DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: New York State Department of Social Services
Docket No. 85-198
Audit Control No. NY-82-AC
Decision No. 794
DATE: September 30, 1986
DECISION
The New York State Department of Social Services (State) appealed
a
decision of the Office of Child Support Enforcement (Agency)
disallowing
$1,507,312 in claims for federal financial participation (FFP)
under
Title IV-D (Child Support and Establishment of Paternity) of the
Social
Security Act (Act) filed by the State for the period of October
1981
through September 1982. During the course of these proceedings,
the
Agency reduced its disallowance to $1,039,363. The claims now at
issue
are $77,756 in training costs and $961,607 in costs allegedly offset
by
interest earned on collected child support payments.
Summary
We uphold the Agency's determination on training costs because the
State
did not show that the disputed training costs were allowable as
the
"direct costs of short term training provided to IV-D agency staff."
45
CFR 304.23(d). The training at issue was provided to state
employees
with some alleged IV-D program responsibilities. The State
did not
present evidence sufficient to establish that the training was
provided
to the employees in a capacity as "IV-D agency staff" allowable
under 45
CFR 304.23(d).
We uphold in principle the Agency's determination on interest earned
but
not properly accounted for by the State. Under section 455(a) of
the
Act, the State must deduct from its claims for IV-D program
expenditures
an amount equal to "fees or income resulting from services
provided"
under the IV-D program. We have previously found that the
Agency
reasonably interpreted this to include interest income on
IV-D
collections. Utah Department of Social Services, Decision No.
750,
April 30, 1986. But, for the reasons.- 2 -
explained below, we permit the State a further opportunity to
submit
evidence concerning the calculation of the amount of interest
earned.
Background
The Child Support Enforcement Program was established, under Title IV-D
of
the Act, to enforce child and spousal support obligations.
Basic
program functions include locating absent parents,
determining
paternity, establishing the amount of the child support
obligation, and
collecting support payments. See, generally, section
451 of the Act.
Title IV-D of the Act authorizes grant funding for the costs of
operating
the State's program. In order to obtain FFP, the State must
operate the
program in accordance with a federally approved state plan
for operating the
program, an approved cost allocation plan for
identifying and allocating
costs, and all applicable federal
regulations.
Some of the funds collected under Title IV-D are collected on behalf
of
families which received assistance under the Title IV-A program, Aid
to
Families with Dependent Children (AFDC). Under section 457 of the
Act,
child support collections on behalf of these families (AFDC
child
support) are not distributed in full to the recipient families;
funds
are withheld to reimburse the governmental entities which contributed
to
the AFDC payments under a complex formula. The federal share of
the
IV-D funds withheld must be credited to the federal government by
the
IV-A agency. 42 CFR 302.51(b)(2).
I. Training costs
The Agency initially disallowed $88,457 in claims for FFP for
training
costs which were found to be "not directly identifiable with the
IV-D
program." Ex. 7. As a result of documentation submitted by the
State
during the course of this appeal, the Agency agreed to reduce
the
disallowance by $10,701. Agency Letter dated April 28, 1986.
The Agency based the disallowance on 45 CFR 304.23(d), which states
that
FFP under Title IV-D is not available for educational and training
costs
other than the "direct costs of short term training provided to
IV-D
agency staff. . . ." 1/ The Agency found that the State had not
been
specific enough
1/ Another exception to the prohibition on IV-D training costs
applies
to cooperative agreements under 45 CFR 304.21. That is not at
issue in
this case. - 3 -
in documenting the number of IV-D agency staff members participating
in
the training activities involved.
The State argued that the training costs were allowable because the
claim
was based on a proposed cost allocation plan under which the kind
of costs
involved were properly allocated as direct costs to the IV-D
program. 2/ The
State cited 45 CFR 302.16 (1981), 3/ which authorized
the State, under its
State plan, to claim allocable costs if the State
had a cost allocation plan
for properly charging the costs of
administration, services, and training
activities.
We find that the State misinterpreted the regulations. Whether or
not
the costs were properly allocated, the issue is whether the costs
were
allowable under a specific regulatory requirement. The regulation
at 45
CFR 302.16 was a general procedural rule, which merely required that
a
State operate in conformity with an approved cost allocation plan.
That
regulation was not a definitive rule on cost allowability. In
contrast,
the regulation at 45 CFR 304.23(d) is a specific prohibition on
federal
participation in certain costs. This specific regulatory
directive must
be read to control the more general procedural
guideline. The mere fact
that the State may have a cost allocation plan
which allocates certain
costs does not make those costs allowable per se.
