Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Maryland
Department of Human Resources
Docket No. 90-126
Decision
No. 1225
DATE: February 7, 1991
DECISION
The Maryland Department of Human Resources (Maryland, State)
appealed
the determination of the Administration for Children, Youth and
Families
(ACYF) disallowing federal financial participation (FFP) in the
amount
of $522,760 claimed under title IV-E of the Social Security Act
(Act).
The disallowance was based on ACYF's review of foster care
maintenance
payments made by the State during fiscal year 1984. ACYF
found that 98
of a sample of 249 payments were not eligible for funding under
title
IV-E. Projecting the results of this review to the universe from
which
the sample was drawn, ACYF determined that payments totalling
$522,760
FFP were inappropriately claimed for fiscal year 1984.
ACYF
subsequently withdrew the disallowance with respect to four
sample
cases, and stated that it would take appropriate steps to
recalculate
the disallowance. ACYF brief dated 11/30/90, pp. 13-14.
On appeal to this Board, Maryland disputed ACYF's findings
of
ineligibility with respect to 19 of the sample cases (in addition to
the
four with respect to which ACYF withdrew the disallowance).
Maryland
also took the position that ACYF should not have extrapolated
the
results of the case review, and that the disallowance should be
reversed
except with respect to individually identified payments in the
remaining
sample cases.
For the reasons discussed below, we conclude that ACYF
properly
extrapolated the results of the case review. Moreover,
we conclude
that, in 18 of the 19 individual cases disputed by Maryland,
the
payments were not made to title IV-E eligibles. Specifically,
we
conclude that ACYF correctly found two cases ineligible on the
ground
that the state title IV-E agency was not responsible for the
child's
placement and care as required by section 472(a)(2) of the Act.
1/ We
further conclude that ACYF correctly found 16 cases ineligible on
the
ground that the child did not have a social security number as
required
by sections 472(a)(4) and 402(a)(25) of the Act. However, we
agree with
Maryland that FFP should not have been disallowed based on the
remaining
disputed case, which was reclassified by the State prior to the
review
as a State-funded rather than a title IV-E case. Thus, ACYF
should
reduce the disallowance by the amount attributable to this case.
2/
Below, we first describe the statutory framework of the foster
care
program. We proceed to discuss the extrapolation issue and then
the
grounds on which the individual cases were found ineligible.
Statutory Framework
The first federal foster care grant program was enacted in 1961
to
supplement the already existing Aid to Families with Dependent
Children
(AFDC) program. Congress added to title IV-A of the Act a
provision
making FFP available for payments on behalf of children for
whose
placement and care the State agency was responsible and who would
have
been eligible for AFDC had they remained in their own homes, but who
had
been removed from home as a result of a judicial determination
and
placed in foster care. This provision was modified by Congress in
1976
to broaden eligibility to include children whose placement had
been
judicially confirmed within six months of removal from the
original
home.
The Adoption Assistance and Child Welfare Act of 1980, Pub. L. No.
96-272,
transferred the title IV-A foster care program to a new title
IV-E of the
Act. The criteria for eligibility for foster care payments
remained
essentially the same. States were permitted to shift their
foster care
programs from IV-A to IV-E beginning October 1, 1980, and
were required to
have made the transition by October 1, 1982.
One of the requirements for title IV-E eligibility at issue here is
the
requirement in section 472(a)(2) that the --
. . . child's placement and care are the responsibility of
(A)
the State agency administering the State plan approved
under
section 471, or (B) any other public agency with whom the
State
agency administering or supervising the administration of
the
State plan approved under section 471 has made an
agreement
which is still in effect . . .
Also at issue here is whether the requirement for title IV-A
eligibility
in section 402(a)(25) applied to title IV-E. During the
time period in
question here, section 402(a)(25) required that a state's
title IV-A
plan provide --
that, as a condition of eligibility under the plan,
each
applicant for or recipient of aid shall furnish to the
State
agency his social security account number . . . .
A reference to section 402 generally appears in section 472(a)(4) of
title
IV-E, which requires that, in order to be eligible for title IV-E
foster care
maintenance payments, the child must have --
(A) received aid under the State plan approved under 402 .
.
. , or (B)(i) would have received such aid . . . .
