Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Massachusetts Department of Social Services
DATE: March 2, 1992
Docket Nos. 90-116 and 90-133
Decision No. 1308
DECISION
The Massachusetts Department of Social Services (State) appealed
two
determinations affecting the State's funding under Title IV-E
(Foster
Care) of the Social Security Act (Act):
(1) Docket No. 90-116: The Administration for
Children and Families
(ACF) disallowed $14,114,086 in federal financial
participation (FFP)
claimed as administrative costs under Title IV-E for the
quarters ending
September 30 and December 31, 1986. This amount
represented the
difference between the amount the State had originally
claimed for
certain social worker costs and the State's revised claims
submitted in
1988. The State subsequently proposed an allocation method
under which
it would be entitled to $1,299,830 FFP for the two quarters, in
addition
to its original claims (thus effectively acknowledging that
$12,814,256
of the revised claims were unallowable). Transcript of
Hearing held
12/5/90 - 12/6/90 (Tr. I) at 8-9.
(2) Docket No. 90-133: The Regional Director, Region I, affirmed
a
decision by the Division of Cost Allocation (DCA). DCA had denied
the
State's request that the modified amendment to its cost allocation
plan
(CAP), as approved by DCA on July 13, 1989 with an effective date
of
July 1, 1988, be given a July 1, 1986 effective date.
ACF based its disallowance on two grounds: (1) that the
retroactive
claim for the quarter ended September 30, 1986 was not timely
filed; and
(2) that the State's claims were not in accordance with the CAP
in
effect during 1986 and were calculated using the results of time
studies
conducted in later periods. DCA's decision to.deny retroactive
approval
of the State's amended CAP (which called for use of a time study)
was
based on the fact that the State had no valid time study data from
the
retroactive periods.
For the reasons stated below, we uphold DCA's decision.
Retroactive
amendment of a CAP is appropriate only if specified regulatory
standards
are met, and DCA reasonably found that those standards were not
met
here. Moreover, even an allocation method proposed prospectively
must
be valid. The allocation method the State proposed here (which
differs
from the time study method in the amended CAP) essentially
involves
"backcasting" of data to the disallowance period. Under prior
Board
decisions, the State had the burden of showing that "backcasting"
was
valid. While the State here satisfactorily answered some of
DCA's
concerns about "backcasting," the State's presentation was
nonetheless
flawed in certain key respects.
In light of our decision denying retroactive amendment of the CAP, we
also
uphold ACF's disallowance of the claims for the two 1986 quarters,
as
inconsistent with the applicable CAP. We also conclude, as ACF
did,
that the revised claim for the first of those quarters was
barred
because it was not timely filed.
Title IV-E
Title IV-E of the Act (enacted by the Adoption Assistance and
Child
Welfare Act of 1980, Public Law 96-272) provides for
maintenance
payments for children in foster care and adoption assistance for
special
needs children. Title IV-E funds are made available for states
which
have submitted, and had approved by ACF, state plans meeting
federal
requirements. Section 471 of the Act. FFP is available,
under an
approved state plan, for foster care maintenance payments or
adoption
assistance for children who meet specified eligibility
requirements.
Sections 472, 473 of the Act. In addition, states may
receive FFP for
expenditures "found necessary . . . for the proper and
efficient
administration of the State plan," including certain training costs
(75%
FFP) and other administrative expenditures (50% FFP). Section
474(a)(3)
of the Act.
ACF regulations implementing Title IV-E are codified at 45 C.F.R.
Parts
1355 and 1356. Section 1356.60(c), which governs administrative
costs
other than training, states: "The State's cost allocation plan
shall
identify which costs are allocated and claimed under [Title
IV-E]."
This section specifies certain costs directly related.only to
the
administration of the Title IV-E foster care program (such
as
determination of eligibility), which may not be claimed under any
other
federal program. The section also gives examples of activities
which
will be considered necessary for the administration of the foster
care
program (such as developing a case plan and placing a child) and
other
activities which are not allowable under Title IV-E (such as
counseling
or treatment services to remedy a child's behavior).
The Cost Allocation Plan Process
A state participating in public assistance programs under the
Act,
including Title IV-E, is required to determine what part of
commonly
incurred expenditures, such as staff salaries, is allocable to
each
program the state administers. A state is required to submit a
plan for
cost allocation to the Director, DCA, in the appropriate HHS
regional
office. 45 C.F.R. .95.507(a). This cost allocation plan
is defined as
"a narrative description of the procedures that the State
agency will
use in identifying, measuring, and allocating all State agency
costs
incurred in support of all programs administered by the State
agency."
45 C.F.R. .95.505. The CAP must contain sufficient information
to
permit the DCA Director to make an informed judgment on the
correctness
and fairness of the state's procedures for identifying,
measuring, and
allocating all costs to each of the programs administered by
the state
agency. 45 C.F.R. .95.507(a)(4).
A state may amend its CAP for various reasons, including the discovery
of
a material defect in the CAP or a change which makes the allocation
basis or
procedures in the approved CAP invalid. 45 C.F.R. .95.509(a).
The
regulation at 45 C.F.R. .95.515 describes when a CAP amendment
takes
effect:
As a general rule, the effective date of a cost allocation
plan
amendment shall be the first date of the calendar
quarter
following the date of the event that required the amendment. .
.
. However, the effective date of the amendment may be
earlier
or later under the following conditions:
(a) An earlier date is needed to avoid a significant
inequity
to either the State or Federal Government.
(b) The information provided by the State which was used
to
approve a previous plan or plan amendment is later found to
be
materially.incomplete or inaccurate, or the previously
approved
plan is later found to violate a Federal statute or
regulation.
In either situation, the effective date of any
required
modification to the plan will be the same as the effective
date
of the plan or plan amendment that contained the defect.
If a CAP amendment is disapproved, the state may appeal the
disapproval
first to the Regional Director and then to this Board.
Costs not
claimed in accordance with an approved CAP (or a pending
proposed
amendment) will be disallowed. 45 C.F.R. .95.519.
