GAB Decision 725
June 6, 1986
Ohio Department of Human Services; Request for
Reconsideration of Garrett, Donald F.; Teitz, Alexander G. Settle, Norval
D.
Decision No. 725
In Ohio Department of Human Services, Decision No. 725, March 7,
1986, the Board considered an appeal from the Ohio Department of
Human
Services (State) of a determination by the Office of Child
Support
Enforcement (OCSE, Agency) to disallow $1,254,170 in federal
financial
participation (FFP) for operation of its child support
enforcement
program under Title IV-D of the Social Security Act (Act) for
fiscal
year 1981 and prior periods. The Board upheld the part of
the
disallowance which related to the State's delegation of
program
operations to Lucas County, but reversed the disallowance as it
related
to the delegation of the program to Summit County. The Agency
has
requested the Board's reconsideration of the Summit County part of
the
decision.
Based on the additional comments received in a brief from OCSE and in
a
telephone conference call, we affirm Decision No. 725. While we
agree
with OCSE's general concerns, particularly that a grantee be
fully
accountable for the use of program funds, we did not find that
our
decision prejudices those concerns in any way as a general matter,
nor
in the particular circumstances of this case.
I. Summary of Decision No. 725
In Decision No. 725, we explained that the original basis of
the
disallowance for Summit County was that the State failed to comply
with
State policies requiring prior approval by the State IV-D agency
of
cooperative agreements delegating program performance. The State
IV-D
agency did not approve the agreements here for Summit County.
(These
cooperative agreements were actually between counties and county
courts
and other entities; the State IV-D agency was not a party to
the
agreements.)
The State maintained that its prior approval policies were non-binding
and
waivable under State law. The Agency argued that this was not so,
but
also responded by arguing(2) alternatively that prior approval by
the IV-D
agency was independently mandated by federal regulation and
was, in any
event, an implicit part of any reasonable scheme of State
accountability for
the use of federal funds. The State rejected these
alternative
arguments, arguing first that federal regulations do not
require prior
approval by the IV-D agency and, secondly, the Agency's
concern about program
accountability was misplaced since the State
exercised adequate
accountability for the delegation of program
operations in the circumstances
here.
In the Board's analysis in Decision No. 725, we first concluded that
the
Agency had not adequately rebutted the State's argument that its
own
approval policies were waivable under Ohio law. We next addressed
the
federal regulations cited by the Agency, and concluded that the
State
could have reasonably interpreted them to not require formal approval
by
the State IV-D agency in the circumstances here. We finally
considered
the Agency's argument that, even in the absence of regulation, the
IV-D
agency would need to have granted prior approval in order to ensure
its
accountability for the use of federal funds. In the decision, while
we
shared the Agency's general concern that a grantee must
remain
accountable for the use of federa funds, we concluded that the State
had
demonstrated this here. First, the State plan (as authorized by
federal
regulation) delegated the responsibility for implementing the plan
to
the counties. Second, State statutes and regulations
comprehensively
addressed the local administration of the State IV-D
program. Finally,
we found an overall contextual element to color the
case: the State had
conducted its own audit of the County's program,
disallowing a
substantial portion of the County's initial claim for
reimbursement and
charging the federal Agency for only otherwise allowable
costs of the
program.
On the basis of the foregoing, which involved much unique to the
case
here, we determined that OCSE simply did not have a substantial
basis
for this particular disallowance. OCSE has nothing to fear in
terms of
the effect of this case on any applicable principle, as we affirmed
our
general support, reiterated through many Board decisions, for
strong
fiscal oversight and affirmative accountability on the part of
grantee
agencies. We simply found no real violation of that principle
based on
which OCSE should recoup money from the State for costs which
appeared
otherwise allowable. /1/
(3)
In its brief on reconsideration, the Agency raised some new arguments.
As
we explain in more detail below, we do not find any factual or legal
error in
Decision No. 725 that would justify reversing our conclusion
regarding Summit
County. While we continue to acknowledge the Agency's
legitimate
concern about program accountability, we find this concern to
have been met
here.