Extrapolation from Sample
To review Maryland's title IV-E foster care program, ACYF used
a
stratified random sampling methodology to select a total of 249 cases
in
which payments were made in fiscal year 1984 in four jurisdictions
in
the State. ACYF found that 98 of the cases involved payments
not
eligible for funding as title IV-E foster care maintenance
payments.
These cases represented claims for FFP totalling $10,875.50.
ACYF then
projected, or extrapolated, the results of the sample to the
universe
from which the sample was selected and determined that at least
$522,760
FFP claimed for fiscal year 1984 represented unallowable
payments. See
letter from Horn to Colvin dated 5/2/90, p. 1, and
enclosure, pp. 2-3.
There is no dispute regarding the validity of the sampling
methodology
used by ACYF. However, Maryland took the position that, as
a matter of
law, ACYF was not permitted to disallow claims for FFP in title
IV-E
maintenance payments based on extrapolation from a sample.
Citing
Louisiana Dept. of Health and Human Resources, DAB No. 580
(1984),
Maryland argued that "[t]he Board has consistently rejected the
Agency's
attempts to impose disallowances based on extrapolation in the
AFDC-FC
[title IV-A foster care] program and the same holding should apply
to
the IV-E program" given its similarity to the IV-A program.
Maryland
brief dated 10/22/90, p. 7. Maryland also argued that, while
ACYF
issued a policy announcement (PA 84-2, dated March 7, 1984) five
months
after the beginning of the fiscal year in question here
which
specifically permitted disallowances in the title IV-E program based
on
extrapolation from a sample, the standards for retroactive
application
of this policy were not met.
ACYF responded that the Board "has always countenanced the
Department's
general policy of using sampling to arrive at
disallowances." ACYF
brief dated 11/30/90, p. 2. ACYF argued that
the Board had found
extrapolation an impermissible basis for a title IV-A
foster care
disallowance solely on the basis that the federal agency had a
contrary
policy during the relevant period. ACYF argued further that
the use of
extrapolation here was consistent with a later policy announcement
for
title IV-A issued on May 4, 1983 (PA 83-02), which stated that
ACYF
would use extrapolation as a basis for disallowances. ACYF also
argued
that, even had the earlier, contrary policy remained in effect, ACYF
was
not bound by the rules governing the prior program in administering
the
new title IV-E foster care program.
We conclude that ACYF was justified in basing the disallowance here
on
extrapolation from a sample. It is well-established in Board and
court
precedent that sound statistical sampling methodology can generally
be
used to determine the amount of costs properly charged to HHS
programs.
See, e.g., New York State Dept. of Social Services, DAB No. 1079
(1989),
p. 5. As ACYF correctly pointed out, the Board's holding
that
extrapolation was impermissible as a basis for taking disallowances
in
the title IV-A foster care program was predicated on its finding
that
the federal agency had adopted a contrary policy during the time
period
in question. It is clear from the Louisiana decision on which
Maryland
relied that, under other circumstances, the Board's position is that
--
[there is] . . . nothing wrong with the Department's
general
policy of using extrapolations from statistical samples
to
produce disallowances.
Louisiana, supra, p. 2. The Board also stated elsewhere in
that
decision:
We again affirm our position that extrapolation from
a
statistical sample may be reliable evidence of the amount
of
unallowable costs in a universe of claims, even though a
grantee
had no prior notice that it would be used. University
of
California--General Purpose Equipment Decision No.
118,
September 29, 1980.
Id., p. 6. Thus, the Board's reversal in Louisiana of the
disallowance
of extrapolated amounts was clearly based on an exception to
this
principle. See also Michigan Dept. of Social Services, DAB No.
589
(1984) (Board held that extrapolation was impermissible based on
the
same rationale on which Louisiana was based).
No such exception exists on the facts of this case. As ACYF noted,
PA
83-02 (issued after the period in question in Louisiana)
specifically
stated that it was ACYF's policy to use extrapolation in
taking
disallowances under title IV-A. Thus, assuming that the title
IV-E
foster care program was governed by the rules applicable to title
IV-A,
the use of extrapolation here was proper. If, on the other hand,
the
title IV-E program operated independently of any rules
previously
applicable under title IV-A, extrapolation was also proper since
there
was no contrary policy established specifically for the title
IV-E
program. It is irrelevant that ACYF did not issue a policy
specifically
providing for the use of extrapolation in title IV-E until after
the
beginning of the period in question here: as the Board pointed out
in
Louisiana, no prior notice is required to use an audit technique
which
produces reliable evidence of the amount of unallowable
costs. See
also Tennessee Dept. of Health and Environment, DAB
No. 898 (1987), pp.
