Department of Health and Human Services
Departmental Appeals Board
QUALITY CONTROL REVIEW PANEL
SUBJECT: Texas Department of
Human Resources
Docket No. A-95-163
Decision No. QC89
DATE: October 25, 1995
DECISION
The Texas Department of Human Services (Texas) appealed a
June 12, 1995
quality control determination by the
Assistant Regional Administrator of the
Administration
for Children and Families (ACF) in State Quality Control
Review No. CP0055 (Federal Quality Control No. 014). The
Assistant
Regional Administrator sustained the federal
Quality Control (QC) review
finding that the case was
ineligible for Aid to Families with Dependent
Children
(AFDC) assistance in the amount of $163 for the October
1994
review month based on a finding that the state
agency's most recent best
estimate was inaccurate,
resulting in a payment discrepancy in the review
month.
The federal QC finding determined further that the
payment
discrepancy was a regular error because the
payment discrepancy in the
review month was linked to the
inaccurate estimate.
For the reasons discussed below, we sustain the Assistant
Regional
Administrator's finding that this case is
ineligible and that the payment
error is a regular error.
Facts
As of the October 1, 1994 review month, the assistance
unit (AU)
consisted of the client and one child. An AFDC
payment of $163 was
authorized representing the
recognized needs for a two member assistance
unit. The
case was prospectively budgeted based on a best estimate
made on April 28, 1994. The best estimate was based on
zero earned
income because the client stated she was not
employed.
During the course of the state quality control review, it
was learned
that the client was working at the time of
the most recent best
estimate. Texas agreed that the
most recent best estimate was
incorrect because the local
agency budgeted zero earned income. In
fact, the client
had begun working Job 1 on April 4, 1994 and received her
first pay check on April 8, 1994. She worked assignments
for this
company through September 1, 1994, receiving her
final pay check of $56.25
in September 1994. The client
also had begun employment on Job 2 on
May 19, 1994 and
was employed with this company through July 22, 1994.
Her employment with Job 2 was concurrent with Job 1. The
client
then began employment on Job 3 in September 1994
and received her first pay
check on October 10, 1994.
These changes were not reported to the
local agency and
no earnings were considered throughout this period.
The
client subsequently reported her earnings from Job 3 to
the agency
on October 25, 1994.
Relevant Authority
Title IV, Part A of the Social Security Act (Act)
establishes the AFDC
program to provide assistance to
certain needy children and their
caretakers. Under
section 408(a) of the Act, the Secretary of the
Department of Health and Human Services must establish a
quality control
system to determine the amount of any
erroneous AFDC payments made by a
state. Under this
system, states review a sample of AFDC payments made
during the review period in order to determine the level
of erroneous
payments. The Act then provides for federal
QC re-review of a
subsample of the cases reviewed by the
state. See section 408(b) of
the Act. Pursuant to this
statutory mandate, the Secretary has issued
regulations
for the operation of the federal and state AFDC QC
systems. 45 C.F.R. �� 205.40 through 205.43. Those
regulations provide that a state agency must operate its
QC system in
accordance with the applicable regulations
and the policies and procedures
prescribed in the Quality
Control Manuals issued by the Department. 45
C.F.R. �
205.40(d)(1).
States use prospective budgeting to determine eligibility
for AFDC and
have the option of using that method to
determine the amount of AFDC
assistance payments. 42
C.F.R. � 233.31. Under prospective
budgeting, the state
AFDC agency computes the amount of assistance for
future
months based on the state agency's best estimate of
income and
circumstances which will exist in those
months. 45 C.F.R. �
233.31(b)(1); QC Manual (QCM) � 3420
at IV-6 and IV-7. This estimate
is based on the agency's
reasonable expectation and knowledge of current,
past or
future circumstances. Monthly assistance payments
thereafter are based on this estimate unless there is a
change in the
AU's circumstances or the estimate expires.
If an income and or
income-related change in an
individual's circumstances occurred subsequent
to the
most recent estimate, but the agency did not act on it,
the
reviewer is directed to calculate the amount of the
error using actual
review month income and circumstances.
