GAB Decision 519
Docket No. 83-273
February 29, 1984
Maryland Department of Human Resources;
Ballard, Judith; Settle, Norval Ford, Cecilia Sparks
The Maryland Department of Human Resources (State) appealed the
Social Security Administration's (Agency, SSA) disallowance of 2,632 of
training costs claimed for the quarter ended March 31, 1977 under Title
IV-A of the Social Security Act.
The Agency disallowed the costs based on its finding that the State
did not allocate training costs in accordance with its State plan. The
State did not contest the substantive basis for the disallowance, but
argued that the Agency's disallowance was untimely and should not be
upheld because upholding the disallowance would violate the Maryland
contract statute of limitations and the equitable doctrine of laches.
For the reasons discussed below, we uphold the disallowance.
Background
For the quarter ended March 31, 1977, the State of Maryland claimed
federal financial participation (FFP) under Title IV-A of the Social
Security Act for state and local maintenance assistance training costs.
The appropriate federal regulations (45 CFR 205.150(a), and (b)(1))
require that a State plan must provide that an approved cost allocation
plan be on file with the Agency's regional office and that a state's
claim for training costs must be in accord with that cost allocation
plan. Maryland's State plan provided that training costs should be
allocated according to caseload.
On July 14, 1977 the Agency deferred payment of $2,387 of training
costs claimed for the period in question. The Agency found that the
State had not allocated training costs between federally and
non-federally funded training programs so that is claimed federal
financial participation in 100% (2) of its training costs. On August
22, 1977 the State appealed the deferral action to the Secretary of the
Department of Health and Human Services. On September 28, 1977 the
Agency formally disallowed $2,632 instead of $2,387 in training expenses
for the period in question. /1/
The Agency treated the State's appeal as a request for
reconsideration and the Acting Commissioner of Social Security upheld
the disallowance on November 3, 1983. The State then appealed the
decision of the Acting Commissioner of Social Security to the
Departmental Grant Appeals Board under 45 CFR Part 16.
Statute of Limitations and the Doctrine of Laches
The State argued that enforcement of the Agency's action is time
barred because the Agency's final decision was not made until six years
after the original disallowance. The State admitted that there was no
federal statute of limitations that applied to this action. Therefore,
argued the State, the timeliness of the Agency's action should be judged
by the appropriate State statute of limitations. The State contended
that under the Social Security Act, the federal-state relationship is
essentially contractual in nature and that, therefore, Maryland's
contract statute of limitations (Md. Ann. Code, Cts. S. Jud. Proc.
Art., Sec. 5-101) should apply in this case. The State cited
International Union, United Automobile, Aerospace and Agricultural
Implement Workers of America v. Hoosier Cardinal Corporation, 383 U.S.
696 (1966) in support of its argument. The State complained that the
Agency's delay in deciding this case rendered the State unable to
reconstruct adequately its records so as to respond to the Agency's
argument that Maryland improperly calculated its training claim. The
State also argued that (3) the Board should reverse the disallowance
because the Agency's six year delay in upholding the disallowance was
contrary to the principles of fairness, and administrative necessity, as
well as violating the equitable doctrine of laches.
The Agency gave no explanation or justification for the delay in
issuing its final decision. The Agency argued, however, that no statute
of limitations or doctrine of laches could be enforced against the
federal government unless specifically provided for by Congress. The
Agency asserted, and the State agreed, that Congress had enacted no
statute of limitations applicable to this case. The Agency further
argued that the delay in issuing its final decision caused the State no
injury because the original disallowance letter was issued promptly and
the State was put on notice that the Agency believed that these costs
were unallowable.
The State has not provided convincing evidence that the Agency in
taking this disallowance should be bound by the State's contract statute
of limitations. It is well settled that the federal government is not
bound by a state statute of limitations, United States v. Summerlin 310
U.S. 414, 416 (1940); see also Roberts v. Morton 549 F. 2d 158 (10th
Cir. 1977). No statute of limitations applies to the federal government
except where Congress expressly provides otherwise, United States v.
Transamerica Insurance Co., 357 F. Supp. 743, 746 (E. D. Va. 1973).
"The reason for this is the public policy of preserving the public
rights, revenues, and property from injury and loss by the negligence of
public officers." Guaranty Trust Co. v. United States, 304 U.S. 126, 132
(1938). Nor has the State shown that a statute of limitations would
apply in an administrative proceeding such as this one.
The State cited International Union, United Automobile, Aerospace,
and Agricultural Implement Workers v. Hoosier Cardinal Corporation,
supra, to support its position. However, that case involved a labor
union suing under a section of the Labor Management Regulations Act
which confers jurisdiction upon federal district courts over suits
involving collective bargaining contracts. The court found that since
there was no provision in that Act for any time limitation upon bringing
an action, the appropriate reference was the State statute of
limitations. The plaintiff in this case was not the federal government
(4) however, and, given the precedents cited above, the State has not
shown how this case bolsters its argument that a state statute of
limitations is applicable against the federal government. /2/
Conclusion
For the reasons stated above we uphold the Agency's disallowance of
$2,632. /1/ The Agency deferred $2,387 by allocating training expenses
using a formula based on administrative costs for the State's general
public assistance program (GPA) as compared to the total administrative
costs. When the disallowance was made, the Agency concluded that the
correct formula was based on the total caseload and, using that formula,
arrived at a disallowance of $2,632. In its brief, the Agency stated
that the disallowance, if properly calculated, would have been $3,335;
however, it only sought recovery of $2,632. /2/ Since we
conclude that a state statute of limitations is not properly applied
here, we do not need to reach the issue of whether, as the State argued
based on Pennhurst State School v. Halderman, 451 U.S. 1 (1981), a
statute of limitations for actions arising under a contract would apply
to actions arising under a Social Security Act grant program. In
addition, it is also well settled that the federal government is not
subject to the defense of laches in enforcing its rights. United States
v. Summerlin, supra, at 416. Furthermore, the doctrine of laches, like
a statute of limitations, is: designed to promote justice by preventing
surprises through the revival of claims that have been allowed to
slumber until evidence has been lost, memories have faded, and witnesses
have disappeared. The theory is that even if one has a just claim it is
unjust not to put the adversary on notice to defend within the period of
limitation and that the right to be free of stale claims in time comes
to prevail over the right to prosecute them. Telegraphers v. Railway
express Agency, 321 U.S. 342, 348-9 (1944). Even if we were to find
that laches could be applied to the federal government, we would find
that in this case, the State had timely notice of the Agency's
disallowance. The disallowance of September 28, 1977 constituted notice
to the State that the Agency believed the cost to be unallowable and
that if the State did not provide evidence to justify its claim of
$2,632, the Agency would not pay it. While we cannot condone the
Agency's delay in reaching a final decision, we find that the State's
failure to argue (5) the merits of the disallowance represents a choice
to pursue only the legal arguments raised and is unrelated to the
passage of time. n3 /3/ The Agency's final determination letter
contains a thorough explanation of the basis for the disallowance and
how it was calculated. The deferral notice actually states that
"(a)dequate documentation" was available for Agency review of the
matter; among the documents in the reconsideration record are the form
OA-41 containing the State's claim and pertinent cost allocation plan
materials. Furthermore, the correspondence from the State contained in
the reconsideration record contains references neither to a need to
submit additional records nor to substantive disagreement that amounts
attributable to GPA training were claimed for FFP. Consequently, we
conclude that the State has not shown that it was unable to pursue this
matter on the merits because of the delay between the original
disallowance and the final determination.
NOVEMBER 14, 1984