GAB Decision 422
Docket No. 82-182
April 29, 1983
Nebraska Department of Public Welfare;
Ford, Cecilia; Settle, Norval Garrett, Donald
Background
The Nebraska Department of Public Welfare (State) appealed the
disallowance of $370,078 by the Associate Commissioner for Family
Assistance, Office of Family Assistance (OFA), Social Security
Administration (Agency) relating to costs for the State's fiscal year
1980 Energy Assistance Program (EAP). /1/ The disallowance was based in
part on the findings contained in the Department of Health and Human
Services Audit Report, ACN 07-20271.
The audit report recommended a refund of $370,078 for payments to
recipients in excess of the amounts authorized by the State Plan,
finding that $11,000 in overpayments were a result of clerical and
processing errors, and $359,078 in overpayments were a result of the
State's failure to determine the federally reimbursable amount of the
EAP payment in accordance with the provisions of the approved State
Plan.
Nebraska chose to develop its own EAP State Plan. That Plan provided
that any portion of an EAP assistance payment which exceeded the amount
set forth in the State Plan was not subject to federal reimbursement.
Nebraska State Plan, Tab E, section D.2. The State Plan further
provided that an EAP assistance payment would be based on need, and need
would be determined by a stated formula. The Plan stated that all
payments under EAP would be made directly to utility suppliers by the
State with the exception that payment would be made to the client when
utilities were included in the (2) rent. State's Appeal File, Exhibit
4, p. 6. The State Plan also provided a specific procedure to be
followed to avoid duplicate payments. That provision stated as follows:
(the) total combined amount of assistance for NEAP (payments by the
State for the energy assistance program), ECAP (payments made under the
Community Services Administration Emergency Crisis Assistance Program)
and SSI-EAP (payments made by HHS directly to SSI recipients for energy
assistance) made on behalf of any eligible household under this program,
shall not exceed the actual amount of need or $400 (later $600),
whichever is less. No household is guaranteed a set amount of
assistance. The household may receive more than the $400 (later $600)
maximum if approved by the State Office.
Nebraska State Plan, section E.5.
Based on the record in this appeal, we sustain the disallowance for
the reasons stated below. /2/
Audit Findings and Methodology
The disallowance at issue here resulted from findings made by HHS
auditors during the course of their audit work during the period July
through November 1980. Upon reviewing a random sample consisting of 250
households for accuracy and compliance with the EAP State Plan, the
auditors identified certain problem areas which resulted in overpayments
to recipients. The most significant problem was the improper treatment
of other energy assistance program payments in determining the State's
EAP payments. The auditors, therefore, performed another statistical
sample. The auditors determined this sample by use of a computer
program which matched households in the State receiving payments under
the State's EAP and either ECAP, SSI-EAP, or both. The auditors found
that 3,558 households received assistance under one or more of the other
energy assistance programs. The auditors (3) randomly selected 206 of
the 3,558 households which received payments from other programs. Any
overpayments determined by the auditors were determined as though the
$600 payment maximum had been effective from the start of the program.
This approach eliminated or reduced some overpayments made while the
initial State Plan was effective. The auditors also allowed payments in
excess of the State Plan limit if the household's need exceeded the
maximum and the State's records indicated the State had approved the
payment in excess of the maximum. The auditors then projected their
sample results to the 3,558 households, which showed, with 90 percent
confidence, that as much as $454,101 to as little as $370,078 was paid
in excess of the limits set in the State Plan. The Agency disallowed
the lowest amount. Out of this projected amount, the auditors
determined $11,000, or approximately 1.2 percent of the universe
sampled, was overpaid due to other types of processing errors. The
auditors noted here that computer controls had been designed to insure
proper payments under the Plan, but that these controls were bypassed in
numerous instances. State's Appeal File, Exhibit 3.
The auditors cited two types of common overpayment errors. In one
instance, the State did not consider other energy assistance payments in
determining a household's need when the maximum payment limit under the
State Plan was not reached. In the other instance, the State paid up to
the State Plan maximum dollar limitation rather than limit payments to
need if less than the maximum.
Parties' Arguments and Analysis
a. Effect of audit findings and refunds on disallowance
The State argued that the audit findings should be considered only
preliminary findings inasmuch as the audit was performed prior to the
conclusion of the State's 1980 EAP and the receipt of all refunds. The
State contended that refunds were made by providers to the State after
August 1, 1980, and there is no indication that any of these refunds
were considered by the auditors in formulating their findings. The
State contended, therefore, that the disallowance should be adjusted or,
more properly, the disallowance should be reversed due to the invalidity
of the audit. State's Brief, pp. 1-2.
(4) The Agency contended that although refunds received after
conclusion of the audit were not included in the audit findings, they
were considered in the disallowance issued by OFA. Agency's Brief, p.