6-7.
State Agency's Responsibility for Child's Placement and Care
ACYF found two cases, Sample No. 648 and Sample No. 662, ineligible
for
foster care maintenance payments on the ground that the State title
IV-E
agency was not responsible for the child's placement and care,
as
required by section 472(a)(2) of the Act. There is no dispute that
in
each case, the child's commitment to the State agency had
been
terminated or rescinded by the court and custody and
guardianship
granted to private individuals. Maryland asserted,
however, that the
State agency nevertheless retained responsibility for the
child's
placement and care within the meaning of the statute. In
support of its
position, Maryland cited State regulations providing that
"continuing
foster care" is "guardianship of the person granted to the foster
parent
and agency involvement limited to financial support."
COMAR
07.02.11.01D(6). Maryland also asserted that both ACYF and
the Board
had interpreted language in section 427 of title IV-B of the Act
which
was similar to that in question here to apply to situations where
the
foster parents had guardianship of the child. 3/ In addition,
Maryland
argued that the State agency's responsibility to provide services
in
support of the child's placement satisfied the statute since there
was
no specific requirement that the child be committed to the State
agency.
Finally, Maryland argued that, if ACYF's interpretation were adopted
and
reimbursement was not available for payments in such cases, a
state
would have less incentive to move a child into this type of
placement
even though it is considered an acceptable permanent placement
under the
statute.
ACYF responded that, by virtue of the court order in each case, the
court
had responsibility for the child's placement and the foster
parents
responsibility for the child's care, so that the statutory test
was not
met. ACYF also contended that the requirements of section 427
did not
apply to the children in question here, so that its
interpretation of that
provision was consistent with its interpretation
here. In addition,
ACYF argued that, even if the placements in question
constituted foster care
within the meaning of State law, this did not
mean that the federal statutory
requirements for title IV-E payments
were met. 4/
We find that, in the two cases at issue, the State agency did not
have
responsibility for the child's placement and care within the meaning
of
section 472(a)(2). In a prior decision, the Board concluded that
the
similarly worded predecessor of this section required that the
State
agency have "the ability to control where a child is placed, and
to
alter the plan of care without further petitioning of the court to
do
so." Washington Dept. of Social and Health Services, DAB No.
280
(1982), p. 8. (The Board held in Washington that this requirement
was
not met where a court order directed that a private
non-profit
organization be responsible for placement and care of the
child.)
Maryland did not dispute that, in the cases in question here, only
a
court could change the child's placement. As in Washington,
the
argument that the State agency could have sought a court order to
remove
the child from the placement in question is simply not persuasive,
since
the State could take the same action for a child living with
his
parents, in which case title IV-E payments would of course not
be
available.
Moreover, even if the State agency was responsible for providing
services
to support the child's placement, this did not constitute
responsibility for
the child's care. Indeed, the regulation cited by
Maryland indicates
that the State agency's official involvement in
guardianship cases was
"limited to financial support," which is clearly
not tantamount to
responsibility for the child's placement and care.
Maryland's interpretation
would render this restriction so broad as to
be meaningless: surely if
Congress had intended to make title IV-E
funds available for any case in
which the State agency took an interest,
it would not have required
specifically that the State agency have
responsibility for the child's
placement and care.
Furthermore, we need not reach the question whether, as the State
argued,
the unavailability of title IV-E funds might discourage states
from making
the type of placement in question here. Given the fact that
federal
funds are limited, it would not be unreasonable for Congress to
have made
them available only where the State agency had a greater role
than it had
here.
We find no support, moreover, for Maryland's contention that
similar
language in section 427 of the Act has been interpreted
differently.
Maryland claimed that Maryland Dept. of Human Resources, DAB No.