Factual Background
In 1986 Massachusetts was claiming its Title IV-E administrative
costs
under a CAP that had been approved by DCA in 1983 with an effective
date
of October 1, 1982, and modified in 1985 (CAP I). The part of CAP
I at
issue here sets out the allocation method for a pool of costs
(cost
pool) consisting of salaries and related costs of certain social
workers
(and their supervisors). As described at the hearing in this
case,
these social workers provide an array of services to protect
children
whose welfare is at risk and to strengthen families,
including
investigating child abuse, recruiting and training foster
homes,
identifying family problems, developing service plans, and
providing
counseling and therapy. Tr. I at 71-75. 1/
Under CAP I, the State allocated these social worker costs to Title
IV-E
through the use of a ratio, with the "# of IV-E Cases Claimed" as
the
numerator of the ratio and the "Generic Caseload Count" as
the
denominator. This ratio, expressed as a percentage, was then
multiplied
by an amount equal to 50% of the total cost pool to determine the
amount
of FFP the State could claim for these costs under Title IV-E.
The
State said that the actual ratios used during the period modified CAP
I
was in effect (January 1, 1985 until March 31, 1987) ranged from 4%
to
8%. State Ex. 15, Att. B.
In 1987, DCA performed a review of CAP I. A State official
testified
that his understanding was that DCA was concerned that
Massachusetts had
the highest rate of .administrative to maintenance claims
in the
country. Tr. I at 19. In the course of its review, DCA
learned that
the State was interpreting CAP I differently from DCA. DCA
found that
the State was using a count of individuals in the numerator of
the
allocation ratio, and a count of family groups in the denominator.
In
DCA's opinion, this was impermissible because it was not
using
comparable data. Tr. I at 203. DCA advised the State that
it must
propose a new method for allocating social worker costs, suggesting
use
of a study of social worker time (as DCA had also suggested to the
State
previously). Tr. I at 25-34, 199-100.
The State rejected the use of a time study and instead negotiated with
DCA
about various proposed methods, generally based on caseload
statistics.
Tr. I at 28-34, 60-61. DCA rejected all of these methods
except one,
and informed the State that unless it revised its CAP to
include this method,
the State's claims would be disallowed. Tr. I at
203-204. The
State then submitted a CAP including this method, which
DCA approved
effective April 1, 1987 (CAP II). CAP II used a ratio with
"# of IV-E
Cases Claimed" in the numerator and "Generic Caseload Count x
(Individuals
per family count - 1)" in the denominator. The State said
that the
actual ratios used "during" the period CAP II was in effect
ranged from 1.8%
to 3.5%. State Ex. 15, Att. B.
Meanwhile, the State was concerned that it was not identifying
all
children in foster care who were eligible for maintenance payments
under
Title IV-E. Thus, it hired a consultant who advised the State on
how to
increase its maintenance claims and who assisted the State in
developing
a time study method for allocating social worker costs.
On June 29, 1988, Massachusetts submitted a revised CAP (CAP III).
CAP
III proposed use of a random moment time study (RMTS) which would
survey
a sample of social worker time. Social workers were to identify
the
predominant activity in which they were engaged during the
"survey
moment" according to eight activity codes. The codes which
were
identified in CAP III as representing activities claimable under
Title
IV-E were Code 1 ("Child Welfare Training"); Code 2 ("Title IV-E
and
Medicaid Eligibility Information Gathering and Documentation"); Code
5
("Child Welfare Case Management/Administration - DSS Placement");
and
Code 6 ("Child Welfare Case Management/Administration - No
DSS
Placement"). State Ex. 2. .DCA asked for clarification of
some of the
definitions and instructions for the RMTS system and began
discussions
with the State over whether the State needed to apply an
"eligibility
factor" to the RMTS results since some of the coded activities
related
to children who were neither eligible for IV-E nor potentially
eligible.
As a result, CAP III was clarified and was modified to include
an
eligibility factor (the number of IV-E eligible cases divided by
the
total number of "Out of Home" cases). State Exs. 4 and 5.
The
eligibility factor was to be applied to activity Codes 1, 5, and 6,
but
not to Code 2. On July 13, 1989, DCA approved modified CAP III,
with an
effective date of July 1, 1988. State Ex. 6.
On July 13, 1989, Massachusetts submitted revised Title
IV-E
administrative cost claims for quarters ending September 30,
and
December 31, 1986. These revised claims were calculated based upon
RMTS
results for the last two quarters of fiscal year 1988, without
applying
an eligibility factor, and totaled $14,114,086 (after deduction of
the
amounts the State had claimed for those quarters under CAP I).
ACF
disallowed these revised claims on the basis that the claim for
the
quarter ending September 30, 1986 was not filed in a timely manner
and
that both claims were not in accordance with the approved CAP in
effect
in 1986 (CAP I). The State appealed this disallowance to the
Board
(Docket No. 89-219).
In October 1989, the State requested that DCA approve a
retroactive
effective date of July 1, 1986, for the State's modified CAP III.
2/
(As we discuss below, however, the State did not implement the
RMTS
until 1988 and based its claims for periods before the RMTS
was
implemented on "backcasting" RMTS data.) The parties agreed to
dismiss
without prejudice the disallowance for the two 1986 quarters, pending
a
decision on this request. DCA ultimately denied the request on
the
basis that it could not be assumed that the time study data
reflected
worker effort for any period other than the quarter sampled.
The
Regional Director upheld the denial, and the State appealed
that
decision to this.Board (Docket No. 90-133) and reinstituted its
appeal
of ACF's disallowance (Docket No. 90-116).
The Issues
During the course of this proceeding, the State acknowledged that it
had
calculated its revised claims for the two quarters of 1986 using
the
original version of CAP III, and needed to recalculate the amount
using
an eligibility factor. The State presented new calculations
using
activity code percentages based on mean RMTS data for the period July
1,
1988 to June 30, 1989 and eligibility factors based on data from
the
relevant 1986 quarter. 3/ The State contended that these
calculations
showed that the State was entitled to receive for social worker
costs at
least $1,115,761 in FFP for the quarter ending September 30,
1986
($627,465 more than the State had received under CAP I) and at
least
$1,220,565 for the quarter ending December 31, 1986 ($672,365 more
than
the State had received under CAP I).
The State argued that retroactive approval of revised CAP III was
required
either on the basis that use of CAP I and CAP II resulted in a
"significant
inequity" to the State or that those CAPs each had a
"material defect."
