Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Oklahoma Department
of Human Services
Docket No. A-92-79
DATE: August 3, 1992
DECISION
The Oklahoma Department of Human Services (State)
appealed a January 22,
1992 quality control (QC) review
determination by the Regional Administrator
of the
Administration for Children and Families (Agency). The
Agency determined that the State had cited an overpayment
of $101 in an
Aid to Families with Dependent Children
(AFDC) grant to L.B., when L.B. was,
in fact, ineligible
for any AFDC assistance. 1/
The State Quality Control review (SQCR) had uncovered
unreported income
for L.B. from one place of employment,
resulting in an overpayment of $101
in L.B.'s AFDC grant
during the review month of June 1991. The SQCR
also
found additional income in June 1991 from another place
of
employment, but disregarded that income in determining
L.B.'s AFDC
eligibility because L.B. had earned the
additional income during the review
month. The federal
QC review determined that the SQCR should have
included
L.B.'s earnings from all sources, including the second
job in
the review month, in the determination of L.B.'s
eligibility, with the total
income from all sources
rendering L.B. ineligible for any AFDC
assistance.
For the reasons discussed below, we find that the SQCR,
in its review of
L.B.'s continued AFDC eligibility, was
required to include the income from
L.B.'s second job
even though those earnings arose during the review month.
Accordingly, we sustain the Agency's determination that
L.B. was
ineligible for AFDC assistance.
Applicable Authority
Section 408(a) of the Social Security Act (Act) provides:
IN GENERAL.--In order to improve the accuracy of
payments of aid to
families with dependent children,
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.
Further, the Act requires each state to review a sample
of cases in which
AFDC payments were made during the
review period in order to determine the
level of
erroneous payments. The Act provides that the Secretary
shall review a subsample of the cases reviewed by the
state, and notify
the state of any case in the subsample
which the Secretary finds involves an
erroneous payment.
See sections 408(b)(1) and (2) of the Act.
Section 402(a)(7)(A) of the Act requires a state agency,
in determining
need, to take into consideration any
income and resources of any child or
relative receiving
AFDC payments. Furthermore, 45 C.F.R.
�233.20(a)(3)(ii)
provides that all income and resources, after all
policies governing the reserves and allowances and
disregard or setting
aside of income and resources have
been uniformly applied, shall be
considered in
determining need and the amount of an AFDC assistance
payment.
Each state is required to operate its quality control
system in
accordance with policies and procedures
prescribed in a Quality Control
Manual (QCM) issued by
the Department of Health and Human Services. 45
C.F.R.
�205.40(b)(1). As relevant here, the QCM provides that a
QC
reviewer must determine whether a discrepancy between
estimated and actual
review month income was due to a
change in an assistant unit's (AU)
circumstances. A
change in employment status is one example of a
change in
circumstances. The QCM directs that such a determination
dictates: 1) whether the reviewer should use actual
review month
income or recalculate the estimate to
determine the amount of the payment
discrepancy; and 2)
whether the discrepancy is a payment adjustment lag
(PAL)
discrepancy or a regular discrepancy. Section 3420.B.
If the reviewer determines that the discrepancy was
caused by a change
in circumstances, the date of the
change determines whether the discrepancy
is PAL or
regular. Id.
The QCM provides that a PAL discrepancy --
results from a change in the AU's circumstances that
occurred in
the review month or the month
immediately preceding the review month.
However,
only changes that affect the review month(s) payment
are
considered PAL discrepancies.
QCM Section 3300.
A PAL discrepancy is distinguishable from a regular
payment discrepancy
which occurs when --
(1) a change in circumstance occurred before the
month immediately
preceding the review month; or,
(2) an incorrect adjustment was made to the
review
month's payment, including a supplemental payment,
based on a
change in circumstances which occurred
during, or in the month immediately
preceding the
review month; or, (3) a change in circumstance
occurred
prior to authorization of the first check
to a newly eligible AU.
Id.
The significance of whether a discrepancy is considered
regular or PAL is
that in the determination of the amount
of any payment error a PAL
discrepancy, depending on the
totality of the circumstances, may not result
in a
finding of payment error. See QCM Section 3, Appendix A.
Factual Background
In the review month of June 1991, L.B. received an AFDC
grant of $321
based on an AU consisting of herself and
her two sons. The grant
amount was based on a
prospective August 20, 1990 estimate of L.B.'s
circumstances.