2. The Agency also argued that OFA compared each of the cases in the
auditors sample to the refund records of the State one year after the
audit. OFA, the Agency argued, found that 4 of these 206 cases, or $629
in refunds applied to the questioned costs. Therefore, the Agency
contended that adequate consideration was given to any adjustment for
refunds. Agency's Brief, p. 2.
In our view, the State's argument overlooks three significant facts.
The first is that under Program Instruction SSA-AT-79-45, dated November
30, 1979, and the State Plan at Tab E, section D. 6, no EAP payments
could be paid to recipients after June 30, 1980. Therefore, at the time
the audit was performed, all the EAP payments should have been made to
eligible recipients. Second, although all refunds may not have been
received by the State from providers during the period of the audit, the
record indicates that prior to issuing the disallowance in the present
appeal, OFA reviewed the State's records concerning refunds against the
cases sampled, and determined that an offset of $629 should be made
against the disallowance. See, State's Appeal File, Exhibit 2 and
Agency's Appeal File, Exhibits A and D. Third, audit findings are not
final Agency determinations, but rather are considered to be
recommendations. See, Alabama Department of Pensions and Security,
Decision No. 128, dated October 31, 1980. Only the Agency component (in
this case, OFA) administering the program and delegated by the
Department may make final disallowance determinations. As we stated
above, OFA did review the State's records relating to refunds and
considered the refunds in making its disallowance determination. The
State has not argued that the Agency's determination of the amount to be
offset was incorrect or that OFA failed to consider these refunds in
making the disallowance at issue. Therefore, we conclude that the
disallowance has been properly adjusted to reflect the refunds received
from the State, and that in any event, the State has not shown any basis
for finding the audit invalid, and requiring a reversal of the
disallowance here.
(5) b. Audit review of records and State office approval mechanism
The State argued that the audit findings were discredited further by
the fact that the auditors reviewed case records in only one county, and
other case reviews were based upon computer input documents. The State
contended that the computer review did not reveal to the auditors those
cases which had received State Office approvals for payment. The State
contended that the auditors failed to consider the State Office approval
mechanism for payments in excess of the maximum because the approvals
were given by telephone and supporting documentation, the "crisis log,"
was kept at the State Office. The State claimed that a number of cases
reviewed by the auditors appeared to have had such approval. State's
Brief, p. 2.
We, at the outset, disagree with the State's arguments questioning
the auditors' review of county records. The audit report indicates that
in determining the overpayments in question here, the auditors reviewed
the State Office's computer records. State's Appeal File, Exhibit 3, p.
11. A memorandum from the Regional Audit Director to the Agency's
representative, included with the Agency's appeal file, indicated that
review of county records was for another aspect of the audit, unrelated
to the disallowance here, and that the information relating to SSI
payments and ECAP payments, in any event, was not obtainable from county
records. Agency's Appeal File, Exhibit D, pp. 3 and 4. The State did
not contest this information. Therefore, the State's argument is
without merit inasmuch as county records were not reviewed for this part
of the disallowance.
We agree with the Agency that proper consideration was given to
payments made in excess of the State plan maximum where State Office
approval had been given. The audit report indicates, as mentioned
above, that these cases were not considered as overpayments. State's
Appeal File, Exhibit 3, p. 12. Also, the Agency indicated that it
compared the cases in its sample with the "crisis log" attached to
the
State's appeal and found no instance where the Agency had not considered
the information in the log. Agency's Appeal File, Exhibit D, p. 2.
Although the State contended that a number of cases reviewed by the
auditors for which overpayments were identified had State Office (6)
approval, the State has not shown to which specific cases it was
referring. The record indicates that the specific case names that made
up the audit sample were available at all times for the State's review.
Acknowledgement Letter dated July 19, 1982 from Linda McMahon, p. 2.
Without a specific showing by the State that the Agency included certain
cases with such approval in determining the overpayments here, we cannot
agree with the State where the State did not contest the information
contained in the audit report and the Agency's submissions.
c. Timing of energy assistance payments and existence of duplicate
payments under the State Plan
The State argued that the auditors did not consider that many of the
State EAP payments were made prior to the payments from ECAP or SSI-EAP,
making it impossible for the State to limit EAP payments due to receipt
of these other benefits. The State contended that, in any event, the
approved State Plan at section K of Tab E provided specifically that
SSI-EAP payments need not be considered as duplicate payments. That
provision is as follows:
Duplicate Payments
States are expected to take all necessary precautions to avoid making
more than one energy assistance payment to an eligible assistance
unit.Payments made to SSI recipients who also receive payments under the
special $400 million allocation, and payments to households eligible for
both SSI payments and EAP payments need not be considered duplicate
payments. If a State's record system can accomplish this, it should be
utilized. However, it is not anticipated that separate procedures will
be set up for this one-time payment.