In addition to comparing allowable percentages under
the various CAPs, the
State alleged the following in support of its
position that retroactive
approval was necessary to avoid a significant
inequity: (1) that ACF
guidance on what administrative costs could be
claimed was unclear and
untimely; (2) that DCA did not provide the State
with .any examples of
acceptable time studies; and (3) that DCA had
forced the State to accept the
CAP II method, even though DCA was aware
that the State was underclaiming
maintenance payments (and therefore
administrative costs).
In response to objections by DCA and ACF (the Agencies) that the State
was
using data from later quarters, the State argued that such
"backcasting" was
permissible so long as the State showed there were no
significant differences
in the two periods. The State conceded that
there were some changes
occurring in certain characteristics of its
caseload between 1986 and 1990,
but said it could demonstrate that
social worker time spent on eligible Title
IV-E activities was stable
during this period. The State presented
evidence, including analyses by
a statistical sampling expert, to show that
its basic administrative
structure was the same and that changes in caseload
characteristics
identified by the Agencies had no statistically significant
effect on
social worker time (except one characteristic, which favored the
State).
After first indicating that it would seek a waiver of the timely
filing
requirement for its revised claim for the quarter ending September
30,
1986, the State argued at the hearing that this was not a new claim,
but
fell within an exception for "adjustments to prior year costs."
The
State also argued that the Board should order the Agencies to
pay
revised claims for the period January 1, 1987 to June 30, 1988 (based
on
the calculation method presented to the Board), even though the
State
had not yet submitted such revisions.
Although the State's arguments were framed as a request for
retroactive
effect of CAP III, we note that the allocation method proposed is
not
that called for in CAP III as approved. The RMTS system
contemplates
collecting survey moments on an ongoing basis and calculating a
claim
for any quarter based on the moments collected during that quarter;
the
proposed method "backcasts" RMTS data from later periods.
Thus, the issues presented are:
I. Whether the State's revised claim for the quarter ending
September
30, 1986 fell under an exception to the timely filing
requirements;
II. Whether "backcasting" of data is ever permissible, and, if
so,
under what circumstances; .III. Whether the State showed that
a
retroactive effective date for its proposed method was necessary
to
avoid a "significant inequity" or because of a "material defect" in
CAP
I and CAP II; and
IV. Whether the State showed that its proposed method, even though
it
"backcast" data, was a valid method for calculating the amount to
which
the State was entitled for social worker costs.
Discussion
I. The claim for the quarter ending September 30, 1986 was not
an
"adjustment to prior year costs."
Section 1132 of the Act (added in 1980) generally prohibits FFP in
any
claim for expenditures made under Title IV of the Act, unless the
claim
is filed within a two-year period after the quarter in which
the
expenditure is made. Pub. L. 96-272, .306. The filing limit
must not
be applied, however, "so as to deny payment with respect to
any
expenditure involving . . . adjustments to prior year costs."
Section
1132(a) of the Act. 4/
Applicable regulations define "adjustment to prior year costs" to
mean
--
an adjustment in the amount of a particular cost item that
was
previously claimed under an interim rate concept and for
which
it is later determined that the cost is greater or less
than
that originally claimed.
45 C.F.R. .95.4.
This definition was published in 1981, shortly after the enactment
of
section 1132. 46 Fed. Reg. 3,527, at 3,529 (January 15, 1981).
The
preamble explained that subsequent adjustments of this type
were
unforeseen and unavoidable and that a broader definition
of
the.exception would render the statute a nullity. 46 Fed. Reg.
at
3,528. The purpose of section 1132 is to ensure that states
submit
final reimbursement requests in a timely fashion so that HHS can
plan
its budget. Thus, we have held that the exception should not be
applied
where a state was aware of costs, but simply failed to claim
them. We
distinguished this situation from adjustments where an interim
rate did
not include costs of which a state was not aware at the time it
filed
its claim based on the interim rate or where a delay in establishing
a
final rate was due to circumstances beyond a state's control.
Courts
have upheld this approach. See South Carolina Health and Human
Services
Finance Commission v. Sullivan, 915 F.2d 129 (4th Cir. 1990).
Here, there is some question whether the State determined that the
amount
of "a particular cost item" is greater than originally claimed.
The State is
not adjusting the amount of any of the social workers'
salaries or other
costs which are the expenditures in which FFP is
claimed. The State's
revised claim was based on an adjustment to the
percentage figure applied to
the same cost pool used in the original
claim. The State's position
appears to be that the cost pool should be
considered "a particular cost
item," but the State provided no support
for this interpretation.
The more critical question here is whether the "ratio" used in CAP
I
constitutes an "interim rate concept" within the meaning of 45
C.F.R.
.95.4. The term "interim" means "provisional" or
"temporary."
Webster's Third New International Dictionary at 1179. The
ratio
established by CAP I, however, is not identified as an
"interim,"
"provisional," or "temporary" method of determining what
percentage of
the social worker cost pool would be allocated to Title
IV-E. Rather,
CAP I contemplates that, once the numerator and
denominator are known,
the resulting percentage will be applied to the cost
pool and that this
will determine the amount of the State's claims. The
mere fact that, in
certain specified circumstances, a CAP may be
retroactively amended does
not bring a ratio determined under a CAP within
the concept of an
"interim rate." Here, the delay in claiming was not
due to
circumstances beyond the State's control which prevented it
from
adjusting from an interim to a final rate within the two-year
filing
period. If the State had chosen to implement an RMTS system at
an
earlier date, the State could have done so. Moreover, the State is
not
simply adjusting a rate according to a pre-established formula
for
adjustment, but is attempting to change the method for determining
the
rate. .Thus, we conclude that the claim for the quarter
ending
September 30, 1986 is not an "adjustment to prior year costs"
and
therefore is barred because it was not timely filed.
II. "Backcasting" is permissible in some circumstances, but the
State
has the burden of showing those circumstances exist.
The Board has previously addressed (in several different contexts)
the
question whether sample results may be applied retroactively to
an
earlier, unsampled period. The Board has held that the proponent
of
such "backcasting" of data, in any context, has the burden of
showing
the validity of the method proposed. Where a party seeks
retroactive
approval of a CAP, the proponent of the method must also show
that one
of the regulatory standards for giving retroactive effect to a
CAP
applies. Establishing the validity of a proposed method is a
separate
step, which is necessary in order to establish the amount claimed
and
would be required even for prospective approval.
In California Dept. of Health Services, DAB No. 666 (1985), the
Board
permitted California to claim enhanced funding for abortions paid
for
between 1972 and 1977 based on data acquired in 1977 and 1978.
