Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: New York State Department of Social Services
DATE: July 6, 1994
Docket Nos. A-93-180 A-93-226 A-94-28 A-94-65 A-94-138
Decision No. 1481
DECISION
The New York State Department of Social Services (New York) appealed
five determinations by the Administration for Children and Families
(ACF) disallowing federal financial participation (FFP) totalling
$3,628,422 claimed by New York under title IV-E of the Social Security
Act (Act). The disallowed claims were for foster care maintenance
payments made to New York City (NYC) voluntary agencies which provided
or arranged for residential foster care services from July 1, 1992
through June 30, 1993.
ACF compared the monthly amounts which New York claimed for maintenance
payments for children eligible for title IV-E (IV-E eligibles) to what
ACF identified as the IV-E share of monthly payments made to several NYC
voluntary agencies within a group of over 60 such agencies. ACF
concluded that, to the extent that the claims exceeded payments, New
York had improperly claimed FFP because it had not sustained actual
expenditures.
As discussed below, we reverse the disallowances in full (without
prejudice to ACF's further review). The Act and implementing
regulations contemplate that states will be reimbursed for total
allowable payments made on a quarterly basis. Here, New York alleged,
and ACF did not dispute, that each of New York's quarterly claims for
payments to NYC voluntary agencies did not exceed total payments to the
agencies for IV-E eligibles for that quarter. Thus, the record here
does not support ACF's finding that New York made claims for other than
actual expenditures. Moreover, the record does not establish that there
was a claim amount in excess of the amount paid to any individual agency
for any particular month much less for any particular quarter.
This decision is based on written briefing submitted by the parties,
including the parties' responses to an Order to Show Cause issued by the
Board, New York's reply to ACF's response to the Order, and ACF's
response to New York's reply. 1/
Relevant Authority
Section 472 of title IV-E of the Act authorizes FFP in the costs of
state foster care maintenance payments. Federal matching of these
payments is available for children in foster care who meet certain
eligibility criteria. Section 474(a)(1) of the Act provides that a
state is entitled to a percentage "of the total amount expended during
such quarter as foster care maintenance payments . . . ." The Act
provides initially for FFP in foster care maintenance payments based on
a state's "estimate of the total sum to be expended [for a particular
quarter]. . . ." Section 474(d)(1). Section 474(d)(2) provides that
the estimated amounts paid by the Secretary shall be reduced or
increased to the extent of any overpayment or underpayment which the
Secretary determines was made for a prior quarter. Any overpayment or
underpayment would necessarily be derived from a comparison of the
state's estimated quarterly expenditures (for which it received advanced
federal funding) with its actual expenditures for the quarter. Actual
expenditures are identified on a state's quarterly report of
expenditures submitted following the close of the quarter and on
subsequent quarterly reports of expenditures identifying an increase or
a reduction in actual expenditures for the earlier quarter. 45 C.F.R.
201.5(a)(3), made applicable by 45 C.F.R. 1355.30(d).
Factual Background
Since the relevant time period, New York has had two separate systems
for computing foster care maintenance payments to NYC voluntary agencies
which have contracted with the NYC Human Resources Administration (HRA)
to provide or arrange for foster care to NYC children.
One of New York's systems for computing foster care maintenance payments
is based on reports filed by the agencies themselves which certify the
amount of payments due for all children in foster care regardless of
IV-E eligibility. The Child Welfare Administration (CWA), a part of
HRA, processes monthly payments for foster care services rendered by the
agencies. The amount payable to an agency is determined based on the
"Care Day Certification Report" submitted by the agency each month.
This
report identifies the number of care days for each foster care program
operated by the agency (e.g., group homes) and the per diem rate of
payment for the services provided for each program. The information
provided on the report pertains to the month preceding the submission of
the report (two months prior to the month for which payment is made).
The report does not identify the number of IV-E eligibles served since
complete and accurate eligibility data is unavailable at the time the
agency files the report.