4/
2/ There was no dispute that the proposed cost allocation
plan was a
valid method to use in calculating the allocation of costs.
See 45 CFR
95.517. The precise provisions of the proposed cost
allocation plan
were not submitted for the record.
3/ 45 CFR 302.16 was revised and redesignated as 45 CFR 304.15 at
47
Fed. Reg. 17586 (April 23, 1982), effective May 24, 1982. Neither
party
has argued that this action substantively changed the regulation
with
regard to this case, and we do not see any change material to the
issue
here.
4/ Theoretically, a cost allocation plan might contain language
which
specified the allowability of a particular cost item. We offered
New
York the opportunity to make such a showing here, but the State
was
unable to produce any such evidence. Nor did the State show that
its
plan methodology was developed for the specific purpose of
identifying
the extent to which the contested employees functioned as IV-D
agency
staff.
- 4 -
To show that the costs are allowable under 45 CFR 304.23(d). the
State
must show that the costs are within the narrow exception to
the
prohibition on federal participation for training costs. The
State
submitted attendance records for courses under four of the six
training
contracts at issue. State's Reply Brief, Ex. 10. Some of
these
attendance records summarily identify attendees by program. The
Agency
accepted the categorization of all attendees designated as
IV-D
employees, and contested only costs for those employees who were
not
specifically identified as IV-D employees, or were identified
as
employees under other federal-state programs who allegedly
exercised
certain responsibilities under the IV-D program. The State
apparently
allocated the training costs for these "IV-D related employees" to
each
of the programs to which the employees were somehow related,
including
the IV-D program, but provided no further explanation of the
connection
between the employees and the IV-D program.
Without evidence of specific IV-D responsibilities of the
disputed
employees, there is not sufficient evidence to determine whether
the
IV-D related employees are "IV-D agency staff" under 45 CFR
304.23(d),
or are other State or county employees who may perform an
overhead
function, but are not IV-D agency staff. 5/ While, generally,
overhead
costs may be properly allocated to and allowable under the IV-D
program,
training costs for overhead personnel must be tested against
the
prohibition and limited exceptions of 45 CFR 304.23(d). The fact
that
the State's proposed cost allocation plan might allocate some of
the
salaries of the personnel at issue to the IV-D program is simply
not
evidence that these personnel were "IV-D agency staff."
The State had adequate notice and several opportunities to submit
evidence
into the record concerning whether the disputed employees were
IV-D agency
staff. The State merely provided the job titles of some
employees (such
as county commissioner and staff development
supervisor). The State
failed to provide even a description of the
employees'
5/ Under general cost principles applicable to state and
local
governments administering federal grants, statewide or
countywide
central service functions (such as central personnel and
administrative
services) may be allocated or billed to programs receiving the
services.
See, generally, Office of Management and Budget Circular A-87 Att.
A,
C.2.a (made applicable by 45 CFR 74.171 and 301.15(e)). But the
fact
that state or county personnel provide these kinds of services to a
IV-D
agency does not make them IV-D agency staff. - 5 -
responsibilities to the IV-D program. Because of the general bar
to
federal participation in training costs for non-IV-D agency staff
under
the IV-D program, such proof is necessary.
We conclude that the State did not meet its burden of demonstrating
that
the disputed costs were allowable under 45 CFR 304.23(d). With
respect
to those contracts for which no attendance records were submitted,
the
State clearly did not justify the claims under the IV-D program.
For
the other contracts involving employees who were not
specifically
identified as IV-D agency staff, the State failed to provide
sufficient
proof that the costs fall within the exception to the bar on
federal
participation on training costs at 45 CFR 304.23(d), by
providing
evidence that these employees were IV-D agency staff.
Therefore, we uphold the Agency's disallowance, in the reduced amount
of
$77,756.
II. Interest Income
The Agency disallowed $1,418,855 which it stated was the federal share
of
interest earned on child support payments collected by the State and
local
districts. During the course of this proceeding, the Agency
reduced its
disallowance to $961,607. Agency submission of June 20,
1986. The
disallowance was based on Audit Report Number NY-82-AC (Audit
Report, Ex. 3),
which examined State accounts and the accounts of seven
counties
administering Title IV-D programs for the State. The Agency
alleged
generally that this interest income should have been applied to
reduce
program expenditures because it constituted "income resulting
from services
provided under the [State] plan." Section 455(a) of the
Act (42 U.S.C.
