Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Missouri Department
of Social Services
Docket No. A-92-164
Decision No. QC30
DATE: November 23, 1992
DECISION
The Missouri Department of Social Services (Missouri)
appealed a May 18,
1992 quality control (QC) review
determination by the Regional Administrator
of the
Administration for Children and Families (ACF). ACF
determined that there was a $44 underpayment in the Aid
to Families with
Dependent Children (AFDC) grant paid for
May 1991 to the assistance unit
(AU) in State QC review
number 49223. In determining the amount of the
underpayment, ACF took into account a discrepancy between
the AU's
actual income for the review month and its
estimated income. Missouri
had viewed this discrepancy
as a payment adjustment lag (PAL) error which
did not
require a finding of a payment error under ACF policy,
and had
found a $75 underpayment.
For the reasons discussed below, we find that the error
in question
constituted a PAL error rather than a regular
error and was therefore not
properly considered in
determining the amount of the underpayment.
Accordingly,
we reverse ACF's determination.
Factual Background
The recipient's wife, M.J., was employed by Mrs.
Allison's Cookies (Mrs.
Allison's) from February 28, 1991
through April 5, 1991. M.J. was last
paid by Mrs.
Allison's on April 19, 1991. On April 9, 1991, M.J.
began working for the Darling Baby Shoe Company
(Darling). She was
first paid by Darling on April 16,
1991. The two jobs involved
different hours and rates of
pay.
The AU of which M.J. was a part had been receiving AFDC
payments as an
ongoing case and was subject to
prospective budgeting. On April 15,
1991, Missouri made
an estimate of the AU's income for purposes of
determining the amount of the AFDC payment for May 1991.
The
estimate was based on M.J.'s income from
Mrs. Allison's. Missouri's QC
reviewers did not question
the basis of the estimate; however, they
determined that
Missouri made a $75 underpayment to the AU because it
failed to apply the $30 and one-third disregard. Federal
QC agreed
that the disregard should have been applied but
determined that the estimate
should have been based on
M.J.'s income from Darling, rather than Mrs.
Allison's,
resulting in an underpayment of $44.
Applicable Requirements
Section 3420.A. of the QC Manual issued by ACF requires
that an estimate
of income used to determine the amount
of payment for current and/or future
months under a
prospective budgeting system be the "best estimate,"
i.e., one which "encompasses all information that could
have been known
at the time the estimate was made." 1/
The QC reviewer
must determine the accuracy of the
estimate by "verify[ing] actual income
and circumstances
for the time period from which the estimate was made
(i.e., use all information that could have been known) .
. . ."
Id. Regardless of whether the estimate is
accurate, however, any
discrepancy between actual income
for the review month and estimated income
constitutes an
error. The amount of the error is determined based on
either a recalculated estimate or actual review month
income.
Section 3420.C.
The specific provisions relied on by the parties are set
out in the next
section.
Parties' Arguments
ACF took the position that Missouri's failure to base its
estimate on the
income from Darling constituted a regular
error. ACF relied on section
3420 of the QC Manual,
which, according to ACF, requires that an inaccurate
estimate of an AU's income, i.e., one which is not based
on all
available information, be treated as a regular
error. Although ACF did
not cite specific language in
this section to support its position, it
appears to have
had in mind section 3420.C., which states in pertinent
part:
In ongoing, prospectively budgeted cases, consider a
number of
variables to determine the amount and type
of the error [where actual income
for the review
month differs from the state agency's estimate].
Variables include the date, accuracy, and timeliness
of the estimate,
whether a change in circumstance
occurred, and if so, when it
occurred.
* * * *
To determine whether the discrepancy, if any, is PAL
or regular in
this situation, determine the accuracy
of the agency's estimate. If
the estimate was
inaccurate, any discrepancy is regular. If the
estimate was accurate, the date of the change in
circumstance determines
whether the discrepancy is
PAL or regular.