At the end of each NYC fiscal year, CWA conducts an interim
reconciliation of all monthly payments made to voluntary agencies
against the actual care days for the payment month as reported to CWA in
a later Care Day Certification Report. (This interim reconciliation may
be preceded by preliminary adjustments in payment amounts.) CWA also
conducts a final reconciliation between 18 months and two years after
the close of the fiscal year in question. Either reconciliation can
result in a supplemental payment or a reduction in future payments.
The second system for computing foster care maintenance payments (relied
upon by New York here to compute its claims) uses comprehensive data on
children in foster care in a statewide automated information system--the
Child Care Review System (CCRS)--administered by the Department of
Social Services. HRA's Office of Financial Management (OFM) uses
monthly reports generated by the CCRS as the basis for developing claims
for state and federal reimbursement for payments made to voluntary
agencies. The monthly reports do not include children for whom
categorical eligibility (for title IV-E or some other program) has not
yet been established. Like CWA, OFM uses a three-month claiming cycle,
so that the monthly claims are based on information in the CCRS two
months prior to the month for which FFP is claimed. OFM submits
claiming information on a monthly "Schedule K" to the Department of
Social Services, which uses it to prepare its quarterly expenditure
reports. OFM may also submit supplemental Schedule K's to reflect
changes in information upon which prior Schedule K's were based (such as
a determination that a child for whom payments were made is eligible for
title IV-E).
Although it relies on CCRS data in developing the monthly claim amounts,
OFM has access to actual payment information and specifically limits the
total monthly claim amounts to the total payments actually made to the
voluntary agencies. OFM conducts a final reconciliation of each monthly
claim between 18 months and two years after the close of the fiscal
year. According to New York, OFM takes the results of CWA's final
reconciliation into account. OFM's reconciliation may result in
decreasing adjustments, but increasing adjustments are uncommon due to
the two-year filing limitation on claims. 2/ New York did not allege
that any adjustments in the claims at issue here have as yet been made
as a result of the reconciliation process, however.
ACF staff reviewed documentation for title IV-E foster care maintenance
claims for NYC for the period July 1, 1992 through June 30, 1993 and
found that the IV-E share of the monthly payments to the voluntary
agencies did not always match the monthly claim amounts on the Schedule
K's, which were based on the information in the CCRS. Specifically, ACF
determined that 12 agencies during the quarter ended September 30, 1992,
11 agencies during the quarter ended December 30, 1992, 10 agencies
during the quarter ended March 31, 1993, 18 agencies during the quarter
ended June 30, 1993, and 10 agencies during the quarter ended September
1993 received payments which were less than the monthly claim amounts on
the Schedule K's during at least one month. ACF disallowed 50% (the
rate of FFP) of the IV-E share of the difference on the ground that this
amount did not represent actual expenditures, as required by applicable
law and ACF guidance. Since the IV-E share of the payments was not
identified in the reports filed by the agencies, ACF estimated the IV-E
share using CCRS data on the number of IV-E eligibles compared to the
total number of children for whom maintenance payments were made.
Analysis
We conclude that ACF erred in determining, based on monthly payments to
a small number of voluntary agencies, that New York claimed amounts in
excess of actual expenditures. The Act provides for FFP in title IV-E
expenditures on a quarterly basis. ACF advances funds to a state based
on the state's estimate of the funds that will be expended during a
quarter. Future quarterly advances to the state are adjusted based on
any overpayment or underpayment for earlier quarters which is identified
after the state determines its actual expenditures for the earlier
quarters. Moreover, during the period in question here, the quarterly
expenditure report form prescribed by ACF (Form IV-E-12) required states
to report only current quarter expenditures, prior quarter adjustments,
and next quarter estimates for non- voluntary foster care and voluntary
foster care, respectively. New York Exs. 29 and 30.
Thus, for the type of claim in question here, ACF required only that New
York identify the maintenance payments made to all voluntary agencies
during a quarter. See New York Exs. 29 and 30 (Form IV-E-12). New York
alleged, and ACF did not dispute, that the total claimed for such
payments in a quarter did not exceed the actual quarterly payments. 3/
Accordingly, there is no reason to conclude that New York claimed more
FFP than the amount to which it was entitled.