The State concluded that any household receiving both SSI-EAP and
State EAP benefits could not be a basis for disallowance since there was
no duplicate payment. State's Brief, p. 3.
In response to a Board inquiry, the Agency argued that under the
Nebraska State Plan, section E. 5, quoted in the Background section
above, the State was required to determine the existence and amount of
ECAP and SSI-EAP payments (7) and to take those payments into
consideration in determining the amount for which recipients of the
State's EAP were eligible. The Agency contended that the State's
failure to consider ECAP and SSI-EAP payments in determining State EAP
payments resulted in State EAP payments in excess of the lesser amount
of need or $600. The Agency identified these excessive payments as
overpayments. Agency's Brief, p. 3.
The Agency also argued that most SSI payments were made prior to any
EAP payments, and few instances were found where ECAP payments followed
State EAP payments. The Agency contended that if an ECAP payment was
made after a State EAP payment, the auditors did not question the State
EAP payment. /3/ The Agency contended that where the State would not
have had that knowledge of these other energy payments, the auditors did
not consider an overpayment to have been made. The Agency contended
that, under the provisions of the State Plan at Tab E, section D.2, the
State had no justification for the excessive EAP payments. Agency's
Brief, pp. 4-5.
The Agency disagreed that SSI-EAP payments and EAP payments to one
household should not be considered duplicate payments. The Agency
argued that section K of the State Plan, Tab E, means that if a State
could avoid duplicate payments, it should avoid them. The Agency
contended that the State maintained records of payment from other energy
programs and those records were available for review prior to making an
EAP payment.The Agency contended that the State never took the records
into account unless the total combined assistance exceeded the $600
maximum. The Agency claimed that the State could have avoided the
duplication, but it did not. Agency's Brief, p. 6.
(8) We do not agree with the State's argument that Section K of Tab E
is a defense here. The Agency did not disallow for duplicate payments.
The disallowance only related to payments made in excess of the amount
set forth in the State Plan. The State Plan here provided at section
E.5 that the total combined assistance under all the energy programs
could not exceed need or $600, whichever is less. This provision,
drafted by the State, recognizes that a household may receive payments
from more than one energy assistance program. The provision did not
operate to omit duplicate payments but merely limited the amount of
combined assistance to be paid to a recipient. The Agency has not
contested the validity of this provision, and did not disallow the total
amount of EAP payments made to households receiving SSI-EAP payments;
the Agency only disallowed for amounts paid to recipients in excess of
the amount provided in the State Plan. Therefore, the State's argument
is without merit.
We also disagree with the State's argument relating to the timing of
EAP payments. The State, here, developed its own State Plan and
specifically included in that plan the provision that total combined
assistance under the different energy assistance programs would not
exceed the actual amount of need or $600, whichever is less. By
including this provision, the State itself made the determination that
it would look at the other energy assistance payments made in
determining the amount of EAP payment to a household. Furthermore, the
State has not denied that ECAP ans SSI-EAP payments were made by March
1980, with some being made as early as January, 1980. Agency's Brief,
p. 4. The record also indicates that although the first State EAP
payments were made on February 12, 1980, the majority of EAP payments
were made after April 14, 1980 when the State Plan was amended to
increase the maximum payment to $600. Agency's Brief, p. 4. We also
note that the auditors did not consider an overpayment to be made where
the State could not have been aware of other energy assistance payments.
For these reasons, we have determined that the State knew or should have
known the amount of assistance paid to recipients under the other energy
assistance programs prior to making its EAP payment. Therefore, the
excess payments are not eligible for federal reimbursement here under
section D, Tab E of the State Plan:
(9) (the) following expenditures are not subject to federal
reimbursement and will not be claimed:
2. any portion of an EAP assistance payment which exceeds the amount
set forth in the State plan...
7. any expenditures which are not made in accordance with the State
plan....
d. Doctrine of equitable estoppel and validity of statistical sampling
The State contended that the EAP program was "thrown together" at
the
last minute, that no regulations were promulgated by HHS, and that the
rules were made up and amended when necessary as the program was going
on. The State asserted that it received verbal assurances and approvals
from HHS officials that its payments were proper but admitted it had no
documentation regarding the specific approvals given by an HHS official.
The State contended that the Agency should not disallow for these
payments based upon questionable statistical projections where the
State's expenditures were properly made and were specifically approved.
The State, therefore, asserted that principles of fairness and equitable
estoppel require HHS to acknowledge the approval given by its agent
which was relied upon by the State in administering its EAP. State's
Brief, p. 4.
