Kansas is suing over $11 million that it says a federal agency is improperly trying to take through an “egregiously hardline position.”
The Kansas Department for Administration filed a lawsuit this week against the federal Department of Health and Human Services. The lawsuit seeks to block HHS from taking back the funding, which HHS says shouldn’t have been paid out.
The lawsuit says that HHS, “after taking an egregiously hardline position,” has refused to negotiate a compromise. Kansas calls HHS’ actions “arbitrary, capricious, an abuse of discretion, and otherwise contrary to law.”
The lawsuit comes as both Kansas and the federal government are controlled by Republican administrations.
The lawsuit stems from a dispute over fees the Kansas Department for Children and Families paid into a state debt collection program run by the Kansas Department of Administration between 2003 and 2010. DCF typically seeks reimbursement from the federal government for a portion of the fees it pays into the program.
The Department of Administration each year files documents with the federal government about the federal funding the state plans to claim. Until 2013, the agency never included the revenue it retained from administering the debt collection program in the filings.
“During that prior time period, the KDOA had relied in good faith on a consultant" to help prepare the filings and "never once” did it include the debt collection revenue in its draft filings, the lawsuit says.
The consultant, Maximus Consulting Services, is an arm of Maximus, which has had other contracts with Kansas throughout the years. Maximus is currently operating the state's Medicaid application processing clearinghouse, which has come under fire for falling behind on work.
The federal government asked about the debt collection revenue in 2012, the lawsuit says, and an audit began. Kansas worked with HHS to provide documentation, but the federal agency refused to negotiate a compromise, the lawsuit says.
HHS didn’t immediately comment on Friday.
An appeals board at HHS upheld the department’s decision that Kansas shouldn’t have received the funding in a Jan. 26 ruling.
Ahead of the decision, Kansas had argued that record retention requirements prohibited the federal government from recovering the $11 million. Generally, states are required to retain records relevant to HHS grants for at least three years after the final grant expenditure. But the requirement also doesn’t bar the federal government from seeking to recover the funding, the board found.
“At most, the expiration of the record retention period prior to initiation of a review may constitute a defense or explanation for a state agency’s inability to provide adequate documentation for challenged costs,” the board wrote in its decision.
Kansas is asking a federal court to declare the board decision null and void. In addition, it wants a court to require HHS to lower the amount it’s seeking.
A docket entry shows that a summons was issued to HHS on Friday.