Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Wisconsin Department
of Health and Social Services
Docket No. A-92-84
DATE: June 12, 1992
DECISION
The Wisconsin Department of Health and Social Services
(State) appealed
the January 27, 1992 quality control
(QC) review determination of the
Regional Administrator
of the Administration for Children and Families (ACF,
the
Agency) that an Aid to Families with Dependent Children
(AFDC)
recipient 1/ was ineligible for an AFDC payment
for the review
month of March, 1991. ACF determined that
the assistance unit's (AU)
income in the review month
should have been considered in determining the
amount of
the payment for that month (prospective budgeting). The
State argued that income from the budget month of
January, 1991 should
have been considered in determining
the amount of the payment for the review
month
(retrospective budgeting), resulting in a payment of
$199.
There is no dispute that if the case was in its
initial month of
eligibility, prospective rather than
retrospective budgeting should have
been used. However,
the parties disputed whether the case was in its
initial
month of eligibility where no AFDC payment was made for
the
three months preceding the review month.
For the reasons discussed below, we agree with the
Agency's determination
that the case was in an initial
month of eligibility and that prospective
budgeting
should have been used. Consequently, we sustain the
Agency's determination that the case was ineligible.
Applicable law and regulations
Section 402(a)(7) of the Social Security Act (42 U.S.C.
�
602(a)(7)) requires that a state's plan for AFDC take
a family's income and
resources into account in
determining need. The agency responsible for
administering a state's AFDC program determines an
applicant's
eligibility prospectively for the month for
which payment is to be awarded;
i.e, the payment month.
The state agency makes this determination by
estimating
various income and non-income factors for the payment
month
and comparing them to the eligibility criteria in
the approved state
plan. Non-income eligibility factors
include family composition, age,
and resources. For
income, eligibility is determined by comparing the
unit's
income to the state's "need standard," which varies
depending on
the size of the AU. Once the AU has been
determined to be
prospectively eligible for AFDC, the
state calculates the amount of
assistance by reducing
gross income by the amount of applicable deductions
and
"disregards" specified in the Act and regulations, and
subtracting
the resulting net or "countable" income from
the payment standard for the
AU's size established in the
state plan. 2/ The unit is
paid the difference between
its countable income and the payment standard;
if its
countable income for the month in question exceeds the
payment
standard, it receives no payment. See 45 C.F.R.
� 233.20. See
generally Rosado v. Wyman, 397 U.S. 42, 90
S.Ct. 1207 (1970); Minnesota v.
Heckler, 739 F.2d 370
(8th Cir. 1984); Mont v. Heintz, 849 F.2d 704
(2d Cir.
1988); Everett v. Schramm, 772 F.2d 1114 (3d Cir. 1985).
The determination of countable income -- the "budgeting"
process -- is
either prospective or retrospective. In
prospective budgeting, the
state uses its best estimate
of countable income for the payment month,
i.e., the same
month for which the eligibility factors were determined
prospectively and for which assistance is awarded. 45
C.F.R. �
233.31(b)(1). In retrospective budgeting, the
state uses the unit's
countable income during the month
either one or two months prior to the
payment month;
states have the option of selecting either one- or
two-
month retrospective budgeting. 45 C.F.R. � 233.31(b)(2).
The month for which countable income is determined is
the budget
month; in prospective budgeting, the payment
and budget months are the
same. 45 C.F.R. �
233.31(b)(3), (4).
While all factors of eligibility must be determined
prospectively for
each month, states are required to use
retrospective budgeting to calculate
the amount of the
assistance payment except during the initial one or two
months of eligibility, depending on whether the state has
selected one-
or-two month retrospective budgeting in its
state plan. 3/
45 C.F.R. �� 233.31, 233.34. Even
during the initial one or two months
of eligibility, a
state may still apply retrospective budgeting where the
unit was previously eligible but assistance was
discontinued for only
one month due to circumstances in
the budget month, and where the
ineligibility is not
expected to last more than one month. In such
cases, the
assistance is deemed to have been "suspended" rather than
terminated, and the state may continue to apply
retrospective
budgeting. The suspension provision is
contained in 45 C.F.R. �
233.34, which provides as
follows:
� 233.34 Computing the assistance payment in
the initial one
or two months (AFDC).
