Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Pennsylvania Department of Public Welfare
DATE: December 4, 1995
Docket Nos. A-95-40, A-96-9
Control Nos. A-03-94-27065
A-03-95-33212
Decision No. 1551
DECISION
The Pennsylvania Department of Public Welfare
(Pennsylvania) appealed two decisions by the
Administration for Children and Families (ACF)
disallowing $9,279 (Docket No. A-95-40) and $10,350
(Docket No. A-96-9) in federal financial participation
(FFP) claimed for foster care maintenance payments made
under title IV-E of the Social Security Act (Act) during
the period January 1, 1983 through December 31, 1987.
ACF disallowed Pennsylvania's claims on the grounds that
they were not filed within two years of the quarter in
which the expenditures were made, as required by section
1132 of the Act and implementing regulations. It appears
that these claims were filed some seven to twelve years
after the foster parent (or parents) were paid because of
an oversight on the part of the county that made the
payments. A memorandum from the Department of Health and
Human Services Region III Office of General Counsel which
Pennsylvania provided with its appeal file discloses that
the claims were ultimately filed only when the county
hired an additional staff person who discovered that the
county had never billed Pennsylvania for the payments.
Pennsylvania Exhibit 3.
Pennsylvania argued that foster care maintenance payments
are payments for services, for which the two-year
deadline would not begin to run until Pennsylvania
reimbursed the county that made the payments.
Accordingly, Pennsylvania argued, its claims were timely.
The parties agreed that this appeal would be limited to
resolution of the legal issue of whether title IV-E
foster care maintenance payments are payments for
services or payments for assistance for the purposes of
the claiming deadline. As discussed below, we conclude
that the foster care maintenance payments at issue here
were assistance payments, and we sustain the
disallowances on that basis. Pending decision of this
threshold issue, the Board deferred Pennsylvania's
request for discovery into ACF's practice concerning time
limits for services claimed in county-administered title
IV-E programs. Our decision renders this discovery
unnecessary; therefore, we deny Pennsylvania's request.
Relevant Statutory and Regulatory Provisions
Title IV-A of the Act provides for payments to needy
families with dependent children. Section 406(b) of the
Act defines "aid to families with dependent children"
(AFDC) as money payments with respect to a dependent
child, including payments to meet the needs of the
relative with whom any dependent child is living.
Title IV-E of the Act, section 470 et seq., provides for
a program of foster care maintenance payments on behalf
of children who otherwise would be eligible for
assistance under title IV-A, and for adoption assistance
for children with special needs. Section 475(4)(A) of
the Act states that "foster care maintenance payments"
means payments to cover the cost of (and the cost of
providing) food, clothing, shelter, daily supervision,
school supplies, a child's personal incidentals,
liability insurance with respect to a child, and
reasonable travel to the child's home for visitation.
Section 1132(a) of the Act prohibits the payment of
federal funds for any expenditure that has not been
claimed within two years after the end of the calendar
quarter in which the state made the expenditure. The
provisions of section 1132(a) are implemented by the
regulations in 45 C.F.R. Part 95, Subpart A. The
regulations provide that a state may receive payment for
a state agency expenditure (including expenditures under
title IV-E) only if the state files its claim for that
expenditure within two years after the calendar quarter
in which the State agency made the expenditure. 45
C.F.R. 95.7.
Section 95.13 of 45 C.F.R. determines when, for the
purpose of the two-year claiming deadline, a state
agency's expenditure is considered made. This section
provides in part as follows:
(a) We consider a State agency's expenditure
for assistance payments under title I, IV-A,
IV-E, X, XIV, or XVI (AABD) to have been made
in the quarter in which a payment was made to
the assistance recipient, his or her protective
payee, or a vendor payee, even if the payment
was for a month in a previous quarter.
(b) We consider a State agency's expenditure
for services under title I, IV-A, IV-D, IV-E,
X, XIV, XVI (AABD) or XIX to have been made in
the quarter in which any State agency made a
payment to the service provider.
Thus, expenditures for assistance payments are considered
made when the recipient receives the payment, while
expenditures for services are made when the state agency
makes payment to the service provider.
