphold the Agency's position regarding
the nature of the facility and the provision of services therein.
ESTOPPEL
The State alleged that by approving the CASP service delivery plan
and budget for fiscal 1978, the Agency is estopped from disallowing the
FFP in question. (9) A substantial question exists as to whether the
Federal Government may be estopped. /5/ Moreover, a Grantee alleging
estoppel must satisfy each of the following criteria:
(1) the party to be estopped must know the facts; (2) he must intend
that his conduct be acted on, or must so act that the party asserting
estoppel has a right to believe it is so intended; (3) the latter must
be ignorant of the true facts; and (4) he must rely on the former's
conduct to his injury. /6/
Unless the State can satisfy its burden of proof of every element
necessary to establish an estoppel, the Board need not consider the
underlying question of whether estoppel can be asserted against the U.
S. Government in a Title XX situation. /7/
It is uncontested that, at the time the State submitted its CASP for
approval, the Agency questioned the State's program for the delivery of
diagnostic services to offenders for its compliance with then 45 CFR
228.44. Questions concerning this program were specifically raised in
the context of the Women's Prison. (See, State's Exhibit IX) The State
alleged that it met with representatives from the Agency to resolve
these questions. The State contended that, in addition to the Women's
Prison, each facility in the CASP service description, including the
RDC, was reviewed in terms of its delivery of diagnostic services, for
offenders. It appears that during these discussions the State made
several representations to the Agency in order to prove compliance with
the regulations, not the least of which was that the RDC served
individuals from throughout the State. As the result of these
discussions the State submitted a final service description which
indicated that services would be provided at the RDC by community public
or private agencies under sub-contract with the Department of
Correction. (State's Exhibit XI)
The Agency maintains that although the revised CASP may have been
vague on some of its finer points it did not explicitly violate the
regulations. The Agency contends that nothing in the State's oral or
written submissions as they related to the CASP indicated that the RDC
was not eligible for Title XX funds. Further, the Agency noted, it (10)
was not until 1980 that the State provided the Agency with information
which led the Agency to conclude that the RDC should not have been
receiving Title XX funding.
Based upon the evidence currently before the Board, it does not
appear that the Agency could be estopped from disallowing the FFP in
question. The facts would appear to indicate that the Agency was not
sufficiently aware of the inherent nature of the RDC to be charged with
knowledge of its role within the State correctional system. Further,
the State has admitted that it informed the Agency that the RDC served
persons from throughout the State. We do not believe that a reasonable
interpretation of 45 CFR 1396.44(a)(3)(ii) would equate felons from
virtually every area of the State with residents of the catchment area
of the facility. It would also appear, based upon the evidence, that
the State was not irgnorant of the true facts regarding the nature of
the RDC and to whom its services were provided.
III. Order
No material facts appear to be in dispute. It does not appear likely
that an evidentiary hearing will be required or that an informal
conference would be useful. It tentatively appears that this case
should be decided on the written record. Therefore, the State is
required to show cause, in writing, within 30 days of receipt of this
Order, why these disallowances should not be upheld based upon the above
analysis, on the grounds that:
(1) The RDC is an integral part of the State's correctional system,
so much so that it is a prison by reasonable interpretation of 45 CFR
1396.44(c)(1).
(2) Services provided at the RDC do not comport with the guidelines
set out at 45 CFR 1396.44(a) and (b), and, therefore, FFP is not
available for their cost.
(3) The State has not demonstrated sufficient knowledge on the part
of the Agency, coincident with its approval of the State's CASP plan, to
estop the Agency from disallowing the FFP in question.
The State should identify in what, if any respects the foregoing
statement of the case is inaccurate or incomplete. The Agency should
notify the Board within 30 days of receipt of this Order if any (11)
material error exists in the Board's tentative analysis of this case.
The responses to this Order should be filed in original and two copies,
with a certificate showing service on the other party. /1/ At issue is
$1,716,141 in FFP; Docket No. 81-85-IN-HD is an appeal in the
amount of $808,709 and 81-151-IN-HD involves $907,432. /2/ This
regulation, during the periods covered by the disallowance
appealed in 81-85-IN-HD, was found at 45 CFR 228.44. On August 25,
1980, (thus, for periods covered by the disallowance appealed in
81-151-IN-HD), 45CFR Part 228 was transferred to 45 cFR Chapter XIII,
Subchapter K and redesignated as Part 1396. (45 Fed. Reg. 56707)
/3/ An Examination of the relevant statute and the description of the
operation of the RDC submitted by the State does not appear to support
the statement that it accepted persons "charged with" felonies, but
who
had not been convicted or pleaded guilty. The RDC served persons who
had not been sentenced, as well as those who had been, but there is no
indication that it serviced persons awaiting trial and confined, for
example, for failure to provide bail. (See, State's Attachment VIII)
The fact that everyone in the RDC had in fact been found guilty of a
felony supports the position that it was a prison as the term is
commonly used. Under the regulatory definition it makes no difference
whether those confined have been convicted or merely charged with
criminal offenses. /4/ On September 4, 1981 the Board addressed
two questions to the State generally regarding who provided services at
the RDC and to whom they were provided. By way of response, dated
November 30, 1981, the State judged both questions irrelevant. However,
the State somewhat grudgingly answered our inquiries in the following
manner: The RDC provides services to individuals from all over the
State, many of whom are not prisoners in the sense of being formally
convicted of offenses. All persons served by the RDC have been charged
with, or convicted of, criminal offenses. and Services are provided in
a professional manner. The diagnostic services provided at RDC are
provided under the direction of FDC staff based on guidelines set forth
by the oversight agency, the Department of Correction. We note that if
we had been of the opinion that the questions were irrelevant, we would
not have asked them. /5/ See, Schweiker v. Hansen, 450 U.S. 785
(1981). /6/ Montana Department of Social and Rehabilitation
Services, Decision No. 171, April 30, 1981 and cases cited therein.
/7/ Washington Department of Social and Health Services Decision No.
176, May 26, 1981.
OCTOBER 22, 1983