II. Agency Arguments on Reconsideration
A. Can the State's Waiver be "Binding" on OCSE?
The Agency argued on reconsideration that, even if the State could
waive
its own approval policies, such waiver would not be "binding" on
the
Agency. Supplemental Memorandum of OCSE, p. 2. For the waiver
to be
"binding" on the Agency would be unfair, argued the Agency, since
it
would make unenforceable a federal regulation requiring compliance by
a
state with its own "laws, rules, regulations and standards." 45
CFR
304.11. The State had argued that the language of this
provision
compelled deference to Ohio law which authorized the waiver of
such
regulations or policies here.
We find that it is illusory to frame the issue in terms of the
"binding"
effect of the "waiver" on OCSE. The Board agrees with the
Agency that a
state may not waive any federal regulation or a state rule
which would
affect a state's accountability for the use of federal
funds; it would,
of course, be absurd to hold that Ohio has a giant
loophole in its laws
allowing it to escape the rightful consequences of State
or federal
requirements. In this case, however, we found that the
State's waiver
of its approval policies had no substantial effect on the
State's
accountability for the particular federal funds in question and that
the
waiver of the policies was thus harmless. First, only a
State
requirement was at issue here; there was no corresponding
federal
requirement requiring prior approval by the State IV-D agency
of
cooperative agreements of delegate agencies, nor was there any
violation
of any other federal requirement that has been demonstrated to be
at
stake here. /2/ Second, the record(4) provides no indication that
the
particular costs here were otherwise unallowable. Indeed, the
State
conducted its own audit and itself disallowed on a substantive
basis
some portion of the money initially claimed by the counties.
Third, as
we found in Decision No. 725, the concern for ongoing
accountability was
met here, since the State plan authorized a delegation of
authority to
the counties and State statutes and administrative rules
addressed fully
the local administration of the program. /3/
The Agency also argued that the waiver of State rules was not binding
on
the Agency because of the federal regulation requiring a state to
submit
all changes in its state plan to the Agency for review. The
Agency
appeared to argue that the waiver of the State's approval
policies
needed to be submitted to the Agency as part of the State plan
process.
The Agency cited 45 CFR 301.13, which provides:
After approval of the original plan by (OCSE), all relevant
changes
required by new statutes, rules, regulations, interpretations, and
court
decisions are required to be submitted currently so that (OCSE)
may
determine whether the plan continues to meet Federal requirements
and
policies.
The Agency appeared to argue that 45 CFR 301.13 should be
broadly
interpreted to preclude waiver since the Agency depended on
the
existence of the State policy issuances when it approved Ohio's
state
plan. /4/ However, we have no evidence of this in the record.
(The
State plan was not previously discussed in the appeal.) Furthermore,
the
Agency has referred us to no authority or standard which requires
or
expects the Agency to rely upon all existing state policies(5) when
it
considers approval of a state plan. /5/ We do not question
the
proposition that a change in a State policy which was a recognized
basis
for State plan approval is subject to review under section
301.13.
However, in this case, there is no evidence of that circumstance.
B. The Issue of Prospective Control over the Program
The Agency further argued that the Agency need not wait until "money
is
mispent" before requiring accountability from the State IV-D
agency.
Supplemental Memorandum of OCSE, p. 4. We fully agree.
The Agency
acknowledged that administration of the state plan can be
delegated to
the counties (See 45 CFR 302.10), but noted that the IV-D agency
must
continue to "supervise . . . the administration of the plan by
its
subdivisions." 45 CFR 305.21(a). The Agency maintained that the
State
has not demonstrated that it maintained its supervisory
responsibility
here.
As explained in part II A above, we also agree with the Agency that
a
state must maintain its supervisory or oversight responsibility.
We
have found, however, that this concern was met on the overall record
of
this case. While the Agency concentrated on the issue of
"prospective"
accountability, a significant factor in the Board's decision
was that
the State conducted its own audit of the program and only charged
the
Agency for otherwise allowable costs, thus maintaining
its
accountability responsibility. As we discussed in Decision No. 725,
and
as reiterated below, the record indicates that the State had
some
ongoing accountability mechanisms in place. We would agree that
the
State could have done a better job; but we think it unreasonable
to
ignore, when examining the State's process with the benefit
of
hindsight, that no otherwise unallowable costs have been claimed.
