Assessment of Interest on Disallowed Claims for Federal Financial Participation
April 4, 1988
Subj: Assessment of Interest on Disallowed Claims for Federal Financial Participation
April 4, 1988
TO:STATE AGENCIES ADMINISTERING CHILD SUPPORT ENFORCEMENT PLANS APPROVED UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER INTERESTED ORGANIZATIONS, AGENCIES AND INDIVIDUALS.
SUBJECT:Assessment of Interest on Disallowed Claims for Federal Financial Participation
REFERENCES:45 CFR Part 30 (30.13 and 30.14)
APPLICABILITY:Title IV-D of the Social Security Act
EFFECTIVE:Immediately upon issuance of this AT
PURPOSE:To alert States that in accordance with requirements at 45 CFR 30.13 and 30.14 the Office of Child Support Enforcement (OCSE) will now charge interest on disallowed paid claims for which the State has received Federal financial participation (FFP); specify procedures for collection and assessment; and explain how OCSE will charge interest on disallowed paid claims under title IV-D.
BACKGROUND:On a quarterly basis each State requests from OCSE the amount the State estimates will be the FFP for the following fiscal quarter. OCSE advances the funds by awarding a grant. After the end of the quarter, the State sends in a quarterly expenditure report that shows actual expenditures. In determining whether the State has erroneously requested FFP on any of its claims, OCSE conducts a review of the State's quarterly expenditure report. If the review verifies that the State has erroneously requested FFP on any of its claims, OCSE issues a notice of disallowance.
Disallowances of this nature usually result in an unpaid claim because the expenditures disallowed are subtracted from the total expenditures claimedbefore the expenditure report is matched against its corresponding quarterly estimate.
A paid claim is one that occurs after a Quarterly Statement of Expenditures (OCSE-41) is matched against the Quarterly Estimate of Expenditures (OCSE-65) for the same quarter. It is the matching of expenditures against the corresponding estimate that results in a claim being paid as provided for in section 455 (b)(2) of the Act which says, "reduced or increased to the extent of any overpayment or underpayment which the Secretary determines was made under this section to such State for any prior quarter and with respect to which adjustment has not already been made under this subsection."
Disallowances of paid claims which are the ones interest will be assessed against occur from, but are not limited to special reviews and audits.
Until now, States appealing a disallowance under 45 CFR Part 16 could retain any disputed FFP, which had been paid to the State, interest-free pending resolution of the dispute.
On January 5, 1987 the Department issued a final rule amending regulations at 45 CFR part 30 to implement the requirements of the Debt Collection Act (DCA) of 1982 (P.L. 97-365) and the revised requirements contained in the Federal Claims Collection Standards (FCCS) issued jointly by the General Accounting Office and the Department of Justice at 4 CFR Parts 101 - 105. Provisions at 45 CFR 30.13 and 30.14 require the application of interest to debts owed to the States.
On the same date, OCSE issued revised regulations removing paragraph (b)(8) at 45 CFR 304.40 which had provided that interest would not be charged on repayments to the Federal government.
Effective for disallowances issued after the effective date of this AT, a State that chooses to retain disallowed FFP on paid claims while the State contests the disallowance by requesting review through the administrative appeals process will be assessed interest on retained funds that are finally determined to be unallowable.
SCOPE:This AT does not apply to:
(1) Claims that have been deferred until a notice of disallowance is issued;
(2) Claims for expenditures that have been reported on the OCSE-41 and disallowed resulting in the total expenditures being reduced before the OSCE-41 report is matched or settled against the OCSE-65 for the same quarter; or
(3) Disallowances which were actually issued before the effective date of this AT. This means that the disallowance decision was issued in accordance with the provisions of 45 CFR 74.304.
