Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Texas Department of
Human Services
Docket No. A-94-078
Decision No. QC66
DATE: May 26, 1994
DECISION
The Texas Department of Human Services (Texas) appealed a
January 27,
1994 quality control (QC) review
determination by the Regional Administrator
of the
Administration for Children and Families (ACF). ACF
determined that Texas improperly paid $166 in Aid to
Families with
Dependent Children (AFDC) to G.S. who was
ineligible because of excess
income. 1/
ACF found that Texas made an erroneous determination of
initial
eligibility, and therefore, the incorrect payment
to G.S. was a regular
payment discrepancy. Texas,
however, argued that this improper payment
was a payment
adjustment lag (PAL) error which did not require a
finding
of a payment error under ACF policy.
For the reasons discussed below, we find that the error
in question
constituted a regular error. Accordingly, we
sustain ACF's
determination of a regular discrepancy in
the amount of $166 for the May
1993 review month.
Relevant Legal Authority
Section 408(a) of the Social Security Act (Act) requires
the Secretary to
operate a QC system which identifies
erroneous payments made by each state
in carrying out its
state plan. 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. Further,
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.
Each state is required to operate its QC
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).
In determining whether an applicant for AFDC assistance
is in need of
benefits, the regulations require a state
agency to take into consideration
the income and
resources of any child or relative applying for AFDC
funds. See 45 C.F.R. � 233.20 (a)(1)(v). The
regulations
also provide that states may use a
prospective budgeting method to determine
whether an
applicant is eligible for AFDC assistance. 45 C.F.R.
�
233.31. The prospective budgeting method allows a
state agency to
determine AFDC eligibility based on the
"best estimate" of the AFDC
recipient's income. 45
C.F.R. � 233.31(b)(1). This estimate
should encompass
all information that could have been known regarding the
assistance unit's (AU) income and income-related
circumstances at the
time the estimate is made. QCM
� 3420. In establishing the best
estimate, a state
should describe its procedures for establishing a best
estimate in its permissible state practice (PSP).
Texas' PSP instructs eligibility workers trying to
project income to
evaluate the applicant's household
income and income-related circumstances,
and to budget
actual income received as of the eligibility interview
date and income that can be reasonably anticipated after
that
date. See Texas Income Assistance Handbook (IAH)
� 784.
According to Texas' PSP, "[r]easonably
anticipated means that the client
knows who the income
will come from, in what month it will be received, and
how much it will be." Id.
The QCM provides that changes in an AU's circumstances
can affect
eligibility for AFDC assistance or the amount
of the household's
payment. QCM � 3300. A change in
circumstance which results in
ineligibility or a
different amount of AFDC assistance due is either a
regular or PAL discrepancy. Id.
According to the QCM, a regular discrepancy occurs when--
(1) a change in circumstance first 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 circumstance
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. A
payment
discrepancy can also result from an incorrect
determination of eligibility or payment amount prior
to
initial authorization. An erroneous
determination at initial
eligibility which results
in an incorrect payment is always considered
a
regular payment discrepancy.
QCM � 3300 (emphasis added).
A regular payment discrepancy is distinguishable from a
PAL discrepancy
which results from --
a change in the AU's circumstances that
first
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.
For initial cases, the best estimate of the AU's income
must always be
current. See QCM � 3420. If the estimate
was incorrectly
calculated, then all income discrepancies
related to the inaccurate estimate
are regular errors.
Id. Whether a discrepancy is considered
regular or PAL
is significant because a PAL discrepancy is not included
in determining the amount while a regular error is
"recorded as the
amount of misspent payment dollars for
the sampled case." QCM �
3300.
Factual Background
G.S. applied for AFDC benefits under the Unemployed
Parent Program on
April 20, 1993 and underwent his AFDC
eligibility interview on April 23,
1993. Upon review of
information provided by G.S.' wife, the State
eligibility
worker (EW) determined that the AU had no income for the
months of March and April 1993 and estimated that the AU
would not have
any prospective income in the ensuing
months, including the review month of
May 1993. On May
3, 1993, however, G.S. began a new job at Franco Auto
Repair. He was hired at a weekly rate of $125 per week,
and by the
end of the month, had earned $500. On May 6,
1993, the EW certified
that G.S. was eligible for AFDC
assistance and a check for $166 was issued
for the month
of May. On May 7, 1993, G.S. received his first paycheck
for $125 and that same day reported to ACF that he had
secured a
job. On May 28, 1993, G.S. terminated his
employment with Franco Auto
Repair and immediately began
a new job.
In reviewing this case, State QC found the case eligible
for the $166
AFDC grant. Federal QC, however, determined
that G.S.' employment made
him ineligible for AFDC
benefits and that the agency's failure to anticipate
G.S.' weekly earnings was a regular payment discrepancy.
ACF
informed Texas of its review findings by letter
dated December 2, 1993, and
Texas requested
reconsideration of this decision. Upon
reconsideration,
ACF sustained its original finding that G.S. was
ineligible for any AFDC assistance and that Texas'
improper payment to
G.S. was a regular payment
discrepancy for the May 1993 review month.
Analysis
On appeal, Texas acknowledged that there was a
discrepancy between G.S.'
estimated and actual income for
May 1993. Texas argued, however, that
this was a PAL
error, since its best estimate of no income was correct
based on the information available at the time of G.S.'
initial
eligibility interview. Texas contended that
G.S.' employment could not
be reasonably anticipated at
the time of the interview, that G.S. did not
have any
income at that time, and that nothing indicated that his
circumstances would change in the near future.