ACF nevertheless argued that it was appropriate to disallow claim
amounts which exceeded IV-E payments to individual agencies. In ACF's
view, New York should have been able to trace the amount claimed for
each agency for each month to payments made for that month on behalf of
IV-E eligibles under the supervision of the agency. Otherwise, ACF
argued, there was no assurance that the payments were made for children
whose IV-E eligibility could be documented. 4/
However, ACF did not here establish that there were in fact claims in
excess of payments to individual agencies for IV-E eligibles. In order
to determine what share of the payments for each agency was allocable to
IV-E, ACF used the ratio of IV-E eligibles to all children for whom
maintenance payments were made to that agency, as shown by the CCRS.
ACF did so since the Care Day Certification Reports filed by the
agencies did not identify the total number of IV-E eligibles served by
the agency. However, the CCRS data differed from the information
reported by the voluntary agencies on the number of children served by
them, and may not have accurately reflected the percent of IV-E
eligibles during the relevant period. For example, the CCRS data might
have shown that there were ten children served by an agency during a
particular month, eight of whom were IV-E eligible, when in fact the two
children whom the CCRS showed as not being IV-E eligible had actually
moved out of that placement prior to the month in question. In this
case, ACF would have determined that only 80% of the payment made to the
agency was allocable to IV-E, when 100% of the payment was properly
allocable. Accordingly, what ACF's method would have identified as a
claim amount in excess of the amount paid to the agency for eligible
children (on a monthly basis) would not have been a claim in excess of
actual, allowable expenditures.
New York of course has the burden of documenting that it in fact had
allowable expenditures for IV-E eligibles in the amount claimed for each
quarter. See New York State Dept. of Social Services, DAB No. 1358, at
25 (1992). However, ACF cannot properly take a disallowance on the basis
that such documentation has not yet been supplied. There is no
requirement that complete supporting documentation be supplied with a
claim. Instead, the applicable regulations provide for deferral of a
questionable claim so that the state can be given an opportunity to make
available "all documents and materials which the Regional office then
believes necessary to determine the allowability of the claim." 45
C.F.R. 201.15(c) (made applicable by 45 C.F.R. 1355.30(g)). 5/
Indeed, when a claim is submitted, all that is required is that the
claim reflect "a systematic analysis of expenditures designed to
identify those appropriately claimed for FFP" (New York State Dept. of
Social Services, DAB No. 537, at 16 (1984)), and that the state "know
where the original documentation for the claim is" (New York State Dept.
of Social Services, DAB No. 542, at 12 (1984)).
The claims in question here clearly met these requirements. A
systematic analysis of eligible expenditures was performed using data in
the CCRS, which contained comprehensive information about each child in
New York's foster care system. The data in the CCRS was presumably
derived from basic source documentation for each child in foster care.
ACF questioned the accuracy of the CCRS; however, ACF did not here
establish that errors in the CCRS data were due to anything other than a
reasonable time lag in updating the system to reflect changes in a
child's status. 6/ Moreover, the effect of any errors in the CCRS data
was mitigated by the fact that, once the claims were developed, OFM
limited the amount claimed for each quarter to the amount paid to the
individual agencies. Furthermore, the claims were very conservative
because no claims were made for children whose IV-E eligibility had not
yet been determined.
In any event, New York's procedures provide for a reconciliation of the
payments made to individual agencies against the actual care days for
the payment month as later reported to CWA by each agency. Such a
reconciliation is necessary because the payments are based on data
reported by the voluntary agency for a month which is two months prior
to the month for which payment is made. In addition, New York's
procedures provide for a reconciliation of its claims for FFP based on
updated information on IV-E eligibles in the CCRS. This reconciliation
apparently takes into consideration the reconciled payment amounts.
