DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: District of Columbia
Department of Human Resources
Docket No. 87-97
Decision No. 914
DATE: October 26, 1987
DECISION
The District of Columbia Department of Human Services (District)
appealed
a determination by the Administration for Children, Youth and
Families
(Agency), to disallow $507,848 of federal financial
participation (FFP)
claimed under foster care provisions of Title IV-A
(AFDC-FC) of the Social
Security Act (Act) in payments made during the
period July 1979 through
September 1980. During Board proceedings, the
District limited its
appeal to $421,599 which the Agency disallowed on
the basis that applications
for foster care benefits had not been
received "until after the claim period
began." The Agency relied on 45
CFR 234.120(d), which authorizes FFP in
AFDC-FC for periods "beginning
with the month in which they [any family or
individual] meet all
eligibility conditions under the [state] plan and in
which an
application has been received by the [state] agency."
The amount of the disallowance was determined by extrapolating from
a
sample of 304 randomly selected individual cases. Of this sample,
the
Agency found that erroneous payments had been made in 157
individual
cases totaling $108,566 in FFP. The Agency projected from
the sample to
the entire number of cases included in the District's
claim. The Agency
determined that the District had submitted a total of
$421,599 in
unallowable claims for FFP in benefits paid prior to receipt of
an
application.
There are two issues in this case: whether the District is entitled to
FFP
in payments for periods before an application was received, and
whether the
Agency, in this case, may extrapolate from a sample to
disallow funds in
excess of individually identified sample errors. For
the.reasons
described below, we uphold the disallowance in full.
Case Background
During the disallowance period, section 408 of Title IV-A provided for
FFP
in payments to eligible children who had been removed from the home
of a
relative by judicial determination and placed in foster care.
These AFDC-FC
payments were made under the auspices of the District's
agency which
administered the Title IV-A program. (Public Law 96-272,
enacted June
17, 1980, repealed section 408 and implemented a separate
foster care
program, but this change did not affect the claim at issue.)
The disputed claims are for payments for which the District did
not
originally claim FFP under the AFDC-FC program established by
section
408. In 1981, in response to an audit report recommending
certain
changes in administration of the District's foster care program,
the
District reviewed its records to determine the eligibility for
AFDC-FC
of children then in foster care. As a result of that review,
the
District filed the disputed claims for 1979 and 1980.
An audit report submitted in a previous appeal concerning these
claims,
provided an explanation of the procedures which the District used
to
determine eligibility for AFDCFC:
The State Agency's procedures stated that there are
two conditions
necessary for the approval of
AFDC-FC: the determination of basic
eligibility for
AFDC, and the submittal of a report within a
specified period of time to petition commitment by a
juvenile
court. In addition, the procedures
also stated that in order to
identify funding for
the child's care in the interim period, a
presumption of eligibility must be made as soon as it is known
that
basic eligibility is approved by the Income
Maintenance
Administration (IMA) and the child has
been placed in a foster
home.
In order to determine AFDC basic eligibility and
AFDC-FC
presumptive eligibility, the State Agency
utilized a form entitled
"AFDC-Foster Care
Eligibility Information" (PW-CW-PA-154).[] The
Family Services Administration (FSA) was supposed to complete
this
form and forward it to the IMA for AFDC
eligibility determination.
The IMA worker used the
154 form information to determine AFDC
eligibility,
and returned a copy of it to FSA, which then
processed
the Case Charge Authorization to set up
presumptive eligibility.
Approval of AFDC-FC
eligibility took effect on the date that
presumptive
eligibility was established. FSA provided the
IMA
worker with a follow up copy of the 154 form
showing the effective
date of approval for
AFDC-FC.
Audit Report Control No. 03-40551, p. 5 (footnote added).
In this case, the Agency examined 304 randomly selected cases and
found
that in 157 of those cases the procedures described above were
not
followed. In those cases, the Agency found, the DHR-154-2 form was
not
completed by the FSA and forwarded to the IMA for an AFDC
eligibility
determination prior to the time the District paid the .benefits
in which
it claimed FFP. The Agency determined that the DHR-154-2
form
constituted the required application for foster care children
and
concluded that FFP was not available because the DHR-154-2
application
form had not been received before the benefits had been
paid. From
these sample cases, comprising 21.3% of the total number of
cases in the
District's claim, the Agency projected to the total number of
cases in
the claim to determine the amount of the disallowance.