ACF asserted that
Missouri's estimate of the AU's income
in this case was inaccurate because
at the time the
estimate was made, information that M.J. had terminated
her employment with Mrs. Allison's on April 5, 1991 and
begun working
for Darling on April 9, 1991 was available
to Missouri. As noted
above, ACF maintained that any
discrepancy based on an inaccurate estimate
is a regular
error. 2/
Missouri took the position that the error constituted a
PAL error rather
than a regular error under section 3300
of the QC Manual. This section
provides in pertinent
part:
A payment adjustment lag (PAL) discrepancy results
from a change in
the AU's circumstances that
occurred in the review month or in the
month
immediately preceding the review
month.
* * * *
To determine whether a discrepancy is regular or PAL
in the
following situations, these special
provisions apply:
A. In ongoing cases involving income, the change in
circumstance is the date income received first
differs from the income amount used to
compute the review month's
payment.
Missouri asserted that, under this provision, the change
in circumstance,
i.e., M.J.'s new employment, occurred on
April 16, 1992, the date M.J. first
received a payment
from Darling. Thus, according to Missouri, the
error
constituted a PAL error because it resulted from a change
in
circumstance that occurred in the month immediately
preceding the review
month.
Missouri also argued in effect that even if an error
resulting from an
inaccurate estimate was required to be
counted as a regular error, the error
in question was not
a regular error because the estimate of the AU's May
1991
income was accurate. Missouri again relied on section
3300 to
establish that the change in circumstance did not
occur until April 16, 1991
(the date M.J. first received
a payment from Darling), which was after the
estimate was
made. Missouri also asserted that permissible state
practice allowed the AU ten days to report a change in
circumstance, and
argued that, since the period for
reporting M.J.'s change in employment did
not expire
until the date the estimate was made, the estimate need
not
have reflected this change. 3/
ACF responded that Missouri's State plan did not refer to
the ten-day
rule relied on by Missouri, and that this
rule was therefore not a factor in
determining the
accuracy of Missouri's estimate even though it was
mentioned in training materials prepared by Missouri
before the State
plan was approved. ACF noted, however,
that the State plan required
that an estimate be
recalculated when "claimant becomes employed or loses
employment," and contended that Missouri did not comply
with this
requirement. ACF response to appeal request at
6, quoting State Plan
Attachment 2.3J.
Analysis
There is no dispute that M.J.'s change in employment was
a change in
circumstance which resulted in a disrepancy
between the AU's estimated
income and the actual review
month income, nor is there any dispute that
this
discrepancy constitutes an error. The dispute concerns
instead the scope of ACF's policy not to count PAL errors
as payment
errors. This policy is purely discretionary
since the Secretary of the
Department of Health and Human
Services is authorized to count all erroneous
payments in
determining a state's error rate for its AFDC program.
See Social Security Act, section 408(a); see also Alabama
Dept. of Human
Resources, Decision on Reconsideration of
Decision No. DAB QC13 (1992) at
4. However, to the
extent that ACF has defined an error as a PAL
error, ACF
is bound by its policy. Thus, the specific question
presented here is whether the error in question is a PAL
error within
the meaning of the QC Manual.
Section 3300 of the QC Manual defines a PAL error as one
which results
from a change in the AU's circumstances
that occurred in the review month or
the month
immediately preceding the review month. Similarly,
section 3420.A. states that "[i]f the reviewer determines
that a
discrepancy was caused by a change in
circumstance, the date of the change
determines whether
the discrepancy is PAL or regular." However,
section
3300 also states that "the key to whether an error is PAL
or
regular is usually the date the change in circumstance
occurred" (emphasis
added). This suggests that a PAL
error may be defined differently in
some situations, and
indeed section 3420.C. does this when it directs that
"[t]o determine whether the discrepancy, if any, is PAL
or regular . .
