Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Alabama Department of
Human Resources
Docket No. A-92-176
DATE: October 14,1992
DECISION ON RECONSIDERATION
The Regional Administrator for the Administration for
Children and
Families (ACF or Agency) filed a request
for reconsideration of the decision
in Docket Nos. A-92-4
and A-92-39. 1/ In that decision, we
reversed error
determinations by the Regional Administrator. We
reasoned that the State had fully complied with the
requirements
specified by the Agency in its Quality
Control Manual (QCM) for
investigating client income
where the client claims no income. For
this reason, we
held that the State did not commit an error for QC
purposes although later information revealed that the
clients had
received unreported income. We have
carefully considered the Agency's
arguments and the
State's responses. We conclude that our prior
decision
was not erroneous as a matter of fact or law, and we
therefore
deny the Agency's request for reconsideration.
Applicable Authority
Section 408(a) of the Social Security (Act) provides:
In General.--In order to improve the accuracy of
payments of
[AFDC], the Secretary shall establish
and operate a quality control system
under which the
Secretary shall determine, with respect to each
State,
the amount (if any) of the disallowance
required to be repaid to the
Secretary due to
erroneous payments made by the State in carrying out
the State plan approved under this part.
Section 408(m)(6) of the Act defines "erroneous payments"
as follows:
The term "erroneous payments" means the sum of
overpayments to
eligible families and payments to
ineligible families made in carrying out a
plan
approved under this part.
Section 402(a)(7)(A) of the Act requires the State
agency, in determining
need, to consider "any . . .
income and resources of any child or relative
claiming
aid to families with dependent children" (AFDC).
Agency's Arguments on Reconsideration
In its request for reconsideration, the Agency
acknowledged that our
decision of May 22, 1992 focused on
the narrow issue of whether the State
had complied with
specific instructions in the QCM for investigating a
client's allegation that the client did not have income.
However,
the Agency went on to argue that the decision
was erroneous as a matter of
law because it might be
interpreted to overturn Agency policy that
"client-
caused" errors be included in calculating a State's error
rate. The Agency argued that this result would be
contrary to
Congress' intent in passing the Omnibus
Budget Reconciliation Act (OBRA) of
1989 because Congress
was aware of the Agency's policy regarding
client-caused
errors and did not take any action in the legislation to
change that policy. The Agency provided the Panel with
portions of
a 1988 report submitted to Congress on behalf
of the Secretary of Health and
Human Services (the
Secretary), which explained the Agency's policy
determination that client-caused errors should be counted
as errors
against the State for AFDC QC purposes.
The Agency further argued that the Panel's decision could
have the effect
of forcing the federal government to
participate in erroneous payments over
and above the
statutory error tolerances. Finally, the Agency pointed
out that section 408(f)(2) of the Act reduces a State's
disallowance by
the amount of overpayments the State has
recovered from clients. The
Agency argued that section
408(f)(2) rendered erroneous the Panel's
observation that
operation of the State's Income Eligibility Verification
System (IEVS) was self-correcting, in that when income
was reported on
IEVS, any overpayment would be discovered
and could be pursued through the
State's overpayment
recoupment procedures.
Analysis
The State correctly pointed out that the Agency's
arguments regarding the
Secretary's 1988 report to
Congress and its potential impact on our analysis
of
Congress' intent in passing the OBRA 89 revisions to the
AFDC QC
program, are raised for the first time on
reconsideration. The Agency
presented arguments
regarding the meaning of section 408 of the Act and
Congress' intent in passing it in its submissions to us
pending our
initial decision. The Agency stated in its
request for reconsideration
that the Secretary's report
was submitted to Congress in March, 1988.
Thus, this is
hardly a case of newly-discovered evidence. It is in the
interests of all parties that the issues be fully
developed during
initial decision proceedings before the
Panel. Therefore, under most
circumstances, the Panel
will not consider, on reconsideration, evidence or
legal
arguments that could have been presented previously, but
were
not. In the present case, we address these
arguments by the Agency,
but only to make clear that they
would not change our conclusion that
reconsideration is
not warranted.
The Agency has maintained throughout the proceedings
before us that the
payments at issue in these cases were
erroneous payments within the
statutory definition.
There has never been any dispute as to the fact
that the
clients in these cases had unreported income in the
review
month which made them ineligible for AFDC
benefits. Thus, payments to
them constituted "payments
to ineligible families," a category within the
statutory
definition of erroneous payments. According to the
Agency, our inquiry should end there. The Agency argued
that, in
section 408(c)(3) of the Act, Congress carved
out specific exceptions to the
definition of erroneous
payments, and that these exceptions must be narrowly
construed.
The Agency has suggested that our decision in Docket Nos.
A-92-4 and
A-92-39 improperly creates an exception to the
statutory definition of
"erroneous payments." That
argument betrays a misunderstanding of our
decision.