The timely claims regulations define "state agency" as
including county governments in the title IV-A and IV-D
programs, but not in title IV-E. Section 95.4 provides
that "for the purposes of expenditures for financial
assistance under title IV-A and for support enforcement
services under title IV-D" state agency means any agency
or organization of the state or local government which is
authorized to incur matchable expenses. The definition
of "state agency" does not mention title IV-E, and for
the purposes of expenditures under other titles says to
see the definitions in specific program regulations. The
title IV-E regulations define state agency as the state
agency administering or supervising the administration of
the IV-E plan. 45 C.F.R. 1355.20(a). This definition
was revised at the final rule stage to exclude local
agencies based on section 472(a)(2)(B) of the Act. 48
Fed. Reg. 23,105 (1983).
Analysis
Pennsylvania asserted that since its foster care program
is administered by counties which are not considered
"state agencies" under title IV-E, the deadline for
claiming FFP would not begin to run under section
95.13(b) until Pennsylvania (the state agency) reimbursed
the county which made the foster care maintenance
payments -- so long as they were considered expenditures
for "services." Pennsylvania argued that foster care
maintenance payments are payments for services because
the definition of "foster care maintenance payments"
includes items such as daily supervision that have not
been historically considered assistance under title IV-A.
Pennsylvania argued that foster parents are essentially
paid for their services in caring for foster children,
such as leading by example, keeping children from harm,
caring for them when sick, and providing love and
affection. Pennsylvania noted that the placement
agreement for one of the children in foster care in this
case calls for the foster parent to arrange routine
medical and dental checkups, and to help in stimulating
the child's responses, teaching good living habits, and
improving peer relationships. The agreement says nothing
about the payments being made for food, clothing, and
shelter.
ACF argued that AFDC under title IV-A of the Act has long
been recognized as assistance, and that foster care
maintenance payments provide AFDC-type assistance to
children who have been removed from their homes and who
would otherwise be eligible for AFDC. The nature of
foster care maintenance payments as assistance, ACF
argued, was unchanged when the foster care program was
moved from title IV-A to title IV-E of the Act in 1980.
We conclude that ACF's interpretation is the only
reasonable interpretation, particularly in light of the
history underlying the purpose of the IV-E program.
First, the status of AFDC payments as "assistance" is
well-established, and was not challenged by Pennsylvania
in this appeal. As ACF noted, AFDC payments are
consistently referred to in the AFDC regulations as
"assistance." For example, 45 C.F.R. 233.20(a)(1) and
(2) discuss determining the need for and the amount of
the assistance payment in AFDC, while 45 C.F.R. 233.34
and 233.35 discuss computing the "assistance payment" in
the initial months of AFDC eligibility. Similarly, as
ACF noted, the Supreme Court has referred to the AFDC
program as being designed to provide financial assistance
to needy dependent children and the parents or relatives
who live with them. Shea v. Vialpando, 416 U.S. 251, 253
(1974).
Second, the Adoption Assistance and Child Welfare Act of
1980 (AACWA), Public Law No. 96-272, and its legislative
history show that the title IV-E foster care program
provides AFDC-type support to children who are otherwise
eligible for AFDC assistance but who have been removed
from their homes. The preamble to the AACWA describes it
as an act to, among other purposes, "strengthen the
program of foster care assistance." Pub. L. No. 96-272,
1980 U.S.C.C.A.N. (94 Stat.) 500. The report of the
Senate Finance Committee notes that the title IV-A
program had been designed to provide aid to needy
children living in a home maintained by a parent or close
relative, and that since 1961 funding had also been
permitted for aid provided to children not in their own
home, but in foster care. S. Rep. No. 96-336, 96th
Cong., 2d. Sess. 10, reprinted in 1980 U.S.C.C.A.N. 1448,
1959. The committee report also refers to the
significant benefit to children that providing assistance
to children in foster care had achieved since that time.
Id. at 1461.
Moreover, the legislative history provides no indication
that the AACWA changed the basic nature of the foster
care program. The committee report notes that, with some
modifications, the AACWA essentially moved the existing
AFDC foster care program from title IV-A to a new part of
the Act, title IV-E. Id. at 1545. Finally, as ACF
pointed out, the legislative history explicitly rejected
the notion that maintenance payments are meant to serve
as a salary for foster parents. The House Conference
report noted that the House bill had not defined "foster
care maintenance payments," while the Senate version
contained a definition that became part of the law (at
section 475(4)(A) of the Act):
Conference agreement. -- The House recedes
with the understanding that, in the case of
foster family homes, payments for the costs of
providing care to foster children are not
intended to include reimbursement in the nature
of a salary for the exercise by the foster
family of ordinary parental duties.
