Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Alabama Department of Human Resources
Docket No. 90-184
Decision No. 1220
DATE: January 25, 1991
DECISION
The Alabama Department of Human Resources (Alabama or State) appealed
a
determination of the Office of Child Support Enforcement (OCSE
or
Agency) to disallow federal financial participation in the amount
of
$67,543 claimed under title IV-D of the Social Security Act (Act).
The
State's claim was for county indirect costs for fiscal years
1984
through 1987. The claim was disallowed because it was not filed
within
the two-year period required by statute and regulations.
We agree with the Agency that the claim was untimely, and we
therefore
uphold the disallowance in the amount of $67,543.
Background
The record reflects that since 1976, the State had entered
into
cooperative agreements with Mobile County to provide title IV-D
child
support enforcement services. Beginning in October 1985, Mobile
County
sought reimbursement from the State for indirect costs (salaries
and
wages) charged to Mobile County's child support enforcement
program.
State's Brief (Br.), p. 2; State's Exhibit (Ex.) 1, p. 1.
However, because of a dispute over the allocation of costs between
title
IV-D and non-title IV-D activities within Mobile County's program,
the
State refused until 1989 to reimburse Mobile County for any of
its
indirect costs. State's Br., p. 3; State's Ex. 1, p. 1.
Moreover, the
State did not seek federal funding for any of these indirect
costs
during this period of time. State's Br., pp. 2-4.
In November 1989, after resolving the dispute, the State issued payment
to
Mobile County for its title IV-D indirect costs incurred from fiscal
year
1984 through fiscal year 1987. Thereafter, the State sought
federal
participation in these costs by claiming them as prior quarter
expenditure
adjustments on its Quarterly Report of Expenditures and
Estimates filed on
February 15, 1990, and later revised March 1, 1990.
State's Exs. 6, 7.
The State's claim in the amount of $67,543 was
disallowed by the Regional
Administrator of the Family Support
Administration (FSA), because it was
untimely under 45 C.F.R. 95.7.
This disallowance was affirmed by the Director
of OCSE. See FSA
Regional Administrator's Letter dated March 5, 1990;
OCSE Director's
Letter dated August 8, 1990.
Applicable Statutory and Regulatory Provisions
Section 1132(a) of the Act prohibits the payment of federal funding
for
any expenditure that has not been claimed within two years after
the
calendar quarter in which the State made the expenditure, except
that
this subsection is not to be applied "so as to deny payment with
respect
to any expenditure involving court-ordered retroactive payments or
audit
exceptions, or adjustments to prior year costs."
The implementing regulations, found at 45 C.F.R. Part 95, Subpart
A
(1984), repeat the two-year limitation period in which states must
file
their claims, and list the exceptions to the time limits, including
"any
claim for an adjustment to prior year costs." 45 C.F.R. 95.19(a).
An
"adjustment to prior years costs" is defined as "an adjustment in
the
amount of a particular cost item that was previously claimed under
an
interim rate concept and for which it is later determined that the
cost
is greater or less than that originally claimed." 45 C.F.R.
95.4.
The regulations also define in which quarter an expenditure is
considered
to have been made. See 45 C.F.R. 95.7; 95.13. For a
state's
expenditures for services under title IV-D, the regulations provide
that
such expenditures are considered "to have been made in the quarter
in
which any State agency made a payment to the service provider."
45
C.F.R. 95.13(b).
For purposes of expenditures for support enforcement services under
title
IV-D, a "state agency," is defined as "any agency or organization
of the
State or local government which is authorized to incur
matchable
expenses." See 45 C.F.R. 95.4.
Also applicable are the regulatory provisions at 45 C.F.R. Part 304,
which
set forth the requirements for federal financial participation for
title IV-D
services. Specifically, 304.25(a) provides in part that:
Expenditures are considered to be made on the date on which
the
cash disbursements occur or the date to which allocated
in
accordance with Part 74 of this title. In the case of
local
administration, the date of disbursements by the local
agency
governs. In the case of purchase of services from another
public
agency, the date of disbursements by such other public
agency
governs.
(Emphasis added.)
Analysis
The State argued that its claim was filed within two years of the
quarter
in which the State made the expenditures and, therefore, was not
barred by 45
C.F.R. 95.7. State's Br., p. 7. The State's position was
that
Mobile County was the "service provider" within the meaning of 45
C.F.R.
95.13(b). Thus, according to the State, the claimed expenditures
were
not made and the two-year time period for filing its claims did not
begin to
run until November 1989, when Alabama reimbursed Mobile County
for its
costs. The State also cited New Jersey Dept. of Human Services,
DAB No.
1016 (1989), in arguing that the expenditures were not made by
the State
until the accounting transactions determining the amounts of
the expenditures
were entered. State's Br., p. 13.
The regulatory provision at 45 C.F.R. 95.13 does not support the
State's
position. A "state agency" for purposes of expenditures for
support
enforcement services under title IV-D means:
any agency or organization of the State or local
government
which is authorized to incur matchable expenses;
Thus, Mobile County is a "state agency" as defined in 45 C.F.R. 95.4.