A State shall compute the amount of the AFDC
payment for the
initial month of eligibility:
(a) Prospectively (except as in
paragraphs
(b) and (c) of this section; or
(b)
Retrospectively if the applicant
received assistance (or would have except
for
the prohibition on payments of less than $10)
for the immediately
preceding payment month
(except where the State pays the second month
after application prospectively); or
(c) Retrospectively
if:
(1) Assistance had been suspended as defined
in paragraph
(d) of this section; and
(2) The initial month follows the month
of
suspension; and
(3) The family's circumstances for the
initial month had not changed significantly
from those reported in the
corresponding budget
month, e.g., loss of job.
(d) A State
may suspend, rather than
terminate, assistance when:
(1) The
agency has knowledge of, or reason
to believe that ineligibility would be
only for
one payment month; and
(2) Ineligibility for that
one payment month
was caused by income or other circumstances in
the
corresponding budget month.
(e) If the initial month is computed
prospectively as in paragraph (a) of this
section, the second month
shall be prospective
if the State elects a 2-month retrospective
budgeting system.
Facts
It is undisputed that the AU consisted of the recipient
and her two
children, and that they had previously been
receiving AFDC payments, but did
not receive them for the
months of December, 1990 through February,
1991. For the
review month, March, 1991, the State found the recipient
prospectively eligible, and awarded $199.00 in AFDC
benefits based on
her countable income for January, 1991,
the budget month under the State's
two-month
retrospective budgeting system. The Agency asserted that
the case should have been treated as in its initial month
of eligibility
due to the cessation of AFDC payment for
the preceding three months, and
should have been budgeted
prospectively. Prospective budgeting
resulted in no
payment for the review month, as the AU's countable
income for March exceeded the State's payment standard.
Contentions
Neither party disputed the AU's income and other
pertinent
eligibility-related circumstances, or each
other's calculations.
Resolution of this appeal thus
turns on whether payment to the AU for the
review month
should have been determined through prospective or
retrospective budgeting.
The State asserted that the case was not in its initial
month of
eligibility during the review month and
therefore should have been budgeted
retrospectively, not
prospectively. The State argued that this was not
a new
but an ongoing case, as the recipient had been receiving
assistance since 1983 including a $137 grant in November,
1990, based on
September earnings, and had also received
Food Stamps and medical assistance
benefits during the
three months when no AFDC payments were made. The
recipient did not receive AFDC payments in December,
January or February
because the monthly retrospective
income exceeded the payment standard in
each of these
months. The State noted that the regulations contain no
definition of "initial month" which contradicts the
State's practice of
treating this as an ongoing case.
The State pointed out that the
recipient did not complete
an application for AFDC in March as the Agency
asserted;
rather, she underwent a six-month eligibility
redetermination,
which uses the same form as an initial
application for benefits. The
State asserted that its
practice in treating this as an ongoing case was
consistent with its approved State plan as well as its
AFDC policy
manual, which does not include the
circumstances of this case in the
category of "beginning
month" cases.
The Agency argued that, as the recipient was not eligible
for and
received no AFDC payments from December, 1990
through February, 1991, the
review month, March, should
have been treated as the initial month of
eligibility
subject to prospective budgeting. The Agency noted that
the State plan did not provide for a suspension policy,
which would have
allowed the use of retrospective
budgeting after a month of ineligibility,
and that, in
any event, a suspension policy would not have applied
because the recipient was ineligible for three months.
The Agency
enclosed portions of its AFDC QC Manual (QCM)
governing the eligibility
determination and budgeting
processes, and cited section 3420 of the QCM,
which
states that prospective budgeting must be used for
reapplications
or reinstatements during the one- or two-
month period subsequent to a month
of ineligibility,
unless a suspension policy applies. The Agency also
cited an example from the QCM which it asserted is
similar to the review
case, in which the AU was
ineligible for one month, in a state with no
suspension
policy. In the example, the correct procedure to process
the case is to assume termination of assistance and
reapplication, and
apply prospective budgeting.
In reply, the State asserted that the suspension
provisions are not
relevant to this case, and that the
procedures for program eligibility are
set by the
regulations, not by the QCM. The State noted that the
implementing procedures in its policy manual were
developed in accord
with federal regulations, and that
the QC system is thus bound to follow
these procedures.