1053
(1989), indicated that children in permanent placements,
including
children placed with legal guardians, were generally subject to
section
427 requirements, which apply to children in foster care "under
the
responsibility of the State." However, as pertinent here, that
case
decided only the narrow question whether certain children, none of
whom
was placed with a guardian, were in permanent placements and thus
exempt
from the periodic review requirement (as reasonably interpreted
by
Maryland in the absence of the implementing regulations issued in
May
1983). Thus, the question raised here did not arise in that
case.
There is also no evidence that ACYF's interpretation of section 427
was
inconsistent with ACYF's position here. While Maryland noted that
ACYF
instructed it to include in the foster care universe to be
reviewed
under section 427 "[f]oster children living with guardian foster
parents
. . . ," (Maryland appeal file, Tab T, p. 147, (letter from David
J.
Lett, Region III Coordinator for Child Welfare Programs,
dated
2/27/84)), this letter also stated that "[c]hildren who have
been
returned to the custody of their parent(s), relative(s), or
other
guardian(s) (Aftercare) should not be included in the universe
from
which the sample is drawn since they are no longer in foster
care." Id.
This letter does not advance the State's case since it is
not clear in
which category of children the children in question here would
fall.
Moreover, it appears that Maryland itself did not interpret section 427
to
apply to children placed with a guardian. Documentation submitted
by
the State for Sample No. 648 indicates that annual reconsiderations
of
the child's care would be held. Maryland Ex. T, p. 144. That
Maryland
did not plan to provide this child with the periodic reviews
which
section 427 requires be held at least every six months undermines
its
argument that the State agency was responsible for the placement
and
care of such children. 5/
Children Without Social Security Numbers
ACYF found 16 cases ineligible for foster care maintenance payments on
the
ground that there was no evidence that the child had a social
security number
or had applied for one before the period covered by the
payments. ACYF
took the position that the requirement in section
402(a)(25) of the Act for a
social security number was also a
requirement for title IV-E eligibility by
virtue of section 472(a)(4),
which provides that a state shall make foster
care maintenance payments
only with respect to a child who was either
receiving or eligible to
receive title IV-A funds. The states were
advised of this
interpretation in guidelines issued by ACYF on May 19, 1983
(ACYF PIQ
83-2) which stated that "[i]n order to be eligible under title
IV-E, the
requirements of . . . section 402(a)(25) must be met."
Maryland appeal
file, Ex. W.
Maryland took the position, however, that subsequent legislation
showed
that Congress never intended to require social security numbers as
a
condition of title IV-E eligibility. Maryland pointed to
legislation
effective April 1, 1985 which amended the Act to require social
security
numbers as a condition of eligibility only for certain named
programs
including title IV-A but not title IV-E. Section 1137(a)(1)
and (b).
Based on this legislation, ACYF changed its policy effective April
1,
1985 to provide that the Act does not require a social security
number
in order for an otherwise eligible child to be eligible for the
title
IV-E program. ACYF-PA-86-01, dated 2/25/86, at Maryland Ex.
X.
Maryland argued that the subsequent legislation showed that
ACYF's
earlier interpretation did not reflect congressional intent and
that
therefore the legislation should have been applied
retroactively.
Maryland also argued that application of the requirement for a
social
security number would serve no useful purpose because there was
no
indication that any of the children in question here had earnings
which
would have been identified by using their social security numbers.
We conclude that ACYF reasonably interpreted the Act prior to
its
amendment as requiring social security numbers as a condition of
title
IV-E eligibility, and that there was no basis for
retroactive
application of the subsequent legislation. There is no
dispute that,
during the relevant period, the Act required social security
numbers as
a condition of eligibility for title IV-A. Similarly, there
is no
dispute that the Act made title IV-A eligibility a condition
of
eligibility for title IV-E. Thus, as a matter of simple logic, it
can
be concluded that a social security number was required in order for
an
individual to be eligible for title IV-E. In our view, this
requirement
is just as clear as if the Act had stated it directly.
Accordingly,
retroactive application of the subsequent legislation was not
justified
on the ground that it clarified an ambiguity or filled a gap in
the
statute. Moreover, we disagree with Maryland's position
that
retroactive application of the subsequent legislation was justified
on
the ground that no purpose was served by application of the
requirement
for social security numbers. Even if there was no need for
this
requirement in the case of any of the children in question here,
the
requirement was reasonable since Maryland did not deny that
the
requirement might serve some purpose in the case of other children.