These reconciliations should assure that the claims did not exceed total
quarterly payments made to each voluntary agency for the IV-E eligibles
whom it actually served during each quarter in question. 7/
We therefore conclude that the record does not support the
disallowances. ACF is of course not precluded from performing a
full-scale review of any aspect of the claims in question, including
whether New York's reconciliation process operates properly to assure
that claims are adjusted to reflect payments to the voluntary agencies
only for IV-E eligibles served by them. 8/
Conclusion
For the reasons discussed above, we conclude that there is no basis in
the record for finding that the claims in question were made for other
than actual expenditures or that there was a claim amount in excess of
the amount paid to any individual voluntary agency. Accordingly, we
reverse the disallowances in their entirety, without prejudice to ACF's
further review as discussed herein.
_____________________________ Judith A.
Ballard
_____________________________ Norval D.
(John) Settle
_____________________________ Donald F.
Garrett Presiding Board Member
1. The Order was issued in Docket Nos. A-93-180, A-93-226, and
A-94-28. Docket Nos. A-94-65 and A-94-138 were subsequently
consolidated with these cases.
2. Section 1132 of the Act requires that claims be filed within the
two-year period beginning on the first day of the calendar quarter
following the calendar quarter in which the expenditures were made.
3. New York initially asserted that the total amount claimed for all
NYC voluntary agencies on a monthly basis was less than the total IV-E
payments for each month to the agencies. New York later confirmed in
response to the Board's Order to Show Cause that the quarterly claims
were also less than the quarterly payments.
4. In support of its position, ACF stated that the discrepancy between
claim amounts and payments averaged 16.2%. ACF argued that this large a
discrepancy could not be accounted for by children's movements from one
voluntary agency to another or by the time lag in updating the CCRS.
ACF also asserted that there was no plausible reason why a voluntary
agency would seek less reimbursement than it was entitled to. ACF
suggested that the excess claims were therefore attributable to children
who were either discharged from foster care or never placed at all. As
indicated below, however, the discrepancy noted by ACF may be more
apparent than real due to the way in which ACF calculated the IV-E share
of the payments. In any event, ACF provided no evidence to support its
speculation as to the reasons for any discrepancy.
5. The claims in question here were not deferred, so there was no
opportunity to provide any additional documentation before the claims
were disallowed.
6. Late in the proceedings before the Board, ACF submitted a copy of
an audit report on HRA's provision of foster care through contracts with
voluntary agencies, issued by the New York State Comptroller on May 25,
1994. The auditors reviewed a sample of 35 voluntary agencies, which
reported 29,468 children in care as of May 31, 1992, while the CCRS
indicated that these agencies were caring for only 25,653 children (13%
fewer than the number reported by the agencies). The auditors concluded
that the CCRS "is often incomplete and inaccurate." ACF letter dated
6/10/94, attached audit report at 22. However, as New York pointed out,
the purpose of the audit was to determine whether foster care children
were receiving proper care. The auditors did not find that the
information contained in the CCRS was unreliable for the purpose of
claiming federal funding, and did not identify any overpayments of FFP.
Moreover, the audit findings are consistent with New York's
representations that its claims were based on CCRS data which had not
been updated to include all IV-E eligibles and that it had a net
underclaim of FFP for each of the quarters in question here.
Accordingly, the audit report does not establish that New York
improperly relied on the CCRS in making its claims.
7. This does not mean that a state can defeat any attempt to disallow
claims in excess of payment amounts to individual providers on the basis
that the payments are subject to future reconciliation. Here, however,
New York had a reconciliation process in place, and there is no evidence
that New York is not proceeding to reconcile the payments in accordance
with its procedures. Moreover, as discussed earlier, ACF did not
establish that there were in fact claims in excess of payment amounts to
any individual providers.
8. ACF argued that a full-scale review of the claims in question here
would preclude it from collecting any disallowance because the
disallowance would then be subject to the moratorium imposed by section
13716 of the Omnibus Reconciliation Act of 1993. However, it is
premature for the Board to address this issue since no review has taken