The District did not contest, in its briefing here, the validity of
the
particular sampling or calculation techniques used, or the
individual
findings of error. The District argued that the Agency was
precluded
from extrapolating from a sample to disallow amounts in excess
of
individually identified errors, in light of the existence of a
quality
control system and the Agency's own policies.
Although the District initially limited its arguments to the question
of
whether sampling was appropriate in this instance, the District's
reply
brief raised an issue regarding the application requirement.
The
District replied to the Agency's contention that an application was
not
a condition of eligibility by arguing that, if this was correct, then
an
application was not necessary for FFP since the beneficiary was
eligible
and the payment proper. Since this issue goes to the
substantive basis
for the disallowance, we consider the application issue
first.
Application Issue
In the disallowance letter, the Agency alleged that FFP was not
allowable
in 157 sample cases, amounting to $108,566, because the
District did not
receive individual.applications until after the claim
period began.
This allegation was apparently based on the Agency's
finding that DHR-154-2
forms had not been forwarded from the District
FSA office to the IMA
office. The Agency cited the regulatory
provision at 45 CFR
234.120, which makes FFP available in AFDC-FC
payments to families or
individuals "for periods beginning with the
month in which they meet all
eligibility conditions . . . and in which
an application has been received. .
. " (emphasis added).
The District argued that FFP should still be available if the
application
requirement is not met, but presented no statutory or
regulatory support for
this argument. The District cited two Board
cases, Louisiana Department
of Social Services, Decision No. 647,
October 22, 1984 and New York
Department of Social Services, Decision
No. 585, May 9, 1985, but these cases
do not support the District's
argument. The Board did not find, in
either of these cases, that an
application was not necessary for FFP.
In light of the language of 45 CFR 234.120, we must conclude, based on
the
record before us, that the receipt of an application is a condition
for
FFP.
We further find that the District has not shown that this condition
was
met here. In acknowledging the notice of appeal, the Board
specifically
instructed the District that the Board would decide both issues
of law
and of fact, and that the District should submit any documentation
in
dispute. The District did not, however, pursue any factual
issues
during Board proceedings. The.District did not dispute
the
characterization of the DHR-154-2 form as an application, and did
not
deny that it had not timely completed that form for the payments
at
issue. The District did not introduce evidence that it had
other
documentation, which could be deemed an application, in the case
files.
Thus, we uphold the Agency's conclusions that FFP is unallowable
in
payments made prior to the month in which a DHR-154-2 form was
received,
and that the payments in the 157 sample cases were unallowable on
this
basis.
2. The Extrapolation/Quality Control Issue
The Agency determined the disallowance amount by extrapolating from
the
individually identified errors in the cases missing
applications
(discussed above) to the entire claim submitted by the
District. Both
parties agreed that extrapolation from a sample would
not be appropriate
if the errors were within the scope of the AFDC quality
control system,
since the Agency's policy during the relevant time period had
been to
disallow only for individually identified erroneous payments of
this
type. As the Board has discussed in several previous decisions,
the
Agency had a policy, prior to and during the time period of the
disputed
claims, which assured states that, pending the promulgation of new
AFDC
quality control regulations, only individually identified errors
would
be disallowed for those errors within the scope of the
then-existing
AFDC quality control system. The Board has held that, for
these errors,
the Agency may not retroactively apply statistical sampling
techniques
to AFDC-FC claims during that time period to disallow amounts in
excess
of individually identified errors. See, e.g., Louisiana
Department of
Health and Human Resources, Decision No. 580, October 22,
1984;
California Department of Social Services, Decision No. 319, June
30,
1982, reconsideration denied, December 31, 1982.
The Agency argued that payment of benefits prior to receipt of
an
application was not an eligibility error within the quality
control
system, but was an administrative error. The District contended
that
the errors were within the scope of the AFDC quality control
system
because case errors under the quality control system were
broadly
defined to include all eligibility determination errors which were
not
systemic administrative problems. See Reconsideration of Decision
No.
319, December 31, 1981, p. 7. The District asserted that
the
application forms were part of the eligibility determination process.
The quality control system regulations at 45 CFR 205.40(a)(2) limit
"case
errors" under the quality control system to "an overpayment,
underpayment or
payment to ineligibles" for active cases, and, for
negative (denied) cases,
to those in which the "reason given . . . for
that action was incorrect."