In conducting its review, the SQCR discovered that L.B.
began working at
a restaurant in April 1991. In June
L.B. received $252.54 in income
from the restaurant. 2/
The SQCR also discovered that L.B.
quit her job at the
restaurant and began working at a motel on June 4, 1991.
L.B. received gross earnings of $403.76 from the motel
in
June. L.B. therefore received a total income of
$656.30 for
June. In discovering the income discrepancy
in L.B.'s circumstances,
the SQCR cited as an error only
the income L.B. received from the restaurant
job and
reduced her AFDC grant by $101.
The Agency, after applying appropriate disregards,
determined that L.B.'s
accountable income for June was,
for AFDC purposes, $357.53, exceeding the
State's AFDC
eligibility limitation of $321. Accordingly, the Agency
concluded that L.B. was ineligible for any AFDC
assistance and that the
State had erred in finding that
L.B.'s grant should be reduced by only $101.
Analysis
The parties agree that discrepancies occurred in L.B.'s
circumstances
following the State's estimate of her AFDC
grant in August 1990.
L.B.'s income element was altered,
first by her restaurant job beginning in
April 1991, then
by her taking the motel job in the review month of June
1991. The parties disagree, however, on whether the SQCR
erred in
failing to take into account L.B.'s income from
the motel job in calculating
her eligibility for
continued AFDC assistance.
The State argued that the SQCR did not err when it
reviewed the income
received by L.B. in the June 1991
review month in determining the amount of
any error in
L.B.'s grant. The State maintained that it was not
required to include L.B.'s income from her job at the
motel in June
because that discrepancy did not occur
prior to the review month of June,
but rather in the
review month itself, and was therefore a PAL discrepancy
that was not required to be accounted for by the SQCR.
The State
contended that, while actual review month
income normally is to be used in
reviewing an AU's
circumstances, QC policy, as expressed in the QCM,
considers such a discrepancy occurring in the review
month to be
excludable from calculation of income. The
State argued that there is
no QCM provision that requires
an otherwise excludable PAL discrepancy to be
included in
the calculation of income just because there was an
existing
regular discrepancy in the same element. The
State contended that the
QCM contains no instructions for
the handling of multiple changes in the
same element.
The State pointed to Appendix A of Section 3 of the QCM
as providing
guidance on how to handle multiple
discrepancies appearing in different
elements. Appendix
A discusses the payment error determination
process.
Step V of Appendix A provides:
C. When there is a combination of PAL and regular
discrepancies and all have the same direction, the
payment error is the
combined effect of all regular
discrepancies.
The State maintained that the SQCR thus acted properly
when it considered
only the earnings from L.B.'s
restaurant job in calculating the amount of
any error in
her AFDC grant.
The Agency responded that Appendix A was inapplicable to
the facts of
this case. The Agency maintained that the
provisions in the body of
the QCM take precedence over
any guidelines put forth in the Appendix, and
that these
provisions specify that the SQCR was required to take
into
account all of L.B.'s income in the review month.
The Agency
maintained that there was no discrepancy in
this case that could be
considered a PAL discrepancy
under the provisions of the QCM. The
Agency, citing
section 3300 of the QCM, argued that only one discrepancy
can be coded in each element of a case, and, if two or
more
discrepancies exist in the same element, only the
earliest discrepancy is
coded. Thus, according to the
Agency, in L.B.'s work element the first
discrepancy
occurred in April and was therefore a regular
discrepancy,
with all subsequent discrepancies in that
same element giving way to the
April regular discrepancy.
Furthermore, the Agency continued, the QCM does offer
guidance on how to
treat discrepancies, regular and PAL,
occurring in the same element.
The QCM provides:
If the estimate is current but a change in
circumstance occurred
after the date of the latest
estimate, but prior to the payment month, use
actual
review month income to determine the amount of the
error.
QCM Section 3420.C.2.
Here L.B.'s estimate was current, but her April job at
the restaurant
altered her employment circumstance.
Since this April change in
circumstance occurred two
months prior to the payment or review month of
June, it
was a regular discrepancy, not a PAL discrepancy. Under
the Agency's reasoning, therefore, section 3420.C.2.
mandates that
L.B.'s total income, from both the
restaurant and the motel jobs, should be
used to
determine the amount of any error in her AFDC grant.