QCM � 3420 B.2.b at IV-11 and �
3420 C.2.(c) at IV-19.
A change in circumstance means a change occurring after
the date of
authorization of the initial payment which
may affect the AU's eligibility
or payment amount. 45
C.F.R. � 205.42(d)(1). In QC, an error
resulting from a
change in circumstance is classified as either a regular
discrepancy, which counts towards the state's error rate,
or a payment
adjustment lag (PAL) discrepancy, which is
not counted in the state's error
rate. QCM � 3300 at
III-1. Generally, errors occurring because
of a change
in circumstance which occurred in the review month or the
month immediately preceding the review month are PAL
errors. 45
C.F.R. � 205.42(d)(1); QCM � 3300 at III-1.
However, under prospective
budgeting, if a local agency's
best estimate of income was incorrect at the
time it was
made, all income and income related discrepancies in the
review month which are linked to or associated with the
inaccurate
estimate are considered regular errors. QCM �
3300 E. at III-9; � 3420
A. at IV-9; QCM � 3420 B. at IV-
11; and � 3420 C.2.(b) and (c) at IV-18 and
19.
Texas' Position
Texas agreed that the most recent best estimate of income
was incorrect
because the client failed to report her
employment with Jobs 1 and 2.
Nevertheless, Texas
maintained that the payment error was not countable
because the error occurred during the PAL period. Texas
contended
that the inaccurate best estimate was due to an
income source that
terminated prior to the review month
and that the subsequent income change
from Job 2 occurred
after the best estimate in April 1994 and also
terminated
prior to the review month. Texas claimed that the income
received in the review month was from employment which
started in
September 1994, the PAL period, and the
client's first pay from this source
was received October
10, 1994, after the October 1, 1994 review month.
Thus,
Texas argued that it correctly found no QC error for the
review
month because the payment discrepancy was properly
considered a PAL
discrepancy.
Texas disputed the federal error determination procedure
which resulted
in a determination of ineligibility and a
finding of a regular payment
discrepancy, because it was
based on income received after the review
date. Texas
pointed out that if the client had timely reported this
change, the agency could not possibly have made the
change effective for
the October 1994 review month.
Texas also contended that continuous
earnings from April
through September 1994 from Jobs 1 and 2 are not
relevant
to the accuracy of the October review month payment since
they
terminated prior to the October 1994 review month
and payment errors for
those months are outside the scope
of the QC review for the October 1994
review month.
Texas cited QCM Section 3300, which states:
"A regular payment discrepancy results when: (1) a
change in
circumstance first occurred before the
month immediately preceding the RM
[review month] .
. . .
Texas also relied on language in QCM section 3300
concerning
classification of an error as regular or PAL,
which states:
in ongoing cases, after identifying the income each
individual is
receiving, the change in circumstance
is the date the particular identified
income first
differs from the income circumstances used by the
local
agency to determine the AU's financial
eligibility and the amount of the
RM's [review
month's] assistance payment.
Texas argued that the change in circumstance here (Job 3)
occurred in
September 1994, the month prior to the
October 1994 review month and
therefore, did not fit the
definition of a regular payment discrepancy.
Analysis
For the following reasons, we sustain the Assistant
Regional
Administrator's determination.
The sole issue in dispute is whether the payment
discrepancy involved in
this case should be classified as
a regular payment discrepancy or a PAL
discrepancy.
When a prospectively budgeted case is pulled for QC
review, the reviewer
must determine whether the local
agency's best estimate was accurate at the
time it was
made. QCM � 3420 A., B. and C.* The reviewer must
also
determine whether there have been any changes in
circumstance since
the best estimate was made but which
were not acted upon by the local
agency. QCM � 3420 B.
at IV-8 - IV-14.
In this case the April 1994 best estimate was incorrect
when it was made
and there were multiple changes in
circumstances in the client's income
subsequent to the
last redetermination of assistance. It is undisputed
that the Manual specifies for prospectively budgeted
cases that if an
income or income-related change in
circumstance occurred subsequent to the
state agency's
most recent best estimate, the reviewer must recalculate
the best estimate using actual review month income and
circumstances in
order to determine the amount of the
error. QCM � 3420 B. at IV-9; QCM
� 3420 C. 2.(c). In
this case, use of actual review month income
resulted in
a finding of a payment to an ineligible of $163.
