Department of Health and Human Services
Departmental Appeals Board
QUALITY CONTROL REVIEW PANEL
SUBJECT: Colorado Department of
Human Services
Docket No. A-95-122
Decision No. QC84
DATE: July 21, 1995
DECISION
The Colorado Department of Human Services (Colorado)
appealed a March 1,
1995 quality control (QC)
determination by the Region VIII Assistant
Regional
Administrator, Family Security Division of the
Administration
for Children and Families (ACF). The
Assistant Regional Administrator
sustained the federal
quality control review conclusion that the assistance
unit (AU), consisting of a mother and her three
daughters, was overpaid
a total of $163 in Aid to
Families with Dependent Children (AFDC) assistance
for
the month of February 1994 (the review month). 1/
Colorado and ACF agree that an error in this case
occurred because
Colorado treated the pregnant 18-year-
old daughter in the AU as a pregnant
adult in calculating
the AU's standard of need and as a dependent child in
disregarding her earned income. The dispute in the case
involves
how the inconsistent treatment of this daughter
should be resolved.
Colorado argues that, since federal regulations provide
states with the
option of treating pregnant minors either
as adults or as dependent
children, the amount of the
error should be determined by treating the
daughter as a
dependent child for purposes of both income and need.
This resolution of the inconsistency would result in a
payment error of
$18. ACF argues that, since Colorado
had initially treated the
daughter as an adult for
determining need, she must be treated as an adult
for
determining her countable earned income. This resolution
of
the inconsistency results in the alleged payment error
of $163.
For the reasons discussed below, we conclude that this
error should be
calculated by considering the pregnant
18-year-old daughter as an adult for
calculating both
income and need. We therefore uphold ACF's error
determination in this case.
LEGAL AUTHORITY
1. The AFDC Payment System
Title IV, Part A of the Social Security Act (Act)
established the AFDC
program to provide assistance to
certain needy children. Under the
AFDC program, payments
are made to needy children and their parents or
caretaker
relatives in AUs which are established by the local
agency
when a family applies for AFDC. 45 C.F.R. �
206.10(a)(1)(vii).
In establishing an AU, section
402(a)(38) of the Act (the mandatory filing
unit
provision) requires states to consolidate certain family
members in
one AU. Section 402(a)(38) provides that an
application on behalf of a
dependent child must include
certain potentially eligible relatives living
in the same
home. These relatives are the parent(s) of a dependent
child and the brothers and sisters of a dependent child
who are
themselves dependent children within the age
limit set by the state.
The level of payment to a particular AU is based on a
number of factors,
including the number of persons in the
AU, whether members of the AU have
other sources of
income, and, in some states, whether a member is an adult
or a dependent child. See generally, 45 C.F.R. � 233.20.
The
income of a dependent child is disregarded in
calculating the amount of
income available to the AU if
the dependent child is a full-time student in
a secondary
or vocational school and is expected to graduate before
his
or her nineteenth birthday. Section 402(a)(8)(A)(i)
of the Act.
Ordinarily, it is not difficult for a local welfare
agency to determine
if a member of an AU is an adult or a
dependent child for budgeting
purposes. However, in
cases in which a minor parent lives with her
parent (the
grandparent), the minor parent can be treated by a state
either as an adult or as a dependent child. 57 Fed. Reg.
30,132,
30,140 (1992).
In the preamble to the final rule implementing the
mandatory filing unit
provision amendment to the Act, ACF
addressed the issue of how states were
to make their
decision regarding whether to treat minor parents as
adults or children. 2/ ACF informed the states that
it had determined that Congress did not specifically
address the issue
of how to classify minor parents when
it enacted the mandatory filing unit
provision. See ACF
Brief (Br.) at 2, citing section 402(a)(38) of the
Act
and H.R. Rep. No. 98-861, 98th Cong., 2d Sess. 1407
(1984).
ACF therefore concluded that "it would be
appropriate to provide States with
flexibility." ACF
stated:
. . . a State may develop its own policy with
respect to the
treatment of a mandatory AU member
who is eligible both as a minor parent
and as a
dependent child. A State may decide, for need and
payment
purposes, to treat such individuals as
dependent children or adults, or may
develop
specific criteria for case-by-case determinations.