Analysis
As explained below, we sustain the Agency's determination
that the AU
should not have received a payment for the
review month. We do not
agree with the State's assertion
that the suspension provisions are
irrelevant to this
case. We find that the wording of the regulations
governing the AFDC eligibility determination and payment
process,
including the suspension and initial month
eligibility provisions, permits
no other conclusion than
that the failure of the AU to qualify for AFDC
benefits
for three consecutive months resulted in termination of
its
eligibility. Consequently, the review month had to
be treated as an
initial month of eligibility for which
prospective budgeting
applied. 4/
The suspension provisions
Under 45 C.F.R. � 233.34(d), a state may suspend rather
than terminate
assistance when an AFDC recipient becomes
ineligible for one month, and
continue using
retrospective budgeting when eligibility resumes. The
preamble to section 233.34 (published in the Federal
Register) explained
the general rule that loss of
eligibility for more than one month requires
termination
of the case, and noted that the suspension policy was
intended as a limited exception to this rule. As
originally
proposed, suspension was to apply only in the
case of ineligibility due to
receipt of an additional
paycheck during a month but where annual income
remained
the same. The preamble to the final rule explained the
change in this provision as follows:
The optional suspension provision was
purposefully very narrowly
drawn to permit
suspension only when there is an extra paycheck
in a
month based on the calendar but the
individual's actual earnings have not
increased. However, there are convincing
administrative reasons
for suspending
recipients whenever ineligibility for only one
month
occurs and � 233.34(d) is revised to
authorize such actions. However,
all other
situations which result in loss of eligibility
for more than
one month represent ongoing
changes in circumstance which must be treated
as terminating events.
47 Fed. Reg. 5,666 (1982).
Application of suspension is illustrated in an example
provided in the
preamble:
If the unit will be eligible for June but not
for July, then the
State must determine whether
the ineligibility is expected to continue
through August. If not, the State may either
terminate for July or
handle the case through a
suspension during the payment month
corresponding to the July budget month. If the
ineligibility is
expected to continue through
August, the State must terminate effective with
the July payment month and, if a July payment
has been issued, recover
it.
Id.
Under 45 C.F.R. � 233.34, retrospective budgeting may be
used after a
period of ineligibility only when suspension
applies; in all other cases,
where assistance is
terminated, prospective budgeting must be used for the
first or second month after eligibility resumes.
Thus, the suspension
provision constitutes a limited
exception to the policy requiring
termination and
reversion to prospective budgeting after a period of
ineligibility. This exception would be meaningless if
states could
apply retrospective budgeting upon
resumption of eligibility outside the
confines of the
suspension policy.
We conclude that the facts of this case fall within the
example cited in
the preamble above and are clearly
addressed by the initial month
regulation. Since the
State did not have a suspension policy, the
regulation
would not have permitted the use of retrospective
budgeting
during the review month even if the AU had been
ineligible for only one
month. Moreover, suspension and
the use of retrospective budgeting
were not permissible
under the regulation where, as here, the AU was
ineligible for more than one month. Accordingly, the
regulation
clearly required that prospective budgeting be
applied to calculate the
amount of payment for the
initial two months once eligibility resumed.
Ineligibility of the AU
The State argued that retrospective budgeting should have
been applied
because the AU was beyond its initial one or
two months of
eligibility. While not stated directly,
the State's appeal presents
two theories under which the
AU might be considered to have been eligible
during the
three months it received no AFDC payments, such that the
review month would not have been its initial month of
eligibility.
First, the State noted that the case was
ongoing, and that the AU was
continuously receiving Food
Stamps and medical assistance benefits during
the three
months that AFDC payments were not received. The State
provided an excerpt from one of its policy manuals which
lists several
types of cases to which "beginning month"
procedures are to be
applied. The list includes one
instance where a medical assistance
case is treated as a
beginning month case, but does not appear to include
the
circumstances of the review case.
However, the State did not cite any provision of the
regulations which
would allow eligibility for Food Stamps
or medical assistance to result in
ongoing AFDC
eligibility when the unit receives no AFDC payments.
Specifically, the regulations governing AFDC eligibility
at 45 C.F.R.
Part 233 do not provide for categorical
eligibility based on receipt of Food
Stamps or medical
assistance benefits. Furthermore, while the portion
of
the State's policy manual provided in the record did not
include this
type of case within the category of
beginning month cases, it also did not
specifically
address the treatment of cases which have failed to
qualify
for AFDC payments for several successive months.