The
Board noted that the parties in that appeal had concluded that data
from
the 1977-1978 period would be the best available evidence
for
identifying what services in the earlier period were for family
planning
and had agreed that there were no significant differences between
the
periods to make use of the later period inappropriate. California
at 2.
In Ohio Dept. of Human Services, DAB No. 900 (1987), the Board stated:
While sampling in its purest form envisions samples
from the same
period in question, common sense would
dictate that samples from
another period may be used
if it can be established that no
substantial change
has occurred so as to invalidate the procedure.
At 11. The Board concluded that Ohio had failed to produce
sufficient
evidence to establish that there were no significant differences
between
the data from the audited period and other periods. See also
Washington
State Dept. of Social and Health Services, DAB No. 924
(1987). .In
Missouri Dept. of Social Services, DAB No. 1021 (1989), the
Board
stated:
The Board's analysis therefore permits sample results from
one
period to be used to support claims from contiguous periods
when
no better documentation is available, provided that it can
be
shown that there are no significant differences between
the
periods. The Board has recognized this approach as an
expedient
tool, particularly when the parties are in agreement on the
need
to establish a claim amount. The party asserting the use
of
data from unsampled periods has the burden of showing
that
circumstances relating to the sampled and unsampled periods
are
such that the data can be used for the unsampled period. We
are
not prepared to state what degree of similarity in
circumstances
is necessary to support the retroactive application of
sampling
results or other data; each case must be judged by
its
particular circumstances.
At 14. Missouri was seeking to use data from the last six weeks of
one
quarter to substantiate its claims for earlier quarters. The
Board
found that the six weeks of the quarter Missouri sought to use
as
representative of earlier quarters was significantly different from
the
earlier quarters. The Board accordingly found that the data from
those
six weeks could not be used to substantiate claims for other
quarters.
In Maryland Dept. of Human Resources, DAB No. 1020 (1989), a
Board
decision cited by DCA as authority for denying the State's request
for
an earlier effective date for its CAP amendment, Maryland sought to
have
a CAP amendment applied retroactively in order to recover $4.8
million
in unreimbursed Title IV-E administrative costs. Since the
beginning of
the Title IV-E program, Maryland had a CAP which allocated the
costs of
social workers' activities based on a time study known as the
Random
Moment Study (RMS). Maryland claimed that a new time study
system, the
Social Services Time Study (SSTS), determined that its Title
IV-E
activities were being underclaimed. Maryland sought to apply
the
results of the SSTS for the quarter ended December 31, 1985 to the
prior
eight quarters that had used the RMS.
The Board found that Maryland's methodology was flawed and that, in
any
event, Maryland should have known it was underclaiming because its
RMS
system did not allocate a particular category of costs to Title
IV-E,
even though those costs were specifically identified in the
IV-E
.regulations as allowable. The Board's decision was overturned
in
Colvin v. Sullivan, Civil No. H-89-1652 (D.Md. Feb. 21, 1990), but
was
ultimately upheld.
The district court found that 45 C.F.R. .95.515 was inconsistent with
the
timely claims provisions in section 1132 of the Act.
Massachusetts
relied on the district court decision in its initial briefs
here, but
that decision was overturned in Colvin v. Sullivan, 939 F.2d 153
(4th
Cir. 1991), which reinstated the Board's decision. The Fourth
Circuit
found that no incompatibility existed between 45 C.F.R. .95.515 and
the
timely claims provisions of section 1132 of the Act. The court
further
found that 45 C.F.R. .95.509(a) --
gives states an incentive to carefully examine their CAPs at
all
times, to discover any defects that might exist as early
as
possible. Maryland could not prove that the RMS method
was
materially defective until it began measuring the
employees'
time by the SSTS method, on October 1, 1985.
Increasing
disbursements from the date that Maryland began measuring by
the
SSTS method, and no earlier, is entirely appropriate.
939 F.2d at 156. The court concluded:
[W]e find that the Secretary's approving of the SSTS method
for
use only in periods where SSTS data had actually been
collected
was both logical and an appropriate exercise of the
discretion
mandated by statute. The statute of limitations
provision of
the Social Security Act did not require the Secretary to
accept
an application for reimbursement that otherwise
lacked
sufficient support, and does not preclude the Secretary
from
setting more stringent standards for the approval of
retroactive
adjustments to CAPs.
939 F.2d at 157.
In sum, backcasting may be permissible to establish the amount of a
claim,
but the State has the burden of showing that it is appropriate
under the
particular circumstances. In the context of a retroactive
amendment of
a CAP, the State must (as a separate requirement) meet the
stringent
standards in 45 C.F.R. .95.515. As we discuss next, the State
did not
meet those standards, even assuming the permissibility of
backcasting
here.
III. The
State did not establish that retroactive amendment
of the CAP was
required.
As the Fourth Circuit recognized in Colvin, the regulatory
requirements
for CAPs reasonably set stringent standards for the approval
of
retroactive amendments to CAPs. The regulations place the burden
on
states to carefully examine their CAPs and to discover any defects
as
soon as possible. Thus, retroactive amendment is appropriate only
where
"an earlier date is needed to avoid a significant inequity" or
"the
information provided by the State which was used to approve a
previous
plan or plan amendment is later found to be materially incomplete
or
inaccurate . . . ." 45 C.F.R. .95.515. As we discuss in this
section,
the State did not establish that either of these conditions was
met
here.
A.
The State did not establish a significant
inequity.
The State argued that we should find there was a significant inequity
here
because (1) ACF guidance on what administrative costs could be
claimed was
unclear and untimely; (2) DCA did not provide the State with
any examples of
acceptable time studies; and (3) DCA had "forced" the
State to accept the CAP
II method, even though DCA was aware that the
State was underclaiming
maintenance payments (and therefore
administrative costs). The State
also relied on the alleged differences
in the amounts claimed under CAPs I
and II and the amounts determined
using the State's proposed method.
The State did not point to any specific lack of clarity in
ACF's
regulations on administrative costs, other than referring to
this
Board's decision in Missouri Dept. of Social Services, DAB No.