However, the State must apply this policy
consistently -- an individual
could not, for
example, be considered as an adult for the purposes
of
the earnings disregards and as a child for the
purpose of the need
standard.
57 Fed. Reg. 30,132, 30,140 (1992). 3/
2. The AFDC Quality Control System
Under section 408(a) of the Act, the Secretary of the
Department of
Health and Human Services must operate an
AFDC QC system pursuant to which
the Secretary determines
the amount of any disallowance required to be
repaid due
to erroneous payments. Disallowances are based on the
amount by which a state's error rate for a given fiscal
year exceeds the
national average error rate. Section
408(f) of the Act.
In order to establish an error rate, a state reviews a
sample of AFDC
payments made during a designated review
period in order to determine the
level of erroneous
payments. Section 408(b)(1)(A) of the Act.
The Act then
provides for federal QC re-review of a subsample of the
cases which were reviewed by the state. Section
408(b)(2) of the
Act.
QC reviews are conducted against permissible state
practice (PSP).
45 C.F.R. � 205.42(b). PSP is defined
as a state's "written rules and
policies that are in
accordance with existing, approved State plan
provisions." QC Manual, section 3130. During the review
month, Colorado did not have a PSP regarding the
treatment of members of
an AU who could be considered
either adults or dependent children under the
Act. 4/
FACTS
The following facts are undisputed. The AU at issue in
this case
consists of a mother, her 18-year-old daughter,
and the mother's two younger
daughters. During the
review month, the 18-year-old daughter was in
school
full-time and was expected to graduate before her
nineteenth
birthday. She was also employed by a local
department store. As
of the review month, she was eight-
months pregnant. This fact had been
reported to Colorado
in November 1993, three months prior to the review
month.
Beginning in December 1993, Colorado increased the
monthly payment to the
AU, basing the new payment level
on a household of two adults and two
children (plus a
pregnancy allowance of $5) rather than on a household of
one adult and three children, as it had previously done.
The local
agency also disregarded the 18-year-old
daughter's income in re-calculating
the payment amount on
the grounds that she was a dependent child who was
also a
full-time student.
During its QC review of this case, Colorado found the
case correctly
paid. When ACF reviewed the case as part
of the federal subsample, it
concluded that, since the
18-year-old had been treated as an adult for
determining
need, her income should not have been disregarded in
computing the amount of the AFDC grant. ACF recomputed
the grant
as follows:
$408.02 child's gross income $533 standard of need
2+2
-90.00 work related expenses -192 countable
income
-30.00
disregard
$341
-96.00 1/3
disregard x.8475 rateable
reduction
$192.00 countable income
$288
+ 5 pregnancy
allowance
$293 grant due
ACF then subtracted the "grant due" ($293) from the grant
Colorado paid
($456) and concluded that there was an
overpayment of $163. ACF letter
dated March 1, 1995.
ANALYSIS
For the following reason, we uphold ACF's determination
in this
case. ACF informed states that they should
develop their own PSP
regarding whether to treat minor
parents who are mandatory members of AUs as
adults or as
dependent children. During the review month, Colorado
budgeted the child inconsistently and had no PSP for
determining whether
the child should have been budgeted
as an adult or as a child.
Therefore, absent such a PSP,
we conclude that it is appropriate for ACF to
resolve the
inconsistency in this case by adopting the higher error
determination. The opposite result, i.e. adopting the
lower error
determination in the absence of a PSP, would
give states which fail to adopt
an appropriate PSP an
unfair advantage in relation to states that have
adopted
a PSP. Below we explain how we reach this conclusion.
QC disallowances are based on the amount by which a
state's error rate
for a given fiscal year exceeds the
national average error rate.
Section 408(f) of the Act.
For each fiscal year, the national average
error rate
is determined by the greater of (1) a ratio of all
erroneous
payments made by states to the total amount of
aid paid by states or (2) 4
percent. Section 408(m)(1)
of the Act. Therefore, a state's
error rate relative to
other states' error rates determines whether the
state
incurs a disallowance. Consequently, each state is
affected
both by how its error rate is calculated and by
how other states' error
rates are calculated.