655(a)), as amended by the Omnibus Reconciliation Act of
1981 (OBRA), Pub.L.
97-35, requires that the amount of any program
income be deducted from the
amount of program expenditures for which the
State would otherwise claim
FFP.
a. Is interest "income" for purposes of section 455(a)?
In a recent case, the Board upheld the Agency's determination
that
interest on child support collections is "income" for purposes
of
section 455(a) of the Act, and we incorporate that reasoning here.
Utah
Department of Social Services, Decision No. 750, April 30, 1986,
pp.
1-7. Below, we discuss some new arguments raised by the State in
this
case.
- 6 -
The State argued that since the interest income resulted from
"investment
activity," the interest income was not within the bounds of
section 455(a) of
the Act because it did not result from services
provided under Title
IV-D. The State noted that interest income is not
specifically
mentioned in section 455(a), and that neither the Act nor
the State plan
requires that states invest dormant funds. The State
cited Perales v.
United States, 598 F. Supp. 19 (S.D.N.Y. 1984), aff'd,
751 F.2d 15 (2d, Cir.
1984), for the proposition that the federal
government cannot impose upon
states, as a grant condition, a
requirement to pay interest upon funds if
there is no statutory mandate
for that grant condition.
We reject the State's argument that interest income earned on
child
support collections is not required, in general, to be deducted
from
program expenditures claimed under section 455(a) of the Act. We
agree
that investment of dormant funds is not required by the Act, and is
not
directly addressed as a program activity, but that is not
dispositive.
6/ It is undisputed that some Title IV-D collections in New York
were
deposited in interest-bearing accounts. The interest income
here
resulted directly from the accumulation of principal balances
from
program activities. The interest in dispute would not have been
earned
if the State had not been collecting child support payments pursuant
to
the IV-D program. Thus, all interest income resulted directly from
the
IV-D collection services provided, whether or not the statute
or
regulations required interest to be earned.
We know of no reasonable basis to find that income from interest should
be
treated, under the statute, differently from other income. The point
of
section 455(a) is that federal funding needs should be offset by the
federal
share of funds produced through program activities. Interest
earned on
collected funds meets this basic policy requirement.
Therefore, we conclude
that the federal share of interest earned must be
deducted from program
expenditures in claiming FFP, in accordance with
section 455(a). 7/
6/ Whether HHS could order states to invest funds is not an
issue
before us.
7/ Although arising in a different program, this holding is
consistent
with our decision in North Carolina Department of Human
Resources,
Decision No. 361, November 30, 1981, aff'd, North Carolina v.
Heckler,
584 F. Supp. 179 (E.D.N.C. 1984) in which we found that a state
must
credit to the Medicaid program an amount (Continued on next page) - 7
-
We find the case before us to be distinguishable from the facts
in
Perales. In Perales, the court reversed a penalty assessment which
was
based on interest income imputed to funds incorrectly claimed under
the
Food Stamp Program, when there was no statutory authorization for such
a
penalty. In this case, the Agency is not assessing a penalty based
on
imputed interest, but rather is merely requiring the State to
properly
report program expenditures under applicable cost principles
requiring
the State to account for the interest actually earned. See
New York
State Department of Social Services, Decision No. 721, February 6,
1986.
The offset of the federal share of interest earned against the
federal
grant can reasonably be required under section 455(a). 8/
The purpose of the disallowance is not punitive; the disallowance is
to
fairly distribute the benefit received by the State in the form
of
interest on funds held for the IV-D program, as required by law.
As discussed in the Board's decision in Utah, the State had notice
of
other reasonable and explicit bases in HHS' general grant
requirements
(45 CFR Part 74) for treating the interest here as both program
income
and as an applicable credit against the federal grant.
These
requirements are such that the result we reach here would be
supportable
even
7/ Cont. equal to the federal share of
interest earned on Medicaid
overpayment
recoveries. See also New York Department of
Social
Services, Decision No. 588, October 31,
1984.
8/ The Agency also relied upon a September 3, 1982 Action
Transmittal,
OCSE-AT-82-8, which required that states reduce claimed
expenditures by
the "total interest earned on collections made under the IV-D
state
plan." The Agency subsequently codified this Action Transmittal at
45
CFR 304.50(b), 49 Federal Register 36764, 36772 (September 19,
1984).