The District did not offer any evidence of how the lack of an
application
would be recognized by the quality control system under the
circumstances
here. The application requirement in the foster care
program appears to
be, at least in part, a documentation requirement
imposed upon states
(although it may have other purposes, as the Agency
noted). In light of
this, there is support for the Agency's position
that the quality control
system would not recognize these errors. Under
the regulatory
definition, "case errors" include only those cases in
which the beneficiary's
actual eligibility status differs from a State's
eligibility
determinations. Here, the parties do not contest that the
beneficiaries
were, in fact, eligible. The error the Agency alleged was
the
District's own administrative failure to develop in a timely manner
the
documentation to support claims for FFP.
But, more to the point, the lack of an application and any
determination
of eligibility would probably have ensured that the payments
would not
have been considered within the quality control system.
Logically, the
District's AFDC-FC caseload would have included only cases
which the
District itself categorized as AFDC-FC on an ongoing basis, or in
which
the District made a negative case determination in considering
an
application. Thus, absent a showing by the District to the contrary,
we
must conclude that these cases would not have been included had
there
been any AFDC-FC quality control sample. See 45 CFR 205.40.
The District provided no support from the Act, the regulations,
policy
issuances, or Board cases for its contention that cases
lacking
applications literally would have been included within the definition
of
"case error," and that the quality control system would have
reached
those cases. The District cited statements by counsel to the
Agency in
a conference held in Docket No. 84-37 (consolidated with other
cases
involving a related issue), in which the District alleged that
the
Agency conceded that case errors included any erroneous claim for
FFP.
Appellant's Exhibit (Ex.) D, p. 46. Our reading of those statements
is
different; the Agency counsel corrected his statement and clarified
that
"case error" was dependent on incorrect determinations of
the
eligibility of recipients or beneficiaries. The District also
alleged
that the Agency had conceded that it could disallow only
individually
identified errors in factually identical cases involving
the
Pennsylvania Department of Public Welfare, Board Docket Nos.
84-39,
84-43 and 84-44. In those cases, however, the Agency made no
such
concession in the record before the Board. In proceedings before
the
Board, the Agency argued that extrapolation from a sample
was
appropriate. Although the Pennsylvania record shows that the
Agency
ultimately agreed to settle for the amount of individually
identified
errors, there is no indication that the settlement reflected any
binding
concession on the legal point.
While the District may be correct that the DHR-154-2 form should have
been
completed as part of the eligibility determination process, that is
beside
the point. The District presented no basis to find that the
quality
control system would cover this type of error. It is true that
some
errors which could be considered technical or administrative were
included in
the quality control system, such as the lack of a social
security
number. But these errors were explicit statutory conditions
of
eligibility for beneficiaries and, thus, directly affected
eligibility.
See, e.g., discussion in Preamble to 1980 Quality Control
Regulations,
45 Fed. Reg. 6330 (January 25, 1980); 45 CFR 232.10.
This case is distinguishable from prior Board cases, cited by
the
District, because in those cases the Agency did not contend that
the
errors involved were not eligibility determination errors. In one
case,
the Board addressed whether a lack of documentation
of
eligibility.redetermination was an error, but the parties did not
raise
the issue of whether it was an error within the scope of the
quality
control system. Louisiana Department of Health and Human
Resources,
Decision No. 580, October 22, 1984. In another, the Agency
counsel
familiar with the facts stated that sample cases of
inadequate
documentation were not counted as errors and that only "cases that
could
be determined as ineligible on the face of the documents were used
in
projecting. . ." the disallowance there. Docket No. 83-286,
Transcript,
p. 52. Thus, the Board concluded that the cases were within
the quality
control system and found that the Agency could not disallow in
excess of
individually identified errors. Montana Department of Social
and
Rehabilitation Services, Decision No. 581, October 24, 1984.
Furthermore, the prior Board cases involved program-wide
disallowances,
while in this case the disallowance would extend only over a
retroactive
claim for FFP submitted, in some instances, over a year after
the
payments were made. As we noted above, it is unclear that the
quality
control system would have covered such a claim in any event.
In sum, we find that the District has not met its burden of persuasion
in
this case. The District did not rebut the Agency's contentions with
any
factual evidence or legal authorities which could provide the Board
with any
basis to reverse this disallowance. We note that the record
was very
poorly developed, particularly for a dispute which has been
before the Board
for such an extended period of time and in which the
parties have had
numerous opportunities to raise and develop factual and
legal issues.
Thus, we conclude that the Agency could permissibly extrapolate
the
disallowance amount from the sample claims it examined.
Conclusion
For the reasons stated above, we uphold the disallowance in the
full
amount of $507,848.
________________________________ Cecilia Sparks Ford
________________________________ Donald F. Garrett
________________________________ Judith A. Ballard
Presiding
Board