SMDL #01-020  
July 3, 2001 
Dear State Medicaid Directors and State Health Officials: 
This letter is to inform you of our policy regarding timely filing of claims at amended 
Federal matching rates under the Medicaid and State Children's Health Insurance 
(SCHIP) programs in light of various Departmental Appeals Board (DAB) decisions 
and questions on this issue. This situation arises when a State timely files a claim for 
Federal financial participation (FFP) at one matching rate (e.g., Federal medical 
assistance percentage), and much later decides that all or a portion of that claim 
could have been claimed appropriately at a higher rate (e.g., the 90 percent family 
planning matching rate). The State files a claim for the higher match rate beyond the 
2-year timely claims filing limits in Section 1132 of the Social Security Act and the 
implementing regulations at 45 CFR, Part 95, Subpart A. The Departmental Appeals 
Board (DAB) ruled in Decision 1655 (enclosed) that this second claim "constituted a 
new and separate request for FFP," and concluded that the second claim would not 
be considered timely filed and therefore is unallowable. 
Since the DAB is the final administrative decision body of the Department and is 
interpreting for the Secretary Section 1132 of the Social Security Act and the 
implementing Departmental regulations at 45 CFR, Part 95, Subpart A, the DAB 
decision is applicable to the Medicaid and SCHIP programs. Therefore, when a State 
files a claim timely at one Federal matching rate and later determines that it could 
have claimed a higher Federal matching rate, any new claim at the higher rate must 
itself be filed timely under the law and regulations (unless it meets one of the timely 
claims filing exceptions specified in 45 CFR 95.19). If the new claim is not timely 
filed and is not within a specified exception, it is unallowable. Note that such a claim 
does not constitute an adjustment to prior year costs as defined in the timely claim 
filing regulation. This policy is applicable to all claims filed on or after the date of this 
letter. 
If you have any questions please contact your Regional Office. 
Sincerely, 
/s/ 
Penny R. Thompson 
Acting Director 
Enclosure
cc: 
CMS Regional Administrators 
CMS Associate Regional Administrators 
for Medicaid and State Operations  Lee Partridge 
Director, Health Policy Unit 
American Public Human Services Association 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
Matt Salo 
Director of Health Legislation 
National Governors' Association 
Brent Ewig 
Association of State and Territorial Health Officials 
  Department of Health and Human Services 
DEPARTMENTAL APPEALS BOARD 
Appellate Division 
SUBJECT: New Jersey Department of Human Services  DATE: April 20, 1998 
Docket No. A-98-3 
Decision No. 1655 
DECISION 
The New Jersey Department of Human Services (New Jersey) appealed a 
determination by the Administration for Children and Families (ACF) disallowing 
$260,450 in federal financial participation (FFP) claimed by New Jersey under title 
IV-D of the Social Security Act (Act). The funds at issue represent the difference 
between the federal share of automated child support enforcement systems (ACSES) 
costs at the 66% rate of FFP and at an enhanced 90% rate. ACF based the 
disallowance on the ground that New Jersey did not submit the request for the 
enhanced FFP rate within the two-year time limit in 45 C.F.R.  95.7, implementing 
section 1132 of the Act. 
Based on the following analysis, we find that New Jerseys request for the enhanced 
FFP rate was a claim that was not filed within the two-year period required by statute 
and did not meet any of the prescribed exceptions to the two-year limitation. 
Therefore, we sustain this disallowance in full. 
Statutory and Regulatory Background 
Section 1132(a) of the Act and 45 C.F.R.  95.7 prohibit the payment of FFP for any 
expenditure for which no claim has been filed within two years of the end of the 
calendar quarter in which the expenditure was incurred.  The language of the statute 
reads: 
[A]ny claim by a State for payment with respect to an expenditure made 
during any calendar quarter by the State -- (1) in carrying out a State plan 
approved under title . . . IV . . . of this Act . . . * * * shall be filed (in such 
form and manner as the Secretary shall by regulations prescribe) within the 
two-year period which begins on the first day of the calendar quarter 
immediately following such calendar quarter; and payment shall not be made 
under this Act on account of any such expenditure if the claim therefor is not 
made within such two-year period. . . .  2

Tracking the statutes language, 45 C.F.R.  95.7 reads: [W]e will pay a State for a 
State agency expenditure . . . only if the State files a claim with us for that 
expenditure within 2 years after the calendar quarter in which the State agency made 
the expenditure. In enacting the two-year filing limitation, Congress addressed the 
Department of Health and Human Services need to plan and administer effectively 
the budgets for Social Security Act programs by controlling states ability to make 
delayed claims.  See Connecticut v. Schweiker, 684 F.2d 979, 982 (D.C. Cir. 1982), 
cert. denied, 459 U.S. 1207 (1983); see also New York State Dept. Of Social 
Services, DAB No. 521 (1984). 