844
(1987). In that decision, the Board held that ACF could not
reasonably
interpret the statute and regulations to limit allowable costs
of
determining eligibility for Title IV-E (and providing certain
required
preplacement services) only to costs associated with
individuals
actually found eligible. We agree with the State that there
was some
lack of clarity in ACF policy in this regard prior to the
Missouri
decision. However, the State did not provide any evidence that
it had
been influenced in choosing a CAP method by ACF's
earlier
interpretation. Instead, the evidence indicates that the State
opted
for a very unsophisticated approach in its CAPs because it was
aware
that its major problem was in failing to identify Title IV-E
eligibles,
and it chose to devote its energies to .that effort. Tr. I
at 28-34,
60-61, 203. Moreover, the State was aware of the Missouri
decision at
least as of May 1987. Tr. I at 34-35; 205-206.
Although a state could
not take advantage of that decision unless it had a
time study method
for allocating costs, the State did not submit such a
method until June
29, 1988. Thus, the State did not establish any
connection between a
lack of clarity in ACF policy and the State's failure to
implement its
RMTS system at an earlier date. 5/
We also do not find any inequity in DCA's failure to provide the
State
with examples of acceptable time studies. While of course it
would have
been helpful if DCA had done this, the regulation puts the burden
on the
State to propose a CAP method. The validity of any time study
method
may depend on the particular circumstances of the individual
state's
organization, so DCA may have been reluctant to suggest that a
time
study method approved for another state was appropriate
for
Massachusetts. DCA did mention to the State that it might wish to
use
time studies, and the State had its own reasons why it did not do
so.
Tr. I at 25-34, 60-61, 199-203, 222-225. Moreover, the State could
have
itself obtained approved time studies from other states (which
it
apparently did not even attempt to do) or from a consultant (as
it
ultimately did).
The fact that the State has the burden to propose a CAP method and has
the
information necessary to determine what method is appropriate also
undercuts
the State's position that DCA unreasonably forced the State to
accept the CAP
II method. DCA reasonably found that the other two
methods proposed by
the State at the time had no basis in logic or
reason. State Ex. 15,
Att.; Tr. I at 218-219. The method DCA said was
acceptable recognized
some greater effort for IV-E cases than for other
cases handled by the social
workers. Tr. I at 204. The State had
failed to show any
reasonable basis for recognizing an effort greater
than that recognized by
the CAP II method. The mere fact that the State
was not claiming as
much FFP in Title IV-E maintenance payments as it
could have did not require
DCA to accept an illogical and .unsupported
CAP method for claiming
administrative costs. Indeed, any underclaiming
of costs was due to the
State's own failure to determine IV-E
eligibility.
We also note that some of the administrative costs at issue here are
ones
which may be allocated to Title IV-E, but which the State is not
required to
allocate to that title. These are the types of costs which
the State
may choose to claim under other programs. Indeed, the State's
original
allocation of part of the costs to Title XX (Social Services)
could have
resulted in their reimbursement by that program except for
the fact that
there is a ceiling on Title XX costs and the State chose
to claim other types
of costs under that title rather than the social
worker costs at issue
here. See Tr. I at 160-161. Because of the
potential overlap
between programs, the Title IV-E regulations
specifically provide that the
State's option of a program under which it
will claim overlapping costs be
exercised in an approved CAP. In other
words, the State's failure to be
federally reimbursed for some of its
social worker costs under Title IV-E can
in the circumstances of this
case be viewed as resulting both from the
State's option of an
allocation method and from its choice not to claim
reimbursement under
Title XX or some other program. 6/
Finally, as discussed below, the State's proposed method does
not
establish with a reasonable degree of certainty the amount the
State
could have claimed if it had implemented an RMTS sooner. Even if
we
would accept the State's proposed method as establishing
reasonable
estimates to be compared to the amounts the State actually
claimed,
however, this comparison does not establish a significant
inequity. In
Maryland, we specifically did not reach the issue whether
a disparity in
claim amounts under two methods would be sufficient to
establish a
significant inequity. Maryland at 7. Assuming that
such a disparity
could establish a significant inequity if it showed that a
state was not
receiving a substantial amount of federal funds to which it
was
entitled, however, we find that DCA was not.required to determine
that
such an inequity existed under the circumstances here.
We are aware that, from one point of view, there seems to be a
substantial
disparity between the amounts the State originally claimed
and the amounts
determined by the State's proposed method. For the
quarter ending
September 30, 1986, 50% of the total cost pool for social
worker costs was
$12,167,517 of which the State originally claimed
$488,296, or 4.01%.
The State's proposed method would increase the
claim by $627,465, to
$1,115,761 (9.17% of the social worker cost pool).
In context, however, this
increase can reasonably be viewed as not so
substantial that it requires
retroactively amending the CAP. The
increase is only 5.16% of the total
social worker cost pool, and that
cost pool represents only part of the
State's total administrative
costs. Other cost pools were charged
directly to Title IV-E or
allocated using a different method. See State
Ex. 2. Moreover, if the
State had implemented the RMTS method sooner,
presumably it would have
had higher costs from administering that method than
it had from the
simple case ratio method used under CAP I.
The same analysis applies to the quarter ending December 31, 1986.
The
State originally claimed $548,200, which is 3.90% of $14,045,624,
which
is the federal share (50%) of the social worker cost pool. The
State's
proposed method would increase the claim by $672,365 to $1,220,565,
or
8.69%. This is an increase of only 4.79% of the total cost pool.
While the claim disparity could be greater if viewed over the
entire
period from the start of the disallowance period through the CAP
II
period, the State did not establish what the disparity would be
during
the CAP II period (or, indeed, that such a disparity existed).
7/ The
State provided information on the percentages it said it used
to
construct its claims for FFP "during" the period January 1, 1987 to
June
30, 1988 (when CAP II was in effect). State Ex. 15, Att. B.
The record
indicates, however, that the State in August 1989 submitted
revised
claims for the period July 1, 1987 to June 30, 1988, based
on
retroactive increases in the Title IV-E caseload identified during
the
State's internal review of IV-E eligibility. State Exs. 7 and
8. The
State presented no.figures showing how it revised its claims for
the CAP
II period, nor how the State's proposed method would alter those
claims,
if at all. Thus, we do not know whether the adjusted
eligibility
figures used in the CAP II method for this period resulted in
revised
claims at percentages higher or lower than what the State's
proposed
method would give.
