Ì .ÌÌ..Ì DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Maryland Department of Human Resources
Docket No. 87©103
Decision No. 896
DATE: September 3, 1987
Ã
The Maryland Department of Human Resources (State) appealed
afinal
decision of the Family Support Administration
(Agency)disallowing
$38,668 in federal financial participation (FFP)claimed
by the State
under Title IV©A of the Social Security Act(Aid to Families
with
Dependent Children). The disallowancerepresents the difference
between
reimbursement at 75 percent FFPclaimed by the State for
training
expenses, rather than the 50percent level that the Agency contended
was
appropriate. Thetraining classes were conducted before October 1,
1981,
theeffective date of section 2319 of the Omnibus
BudgetReconciliation
Act (OBRA), Pub. L. 97©35, which reduced FFP fortraining
to 50%, but
were not paid for until after that date.
As we discuss below, we find that the statute an# the
regulationsclearly
support the disallowance and, consequently, we uphold
it.
”Background•
The facts in this case are undisputed. The State contracted
withfour
public educational institutions to conduct training for
itsAFDC
employees at a time when the rate of FFP for such activitieswas
75
percent. The training was conducted sometime beforeOctober 1,
1981.
Th# State has asserted that it was billed forthe training and paid
those
bills #in the ordinary course" afterSeptember 30, 1981. Appeal
brief at
5. ”1•/ It filed a claim forreimbursement for training expenses at
75
percent FFP. TheAgency held that the applicable rate was 50
percent,
because theexpenditures at issue had been made during the
quarter
endingDecember 31, 1981, wh#n the bills were paid. Since
OBRA
section2319 stated that it
”
•
The State did not specify whether it received any of
thebills
prior to September 30, 1981, since the parties relied
oneither
the date the services were rendered (State) or the
datepayment
was made (Agency). As noted below, the State failed
toestablish
that the costs were allocated in accordance
withapplicable
regulations to a quarter prior to that ending onDecember
31,
1981.
applied to "expenditures made after September 30, 1981,"
andAgency
regulations at 45 CFR 95.13(d) provide that an expenditureis made
when
the provider is paid or in the quarter when thecosts were allocated
in
accordance with the applicableÜj
In its appeal brief, the State contended that the
Agency'sinterpretation
of the statute was not supported by its languageor
legislative history
and, moreover, was contrary to the wellªestablished rule
that statutes
affecting substantial rights andliabilities are presumed to
have only
prospective effect. TheState claimed that since it had the
expectation
at the time thatit contracted for the training that it would
be
reimbursed at the75% FFP rate, it had a vested right to that rate.
In
support ofits position that retrospective application of a
statute
isillegal when a party is unduly burdened, the State cited
severalcourt
cases and Board decisions.
In addition, the State contended that 45 CFR 95.13(d) does notapply to
the
facts of this case because that provision appliesonly to payments
made to a
private agency or individual, and allof the educational
institutions which
provided the AFDC trainingwere indisputably public
institutions. The
State maintained thatthese entities were included in
the definition of State
agencyfound at 45 CFR 95.4. The State also
contended that Agency
andBoard precedent supported the State's position
that anexpenditure was made
when services were rendered, not when
thebill was paid.
”#nalysis•
The question in this case is not whether FFP is available for
theState's
training costs, but rather what percentage of the costscan
be
reimbursed. The precise language used by Congress in OBRAsection
2319
is: "The repeals made by this section shall applyto
#####”ditures•
”made• ”after• ”September• ”30•, ”1981•." (Emphas#s
added.)Prior to the
passage of OBRA, AFDC training costs werereimbursable at
75% under
section 403(a)(3)(A) of the Act. Withthe passage of OBRA
federal
participation was reduced to the 50%provided generally
for
administrative expenses under section403(a)(3)(C). Since the
amendment
was in the nature of a repeal,the Agency was without authority to
pay
more than that reducedrate for expenditures made after the
statute's
effective date.