See
New York State Dept. of Social Services, DAB No. 1012 (1989), p. 8.
Payment for Case Reclassified by State as Ineligible
ACYF found Sample No. 746 ineligible for title IV-E foster
care
maintenance payments on several grounds, including lack of a
social
security number. ACYF Ex. 3, p. 13. Maryland contended,
however, that
even if one or more of ACYF's findings were correct, no
disallowance was
warranted with respect to this child because the State
itself had
reclassified the child as ineligible prior to the federal review
and had
returned title IV-E funds claimed for the child to the
federal
government. Thus, in Maryland's view, the child should not have
been
included in the sample. ACYF did not dispute that a child for whom
no
title IV-E funds were claimed should not be included in the
sample.
However, ACYF asserted that this case should not be removed from
the
sample because Maryland had reclassified the child as ineligible
for
title IV-E only after ACYF identified the case as one which would
be
included in the sample. The rationale for ACYF's position was
that
"[i]f a state could have erroneous cases removed from the sample
simply
by agreeing with the agency that it had erred and returning the
funds,
it could easily have all the cases in which it erred removed from
the
sample." ACYF brief dated 11/30/91, p. 14.
While we do not disagree with the rationale stated by ACYF, we
conclude
that, contrary to ACYF's assertion, Maryland found the child
ineligible
for title IV-E before the sample was taken. The record
includes a
letter from the State to the federal agency confirming that
"[t]he
sample selection will take place in Prince George's and
Mongtomery
Counties on 3-6-85. . . ." Maryland Ex. E, letter from
Farrow to Myers
dated 2/27/85. The case in question was selected from
Prince George's
County. ACYF Ex. 3, p. 13 of enclosure. ACYF did
not deny that the
sample selection in fact took place as scheduled. The
record clearly
establishes, moreover, that Maryland reclassified the child
as
ineligible for title IV-E prior to March 6, 1985, with a
determination
by the local department of social services on February 4, 1985
that the
payments made for the child in question were charged incorrectly
to
title IV-E funds (Maryland Ex. V, p. 1) and a journal voucher
entry
dated March 5, 1985 reflecting a debit to state funds in the amount
of
the payments made for the child. Id., p. 2.
Since ACYF's position that the child should have been included in
the
sample was based solely on its mistaken belief that
Maryland
reclassified the child as ineligible for title IV-E after the review
was
conducted, we conclude that the child should be removed from the
sample,
as argued by the State.
.Conclusion
For the reasons discussed above, except with respect to Sample No. 746,
we
uphold the disallowance as reduced by ACYF pursuant to its decision
to
withdraw the disallowance pertaining to four cases.
___________________________ Judith
A.
Ballard
___________________________ Norval
D. (John)
Settle
___________________________ Donald
F.
Garrett Presiding Board
Member.1.
Although there were additional
grounds for
ACYF's finding of
ineligibility in each of
these cases, we
need not consider them. In
any
event, it appears that ACYF no longer
relies on these additional grounds since
it
did not mention them in its
brief.
2. It appears that ACYF's policy was simply to drop a
case which was
found not to belong in the sample rather than to substitute
another case
since that is how ACYF treated two of the four cases with
respect to
which it withdrew the disallowance.
3. Section 427 provides that a state may receive
additional funds
for child welfare services, beyond the amount otherwise
available under
title IV-B of the Act, if the state meets certain
requirements for
protecting children in foster care "under the responsibility
of the
State."
4. ACYF noted in any event that the Maryland Code
provided that the
foster care program covered children -- who are abused,
abandoned,
neglected, or dependent, if a juvenile court:
(i) has determined that continued residence in
the
child's home is contrary to the child's welfare;
and
(ii) has committed the child to the custody
or
guardianship of a local department.
Md. Family Law Code Ann. section 5-525(a)(2) (1984) (emphasis
added).
Under this provision, the children in question here would not
be
considered in the State's foster care program.
5. In any event, it is arguable that the section 427 protections do
not
apply to children living with guardians since one of the objectives
of
the periodic review is "to project a likely date by which the child
may
be returned home or placed for adoption or legal guardianship. . .
."
Section 475(5)(b). If legal guardianship is a placement goal under
the
statute, there might be no need to review the child's status once
the
child was in this