Crucial to our decision was the fact that the Agency had
specified in section 3552 of the QCM that States should
rely on IEVS in
investigating a client's claim of no
earned income. Thus, our decision
does not create a new
exception, but merely recognizes an exception which
the
Agency impliedly created in its QCM. As we explained in
our
earlier decision, information regarding income is not
necessarily posted to
IEVS immediately when a person
obtains employment. Employers report
employee income to
the State quarterly. Therefore, there can be a time
lag
before client income appears on IEVS, even though the
system is
operating properly. Because of the QCM
provision directing states to
use IEVS as primary
evidence of client income, we reasoned that the State
could not be held in error where the income information
had not yet been
posted to IEVS. Our decision recognized
that, in essence, the Agency
itself has created a policy
through the QCM under which technically
erroneous
payments which result from the time lag inherent in IEVS
reporting will not be counted in determining a state's
error rate.
The Agency argued that its policy is that any erroneous
payment within
the statutory definition must be counted
in determining a state's error
rate. However, the Agency
has promulgated a policy elsewhere in the
QCM pursuant to
which certain errors, known as Payment Adjustment Lag
(PAL) errors, do not count in determining a State's error
rate, despite
the fact that they may result in erroneous
payments, as defined by
statute. 2/ From the Agency's
promulgation of its PAL
policy, we infer that the Agency
has concluded that it has the authority, in
certain
circumstances, to define certain types of "erroneous
payments"
that will not be included in determining a
state's error rate.
3/ Thus, in our view, the Agency,
in section 3552 of the QCM, has
impliedly adopted a
similar policy under which technically erroneous
payments
resulting from income not yet reported to IEVS will not
be
counted in determining a state's error rate.
Contrary to the Agency's assertion, our decision in
Docket Nos. A-92-4
and A-92-39 does not require the
Agency to reverse its policy of including
client-caused
errors in calculating a state's error rate. Under our
interpretation, section 3552 of the QCM excludes from a
state's error
rate only those cases in which the state
fully investigated a client's
allegation that there was
no income, and in which income information was not
yet
available through IEVS because the information had yet to
be
processed in accordance with the proper administration
of the responsible
state agency. The Agency did not
allege in this case that the State's
administration of
its IEVS was improper or that the IEVS was somehow
deficient.
We are unpersuaded by the Agency's argument that our
decision will force
the federal government to participate
in erroneous payments beyond those
required by the
statutory error tolerances. Our decision in no way
modifies the statutory error tolerances. We have
concluded that
section 3552 of the QCM embodies a policy
decision by the Agency that
certain payments not be
considered in computing a state's error rate.
This
policy means that, for purposes of the QC process, such
payments
are not considered to be "erroneous." If a
state's error rate,
computed in accordance with all
relevant Agency policies, exceeds the
statutory error
tolerance, the federal government will be entitled to
collect a disallowance. Moreover, as we pointed out in
our earlier
decision, the Agency is free to modify the
policy embodied in section 3552
of the QCM should it
choose to do so.
Similarly, we are not persuaded by the Agency's argument
that Congress,
by its silence, implicitly endorsed the
Agency's policy that all
client-caused errors must be
counted in determining a state's error
rate. The Agency
has pointed to nothing in the legislative history
that
would indicate that Congress consciously endorsed that
policy. Given Congress' silence, we are unwilling to
place
determinative weight on the mere fact that a report
expressing the Agency's
views was submitted.
Finally, we reject the Agency's contention that section
408(f)(2) of the
Act precludes the result we reach. The
Agency argued that, under our
analysis, states would
benefit from a credit against their disallowance
amount
for overpayments recovered, without incurring any
detriment for
the original erroneous payment. However,
the fact that a state may
eventually have its
disallowance amount reduced on account of overpayment
recoveries is simply irrelevant to the question of
whether the state
commits an error for QC purposes by
making that payment in the first
place.
Conclusion
For the reasons stated, we conclude that our decision in
Docket Nos.
A-92-4 and A-92-39 was not erroneous as a
matter of fact or law.
Therefore, we decline to
reconsider our earlier decision.
_____________________________
Peggy
McFadden Elmore
_____________________________
Leslie
A. Weyn
_____________________________
Maxine
Winerman
* * * Footnotes * * *
1. Upon such a request, the
Quality Control
Review Panel's Interim Guidelines provide that the Panel
may reconsider its decision where a party alleges a clear
error of fact
or law.
2. PAL errors are
payment errors -- referred to
as "discrepancies" in the QCM -- that result
from changes
in circumstances which occur in the review month or in
the
month immediately preceding the review month. QCM
section 3300.
The QCM notes: "The PAL concept was
established to take into account
the fact that advance
notice requirements or systems limitations may prevent
the [State] from making timely adjustments to the review
month's payment
when changes in circumstances occur."
Id. Appendix A to the QCM
provides that "when all the
discrepancies found to exist in the case are
PAL, there
will [be] no payment error."
3. Perhaps this authority is derived from the
Secretary's
authority, under section 408(a) of the Act,
to "determine, with respect to
each State, the amount (if
any) of the disallowance required to be repaid to
the
Secretary due to erroneous payments made by the State."
This
provision appears to grant the Secretary broad
discretion to determine
whether or not all technically
erroneous payments should be considered in
determining a
State's error rate, and hence, its disallowance
amount.