Section 1132 of the Act and 45 C.F.R.  95.19 provide several exceptions to the two-
year limit for filing claims. The exceptions include: claims for adjustments to prior 
year costs; claims resulting from audit exceptions or from court-ordered retroactive 
payments; and any claim for which the Secretary of the Department of Health and 
Human Services decides there was good cause for the late filing. 
Definitions relating to the filing limitation are set forth at 45 C.F.R.  95.4. The 
regulation defines the term claim as a request for Federal financial participation in 
the manner and format required by our program regulations, and instructions or 
directives issued thereunder.  Federal financial participation in turn is defined as 
the Federal governments share of an expenditure made by a State agency under 
any of the programs listed in  95.1. 
The costs at issue in this case were claimed under the Child Support and 
Establishment of Paternity Program established under title IV-D of the Act (42 
U.S.C.  651-669; sections 451-469 of the Act). The title IV-D program is a 
cooperative federal-state program that was enacted for the purposes of:  locating 
absent parents; enforcing their support obligations; establishing paternity; obtaining 
child and spousal support; and assuring that assistance in obtaining support be 
available to all children for whom such assistance is requested.  See section 451 of 
the Act. The program is administered by the Office of Child Support Enforcement in 
ACF. 
In order to receive grant funding in the form of FFP, a state must operate its title IV-
D program in accordance with a federally approved state plan and applicable federal 
regulations. During the period in which the expenditures at issue were incurred, 
sections 452, 454 and 455 of the Act and 45 C.F.R. Part 307 set forth requirements 
for statewide automated data processing and information retrieval systems to carry 
out a states child support enforcement plan. Computerized support enforcement 
systems were to be designed to [c]ontrol, account for, and monitor all the factors in 
the support collection and paternity determination processes under the State plan. 
45 C.F.R.  307.10(b).  Further, the regulations provided for the availability of FFP 
at the 90% rate for hardware and proprietary software costs for states that maintained 
an approved computerized support enforcement system. 45 C.F.R.  307.30(b).  3

The procedures for filing claims under title IV-D are set forth in the grant 
administration regulations at 45 C.F.R. Part 95 and in program guidelines. 
Factual Background 
The New Jersey Division of Family Development (DFD) of the Department of 
Human Services administers and supervises New Jerseys title IV-D Child Support 
Enforcement Program. The DFD developed and operates New Jerseys ACSES. On 
March 1, 1995, the DFD filed a quarterly report of expenditures and estimates (QER) 
(OCSE-131) for the quarter ending September 30, 1994.  Notwithstanding prior 
notification from ACF that its ACSES operational costs could be claimed at an 
enhanced rate,1 New Jersey claimed its ACSES hardware and proprietary software 
operating costs as a current expenditure, included in line 7 of the report, Other ADP 
Expenditures (at the regular FFP rate). Similarly, New Jersey included the ACSES 
hardware and proprietary software costs for the quarters ending December 31, 1994 
and March 31, 1995 on line 7 of the QERs dated April 26, 1995 and August 10, 
1995, respectively. Accordingly, in each instance, New Jersey specifically claimed, 
through its QER filings, FFP at the regular 66% rate and was paid at that rate. 
The 1995 federal fiscal year costs had originally been determined through use of 
billing rates based on budgeted expenses, but were subsequently recalculated using 
actual expenditures for the year. Based on the recalculations, New Jersey submitted 
an adjustment of the gross expenditures for the ACSES costs for the three quarters at 
issue on line 7 of the revised QER for the quarter ended June 30, 1996, which was 
dated December 16, 1996. While the revised QER was filed more than two years 
after the end of the September 30, 1994 quarter in which the expenditures were 
made, the claim was allowed under the adjustment to prior year costs exception to 
the two-year filing requirement. In the revised filing, New Jersey again specifically 
claimed FFP for the ACSES costs at the regular, 66% rate. 