In evaluating the parties' positions in this appeal, we
are compelled to
declare that the provisions of the QCM
on how to deal with multiple
discrepancies occurring in
the same element are ambiguous at best.
While each party
has advanced its own interpretation of various sections
of the QCM in support of its respective position, the
parties' arguments
have not been extensive, supported by
citations to authority, and
accordingly not entirely
persuasive. Nevertheless, we are obligated to
render a
decision in this matter, and, on the whole, we find the
Agency's interpretation of the QCM more reasonable in
light of the
Congressional intent to create a quality
control system to detect payment
errors in the AFDC
program.
The Agency's interpretation of section 3420.C.2. of the
QCM is a
reasonable approach to dealing with changes in
an AU's circumstances.
If the only discrepancy in an
element is a PAL discrepancy, i.e., a
discrepancy
occurring in the review month or the month immediately
preceding the review month, it is quite likely that a
SQCR would fail to
detect this discrepancy at the time of
its review due to time delays in the
reporting of a
change in an AU's circumstances such as new employment.
The SQCR would not have any reason to delve any further
in their
investigation once the usual sources of
information had been consulted and
nothing indicating a
change in circumstances had been found.
In the case of a regular discrepancy, however, a SQCR is
put on notice
that a change in circumstances has occurred
and that it should be alert for
others, particularly for
further discrepancies in the same element.
Here the
SQCR, having been apprised of L.B.'s April job in the
restaurant and also aware of her job at the motel, should
be required to
include L.B.'s income from both jobs in
the determination of her AFDC
eligibility.
It is important to recognize that this appeal does not
present the
question of whether the SQCR was unaware of
the status of L.B.'s employment
and wage earnings at the
time of the review. In many instances a SQCR
may be
unaware of an AFDC recipient's employment status in the
designated review month because of time lags in the
reporting of
employment data. That was not the case
here. Here it is
indisputable that the SQCR, when it
conducted the review, knew of L.B.'s
employment activity
in June.
L.B.'s case was assigned for review on July 23, 1991,
with the review
completed on September 12, 1991. In the
earned income element of the
review, the SQCR described
in detail L.B.'s jobs at the restaurant and the
motel.
The SQCR determined, however, that L.B. had a break in
her
employment from mid-May until early June, concluding
that the income from
the motel was "new income" and
therefore a PAL error not creating an
over-payment to
L.B. The SQCR accordingly deducted only the income
attributable to the restaurant job from L.B.'s AFDC
grant.
In making this determination, the SQCR was clearly wrong.
The State
did not refer to any provision of the QCM for
making this distinction about
"new income." The State
has not provided any convincing argument why
section
3240.C.2. should not control here, and that section
requires the
SQCR to consider all of L.B.'s income to
determine the amount of any error
in her AFDC grant.
While we are not prepared to accept at face value the
Agency's assertion
that Appendix A is completely
inapplicable to the facts of this case because
its
guidelines must automatically give way to the provisions
in the body
of the QCM, the State simply has not given us
any justification why or how
Appendix A should be applied
in this case. The State has not provided
us with any
discussion on how it determined L.B.'s payment error
following the guidelines set forth in the Appendix. In
this
absence of argument and supporting documentation, we
find no basis for the
State's interpretation of the QCM.
In light of the ambiguity of the QCM, we find that the
Agency's
interpretation of the facts of this case is more
reasonable than the
State's. To find otherwise
would give approval to a SQCR overlooking an
obvious
erroneous payment in contradiction of the Congressional
purpose
of establishing a quality control system in the
AFDC program to detect
erroneous payments.
Conclusion
For the reasons described above, we find that in the
particular
circumstances of this case the SQCR should
have included L.B.'s earnings
from her job at the motel
in the review month and that the Agency was correct in
concluding that
L.B., because of the amount of her income
in the review month, was
ineligible for any AFDC
assistance.
_____________________________
Andrea M. Selzer
_____________________________
Maxine Winerman
_____________________________
Thomas D. Horvath
* * * Footnotes * * *
1. We identify the
recipient by her initials in
order to protect her privacy. The State
quality control
review number is
200730.
2. L.B.
actually stopped working at the
restaurant on May 18, 1991. She did
not receive her last
two weeks of wages, however, until June.
(..continued)