Review of Legal and Administrative Costs Incurred by the New York State Department of Social Services and by the New York State Department of Law on Behalf of the New York State Department of Social Services

EXECUTIVE SUMMARY:

This report provides the results of our review of the legal and related administrative costs incurred by the New York State Department of Social Services (NYSDSS) and by the New York State Department of Law (NYSDOL) on behalf of NYSDSS. This review was requested by the Department of Health and Human Services (DHHS), Division of Cost Allocation (DCA). The primary objectives of our review were to determine if the legal and administrative costs allocated to Federal programs in the period April 1, 1990 through June 30, 1995 were reasonable, allocable and allowable. In addition, DCA requested we verify that New York State did not claim the legal and administrative costs relating to its December 20, 1994 training contract settlement agreement with the Department of Justice, the Office of Inspector General, and DCA.

In general, we found that the legal and administrative costs claimed for Federal reimbursement by NYSDSS in our audit period were allowable as claimed. Although we found that both NYSDSS' Bureau of Deferrals and NYSDOL's Affirmative Litigation Unit incurred costs which are unallowable for Federal reimbursement, we are not recommending any financial adjustments for costs claimed in our audit period as discussed in the Findings and Recommendations section of this report. However, we are recommending that NYSDSS refund $1,334,849 ($593,174 Federal share) for claimed costs which related to a Memorandum of Understanding (MOU) between NYSDSS and NYSDOL. In our opinion, NYSDSS' claiming of the MOU costs circumvented a prior agreement between DCA and NYSDOL and also was contrary to the cost principles contained in Office of Management and Budget Circular No. A-87. We further found that the MOU costs included expenses which are not eligible for Federal financial participation. Our recommended adjustment is discussed in more detail in the Findings and Recommendations section.

Lastly, we found that NYSDSS had properly adjusted its Central Office Cost Allocation Claim (COCAC) for the legal and administrative costs which related to the December 20, 1994 settlement agreement.

We are recommending that the NYSDSS refund $1,334,849 ($593,174 Federal share), and that NYSDSS calculate and refund legal and administrative costs claimed under the MOU for the period subsequent to our review.

The State did not concur with our recommendation to refund $593,174 to the Federal Government for improper claims identified under the MOU for the period April 1, 1993 to June 30, 1995. Also, the State did not comment on the report’s recommendation that NYSDSS calculate and refund legal and administrative costs claimed under the MOU for the period subsequent to our review.