The
regulation at 45 C.F.R. 95.13(b) would apply only if these payments
had been
made by Mobile County (a state agency) to a service provider.
It does not
apply to payments made by the State to Mobile County.
The State's reliance on New Jersey is also misplaced. Although
New
Jersey involved a determination of when an expenditure is made,
the
claims at issue were for Medicaid services provided by
public
residential treatment centers. The Board held that the
expenditures
were not "made" within the meaning of 45 C.F.R. 95.13(b), when
the
treatment centers paid their employees. The Board reasoned that
under
Medicaid, a state does not file for each item of cost incurred by
each
facility. Rather, the claim a state makes is an amount equal to
the
federal medical assistance percentage of the total amount expended
by
the State as medical assistance under the state plan, i.e., expended
for
the care and treatment of patients (Medicaid services). This is not
the
same as claiming the actual costs of each item used by the
facility. In
fact, as the Board noted, "many of the costs may not be
allowable costs
under the state Medicaid plan method for determining the
reimbursement
rate eligible for federal participation." New Jersey, p.
4.
Since the states provide for payment for services under Medicaid
through
the use of reimbursement rates determined in accordance with methods
and
standards developed by the states, the Board determined that a rate
of
reimbursement must be set before a state can submit a claim for
federal
funding for Medicaid services under title XIX. New Jersey, pp.
5-6.
Unlike New Jersey, Alabama's claim was for the actual costs of wages
and
salaries incurred by the Mobile County title IV-D program for
fiscal
years 1984 through 1987. The regulation at 45 C.F.R.
304.25(a)
specifically states that such expenditures are considered to have
been
made on the "date of disbursement." Since these expenditures were
made
from fiscal years 1984 through 1987 (dates of disbursement), yet
not
claimed by the State until February 1990, the State's claim was not
made
within the two-year filing period mandated by section 1132 of the
Act
and was, therefore, untimely.
Alabama argued, in the alternative, that its claim falls within
the
exception contained at 45 C.F.R. 95.19(a). This regulation
implements
one of the exceptions contained in section 1132 of the Act and
provides
that the time limit in 45 C.F.R. 95.7 does not apply to any claim
for an
"adjustment to prior year costs."
However, this is not a case where the State submitted earlier claims
for
indirect costs and then adjusted the amount. Nor is it a case in
which
the State simply overlooked these costs; rather, Alabama chose not
to
include these costs until it resolved its dispute with Mobile
County.
See South Carolina State Health and Human Services Finance
Commission,
DAB No. 943 (1988), aff'd, No. 88-1313-16 (D.S.C. July 17, 1989),
aff'd,
915 F.2d 129 (4th Cir. 1990). As already noted, the State's
claim was
for costs which had not been previously claimed on any basis.
State's
Br., p. 15. The State's claim, therefore, cannot be considered
as an
adjustment to prior year costs, since this term is defined as
"an
adjustment in the amount of a particular cost item that was
previously
claimed . . . . . " 45 C.F.R. 95.4.
Finally, the State argued that the Agency's disallowance was "imposed
on
technical grounds rather than grounds of substance." State's
Br., p.
18. The State cited a number of Board decisions in arguing that
we
should reverse this disallowance.
The cases cited by Alabama do not support its position. Two of these
cases
were under Medicaid and involved an interpretation of a state
plan. 1/
The third case, Alabama Dept. of Human Resources, DAB No. 939
(1988),
involved an issue of prior Agency approval for costs under title
IV-A.
The Board upheld the disallowance in Alabama, but stayed the
effect of its
decision to allow the parties an opportunity to consider
whether retroactive
approval of the disputed costs was warranted.
Here, we are not dealing with the interpretation of a state
plan
provision, but instead, determining the applicability of a
federal
statute and implementing regulations. The timely claims
provision of
section 1132 of the Act is not a mere technicality, it is
a
congressional mandate. The Board has no authority to ignore
that
mandate, nor reverse a disallowance on general equitable grounds.
New
Jersey Dept. of Human Services, DAB No. 1142 (1990).
The purpose of the timely claims limitation is to prevent the states
from
coming in many years after expenditures are made, because such
delayed
claiming makes it difficult for the Department of Health and
Human Services
to plan its budget. The exceptions to the time
limitations were
intended to cover only extreme situations, where it
would be patently unfair
to a state to outlaw its claim merely because
of the passage of time.
New York State Dept. of Social Services, DAB
No. 521 (1984). That is
certainly not true in the present case; the
State here was well aware of the
county's claims throughout the timely
claims period.
Conclusion
Accordingly, we uphold the disallowance in the amount of $67,543.
___________________________
Judith A. Ballard
___________________________
Norval
D. (John) Settle
___________________________
Alexander
G. Teitz Presiding
Board Member
.1. Alabama
cited two cases under Medicaid, Kansas Dept. of
Social and
Rehabilitation Services, DAB No. 1026 (1989), and New Jersey Dept.
of
Human Resources, DAB No. 1090