Thereafter, New Jersey determined what portions of the gross costs reflected in the 
earlier QERs represented expenditures for ACSES hardware and proprietary software 
that were eligible for the enhanced, 90% FFP rate. In its QER for the quarter ending 
December 31, 1996, dated May 28, 1997, New Jersey submitted adjustments to the 
prior quarters to reflect the enhanced FFP rate for the ACSES 
1
 As discussed more fully in the analysis section of this decision, ACF 
informed New Jersey by letter dated October 4, 1994, that the ACSES had achieved 
conditional certification and that the systems operational costs could be claimed at 
the enhanced FFP rate effective July 1, 1994 until October 1, 1995.  4

costs. These adjustments resulted in a net increase in FFP sought of $260,450 for the 
three quarters at issue. The specific amounts of the claims are shown below: 
Quarter Ended  FFP at 66%  FFP at 90%  Difference in 
FFP Sought 
9/30/94  $267,166  $364,317  $97,151 
12/31/94  $219,576  $299,422  $79,846 
3/31/95  $229,497  $312,950  $83,453 
TOTAL  $716,239  $976,689  $260,450 
Issues 
As discussed above, under section 1132 of the Act and 45 C.F.R.  95.7, claims for 
FFP for expenditures must be filed within two years of the end of the calendar 
quarter in which the expenditures were incurred. The expenditures for which New 
Jersey claimed the enhanced FFP rate were incurred during the quarters ending 
September 30, 1994, December 31, 1994, and March 31, 1995. Therefore, the latest 
dates for claiming FFP for those expenditures would have been September 30, 1996, 
December 31, 1996, and March 31, 1997, respectively. 
New Jersey did not rely on any of the exceptions to the two-year filing limitation in 
section 1132 of the Act and 45 C.F.R.  95.19 to support its appeal. 2  Rather, New 
Jersey submitted that the May 28, 1997 request for the enhanced FFP rate merely 
corrected the FFP rate in its previous, timely filed claims and did not add discrete 
cost items not found in the original claims. Accordingly, New Jersey posited, the 
May 28, 1997 claim was not a separate claim barred by the two-year filing 
2
 New Jersey stated in its October 3, 1997 notice of appeal that it was 
entitled to receive the enhanced FFP based on the adjustment to prior year costs 
exception to the two-year filing limitation. New Jersey did not pursue this contention 
in its initial brief, and explicitly stated in its reply brief that it did not argue that its 
claim should be allowed based on the exception. Under 45 C.F.R.  95.4, an 
adjustment to prior year 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. In light of the regulatory definition of adjustment to prior year costs, 
the exception would not apply in this case because the enhanced FFP claims were not 
based on adjustments to the amount of the cost. See, e.g., New Jersey Dept. Of 
Human Services, DAB No. 1562 (1996).  5

limitation, but a corrective claim.  In support of its argument, New Jersey 
principally relied on language found in California Dept. Of Health Services, DAB 
No. 1472 (1994).  New Jersey submitted that that decision held that when a state files 
a timely claim for an expenditure and, after two years, requests additional funds 
based on a corrected rate of FFP for the same expenditure in the previous claim, the 
second submission is not time-barred. 
New Jersey also argued that in Maryland Dept. of Human Resources, DAB No. 483 
(1983), and Massachusetts Dept. Of Public Welfare, DAB No. 796 (1986), the Board 
distinguished claims involving adjustments of previously understated cost items, 
which a state may pursue beyond the two-year filing limitation (as in Maryland), 
from claims involving separate cost items, which are subject to the filing limitation 
(as in Massachusetts). New Jersey asserted that the distinction flows from the 
wording of 45 C.F.R.  95.7, which provides that the agency will pay a State for a 
State agency expenditure ... only if the State files a claim with us for that expenditure 
within 2 years after the calendar quarter in which the State agency made the 
expenditure. (Emphasis added.) New Jersey contended that because there was no 
increase in total expenditures submitted, but merely an increase in the amount of FFP 
sought, the filing limitation should not apply. Moreover, New Jersey submitted, 
ACFs position that the claims for enhanced FFP were untimely because the 
departmental forms on which the FFP correction request were stated was filed more 
than two years after the expenditures in question almost literally elevates form over 
substance. See New Jersey Reply Br. at 2. 