H.R. Conf. Rep. No. 96-900, 96th Cong., 2d Sess. 49-50,
reprinted in 1980 U.S.C.C.A.N. 1561, 1570. This language
clearly indicates that foster care maintenance payments
are not intended as reimbursement for parenting
"services" or the provision of love and affection, as
Pennsylvania argued. Accordingly, we conclude that
Pennsylvania's foster care maintenance payments can only
be classified as assistance payments. There is thus no
need for the timely claims regulations to specifically
define assistance payment or state that foster care
maintenance payments are assistance payments.
Pennsylvania argued that the legislative history was not
compelling because the foster care maintenance payment
has historically included a "stipend" as compensation for
providing care and supervision to the child.
Pennsylvania argued that ACF has long recognized a
service component to the foster care maintenance payment,
since the Handbook of Public Assistance Administration
(HPA) authorizes differing payments based on the degree
of care that the child required. The section of the
Handbook of Public Assistance Administration Pennsylvania
referred to states that foster care will be an item in
the state's AFDC need standard, and that the state's cost
figures might vary in reference to the age of the child
or the care the child receives. HPA 3452.8. We do not
agree that this provision demonstrates a practice of
recognizing a service component to foster care
maintenance payments under title IV-A such that they
could reasonably be classified as payments for services,
and not assistance. Rather, other portions of the same
HPA section support ACF's position that foster care
maintenance payments provide AFDC "assistance," or
substitute family care, to children who would be eligible
for and receiving AFDC assistance payments had they not
been removed from their homes. The HPA states that:
Foster family care is the provision of
substitute family care for children for a
planned period of time when their own family
cannot care for them for a temporary or
extended period and when adoption is neither
desirable nor feasible.
HPA 3452.5, H.T. No. 5 (July 24, 1963) The HPA further
states that:
Assistance in the form of payments for foster
care in behalf of the eligible child refers to
the payments made to foster parents or
children's institutions. The payment for
foster care may be made to the foster parents
or the children's institutions or cooperating
agency in behalf of the eligible children in
their care. In these instances such payment
represents assistance in behalf of the eligible
children receiving such care.
Id. 3452.7.
That foster care maintenance payments are assistance
payments is also evident from the timely claims
regulations. Section 95.13(a) refers to "assistance
payments" being made under several titles of the Act,
including title IV-E. As ACF argued, this reference to
title IV-E assistance payments would be superfluous if
foster care maintenance payments under title IV-E are
payments for services. Pennsylvania replied that the
reference to title IV-E in section 95.13(a) would not be
superfluous if foster care maintenance payments are
considered payments for services because that section
could be referring to adoption assistance payments under
title IV-E. Pennsylvania's argument fails to consider
the similarity of adoption assistance and foster care
maintenance payments.
Section 473(a)(1)(B) of the Act provides for payment of
nonrecurring adoption expenses (such as adoption fees,
court costs, and attorney fees), and ongoing adoption
assistance payments to adoptive parents of children with
special needs who, prior to the adoption, had received
(or could have received) AFDC assistance or foster care
maintenance payments. The amount of the payments must
take into account the circumstances of the adopting
parents and the needs of the child, and the ongoing
adoption assistance payments may not exceed the foster
care maintenance payment that would be made if the child
was in foster care. Section 473(a)(3) of the Act. Both
foster care maintenance payments and adoption assistance
payments provide ongoing support for children based on a
standard of need. The two payments are of such a similar
nature that it would not make sense to consider one
assistance payments and the other payments for services.
Thus, the reference in section 95.13(a) of the
regulations to assistance payments under title IV-E can
only be construed as including foster care maintenance
payments.
Pennsylvania also argued that even if foster care
maintenance payments have historically been considered
assistance, it would not be fair to carry the
characterization over to the title IV-E program.
Pennsylvania stated that ACF has, in its arguments before
this Board in past cases, been inconsistent about whether
AFDC policies were carried over intact to the IV-E
program. However, Pennsylvania did not show that ACF has
ever characterized foster care maintenance payments as
payments for services, or otherwise presented an
interpretation contrary to the one in these appeals.
Thus, the existence of any inconsistency in positions
advanced before the Board in other cases as to applicable
program policies would not provide any basis to conclude
that the essential nature of foster care maintenance
payments as assistance had changed.