Thus, the central issue in this case is whether an expenditure ismade
on
the date of payment or when services are rendered. TheState
contended
that the statutory language is unclear because itdid not
explicitly
state that it applied to training servicesrendered before
September 30,
1981, and the State spentconsiderable energy arguing that the
Agency's
interpreta¬tionimposed an illegal retroactive penalty. We find
that the
statuteis not retrospective in effect and that, moreover,
the
term"expenditure" had a clearly defined regulatory meaning in
thecontext
of the programs affected by the statute when it wasÜj
A. The Statute Is Not Retrospective in Effect
The State contended that the Agency's interpretation of thestatute
imposed
an illegal retroactive penalty. It argued thatno justification
existed
for departing "from the well©establishedrule of statutory
interpretation that
statutes affectingsubstantial rights and liabilities
are presumed to have
onlyprospective effect." State brief, p. 5. The
State cited insupport
two recent Supreme Court cases, ”Bennett v. New
Jersey•,470 U.S. 632 (1985),
and ”United States v. •########©©©Bank,
459U.S. 70 (1982), as well as ”Coe v.
Secretary of HEW•, 502 F.2d
1337(4th Cir. 1974).
None of the cases cited by the State are relevant here since
theissue
before us is not about the general rule for applyinglegislation
only
prospectively, but whether the rule applies atall in the case before
us.
The statute here does not evenpurport to be retrospective
in
application. The statute wasenacted on August 13, 1981, and
applied
only to expendituresafter September 30 of that year. It
therefore
applied onlyprospectively, ”i.e.•, to expenditures made after
its
enactment. Only if it attempted to apply to expenditures made
before
itsenactment would it be retrospective in effect. ”2•/
This was pointed out by the Board in New York State Department
ofSocial
Services, No. 521 (1984), which was also relied upon bythe
State. The
Board there said that the timely claims filingstatute, which
was not
retro¬active in effect, was entirelydifferent from "a law which
when
enacted has the effect ofbarring any claim for expenditures before
its
passage." ”New• ”York•,p. 12. So here the statute does not preclude
75%
FFP for any
”
•
2/ The State did not offer any evidence to show that it #ould nothave
paid
for the services before October 1.
expenditures made before its passage. The question is
whetherthe
expenditure was made before or after the effective date ofthe
statute,
or stated simply, the only question is when theexpenditure was
made.
This is not dependent on the language ofthe statute, which is
perfectly
clear on its face.
Moreover, if we were to accept the State's argument that it had
avested
right to reimbursement at 75%, then the timing ofstatutory changes
in
FFP levels would be controlled by Statecontracts for services;
the
Agency would be denied "fixed,predictable standards for determining
if
expenditures are proper"that the Supreme Court cited as an
important
policy considerationin ”Bennett•, 470 U.S. at 637, both in cases
where
the level wasincreased as well as decreased. As the Agency noted
in
itsbrief, the State may always protect itself from funding
cutbacksby
using contractual clauses to make its agreements contingentÜj
B.Ì .ÌThe Regulations Define When the State's Expenditure OccurredÞ.JÞ
On January 15, 1981, well before the passage of OBRA,
the
Agencypromulgated the regulations that include the provision
that
theAgency applied here, 45 CFR 95.13(d). ”See• 46 Fed. Reg.
3529(1981).
_3/ That section states:
Ì .ÌWe consider a State agency's expenditure for administrationor
training
under title . . . IV©A . . . to have been madein the quarter
payment was made
by a State agency ”to aprivate agency or• ”individual•;
or in the quarter to
which thecosts were allocated in accordance with
the regulations foreach
program. (emphasis added).Þ.JÞ ”
•
3/ Subpart A of 45 CFR Part 95, entitled "Time Limits for #tatesto
File
Claims," was adopted to implement section 1132 of theAct, which
was
added in 1980 by section 306 of Pub. L. 96©272. This regulation was
not
promulgated for the purpose ofimplementing the statute before us.
We
believe it is pertinent,however, because it gives a definition of
when
an expenditure ismade under the various public assistance
programs.
Even withoutthis provision, the ordinary everyday meaning of
the
word"expend" is to pay out. ”See• Hawaii Department of
SocialServices,
No. 779 (1986); ”see• ”also• Florida Department of
Healthand
Rehabilitative Services, No. 884 (1987) (citing ”Hawaii•).