In addition, New Jersey wrote that the purpose of the two-year filing limitation 
would not be served by denying the claim in this case. The intent of the limitation 
was to prevent states from submitting expenditures many years after they were made 
or transferring claims from one federal program to another. New Jersey submitted 
that it neither claimed new expenditures many years after they were incurred nor 
transferred claims from one program to another. 
New Jersey also contended that the revised FFP request was not the type of claim 
that would impede ACF budget planning.  Correspondence in the record shows that 
ACF knew that New Jersey could claim the ACSES costs at the enhanced rate, New 
Jersey argued. Specifically, in a letter dated October 4, 1994, the Director of the 
ACF Office of Information Systems Management (OISM) wrote to New Jersey that 
its ACSES had achieved conditional certification and that the systems operational 
costs may be claimed at an enhanced rate effective July 1, 1994 until October 1, 
1995. Also, on May 24, 1995, the Acting Director of the OISM wrote to New 
Jersey that, based on estimated costs submitted by New Jersey, ACF would approve 
$1,470,128 in ACSES operational costs at the enhanced FFP rate for the period July 
1, 1994, through September 30, 1995.  Accordingly, New Jersey argued, the request 
for the enhanced rate could not have made it difficult for ACF to plan its budget 
because ACF knew the enhanced FFP claim likely would be made. 
Analysis  6

New Jerseys contentions before us are not persuasive, and its reliance on the 
referenced Board decisions is misplaced. As noted above, the regulations define 
claim to mean a request for Federal financial participation in the manner and 
format required by program regulations, and instructions or directives issued 
thereunder.  Further, section 1132 of the Act states that claims must be made in 
such form and manner as the Secretary shall by regulation prescribe.  By regulation, 
the Secretary has prescribed that claims be made using the formats required through 
program instructions or directives. 45 C.F.R.  95.4. Accordingly, an evaluation of 
how costs are claimed on departmental forms does not, as New Jersey argued, elevate 
form over substance, but is integral to determining whether, under applicable legal 
standards, a claim has been made. 
To receive FFP under the title IV-D program, New Jersey submitted claim 
information using a specific format, Form OCSE-131, Child Support Enforcement 
Program Financial Report Part 1: Quarterly Report of Expenditures and Estimates. 
Of particular importance in this case is the fact that the form requires a state to list 
separately costs for which it seeks FFP at the regular rate, and costs for which it 
seeks FFP at the enhanced rate. In addition, the form specifies the types of costs that 
are eligible for the enhanced FFP rate. 
Applying the definition of the term claim and the QER format requirements to the 
facts presented in this case, we cannot accept New Jerseys contentions that the May 
28, 1997 request for enhanced FFP was not a new claim barred by the two-year filing 
limitation, but was merely corrective of timely submitted claims. Although the 
information furnished with the May 28, 1997 claim may not have added discrete 
costs to the gross underlying expenses that were the bases of New Jerseys earlier, 
timely claims, the May 1997 request for additional FFP nevertheless constituted a 
new and separate request for FFP in the manner and format required by program 
directives. New Jersey had not previously requested FFP at the enhanced rate by so 
indicating on the form.  Entitlement to an enhanced rate is not automatic.  Regulatory 
and other conditions apply, so it is reasonable for ACF to require that a claim 
indicate the rate of FFP which a state is seeking. 
In sum, the May 28, 1997 request for the ACSES costs at issue represented the first 
filing in which New Jersey sought enhanced FFP for the ACSES costs in the manner 
prescribed by the Secretarys instructions, resulting in a new claim for $260,450 in 
FFP in addition to the amounts previously sought and paid. As New Jersey itself 
acknowledged, the earlier claims explicitly requested FFP amounts calculated by 
applying the regular percentage rate, under the format guidelines. Thus, there is no 
basis in the governing definition of the term claim and the QER instructions to 
justify considering the May 1997 request as anything other than a new, separate 
claim, itself subject to the two-year filing limitation.  7

Further, we find that New Jerseys reliance on the California decision is misplaced. 