Moreover, the State did not submit claims for the CAP II
period
(explaining that it thought its claims for the 1986 quarters had
delayed
approval of CAP III). Tr. I at 108-109. The claims would
be untimely
if submitted now (as we found the claim for the quarter ending
September
30, 1986 was untimely). The State suggested that we could
require the
Agencies to approve and pay claims for the CAP II period, but
this Board
has no authority to grant waivers of the timely filing
requirements. 45
C.F.R. ..95.22-95.34; New Jersey Dept. of Human
Services, DAB No. 1142
(1990). Thus, since claims may be barred for all
quarters involved here
(except the quarter ending December 31, 1986), it
would be speculative
to say that retroactive approval of the State's proposed
method is
necessary to avoid a significant inequity because the cumulative
amounts
the State could otherwise receive would be substantial. There
is no
assurance that the State has not already forfeited any entitlement
it
might have to additional funds because of its own failure to
submit
timely claims.
In sum, the State failed to meet its burden to show that
retroactive
approval was needed here to avoid a significant inequity to the
State.
B. The
State did not show that retroactive approval
was necessary because of a
material defect.
The State argued that CAPs I and II contained material defects,
justifying
retroactive approval of the State's proposed method. In our
view, this
argument is based on a misunderstanding of the CAP
regulations and, in any
event, has no merit.
The regulations contemplate that a state is responsible for proposing
an
allocation method since the state has the best knowledge of its
own
administrative structure and organization. A state must promptly
amend
its CAP if there are organizational or programmatic changes
affecting
the validity of a CAP or if a "material defect is discovered in the
cost
allocation plan by the Director, DCA, or the State." 45
C.F.R.
.95.509(a). In this context, section 95.515 provides that
the
effective.date will be "the first day of the calendar quarter
following
the date of the event that required the amendment" but may be
earlier if
specific conditions are met, including that --
The information provided by the State which was used
to approve a
previous plan or plan amendment is
later found to be materially
incomplete or
inaccurate . . . .
Here, there was no finding of a material defect by DCA. Indeed,
ACF
policy specifically permits a state to use a caseload count as
an
allocation method. ACYF-PA-87-05, State Ex. 14.
The mere fact that the State considers CAP I and CAP II to be
materially
defective is not in our view sufficient to establish either that
a
defect existed, or that it was material. Using a caseload count
is
reasonable, even if not entirely accurate, because it is simple
and
gives roughly equitable results. Moreover, we do not consider it
a
defect that the State might have received more reimbursement under
Title
IV-E if it had instituted an RMTS sooner. Allocating more of the
costs
to Title XX was primarily the State's decision. Also, for
reasons
explained above, we do not consider the disparity between what the
State
did claim for each disallowance quarter and what it might have
claimed
to be substantial when viewed in light of the State's
total
administrative costs.
Finally, DCA did not find the State's information to be
materially
incomplete or inaccurate. While as indicated above the State
provided
little to support any particular claiming method, the record does
not
indicate that the State's information was inaccurate, and DCA
accepted
it as sufficient to support the methods actually used.
In sum, we find that the State did not show that an earlier date for
its
CAP was needed because of either a significant inequity or a
material
defect in CAP I or CAP II.
IV. The State's proposed method is flawed.
The Agencies took the position that the State's RMTS data could not
be
backcast to the disallowance period. They presented testimony
and
evidence on the changes taking place in the State during the
1980's,
including data comparing caseload characteristics during 1986 and
later
periods. The State sought to meet its burden to establish that
its
backcasting method was valid through.testimony by a program official
and
consultant on how any changes affected social worker time and
through
testimony by a statistical sampling expert analyzing the
correlation
between social worker time and the caseload characteristics
identified
by the Agencies. The Agencies replied by presenting their
own
statistical sampling expert.
In this section, we first explain what the statistical analyses were
and
what remaining issues there are concerning the validity of
those
analyses. We then address more general questions regarding
alleged
differences between the two periods and the State's presentation.
A. The statistical analyses
As discussed above, the State's method proposed here used RMTS
data
obtained during the period July 1, 1988 to June 30, 1989 (the
RMTS
period) and eligibility data the State said was from the last
two
quarters of calendar year 1986 (the disallowance period). In
actually
calculating the amounts it said was due for each of the two
1986
quarters, the State determined the mean (or average) percent of
total
social worker time allocated by the RMTS to Codes 1, 2, 5, and 6.
The
State then multiplied each of the mean percents for Codes 1, 5, and 6
by
the eligibility factor for each quarter. The resulting percents
were
then added to the mean percent for Code 2 for the quarter to obtain
the
resulting percentage (9.17% for the quarter ending September 30,
1986
and 8.69% for the quarter ending December 31, 1986). The
resulting
percent for each quarter was then multiplied by 50% of the total
cost
pool to get the total FFP to which the State said it was entitled
for
each quarter. State submission of 12/5/90, Revised Atts. 2(a) and
2(b).
The State's testimony to support its method focused not on the
percentages
allocated to each of the RMTS Codes, but on the sum of the
percentages of
time allocated to Codes 1, 2, 5, and 6. The State
referred to this sum
as "aggregate claimable time," but this is somewhat
of a misnomer.
These Codes represent the types of activities which may
be claimable under
Title IV-E, but the total claimable time is
determined only after applying
the eligibility factor to Codes 1, 5, and
6. While we use the term
"aggregate claimable time" in our discussion
of the State's evidence (since
that is the term the State used), we also
explain below why we think the
focus should have been on the individual
codes. .The State's
statistical expert testified generally that use of
a mean was a method used
"fairly commonly in statistical analyses" when
there are missing data.
Tr. I at 176. She noted that the "aggregate
claimable time" obtained by
the RMTS during the RMTS period was a
relatively stable figure. Tr. I
at 183. (It ranged from 57.2% to
60.3%.) She testified that this
showed that there were no significant
differences in how social workers were
spending their time in 1988,
1989, and 1990, despite the fact that there were
very substantial
differences in other characteristics of the agency.
She also testified
that she had looked at data from at least two other states
and found a
very similar pattern, indicating that even if there are changes
in the
nature of the caseload and other characteristics of the
agency,
caseworker time does not vary as a function of these changes.
Tr. I at
167-171.