., determine the accuracy of the agency's
estimate," and states that "[i]f
the estimate was
inaccurate, any discrepancy is regular." Thus, we
find
that ACF's policy does not treat as PAL errors those
errors which
are based on inaccurate estimates of an AU's
prospective income, even if
those errors would otherwise
be PAL errors based on the date of the change
in
circumstance.
Nevertheless, we agree with Missouri that, even under
this provision, the
error in question here was a PAL
error because the estimate was
accurate. Section 3420.A.
provides that an accurate estimate is one
which
"encompasses all information which could have been known
at the
time the estimate was made." ACF took the
position that the estimate
was inaccurate because
Missouri could have known on April 15, 1991 that M.J.
had
changed employers and could have ascertained what her
income with
the new employer would be. However, as
Missouri pointed out, section
3300 of the QC Manual
provides that in ongoing cases involving income, a
change
in circumstance occurs not on the date of the change in
job
status, but on the date that the income received
first differs from the
prior income. 4/ ACF did not
dispute that the date of the
change in circumstance under
this provision was April 16, 1991. In our
view, ACF
cannot reasonably maintain that Missouri should have
known of
M.J.'s change in circumstance at the time it
made the estimate on April 15,
1991 when, applying ACF's
own rule, this change in circumstance did not
occur until
April 16, 1991.
Moreover, we reject ACF's suggestion that the estimate
was inaccurate
under the terms of the State plan.
Although the plan stated that the
estimate must be
recalculated when the recipient becomes employed or loses
employment, this leaves open the question when these
changes are
considered to have occurred.
Accordingly, we conclude that there is no evidence in the
record that the
estimate was inaccurate and therefore the
ordinary definition of a PAL error
was applicable here.
Under that definition, an error which results
from a
change in circumstance which occurred during the month
preceding
the review month is a PAL error. The error in
question here was such
an error since the review month
was May 1991 and the change in circumstance
occurred on
April 16, 1991. 5/
Conclusion
For the reasons discussed above, we conclude that the
discrepancy between
the AU's actual review month income
and its estimated income constituted a
PAL error which
should not be included in determining the amount of the
underpayment. Accordingly, we reverse ACF's
determination.
_____________________________
Carmen Cafasso
_____________________________
Maxine M. Winerman
_____________________________
Carolyn Reines-Graubard
* * * Footnotes * * *
1. Both ACF and
Missouri quoted portions of
section 3420 as revised August 22, 1991.
These revisions
were transmitted to the states with ACF-AT-91-26, which
stated that it was effective upon issuance. Since the
effective
date of the revisions was after the review
month in question here, our
decision is based on the
earlier version of section 3420. We note in
any event
that the revisions appear to clarify but not
substantively
change the provisions of section 3420 which
are pertinent
here.
2. ACF also
contended that the estimate was
inaccurate because Missouri did not apply
the 30 and one-
third disregard. However, ACF treated the failure to
apply this disregard as an error in a separate QC review
element.
Thus, it has no bearing on the question
presented here whether the error
resulting from the
change in circumstance was a PAL or regular
error.
3. The record
does not show when M.J.'s change
in employment was reported to the state
agency, however.
4. Section 3300 inexplicably provides a
different
rule for new cases:
Where a case experiences an employment status
change, e.g., a new
job, loss of job . . ., during
the month of application or the second month
in some
States, the change in circumstance is the date of
the status
change rather than the date earnings
first differed. This rule
recognizes that the local
agency could have contacted the employer, obtained
an estimate of earnings, and made any payment
adjustments as
appropriate.
Although ACF cited this provision in its response to
Missouri's appeal
request, it later acknowledged that the
provision was inapplicable to
ongoing cases such as the
case in question here. ACF Response to
Request for
Further Information at 2.
5. In light of our
conclusion that the estimate
was not inaccurate under the terms of the QC
Manual, we
need not address Missouri's argument that the estimate
was
accurate because permissible state practice allowed
ten days for reporting
changes.
(..continued)