This argument lacks merit, since what the EW knew at the
time of the
eligibility interview is not relevant. The
QCM specifically states
that "the best estimate is
established at the time payment of assistance is
authorized." QCM � 3420 (emphasis added). Since G.S.
had
started a new job at the time payment was authorized,
the EW should have
considered this income in establishing
the best estimate of projected
income. Indeed, G.S.'
income from Franco Auto Repair could have been
"reasonably anticipated," pursuant to the QCM, since G.S.
knew, prior to
certification, from whom the income he
would be receiving would come, in
what month it would be
received, and how much he would receive. See
IAH � 784.
Nevertheless, the EW relied only upon the information
obtained at G.S.' eligibility interview. This was
contrary to the
QCM which requires an EW to consider "all
information that could have been
known" regarding an AFDC
applicants income, in establishing the best
estimate of
prospective income. QCM � 3420 (emphasis added).
Moreover, the regulations provide that the best estimate
must always be
current. See QCM � 3420. Thus, in
determining whether G.S. was
initially eligible to
receive AFDC assistance, the EW failed to establish
the
best estimate of G.S.' prospective income. As a result
of this
inaccurate estimate, G.S. received an improper
AFDC payment of $166.
According to the QCM, any payment
errors linked to an inaccurate estimate
must be
classified as regular payment discrepancies. See QCM �
3420.
Texas argued further that since G.S. had 10 days to
report his change in
employment status under its PSP, and
since this reporting date fell after
the authorization of
payment, that its estimate was accurate at the time of
certification. Texas reasoned that federal law does not
specify a
time period for reporting changes in income,
but allows the state agency to
determine the time period.
See 45 C.F.R. � 206.10(a)(2)(ii).
Accordingly, Texas
asserted that section B-613 of its PSP requires that an
AU report changes in income within 10 days of receipt.
Moreover,
Texas alleged that it is the recipient's
obligation to inform the state
agency of any changes in
income within a reasonable period of time after the
change. See 45 C.F.R. � 233.20. Since G.S. received his
first paycheck on May 7, 1993, Texas argued that he did
not have to
report the change in income until May 17,
1993, which was after the agency's
authorization of
initial payment.
Both Texas' 10-day reporting requirement and the timely
reporting
requirement of 45 C.F.R. � 233.20 are
irrelevant to the issue here.
According to federal QCM
procedures, in cases involving new AFDC applicants,
any
change in circumstance which occurs prior to
authorization of the
first assistance payment will result
in regular discrepancies regardless of
the QC review
date. QCM � 3300. The QCM does not take reporting
deadlines into consideration, but conclusively states
that "[a]n
erroneous determination at initial eligibility
which results in an incorrect
payment is always
considered a regular payment discrepancy." Id.
According to the QCM, ongoing QCM cases must be treated
differently from
new cases. See New Mexico Human
Services Department, DAB No. QC 64
(1994). In New
Mexico, the Board found that in new cases, all changes
in
circumstances affecting income should be accounted for as
they occur,
while in ongoing cases, events prospectively
affecting income are to be
taken into account only when
they have resulted in a change of income in
hand. Id. at
6. In regards to new cases, the QCM expressly
references
a change in employment status during the month before
authorization as constituting an income-related change in
circumstance. QCM � 3300; New Mexico at 4. In the case
of
new applicants, the agency has the opportunity to take
preexisting
conditions into account in the application
and initial authorization
process. Thus, the agency
should be held accountable for any errors
occurring
during such application process. Indeed, the QCM
provides that "[e]vents occurring prior to authorization
of the initial
payment of assistance are not changes in
circumstances for QC
purposes." QCM � 3400.
Finally, Texas also argued that it was unduly burdensome
to require a
state agency to recontact applicants before
authorization of initial payment
to determine whether any
changes had occurred since their interview.
Such a
practice, alleged Texas, would further delay eligibility
determinations and issuance of benefits. Moreover, Texas
asserted
that the 10-day reporting requirement applies to
both AFDC applicants and
recipients; therefore, it would
be unfair to impose a more restrictive
reporting
requirement upon AFDC applicants, since neither the
federal
regulations nor Texas' PSP support such a
practice.
We conclude, however, that it is not unduly burdensome to
require a state
agency to keep abreast of any changes in
an applicant's status up until the
date on which payment
is authorized. By requiring state agencies to
ensure
that all initial eligibility determinations are based on
the most
current information available at certification,
QC reviewers can ensure that
the number of improper
payments and findings of regular payment errors do
not
threaten the existence of the AFDC program. Furthermore,
since
future payments are based on an EW's initial
eligibility determination, a
reasonable basis supports
more stringent requirements for AFDC applicants
than for
AFDC recipients. As stated above, the QCM provides that
since an agency has the opportunity to act on changes in
status before
authorizing initial payment, any events
occurring before initial
certification which result in
improper payments must be classified as
regular errors.
See QCM � 3300 and 3420.
Here, Texas failed to inquire about any changes in status
since the
eligibility interview, and therefore, the best
estimate of G.S.' income did
not reflect the $500 which
he received at his new job, and about which Texas
could
have known. Due to this discrepancy between estimated
and
actual income, Texas incorrectly determined that G.S.
was initially eligible
for AFDC benefits, and improperly
issued him a $166 check. Since this
erroneous
determination of initial eligibility led to an improper
payment, pursuant to QCM � 3300, Texas' payment to G.S.
was a regular
payment error. See QCM � 3300.
Conclusion
For the reasons discussed above, we conclude that the
discrepancy between
G.S.' actual review month income and
his estimated income constituted a
regular error.
Accordingly, we sustain ACF's determination.
__________________________
Ana-Maria Mackey
__________________________
Peggy McFadden-Elmore
__________________________
Leslie Sussan
* * * Footnotes * * *
1. We identify the applicant by
his initials in
order to protect his privacy. The Texas QC number is
005078.