The State's statistical expert also presented results of a
correlation
analysis and a regression analysis. The correlation
analysis was
performed to determine whether any of the caseload
characteristics
identified by the Agencies had a statistically significant
relationship
to "aggregate claimable time" during the RMTS period. The
results of
this analysis showed that none of the identified characteristics
had a
statistically significant correlation with "aggregate claimable
time,"
except "group home expenditures." The analysis also showed that,
as
group home expenditures increased, "aggregate claimable time"
decreased.
8/ Since group home expenditures were lower in the
disallowance period
than in the RMTS period, this factor (considered alone)
would indicate
that "aggregate claimable time" was likely higher in the
disallowance
period than in the RMTS period.
The regression analysis presented by the State's statistical expert
was
essentially use of a formula to weight different characteristics
in
different proportions and then to multiply those weights against
the
actual data in order to estimate an "aggregate claimable time." Tr.
I
at 176-177; State submission of 12/5/90, Rev. Att. 5. The
analysis
projected estimated percentages of ."aggregate claimable time" for
each
month of the period July 1986 through March 1988. The
estimated
percentages ranged from 58.6% to 67.1%. State submission of
12/5/90,
Att. 9. As support for the validity of this analysis, the
statistical
expert also used her regression model to calculate "aggregate
claimable
time" percentages for each month in the RMTS period. The
figures
obtained from this calculation were within 2.4 percentage points of
the
actual percentages obtained from the RMTS. The projected mean
percent
was 58.3% compared to the actual mean of 58.4% for the RMTS
period.
Id., Att. 10. According to the to the State's expert, this
shows that
the regression model was doing a "reasonably decent" job of
prediction.
Tr. I at 183.
Finally, the State's expert testified that "if anything, the
estimates
that have been used in the claim appear to be under estimates
rather
than over estimates, based on the data that are available with regard
to
the [State] agency characteristics." Tr. I at 183.
After examining the underlying information used by the State's
statistical
expert for her analyses, the Agencies' statistical expert
agreed with her in
some important respects. He withdrew objections he
had preliminarily
raised regarding the validity of the RMTS samples
drawn by the State, and
certain aspects of the statistical analyses
presented. He agreed that,
of the caseload characteristics identified
by the Agencies, the only one with
a statistically significant
correlation to "aggregate claimable time" was
group home expenditures.
He further agreed that her calculations were
accurate. Transcript of
Hearing held 2/19/91 (Tr. II) at 6-7,
16-21. His testimony did,
however, raise certain remaining questions,
which we address next.
B. The
remaining issues concerning the statistical
analyses
The Agencies' expert testified that he had four continuing objections
to
the State's analyses. The first objection was that the State had
not
established that the conditions in the disallowance period
were
identical to the conditions in the RMTS period. He conceded,
however,
that the State did not need to establish identical conditions, but
only
that those characteristics affecting social worker time were the
same.
As we discuss below, the State's presentation on the two periods
had
certain flaws which do call into question the validity of
backcasting
data here. .The Agencies' expert's second objection was
that the range
of values for group home expenditures during the disallowance
period was
different from the range of values during the RMTS period.
He said that
this affected the validity of the State's regression
analysis. Tr. II
at 8-9. The State's expert did not deny that the
range of values has
some bearing on the use of a regression analysis, but
pointed out that
here the regression analysis was not being used to establish
an exact
figure for "aggregate claimable time" for the disallowance period,
but
only to substantiate the reasonableness of using the mean from the
RMTS
period. Tr. II at 22-23.
The Agencies' expert also pointed out that the group home
expenditures
variable explained only 17% of the total variation in
"aggregate
claimable time" during the RMTS period. This left 83% of the
variation
unexplained. Tr. II at 11-12. The State's expert
responded that, given
how slight the variation was to begin with, this was
not a meaningful
objection. She testified that, in her experience with
statistics in
social services programs, it is unusual to be able to explain
as much as
17% of such a small variation. She also testified that the
remaining
variation could be explained as simply random fluctuations.
Tr. II at
23-24.
The State's expert may be correct that the difference in range of
values
of group home expenditures does not undercut use of the
regression
analysis to support use of the mean. However, her own
testimony
indicates that a regression analysis (if shown to have predictive
power)
would be a better alternative than use of a mean. Tr. I at
176.
Moreover, the State's expert did not deny that an inability to
fully
explain the variation lessened the predictive power of the
regression
analysis. Thus, while we do not think these two objections
by
themselves would be a basis for finding that use of the mean is
not
reasonable, they point up the fact that the mean is a rough
estimate,
not as exact as a statistical analysis where the variables are
known.
The final -- and in our view most substantial -- objection raised by
the
Agencies' expert related to the State's focus on the
"aggregate
claimable time," rather than on the individual RMTS Codes.
He pointed
out that, while the "aggregate claimable time" figure was
relatively
stable over the RMTS period, the percentages obtained by the RMTS
for
individual codes did not have the same stability. The importance
of
this is that (as .pointed out above) the State's claim for FFP is
not
based on the "aggregate claimable time" obtained by the RMTS, but on
a
percentage obtained by applying the eligibility factor to the
results
from Codes 1, 5, and 6 and adding that to the results from Code
2
(determining eligibility). 9/ The eligibility factors used here
were
roughly 10%. Thus, in calculating the claiming percentage, the
results
from Code 2 have about 10 times as much weight as the results from
the
other three Codes. Yet, the RMTS results from Code 2 ranged from
2.43%
to 4.17%. In other words, evidence concerning the reasonableness
of
using the mean "aggregate claimable time" to backcast data does
not
establish the reasonableness of using the means for the
individual
codes, as the State did. Moreover, using an inaccurate
measure for Code
2 may overstate the claiming percentage.
Even if the State's method could reasonably be adjusted to account
for
this problem, 10/ however, use of the method would depend on whether
the
State showed there were no relevant differences between the RMTS
period
and the disallowance period. For reasons we discuss next, we
find that
the State's presentation on the similarities and differences was
flawed
in certain respects.
C. Other
questions regarding differences between the
two periods
The evidence presented by the Agencies regarding differences between
the
RMTS period and the earlier period was for the most part either
general
and anecdotal (and sufficiently rebutted by the State's witnesses)
or
based on the caseload characteristics analyzed by the State's
expert.
Moreover, the Agencies were identifying changes in the State's
programs
without regard to whether those changes were of a type which
would
affect .allocation of social worker time using the RMTS Codes.
We
nonetheless find the State's evidence comparing the two periods to
be
flawed in certain respects.