The State argued that the Action Transmittal should not be applied
in
this case, but did not argue specifically that it had relied on
a
different interpretation of section 455(a), nor that it would
be
adversely affected by retroactive application of the
Agency's
interpretation. Indeed, what we are addressing here is
primarily a
question of whether the State can retain the full amount of what
is
essentially a windfall to the program, or must share a fair part of
it
with the federal government. Thus, we do not think that the Agency
is
precluded from applying its interpretation here. - 8 -
in the absence of section 455(a) of the Act. We incorporate
those
determinations here. See Utah, Decision No. 750, pp.
2-4.
b. Does the Intergovernmental Cooperation Act apply?
The Intergovernmental Cooperation Act (ICA), at 31 U.S.C.
6503
(previously codified at 42 U.S.C. 4213), states that a State is
not
accountable for interest earned on grant money pending its
disbursement.
This provision operates as a statutory exception to the general rule
set
out at 45 CFR 74.47(a), which requires grantees to remit to the
federal
government any "interest or investment income earned on advances of
HHS
grant funds. This includes any interest or investment income earned
by
subgrantees." 9/
In this case, some of the child support collections, for families
who
received assistance payments under the Title IV-A AFDC program,
were
used to reimburse the State and federal governments for those
assistance
payments. Under section 457 of the Act and 45 CFR 302.51,
the State is
required to distribute a portion of the child support collected
for
families who received IV-A AFDC assistance payments to reimburse
the
IV-A AFDC program. The regulations at 45 CFR 302.51 provide that
states
must credit the federal government for the federal share of these
IV-D
collections through the IV-A agency.
This situation is like that in North Carolina Department of
Human
Resources, Decision No. 361, November 30, 1982, aff'd, North Carolina
v.
Heckler, 584 F. Supp 179 (E.D.N.C. 1984). In North Carolina, the
funds
involved had been collected from providers as overpayments.
Instead of
refunding the money to the various participating government
entities,
the State deducted the amount from current funding claims.
Thus, North
Carolina claimed that the funds acquired the character of
advances on
grant funding. The Board rejected North Carolina's
contention because
there was no evidence that the funds were being held
pending
disbursement; rather, the Board found that the funds were held
pending
repayment
9/ Some of the collections at issue in this case were
distributed, in
full, directly to recipient families. These collections
are funds which
the State recovered from, and distributed to, private
parties. The
State did not contend that the ICA or 45 CFR 74.47 applies
to these
child support collections. Since these are not grant-in-aid
funds, the
ICA simply does not apply. - 9 -
of the federal share. See also New York Department of Social
Services,
Decision No. 588, October 31, 1984, p. 9.
The AFDC child support collections in this case reimburse the
federal,
state, and local governments for AFDC payments already made; the
funds
are held by the IV-D program only pending distribution to the
AFDC
program. Only after distribution and crediting of the federal
share
could the funds be considered grant funds, because then they
replace
federal funds. As we discuss below, after distribution to the
AFDC
program and crediting of the federal share, no interest earned would
be
attributable to the IV-D program.
We conclude that the ICA exception for interest earned on advances
of
grant funds does not apply to the funds while they are held by the
IV-D
program because they are not grant funds at that time.
c. At what point was interest on AFDC child support collections
no
longer attributable to the IV-D program?
The State argued that the Agency improperly included in the
disallowance
interest on funds from child support collections which
reimbursed the
Title IV-A (AFDC) program for assistance payments made to
recipient
families after the federal government had already been credited
with
those funds. 10/ The State and the Agency disagreed as to when
the
federal government was credited with its share of the AFDC child
support
collections and when, therefore, interest for which the State
was
accountable to the IV-D program ceased to accrue.
In the specific circumstances of Utah, the Board found that the
federal
government could be credited with child support collections in two
ways:
either by an accounting rendered on the quarterly report of both
AFDC
expenditures and AFDC child support collections, or by an
earlier
distribution, pursuant to section 457 of the Act and 45 CFR
302.51,
crediting the federal share of AFDC child support collections to
the
federal account in the AFDC program and using the funds to redeem
AFDC
program liabilities. Utah, Decision No. 750, pp. 10-11. In
this case,
the State asserted that it credited the federal share of AFDC
10/ The State's argument here concerns only child support
collections
for families which received IV-A AFDC assistance payments.
An undefined
proportion of the interest income at issue was earned from
non-AFDC
collections. The State did not contest the Agency's
calculation of
interest on non-AFDC collections that were actually deposited
in
interest bearing accounts. - 10 -
collections by submitting a lower quarterly estimated claim for
federal
financial participation in the AFDC program, at the beginning of
the
quarter when it deducted estimated AFDC collections from estimated
AFDC
expenditures. 11/ The State argued that, as a result, the State
advanced
funds to pay AFDC expenditures and that subsequent AFDC child
support
payments reimbursed the State for the funds so advanced.