In California, the Board upheld a Health Care Financing Administration (HCFA) title 
XIX disallowance on the ground that the claim was untimely under section 1132 of 
the Act. The claimed amount represented the federal share of fringe costs (vacation, 
sick leave, etc.) for state licensing and certification employees that had been 
inadvertently omitted by Californias QER processing system, resulting in federal 
costs being under-reported for three quarters. Following the discovery of the error, 
California submitted revisions to the QERs, and HCFA denied the claim for one of 
the quarters under section 1132 of the Act because it was filed after the two-year 
deadline.  The Board held in California that the adjustments to prior year costs 
exception of section 1132 of the Act and 45 C.F.R.  95.4, on which the State relied, 
was not applicable. 
In California, the Board also addressed a contention by California that because 
HCFA had permitted it to claim additional FFP beyond the two-year limit in an 
instance when a lower percentage of FFP had been erroneously claimed, the fringe 
claims should be similarly exempted from the limit.  After stating that it was not 
clear from Californias description exactly what action HCFA took in the earlier 
case, the Board rejected the contention that the case then before it was analogous to 
the HCFA action described in Californias brief. Thus, the question presented here 
was not before the Board in California.3 
Moreover, in California we rejected an argument analogous to that presented by New 
Jersey, that the fringe claims were not new but were part and parcel of 
Californias timely claims for the employee base salaries, which had inadvertently 
excluded fringes. Specifically, the Board concluded that section 1132(a) of the Act 
does not distinguish new from old claims, but merely imposes a deadline for 
filing claims. Indeed, in Colorado Dept. Of Social Services, DAB No. 1239 (1991), 
the Board upheld the disallowance of untimely claims even where the claims 
involved the same types of expenditures previously claimed for the same time period 
(claim for increased administrative costs based on data from revised time reporting 
system was not an adjustment to a prior year cost). Accordingly, we find New 
Jerseys reliance on the California decision to be misplaced. 
Additionally, the Maryland decision does not support New Jerseys appeal.  In 
Maryland, an audit found that timely claims for co-operative agreement costs under 
title IV-D of the Act contained clerical errors, and a net credit was due the State. 
Maryland thereafter made an increasing adjustment for the credit on a QER filed 
3
 Following the submission of New Jerseys Reply Brief, Counsel for ACF 
contacted a Board staff attorney to inquire whether ACF could file a response to New 
Jerseys characterization of the California case in the Reply Brief. ACF Counsel 
stated that ACF would not seek to file a written response if the Board were to review 
the briefs submitted in California.  Since we reject New Jerseys argument 
concerning California based on the language in the decision, we see no need to 
analyze the briefs or to permit arguments based on those briefs.  8

more than two years after the expenditures had been incurred. The Director of the 
Office of Child Support Enforcement (OCSE) found that Marylands claim was not 
barred by the two-year filing restriction at issue in this case because it involved the 
audit exception of 45 C.F.R.  95.19(b). Nevertheless, OCSE determined that the 
claim was barred by a separate, appropriations statute that prohibited the use of funds 
to reimburse expenditures unless claims were filed within one year of the fiscal year 
in which the expenditure occurred. 
Thus, Maryland was not decided on the basis of the filing limitation in this case, but 
a separate filing limitation imposed by congressional appropriations legislation. The 
Board did not evaluate whether the request for the credit in Maryland constituted a 
new and separate claim within the meaning of the Secretarys regulations involving 
section 1132(a) of the Act.4  Moreover, the appeal did not involve a state submitting 
a timely claim for costs at the regular FFP rate, even though they were plainly 
eligible for an enhanced payment rate, and only later seeking to correct its own 
oversight by making a specific claim for the same costs at the enhanced FFP rate. 
Accordingly, we find New Jerseys reliance on the Maryland action misplaced. 
We also disagree with New Jersey that the intent of the filing limitation would not be 
served by denying New Jerseys claim. The rationale for the two-year filing 
limitation of section 1132 of the Act has been examined in numerous previous cases. 