The State's two witnesses on program matters testified that there were
no
organizational changes affecting the social workers. However, the
State
did not support this testimony with any organizational charts or
other
documentation from the time period. Moreover, one of these
witnesses
was a high level official responsible for maximizing the
State's claims for
federal funds, and the other witness was the
consultant hired by the State to
increase its Title IV-E claims. The
consultant admitted that his
compensation depended on the State's FFP
recovery from his activities.
Tr. I at 54. The State presented no
testimony from the social workers
to substantiate that there were no
changes affecting the allocation of their
time.
The consultant stated his opinion that, while the State did
initiate
certain projects (such as efforts to recruit more foster parents),
these
initiatives would not affect the State's basic mission. Tr. I
at
143-144. We do not give as much weight to his opinion on this as
we
would to the opinion of social workers directly affected by
such
initiatives. Moreover, as we discussed above, even if these
initiatives
did not affect the State's basic mission, they might have
affected what
portion of social worker time was allocated to claimable RMTS
Codes, and
thus had an effect on the ultimate claiming percentage. In
particular,
the time allocated to Code 2 may have been affected by an
initiative the
State admitted taking to increase the number of children
determined
eligible for Title IV-E. While the consultant testified that
most of
this effort would have been done by his consulting firm under
contract
with the State or by a separate eligibility determination unit, he
also
acknowledged that the social workers played a role in
gathering
documentation for eligibility. Tr. I at 145-149.
We found an additional flaw in the State's presentation. The State
said
that the eligibility factors used to recalculate the claims were
based
on data from the disallowance quarters. The Board asked the State
to
substantiate this and to show how it had calculated the
eligibility
factors. The document the State submitted is a rough
handwritten
summary listing numbers of eligible Title IV-E families from
various
State regional offices. State's submission of 12/11/90,
Att. The State
provided.no explanation or documentation of the source
of these figures.
11/
In sum, while the State sufficiently rebutted much of the
Agencies'
evidence presented to show that backcasting was not appropriate
here, we
still have substantial remaining questions on the State's
method
(particularly the State's failure to focus on individual Code
results
rather than "aggregate claimable time") and on the accuracy
and
completeness of the information presented here. Thus, we conclude
that
the State did not meet its burden to show that its method
could
appropriately be used to determine the amount the State would have
been
able to claim if the State had implemented the RMTS in June 1986
rather
than in 1988.
Conclusion
For the reasons discussed above, we uphold DCA's decision not to approve
a
retroactive effective date for CAP III (or for the State's method
proposed
here). We therefore uphold ACF's disallowance of costs claimed
in
excess of the amount allowable under CAP I for the quarters ending
September
30, 1986 and December 31, 1986. We also conclude that the
claim for the
first of those quarters was untimely.
________________________ Donald
F.
Garrett
________________________ Norval
D.
(John) Settle
________________________ Judith
A.
Ballard Presiding Board Member
1. These types of services might be reimbursable under one or
more
federal or state programs, including Title IV-E, state foster
care,
Title IV-B (Child Welfare Services), or Title XX (Social Services).
2. The State also requested in the alternative that the CAP III
version
originally submitted by the State be approved. DCA and the
Regional
Director both denied this request, explaining why application of
an
eligibility factor was required under ACF policy
(specifically,
ACYF-PA-87-05). State Exs. 1 and 3; Regional Director's
Letter of
6/8/90. The State did not appeal this disapproval to the
Board.
3. DCA and ACF argued that this revised calculation constituted
an
"untimely claim." Generally, states have to document an
allocation
method at the time they submit their claims. We do not
agree, however,
that adjustment of an allocation method in the context of a
dispute over
the method always constitutes a new claim for purposes of the
timely
filing provisions. When the new allocation reduces the amount at
issue,
it could be viewed as simply a settlement offer. Treating the
offer as
a new claim would not be necessary to meet the purposes of the
timely
filing provisions. The State actively sought here to settle the
case,
and the Board delayed proceedings several times to permit the parties
to
negotiate. As we discuss below, however, we find the claim for
the
quarter ending September 30, 1986, was untimely because it was not
filed
within the two-year period required and did not meet an exception
to
that requirement.
4. Section 1132(b) provides that the Secretary "shall waive the
filing
requirement if he determines (in accordance with regulations) that
there
was good cause for the failure by the State to file such claim"
within
the prescribed period. As noted above, the State at first
indicated it
was seeking a waiver for the claim at issue here. The
State later said,
however, that it had decided not to pursue a waiver until
its appeals
were decided.
5. The State also suggested that DCA unreasonably delayed approval
of
CAP III. The record shows, however, that most of the delay was due
to
problems with the CAP, as proposed. State Exs. 1-7; Tr. at
205. DCA
ultimately approved modified CAP III retroactively to July 1,
1988, the
beginning of the first quarter in which the State had fully
implemented
the RMTS.
6. The State argued that ACF's policy announcement
ACYF-PA-87-05
required that Title IV-E bear its "proportionate share" of the
State's
administrative costs. This policy simply requires a
proportionate
allocation of services provided to IV-E eligibles and to other
program's
recipients. Caseload count is specifically identified as an
equitable
basis for allocating costs of such activities.
7. The State also did not address the first part of the period CAP
I
was in effect, other than to give 4-8% of the cost pool as the range
of
percentages used during the CAP I period.
8. The State's consultant offered the following as a
possible
explanation. The caretakers in group homes are more
experienced than
foster parents generally. Thus, the social workers
would need to be
less involved in monitoring children placed in group
homes. Tr. I at
195-196.
9. The State's expert apparently misunderstood this, believing that
it
was the "aggregate claimable time" which drove the State's
revised
claims. Tr. II at 31-32.
10. For example, the State's method could be adjusted to use the
low
end of the range obtained for Code 2 during the RMTS period
(2.43%)
instead of the mean for Code 2 used by the State (3.42%). (This
would
reduce by .99% the claiming percentages calculated for the
disallowance
period, yielding a claiming percentage of 8.18% for the quarter
ending
September 30, 1986 and 7.70% for the quarter ending December 31,
1986.)
11. In a pre-hearing conference, the Board had specifically asked
the
parties to document their positions and, in particular, asked the
State
to document that the eligibility factors used to recalculate the
claims
were based on eligibility data from the 1986 quarters. See
Board's
confirmation of