The State argued that this provision was inapplicable in thiscase
because
the payments were made to public educationalinstitutions rather
than a
private agency or individual, and thatthese institutions came
under the
definition of "State agency" atsection 95.4 of these
regulations. That
section states:
Ì .Ì”State• ”agency• for the purposes of expenditures
for
financialassistance under title IV©A . . . means any
agency
ororganization of the State or local government which isauthorized
to
incur matchable expenses. . . 45 CFR 95.4.Þ.JÞ
The Agency contended that the definition of "State agency" insection
95.4
was inapplicable here because the expendituresinvolved were for
training, not
financial assistance under titleIV©A, and because the
schools involved acted
as private entitieswho contracted to provide
training for the State.
The Statecountered that
Ì .Ì[T]he Agency cannot seriously argue that reimbursableexpenses
under
Title IV©A are limited to claims forproviding financial assistance . .
.
nor does the Agencycite any authority for its argument that
those
publicinstitutions were not "authorized to incur
matchableexpenses"
under section 95.4." Reply brief at 3.Þ.JÞ Üj
We agree with the Agency, however, that these schools were
actingas
private agencies. The Agency's contention concerning
theapplicability
of the section 95.4 definition of "State agency"was not that
Title IV©A
precluded reimbursement for trainingexpenses, but rather that
"financial
assistance under title IV©A"means monetary assistance provided to
an
individual, notassistance provided to a State agency for
administration
ortraining needs. Indeed, FFP for financial assistance
is governedby a
different section of the AFDC regulations, 45 CFR
234.120,from that
covering FFP for training expenditures, 45 CFR 235.64. On
this basis
alone it is clear that the definition of "Stateagency" does not
preclude
the application of this definition ofexpenditure.
Furthermore, we agree with the Agency that the record in
thiscase
indicated that these educational institutions did not fitthe
section
95.4 definition of State agency. The State arguedthat the
Agency had
not cited any authority for its argument thatthese public
institutions
were not "authorized to incur matchableexpenses." The State did
not
supply any evidence apart from itsown unsupported statement that
the
institutions were soauthorized. Thus, we agree with the Agency that
the
record inthis case indicates that these schools acted as
private
entitiesin contracting with the State to provide training
services;
the"matchable expenses" created by the training activities
wereincurred
by the State agency under its contract with theseinstitutions
rather
than by the institutions on their ownauthority.
In addition, the State argued that the Agency's position here(that
the
State incurred expenditures for services by thesepublic
institutions
only when it paid for them) was inconsistentwith its previous
arguments
to the Board "that publicly operatedÜj
Leaving aside the fact that the Agency's argument was never ruledon
#/,
the cited brief does not say what the
”
•
4/ The Board found it unnecessary to reach this issue in
#tsDecision.
”See• Colorado Department of Social Services, No. 602(1984).
State says it does. The Agency sums up its argument in No. 83ª217 on
p.
6 of its brief, concluding that for publicly ownedfacilities,
"the
operative date is the date that the ”facility•made the
expenditure,"
(emphasis in original) rather than thedate the State Medicaid
agency
reimbursed the facility. Herethere is no contention that
the
State©owned facilities (theschools) made ####n#####”es• at any
time.
The only expenditu#es atissue are t#ose when the State paid the
schools,
which was afterSeptember 30.
Based on the foregoing, we conclude that the Agency was correctin
applying
the regulation specifying when an expenditure takesplace to the
transactions
in the present case. 5/ That regulationwas in place on
August 13, 1981, when
O#RA was passed.
”Conclusion•
Based on the foregoing, the Agency's disallowance is upheld.
”
•
Donald
©#. Garrett
Ì .ÌÌ..ÌÌ..ÌÌ..ÌÌ.#Ì” #####
/
• Norval D.#;ohn)
SettleÞ#JÞ ” • ”.
## •
”
#,#..
#.######©
•
Presiding Board Membe###
”
• Üj .Ì5/ The State also cited two Board
decisions in support of#ts
contention that its expenditure took place
prior toOctober 1, 1981:
Michigan Department of Social Services,No. 352
(1982), and Economic
Opportunity PlanningAssociation of Greater Toledo,
No. 579 (1984).
Although weindicated that in the unusual circumstances
in both casesfunds
need not necessarily be paid out for an expenditure
totake place, in neither
case was the ”date• of the
expenditurediscussed.Þ.JÞ