The Agency argued, citing applicable federal court cases in support,
that statistical sampling is a valid audit technique. The Agency argued
that the Court held in Illinois Physicians Union v. Miller, 675 F. 2d
151 (7th Cir. 1982) that use of sampling and extrapolation procedure is
not arbitrary, capricious or invidiously discriminatory where there is
an opportunity to rebut an initial determination of overpayment. The
Agency contended that the State has the opportunity before this Board to
rebut the sampling, but has not done so other than by making a general
statement that the sampling seems unfair. Agency's Brief, p. 7.
Furthermore, the Agency argued that, even assuming a representation
was made by an OFA official, there is no legal basis on which to apply
equitable estoppel in this case. The Agency cited Schweiker v. Hansen,
45 U.S. 785 (1981), in which the Supreme Court declined to apply
equitable estoppel (10) against the government, and New Jersey v.
Department of Health and Human Services, 670 F. 2d 1284 (3rd Cir.
1982), where the Court, relying on Schweiker v. Hansen, also declined to
apply equitable estoppel against HHS. The Agency asserted that the
Board should not apply equitable estoppel where federal courts have not
applied it. The Agency also contended that the State admitted there is
no documentation of any such approval, and that the OFA official, in a
sworn affidavit, denied any such assertion. Agency's Brief, p. 8.
The State has argued that we should apply the doctrine of equitable
estoppel here; we do not agree. The State has admitted that it has no
documentation of those approvals (State's Brief, p. 4), and the
affidavit from the OFA official states that he did not give any such
approvals (Agency's Appeal File, Exhibit E.). The State has made
nothing more than a general statement here that estoppel should lie
against the Agency. The State has not set forth the required elements
for estoppel. By this failure, the State has not shown why the Agency
should be estopped and therefore has not carried the required burden of
proof necessary in establishing estoppel. Furthermore, the State's
estoppel argument cannot be supported on the basis of recent Supreme
Court decisions. In both Schweiker v. Hansen, supra, and INS v.
Miranda, 103 S. Ct. 281 (1982), the Court found that the facts did not
justify estopping the federal government on the basis of representations
by federal employees. The implication in these cases is that the only
possible basis for applying estoppel would be if there was affirmative
misconduct on the part of the federal officials involved. Even if the
OFA official had given verbal assurances to the State here, the State
has not shown that, under the reasoning of these cases, those assurances
amounted to affirmative misconduct by the employee.
The State, throughout its appeal, has merely asserted that the audit
was improper and that the statistical projections were questionable.
This Board has previously held that the grantee has the burden of coming
forward to show that audit findings were wrong. See, New York State
Department of Social Services, Decision No. 204, dated August 7, 1981.
The State has neither alleged that the sampling methodology used here
was inappropriate nor provided any specific evidence to that effect.
The State merely challenges generally the use of statistical sampling as
a basis for a grant disallowance.
(11) We agree with the Agency and have found in past decisions that
statistical sampling is a valid audit technique which has been upheld by
federal courts. See, California Department of Health Services-San
Joaquin Foundation, Decision No. 182, dated May 29, 1981. Here, the
State has had ample opportunity from the time the draft audit report was
issued to and through the present appeal to rebut the determination at
issue with argument and evidence, but it has not done so. We find,
therefore, that since we have no evidence to the contrary, the use of
statistical sampling here was valid and that the method used by the
auditors was reasonable.
e. Clerical and other processing errors
The State did not set forth any specific arguments relating to the
$11,000 in overpayments that the auditors determined were the result of
clerical and processing erros. We assume, however, that the State is
also contesting the validity of the audit regarding these payments. The
auditors found that these overpayments resulted from the State bypassing
computer controls specifically programmed to avoid such overpayments.
The State has not presented any argument to rebut the auditors' findings
and the subsequent disallowance. Under the provisions of the Program
Instructions and the State Plan at section D of Tab E, quoted above,
these payments are not reimbursable. Therefore, we sustain the Agency's
disallowance of $11,000 in overpayments resulting from clerical and
processing errors.
Conclusion
For the reasons stated above, we sustain the disallowance. /1/ A
refund of $629 has been made by the State, thereby reducing the
amount in dispute to $369,449. /2/ The State submitted a brief
and appeal file and the Agency submitted its response.The State,
although it was informed by the Board that it had an opportunity to
submit a reply to the Agency's response, did not submit one. /3/
The Agency stated that 91.5 percent of the State EAP payments were made
after March 7, 1980. SSI payments were made on January 7, 1980 to all
eligible SSI recipients on the December 1979 rolls, and on February 7
and March 7, 1980 for individuals who became eligible in January and
February, 1980. The first State EAP payments were made February 12,
1980. ECAP payments were made, for the most part, during January
through March 1980. Many of the questioned State EAP payments were made
after April 14, 1980 when the State Plan was amended to increase the
maximum combined assistance to $600. Agency's Brief, p. 4.
JULY 07, 1984