Consequently, we
conclude that the fact that the AU
received Food Stamps and medical
assistance benefits
during the three months that AFDC payments were not
being
made did not make the AU eligible for AFDC during those
three
months. To the extent that the State's policy
manual requires treating
this case as beyond its initial
month of eligibility, it conflicts with the
regulations
for determining AFDC eligibility at 45 C.F.R. Part 233,
and
is not a proper basis for determining whether there
was an erroneous
payment.
The State also reported that the client did not receive
AFDC in December,
January or February because monthly
retrospective income exceeded the
payment standard in
each of these months. This suggests an argument
that the
AU was continuously eligible for December, 1990 through
February, 1991 based on prospective eligibility
determinations, even
though it received no AFDC payments
during those months because of excessive
income in the
retrospective budget months.
However, it seems clear that it is the actual receipt of
payments which
indicates whether an AU is eligible for
AFDC in a given month. The
regulations governing AFDC
specify limited instances, not applicable here,
where
individuals who do not receive any AFDC payment may still
be
considered to be recipients of AFDC for program
purposes. For example,
the regulations require that
payments be rounded down to the next lower
whole dollar,
and that no payment be made to an AU in any month in
which
the amount of aid prior to any adjustments is
determined to be less than
$10. 45 C.F.R. �� 233.20
(a)(2)(iv); 233.20(a)(3)(viii)(C).
However, 45 C.F.R.
� 233.20(a)(3)(viii)(D) provides that
an individual
denied aid because of these requirements shall be deemed
a
recipient of aid for all other purposes (except
participation in the
Community Work Experience Program).
Similarly, while states may
recover overpayments to
recipients by reducing the amount of aid payable to
an
AU, if such recovery reduces the amount payable to the AU
to zero,
members of the AU are still considered
recipients of AFDC. 45 C.F.R. �
233.20(a)(13)(i)(C).
The implication of the delineation of these specific
instances where
persons not receiving payments are deemed
AFDC recipients is that in all
other cases where no
payment is received they are considered ineligible for
AFDC. Accordingly, we conclude that where the AU has not
received
AFDC payments for three consecutive months, the
next subsequent month for
which benefits are sought must
be considered an initial month of
eligibility.
Other provisions of the regulations also support this
conclusion:
o The definition of overpayment at 45 C.F.R.
� 233.20(a)(13)(i) -- "a financial assistance
payment received by
. . . an assistance unit
. . . which exceeds the amount
for which that
unit was eligible" -- shows that eligibility
encompasses
not only passing the eligibility
tests applied prior to the determination of
the
payment amount, but also eligibility for the
amount properly
resulting from the payment
calculation. Where the payment calculation
results in no payment, the unit is not
eligible.
o 45 C.F.R. � 232.21, which provides for computation
of assistance
and supplemental payments for units
which receive child support, contains an
example
which shows that failure to qualify for payment
under the
payment calculation results in
ineligibility. In the example, the
state computes
the assistance payment by subtracting income from a
reduced need standard, and income above the reduced
need standard
results in ineligibility.
The failure of the AU to qualify for AFDC payments for
the months
December, 1990 through February, 1991 rendered
it ineligible for AFDC.
Thus, the review month had to be
treated as an initial month of eligibility,
and
application of prospective budgeting was required. 5/
Conclusion
For the reasons discussed above, we conclude that the
recipient should
not have received the AFDC payment for
the review month of March,
1991. Accordingly, we affirm
ACF's determination that the case was
ineligible.
Carolyn Reines-Graubard
Maxine Winerman
Jeffrey A. Sacks
* * * Footnotes * * *
1. State QC review number
611130.
2. The payment standard may be
less than the need standard.
The need standard may be ratably reduced,
and maximum payments
may be established. 45 C.F.R. ��
233.20(a)(2)(ii);
233.20(a)(3)(viii).
3. This requirement applies to assistance units that are
required to
file monthly reports. 45 C.F.R. � 233.31(a). The
State's
appeal request and attachments indicate that the recipient
filed monthly
reports.
4. In view of this conclusion,
we need not address the
State's argument that the QCM provisions cited by
the Agency
conflict with the regulations in order to decide this appeal.
5. Because the assistance unit also was
not entitled to any
payment for the review month, it was ineligible for that
month,
and the next month, April 1991, would also have to be treated as
an initial month of eligibility.