The State argued that all aspects of distribution of the AFDC
child
support collections were complete at the end of the month following
the
month the funds were collected, when the State received monthly
reports
from the local counties administering the two programs. At that
time,
the State reasoned, the counties credited the State with the
non-local
share of the child support collections and no further distribution
of
proceeds took place. 12/ The State alleged that it had already
credited
the federal government with its share through the reduction of
the
estimated claim at the beginning of the quarter. Tr., pp. 7-13.
The Agency did not contest that the monthly county report distributed
the
collected funds between the State and the local districts, but
pointed out
that this was irrelevant, since the important question was
when the funds
were distributed to the federal government. The Agency
denied that the
counties' monthly reports credited the federal
government with any share of
the AFDC child support collections. The
Agency argued that, under the
quarterly reporting system, the only act
which actually credited the federal
government with the AFDC collections
was the submission of the quarterly
report. The Agency contended that,
although no
11/ The State was required to reduce its quarterly estimated claim
for
expenditures under the AFDC program by the quarterly estimated
AFDC
collections pursuant to section 403(b)(2) of the Act.
12/ Throughout this whole so-called distribution process, the
State
acknowledged, no cash actually changed hands. The cash was
collected by
local counties administering the IV-D program and placed in the
county's
general fund. The counties reported these funds in a monthly
report to
the State, offsetting IV-D funds from expenditures claimed for IV-A
AFDC
funding from the State. The actual cash remained with the local
county
after the monthly report was submitted because the county had
settled
its accounts. After the report was received by the State, the
State
ceased to hold the counties accountable for these funds and the
State
would reduce the next grant to the county by an equivalent
amount. Tr.,
p. 12. - 11 -
cash changed hands, the quarterly report was the only time during
the
quarter when the State settled accounts with the federal
government,
offsetting IV-D funds against claims for funds for the cost of
the AFDC
program. 13/
As the Board stated in Utah, "the State clearly bears a burden
generally
of accounting for liabilities such as program income (see, e.g.,
31
U.S.C. 6503(b)), and under section 455(a) clearly shares
the
responsibility of accounting for income under title IV-D." pp.
11-12.
We agree in principle with the Agency that the important question is
not
when the State settled its accounts with localities, but when the
State
reasonably can be said to have credited the federal government with
its
share of the IV-D collections. The question arises in the context
of a
complex, intrastate accounting process which is overseen by New
York.
Since no funds actually changed hands or were physically distributed
in
any manner, we find that the Agency would ordinarily be justified
in
assuming that the IV-D collections had not been credited to the
federal
account until the State formally settled its accounts with the
federal
government at the end of the quarter, unless the State can
affirmatively
establish an earlier point when the funds were credited.
Cf. Utah, pp.
11-13.
Certainly, the reduction of the State's estimated claim did not credit
the
federal government with its share of the IV-D collections. The
purpose
of the estimated claims and advance payments is to ensure that
the State has
sufficient cash flow to meet joint federal-state
obligations. Estimated
child support collections are deducted from
estimated AFDC payments because
they reduce overall needs for cash
advances during the quarter, but this
reduced estimate does not "credit"
the federal government with its share of
actual AFDC child support
collections. As we stated in Utah, the
State's funding mechanism for
the AFDC program is not dispositive of our
inquiry. The IV-D program is
a separate program and "[n]othing in the
law or otherwise
13/ The Agency originally argued during this proceeding that
the
federal government was only credited with the funds on the date that
the
quarterly expenditure report for the IV-A program was received.
After
the Board's Utah decision, the Agency issued PIQ 86-1, which stated
that
the Agency would calculate interest on IV-D collections only until
the
end of the quarter, regardless of when the quarterly report was
actually
received. While this, apparently, was the reason for the
substantial
reduction in the disallowance, it does not affect the basic
reasoning of
the Agency's position. - 12 -
authorizes OCSE to ignore the requirements in IV-D because of a cash
flow
problem in Title IV-A or, for that matter, in any other federal
program."
Utah, Decision No. 750, p. 5.