As stated earlier, QC reviews are conducted against PSP.
45 C.F.R.
� 205.42(b). This is appropriate for at least
two reasons.
First, title IV-A of the Social Security
Act and the AFDC regulations give
states wide latitude in
structuring their AFDC programs. This latitude
is
reflected in the considerable diversity among state
programs.
In evaluating whether a state has made a
payment error it is therefore
necessary to evaluate the
state case worker's decision in the context of the
state
program as reflected in state policy, or PSP.
Second, the existence of PSP provides a basis for
concluding that the
decision of one case worker in one
sample case is representative of the
decisions of other
case workers in the universe from which the sample is
drawn. Consequently, comprehensive PSP furthers the AFDC
goal of
treating similarly situated applicants and
recipients consistently (45
C.F.R. � 233.10(a)(1)(iv); 45
C.F.R. � 233.20(a)(1)) and improves the
accuracy of QC
error determinations by providing a basis for choosing
one budget result over another budget result. Therefore,
development of PSP is both important to the integrity of
the state
system by ensuring that applicants and
recipients are treated consistently
and to the integrity
of the QC system by ensuring that payment decisions in
sample cases are representative of other cases.
In this case, Colorado cited no PSP. While under federal
law the
pregnant 18-year-old daughter could have been
budgeted either as an adult or
as a dependent child,
Colorado could identify no state policy which would
inform a case worker, ACF, or the Panel regarding how to
resolve the
budgeting inconsistency in this case.
Therefore, it is appropriate for
ACF to adopt the higher
error figure because allowing Colorado to resolve
this
inconsistency by choosing the lower error figure in the
absence of
PSP puts it at an advantage in relation to
other states which have adopted a
PSP. This is because
states which have a PSP are tied to one budget
result:
under a PSP a state cannot "choose" between error figures
on a case-by-case basis because their PSP dictates how
the payment
should have been calculated. Since QC
disallowances are based on
states' relative performances,
a state without a PSP would have a relative
advantage
over states with a PSP if it could always choose the
lower
error figure.
Further, allowing Colorado to choose the lower error
amount, particularly
when ACF had informed the states
that they should adopt a PSP on this issue,
would
diminish the role of PSP in the administration of the
AFDC program
and AFDC QC. Allowing states without a PSP
to adopt a lower error
finding would mean that it could
be to a state's advantage to fail to
develop appropriate
PSP. Since PSP both helps to ensure that similarly
situated people are treated consistently and also is
critical to the
reliability of the QC error determination
system, ACF could not endorse a
practice that might
discourage development of PSP.
Therefore, it is appropriate for the QC overpayment error
in this case to
be determined to be $163 rather than $18.
Conclusion
For the reasons stated above, we uphold the determination
of the
Assistant Regional Administrator that a QC
overpayment error of $163
occurred in this case.
____________________________
Sara
B. Anderson
____________________________
Gilde
Breidenbach Morrisson
____________________________
Maxine
M. Winerman
* * * Footnotes * * *
1. This case is federal
review number 392 and
state review number 940859.
2. Originally, ACF
instructed states that they
must make a determination as to whether the
minor parent
or the grandparent was actually responsible for the
day-
to-day care and control of each child in the unit. 57
Fed.
Reg. 30,132, 30,140 (1992) citing SSA-AT-86-1. In
response to the
states' concerns that this determination
would be time-consuming and
complex, ACF revised its
original position in the final
rule.
3. We note that
ACF's discussion with regard to
the issue of whether a minor parent should
be considered
a dependent child or an adult appears to concern minor
parents rather than pregnant minors. However, ACF cited
this
language in support of its error determination and
Colorado did not raise
any question as to whether it was
applicable to this
case.
4. Colorado now
has a written policy on this
matter which would require a case worker to
treat a
similarly situated pregnant 18-year-old as a dependent
child. However, the policy was promulgated a year after
the review
month and it is not relevant to this case.
(..continued)