The Agency disputed the position that State statutes and
regulations
fulfilled the State's supervisory or oversight responsibility,
arguing
that this position was undermined when the Board in Decision No.
725
accepted the argument that the State could waive such
rules.
Supplemental Memorandum of(6) OCSE, pp. 4-5. However, the Board
in
Decision No. 725 certainly did not conclude that Ohio could waive
a
statute, nor did the Board address specifically whether the State
could
waive a properly promulgated regulation. We made no general
conclusions
about what Ohio could waive. The Board simply was not
dealing with an
issue of the permissible scope of the State's right to
waive
administrative requirements; certainly, as we have indicated
above, we
agree that the State's waiver authority is clearly subject, at
the
least, to limitations necessary to maintain accountability for
federal
funds. We merely concluded that the Agency had not rebutted the
State's
argument that it could waive the State's policy in the
circumstances
here, where one factor was that the waiver of the rule had no
effect on
the substantive allowability of costs. We continue to
conclude from the
record that the Agency's concern about whether the State
exercised
control over operation of the program was met on the record here,
since
the State plan, as approved by the Agency, provided for
administration
of the plan by the counties; State statutes and
regulations governed
how the program must operate; and the State's own
audit established
that costs charged to OCSE were otherwise fully allowable
(a proposition
not meaningfully disputed by OCSE).
Another Agency argument about these applicable State statutes
and
regulations was that, unless the State reviewed the
cooperative
agreements in advance of their implementation, the State would
have no
way to monitor whether these statutes and regulations were followed
by
the counties. First, the comprehensiveness and specificity of
the
regulations would appear to indicate that county officials would
not
require this type of monitoring. We would presume that the
counties
would comply with regulations specifically addressed to the
day-to-day
operation of the program. Furthermore, the Agency has not
demonstrated
how the IV-D agency's prior review of the cooperative agreements
would
demonstrate that all statutes and regulations were being complied
with
by the counties, since the regulations go far beyond the
matters
addressed by the cooperative agreements themselves. (One small
part of
the regulations addressed the items needed to be included in
the
cooperative agreements. See Ohio Administrative Code
5101:1-29-53.)
Finally, we reiterate that we do not disagree that prior
review of the
agreements would have been better than no review, and OCSE may
well want
to mandate such a review in its own guidelines; but in the
peculiar
circumstances here, the lack of such review of the particular
agreements
involved represented something tantamount to harmless error and
operated
in the context of at least minimal prospective
accountability.(7)
CONCLUSION
For the reasons discussed above, we affirm Decision No. 725.
/1/
Furthermore, we are aware of
nothing which would now prohibit
OCSE from looking specifically at those
costs in more detail to
determine whether any are in fact
unallowable. /2/ Although
not
addressed, by the parties on reconsideration, the Board in Decision
No.
725 discussed an Agency argument about the effect of a
federal
regulation which required the state plan to "provide that the State
will
enter into written agreements for cooperative arrangements
with
appropriate courts and law enforcement officials." 45 CFR 302.34.
We
explained in the decision why we concluded that this provision did
not
specifically require the signature of a IV-D agency official
before
implementation of County-managed cooperative agreements. See
Decision
No. 725, pp. 7-9.
/3/ On reconsideration, the State made the
additional comment that the State
maintained ongoing oversight since it
had the ability to reject claims for
IV-D funding made by the counties
on a monthly basis. Tape of May 7,
1986 Telephone Conference Call.
/4/
The Agency did not maintain
that Ohio actually made any changes
in its state plan for our
purposes. /5/ During the
telephone
conference call held during reconsideration, an Agency official
stated
in argument that the Agency considers all existing policies
and
regulations when reviewing a state plan. Tape of May 7, 1986
Telephone
Conference Call. However, the Agency identified no specific
state plan
provision affected by the State's policies here, nor did the
Agency show
that these particular State policies were in fact even considered
when
Ohio's plan was approved.
MARCH 28, 1987