See, e.g., Connecticut v. Schweiker, 684 F.2d at 982;  New York State Dept. Of 
Social Services, DAB No. 521. The legislative history of section 1132 indicates that 
the purpose of the legislation was to prevent states from claiming FFP, or transferring 
claims for FFP from one program to another, many years after expenditures were 
made and without any time limit.  Such delayed claims make it difficult for the 
Department of Health and Human Services to plan its budget; claims for millions of 
dollars for expenditures in years long gone could turn up at any time.  Further, the 
exceptions to the filing limitations were not intended to cover a routine situation 
where a state simply did not get around to getting its data together in time to file a 
claim within the deadline. Rather, the exceptions are to address cases where it would 
be patently unfair to disallow a claim merely because of the passage of time. 
We conclude that the underlying purposes of the filing requirement described in 
earlier cases apply with equal force here. The letters dated October 1994, and May 
1995, show that New Jersey was informed that it could claim the ACSES costs at the 
90% rate in sufficient time for New Jersey to submit its enhanced FFP claims on a 
current basis. The correspondence also shows that ACF was aware that New Jersey 
was authorized to submit requests for enhanced FFP before and during the periods 
when New Jersey filed its timely claims for the quarters at issue. The letters do not, 
however, show that ACF knew (after New Jersey failed to request the enhanced FFP 
in its timely claims), that New Jersey would meet the conditions of approval and at 
4
 We note, however, that in finding that the audit exception applied, the 
OCSE Director treated the claim as untimely under 45 C.F.R.  95.10.  9

some indeterminate point in the future claim the additional FFP amounts.5 Further, 
even if ACF suspected that New Jersey might subsequently seek to revise the FFP 
rate on its timely claims, the delay and lack of certainty associated with such a 
potential, revised claim would indeed make it difficult for ACF to plan its budgets in 
the future because, under New Jerseys theory supporting this appeal, the revised 
claim could turn up at any time. 
Finally, we note that 45 C.F.R.  95.19 and 95.22 provide for an exception to the 
two-year filing limitation for good cause, defined as lateness due to circumstances 
beyond the States control.6 Section 95.22 states, however, that [c]ircumstances 
beyond the States control do not include neglect or administrative inadequacy on the 
part of the State, State agencies, the State legislature or any of their offices, officers, 
or employees.  The record in this case shows that the systems necessary to ascertain 
the enhanced FFP amounts for the ACSES costs and to file timely requests for 
enhanced FFP were within the sole control of New Jersey. No justification was 
furnished to explain the delay in the request for the enhanced FFP rate. It is this type 
of casual approach to the submission of claims for FFP that the limitation in the 
statute and its implementing regulations was designed to prevent. 
5
 The October 4, 1994 letter, stating that New Jersey had achieved 
conditional certification of ACSES and that the ACSES costs could be claimed at 
the enhanced rate, qualified the approval as follows: 
To remain certified, the State must also maintain compliance with the 
regulations implementing Public Law 96-265 and claim costs in accordance 
with an approved cost allocation plan as required by 45 Code of Federal 
Regulations, Part 95, Subpart E. 
Indeed, the record does not show whether New Jersey in fact complied with 45 
C.F.R.  95.507(b)(4) by revising its cost allocation plan to include the methodology 
used to allocate the ACSES costs to the 90% rate. While the record indicates that 
New Jersey allocated the costs based on data furnished by New Jerseys Office of 
Telecommunications and Information Systems, New Jersey did not specifically 
allege that it had obtained approval for the allocation methodology used. 
6
 In the September 9, 1997 disallowance notification, ACF stated that it 
saw no reason to allow the May 28, 1997 claim under the good cause exception.  10

Conclusion 
Based on the above analysis, we conclude that New Jerseys request for the enhanced 
FFP rate was a claim that was not filed within the two-year period required by 
section 1132 of the Act and 45 C.F.R.  95.7. Accordingly, we sustain the 
disallowance. 
_____________________________ 
Cecilia Sparks Ford 
________________________________ 
Donald F. Garrett 
________________________________ 
Judith A. Ballard 
Presiding Board Member