We recognize, however, as we did in Utah, that a state may credit
the
federal government in ways other than by settlement at the end of
the
quarter. As we explained in Utah, OCSE is correctly concerned
with
accountability, but arguably arbitrary in imposing the date of
the
quarterly report as a measure of that accountability, if there
is
evidence that interest actually ceased to be earned as of an
earlier
point. What the State appears to be alleging is that it
effectively, if
not formally, credited the federal government with the
federal share of
IV-D collections by requiring local counties to offset AFDC
support
collections against AFDC expenditures. The State implied that
this
system resulted in the county either using the AFDC support
collections
directly to replace federal and state funding, or substituting
an
equivalent amount of county funds. However, New York provided only
a
general conceptual allegation that this occurred, not actual
documentary
evidence of any such disposition.
The point when the State effectively credited the federal government
with
the federal share of IV-D collections must be established by
evidence of an
act which changes the character of the funds, such as the
issuance of IV-A
program warrants against the funds as in Utah, or by
documentation of an act
which similarly substitutes IV-D collections for
federal funds.
Settlement with the local counties is relevant only if
the State used
information obtained from the counties, for example, to
specifically reduce
the amount of federal funds drawn under the State's
letter of credit, as
shown by documentation of actual amounts and the
relationship of those
amounts to IV-D collections. Settlement with the
federal government
would occur when the IV-D funds actually (not
theoretically) are substituted
for federal grant funds or otherwise used
to reduce the drawdown of federal
funds. After that date, we agree that
the State should not be held
liable for the interest at issue here,
since the underlying principal would
have been effectively distributed.
In this case, the State has not provided any hard evidence of any
act
changing the character of the IV-D funds, such as the issuance of
IV-A
program warrants against the IV-D account in Utah or as discussed
above.
Nor has the State met its burden of establishing that IV-D funds
were
credited to the federal government by substitution for federal
grant
funds which would otherwise be drawn under the State's letter of
credit.
The State is free to commingle program funds and use any
accounting
system which will meet the
- 13 -
reporting requirements established in the Act and regulations.
The
State, however, must accept the burden of ensuring that its
accounting
system provides adequate information and accounts for liabilities
such
as program income. Here, the State simply provided no
substantial
documentary evidence to support its arguments.
However, we conclude that New York ought to have one last,
limited
opportunity to make the showing required above. It is not easy
to apply
section 455(a) of the Act in the accounting context here. New
York's
accounting system is complex, involving considerable financial
activity
related to the intricacies and interactions of the IV-A and the
IV-D
programs at both state and county levels. The issue of when
interest
ceases to be earned has only been developed recently by the
Agency. New
York fairly may not have understood its burden or the need
for more
detail to justify its position.
Within 15 days from receipt of this decision, the State must submit
a
statement of whether it has additional information to submit, and
a
description of that information. Thereafter, the State will have
30
days to submit this information to the Agency (or such longer period
as
the Agency determines appropriate). If the State cannot
produce
satisfactory information to justify an earlier date, we find that
the
Agency properly used the end of the quarter as the date when the
federal
government was credited with the principal sums at issue, and
properly
calculated the amount of interest.
In sum, we uphold the Agency's calculation with respect to the
disputed
interest income, subject to reduction if the State can submit
evidence
that the principal sums were actually credited to the federal
government
before the end of the quarter and that, therefore, no
interest
attributable to the IV-D program was earned thereafter.
d. Interest questioned on other grounds.
In its reply brief, New York argued briefly that part of the
disallowance
should be overturned because it was attributable to
counties in which
interest allegedly was not actually earned. Reply
Brief, p. 11.
The State did not develop any issue concerning the
Agency's methodology in
calculating these amounts; rather, the State
merely presented a telephone
survey conducted of certain county IV-D
coordinators which the State said
showed no interest was earned. We
find this evidence
questionable. The survey would have been more
credible if it had
involved treasury or finance officials, since
interest deposited in a general
fund likely would earn interest even if
none was credited to the IV-D program
per se. In any event, since the
State now - 14 -
has an opportunity to present evidence concerning the actual amounts
of
interest earned, the State will have a chance to make a more
definitive
showing on this matter, if it can.
Conclusion
We conclude by upholding the disallowance for training costs in the
amount
of $77,756. We also uphold the disallowance for interest income
in the
amount of $961,607, subject to reduction if the State provides
evidence,
consistent with the principles outlined in this decision, that
a lesser
amount of interest was actually earned. This evidence must be
provided
to the Agency in accordance with the schedule set out above.
________________________________ Judith A. Ballard
________________________________ Cecilia Sparks Ford
________________________________ Norval D. (John)
Settle
Presiding Board