INSTRUCTION:OCSE will charge a State interest on FFP of disallowed paid amounts when
(1) OCSE has notified the State under 45 CFR 74.304 that a claim for FPP that has already been paid is not allowable;
(2) the State has requested review of the disallowance through the administrative appeals process which includes a request for review of the disallowance by the Director, OCSE and/or an appeal to the Departmental Grant Appeals Board (the Board) under 45 CFR Part 16 and has elected to retain the FFP during the administrative appeals process; and
(3) The final administrative determination is made upholding part or all of the disallowance; or the State has withdrawn its appeal on all or part of the amount in dispute; or the State has reversed its decision to retain the funds without withdrawing its appeal and the Director or the Board upholds all or part of the disallowance.
If a Federal court overturns, in whole or in part, a Board decision that sustained a disallowance, OSCE will return the principal and any interest collected on that part of the claim which was disallowed, and overturned by the courts, upon completion of all judicial appeals.
Any decision to retain or return disallowed funds must apply to the entire amount in dispute, unless a State decides to withdraw its appeal on part of the disallowance and returns that part of the funds on which it has withdrawn its appeal.
PROCEDURES:When a disallowance is issued on a paid claim, it becomes a debt and States, at their option, may either (1) pay the debt or (2) be liable for interest on the uncollected debt while a formal or informal review of the debt is pending.
If the State elects to pay the debt, it can do so by (a) issuing a check to OCSE in satisfaction of the debt; or (b) reporting a decreasing (negative) adjustment in its Quarterly Statement of Expenditures (OCSE-41); or (c) having OCSE issue a decreasing (negative) adjustment on a grant award issued to the State.
If the State elects to have OCSE offset the disputed amount, it may not reverse that election.
If a State has appealed a disallowance and wishes to retain the disallowed funds until all administrative appeals are exhausted, the State must notify the OCSE Director in writing of its decision.
The State must mail its decision to the OCSE Director within 30 days after the date of the notice of disallowance. If the State withdraws either its decision to retain the FFP or its appeal on all or part of the FFP or both, the State must notify OCSE in writing. OCSE will issue a grant award reduction to recover the funds within 15 days after the expiration of the State's allowed response time.
CHARGE:Interest will begin to accrue from the date of notification of disallowance to the State. However, interest shall not be charged if the debt is paid within 30 days after the date of notification. Determination of the interest charge will be in accordance with the provisions of 45 CFR Part 30. Once assessed, the rate of interest will remain fixed for the duration of the indebtedness.
Therefore, if the State chooses to retain funds for disallowed paid claims while awaiting a final administrative determination and that determination shows that any amount was properly disallowed, OCSE will issue a grant award reduction to the State within 15 days after the date of the final determination for the amount of the disallowance specified in the final determination, plus any interest on that amount. Further, if the State chooses to retain funds for disallowed FFP and later withdraws its appeal on part or all of the claim, interest will be charged on that portion of the claim that has been retained by the State through the date OCSE receives written notice from the State of theamount of the claim for which it is withdrawing its appeal.
The interest charge on the amount of disallowed FFP retained by the State will begin on the date of notification of the disallowance and end on the date OCSE receives written notice from the State that it is withdrawing its appeal on all of the funds, or that it no longer chooses to retain the funds. Interest will end on the date of a final determination on the part for which the State notifies OCSE in writing that it no longer chooses to retain the funds.
If the State withdraws its appeal on part of the funds, interest will end on the date OCSE receives written notices from the State that it is withdrawing its appeal. Interest will end on the date of a final determination on the part for which the State pursues its appeal, or on the date the State notifies OCSE in writing that it no longer chooses to retain the funds.
ADMIN. COSTS:Unless authorized by statute, regulations or written agreements, administrative costs and late payment penalties will be assessed in accordance with the provisions of 45 CFR Part 30.
WAIVERS:The Secretary may waive collecting all or part of interest, administrative costs or late payment penalties, if:
(1) the debt or the charges resulted form the agency's error, action or inaction (other than normal processing delays) and without fault on the part of the debtor; or
(2) collection in any manner authorized would defeat the overall objectives of the program.
INQUIRIES TO:All inquiries should be directed to the OCSE Regional Representatives.
Wayne A. Stanton