Pennsylvania urged the Board to adopt the "predominant
purposes" test prescribed by the Uniform Commercial Code
(UCC) to classify mixed goods-and-services transactions,
and argued that courts applying this test have refused to
classify caretaking as being other than a service. The
predominant thrust of maintenance payments is the
provision of services, Pennsylvania asserted, because
caring for a foster child entails more than paying for
groceries, clothing and rent. Pennsylvania also argued
that the Internal Revenue Code (IRC) recognizes that
foster care payments are for "caring" for a qualified
individual in foster care. However, the IRC and UCC
provisions that Pennsylvania cited show no error in ACF's
position. Pennsylvania's argument confuses the societal
benefit, i.e. "service," rendered by the foster parents
with the statutory scheme under title IV-E whereby
assistance is authorized for eligible children.
Pennsylvania did not demonstrate how portions of the UCC
used to classify commercial transactions as being either
transactions of goods or services have any bearing
whatsoever on the question presented by these appeals.
The predominant purposes test Pennsylvania advocated is
not applicable, given the clear legislative view that
foster care maintenance payments are not compensation to
the foster parents for caring for a child. Similarly,
the IRC provisions are not directly relevant here, and do
not contradict ACF's position that foster care
maintenance payments serve essentially the same function
as AFDC assistance payments for children who have been
removed from their homes.
Finally, Pennsylvania argued that ACF has not provided
notice of its interpretation that foster care maintenance
payments are assistance payments, and that Pennsylvania
should thus not be bound by that interpretation.
Pennsylvania noted that ACF has not defined "services" or
"assistance" or declared foster care maintenance payments
to be assistance payments for the purposes of the timely
claims provision. Pennsylvania argued that in the
absence of notice, it was entitled to rely on its own
interpretation, and thus the only question for the Board
to consider was whether Pennsylvania's interpretation of
foster care maintenance payments as being payments for
services was reasonable.
This case concerns the nature of the entitlement payment
authorized by title IV-E. A foster care maintenance
payment is a money payment to cover basic needs made on
behalf of an eligible recipient in accordance with a
state's approved plan under title IV-E. Since we have
concluded that title IV-E foster care can reasonably be
read only as an assistance payment provision, we reject
Pennsylvania's argument that its interpretation that
maintenance payments are payments for services is
reasonable. The title IV-E statutory scheme and prior
history of the foster care maintenance payments program
under title IV-A provide fully adequate notice that these
payments are assistance, not services. Thus, there
was no need for an express ACF statement of policy
classifying maintenance payments as assistance payments.
1/
Pennsylvania did not dispute ACF's determination that it
claimed FFP more than two years beyond the end of the
last quarter in which the county made the disallowed
foster care maintenance payments on behalf of title IV-E
eligible children. Section 95.13(a) of the timely claims
regulations refers to payments made to assistance
recipients and encompasses foster care maintenance
payments made to foster parents on behalf of eligible
children. Accordingly, we conclude that Pennsylvania's
claims for FFP were untimely under the requirements set
by 45 C.F.R. 95.7 and 95.13(a). 2/
Conclusion
Based on the foregoing analysis, we conclude that foster
care maintenance payments are payments of assistance, and
we sustain the disallowances on the grounds that
Pennsylvania's claims for FFP were untimely.
Donald F. Garrett
M. Terry Johnson
Cecilia Sparks Ford
Presiding Board Member
1. Pennsylvania relied on cases such as West Virginia
Department of Health and Human Resources, DAB No. 1437
(1993), for the proposition that where a state and the
federal agency have differing reasonable interpretations
of an ambiguous statute or regulation, the federal
agency's interpretation may adversely affect the state
only if the state had actual and timely notice of the
terms thereof. These cases are inapposite to the
circumstances presented by this case because there is no
legitimate statutory interpretation question. In
addition, while this makes no difference to the outcome,
we note that there is no indication that Pennsylvania
ever relied on the interpretation it advanced in this
appeal. Pennsylvania has not shown that it failed to
file its claims within two years after the county made
the maintenance payments because it considered them
payments for services, or because it believed that the
claiming deadline would not begin to run until it paid
the county.
2. We did not reach whether Pennsylvania's claims
would be timely even if considered claims for payments
for services. Section 95.13(b) provides that payments
for services are considered made when a state agency made
a payment to the service provider. The parties did not
brief whether counties, which make foster care
maintenance payments on behalf of eligible children in
foster care, could be considered "service providers"
under this provision.