In the QC review process, after the amount of the error
is determined,
the error must be classified as regular or
PAL. The Manual provides at
sections 3300 and 3420 how
to classify the error determination in
circumstances
similar to the present case. Specifically, it provides
that if the state agency's most recent best estimate was
not calculated
correctly, then all payment errors linked
to or associated with the
inaccurate estimate are
classified as regular errors even if a subsequent
change
of circumstances occurred in the PAL period. QCM � 3420
A.
at IV-8, � 3420 B. at IV-11, and � 3420 C.2.(c) at IV-
19. The errors
are classified as regular because the
agency's most recent best estimate is
the basis for the
review month's payment and the best estimate must
accurately reflect the facts regarding the income and
income-related
factors for each individual in the AU.
The assistance payment,
therefore, must be calculated
correctly based on these facts. The
purpose behind
classifying such a payment error as a regular error is to
prevent a state from using a subsequent change of
circumstance,
occurring in the PAL period, to avoid an
error which otherwise would have
resulted from the
initial incorrect estimate.
The QCM directives concerning the effect of multiple
changes in
circumstance reflect the same goal of
preventing a change in the PAL from
negating an error in
a payment factor which initially occurred prior to the
PAL period. It provides:
Where there are multiple changes in circumstances in
the same on
eligibility/payment factor for the same
individual, then the timing of the
initial change
will determine whether that error is classified as
PAL or
regular . . . . A change in a recipient's
circumstances refers to a
change in a single
eligibility/payment for that individual, and relates
to the fundamental difference between what the
agency considered
relative to each different
eligibility/payment factor for each individual in
the assistance unit in arriving at the authorized
payment, and the QC
review findings for the same
eligibility/payment factor and
individual. Thus,
any additional deviation(s) in the same
eligibility/payment factor do not negate the
fundamental issue - that
the particular
eligibility/payment factor applicable to the
individual
has been consistently in error since the
date of initial onset.
QCM � 3300 at III-4.
In this particular case, the agency's best estimate was
based on the
client's earning zero income and the
client's subsequent payments, including
her payment for
the October 1994 review month, was based on zero earned
income. The facts of this case, however, indicate that
the client
was working at the time of the April 1994 best
estimate and had been
continuously earning income, albeit
from different jobs, throughout this
period, continuing
through the review month. While the client received
her
first pay check from Job 3 in October 1994, the review
month, it
does not change the fact that the same payment
factor has been continuously
and consistently in error
since the date of the April best estimate.
Thus, the
fact that the client may have changed jobs and received
income
from the third job for the first time during the
review month or PAL period
does not negate the fact that
the April best estimate was incorrect because
it was
based on zero earned income. Under the provisions of the
QCM, earned income, even from different jobs, which
resulted in income
in each month from the date of the
inaccurate estimate to the date of the
review month, are
clearly linked to or associated with the inaccurate
estimate. The review month's payment was in error
because the
client has been earning income continuously
since April, whether those wages
came from Job 1, Job 2,
or Job 3. "As a result, the agency's best
estimate of
income, the basis for all assistance payments, has been
in
error due to earnings since the most recent
redetermination." QCM �
3300 at III-7. Therefore, this
error is a regular error.
Conclusion
For the reasons discussed above, we sustain ACF's
determination that the
assistance unit was ineligible and
overpaid in the amount of $163 and that
the payment error
is properly considered a regular error.
_____________________________
Sara Anderson
_____________________________
Thomas D. Horvath
_____________________________
Andrea M. Selzer
* * * Footnotes * * *
* In this decision, we use the text of
sections
3300 and 3420 of the QCM in effect on October 1994, the
date of
the review month, which was amended in part by an
action transmittal dated
July 15, 1994 (ACF-AT-94-16) and
effective that same date. In its
reply brief, Texas
argued that revisions to sections 3300 and 3420 of the
QCM issued August 3, 1995 support its position
determining a PAL error
here. The action transmittal,
ACF-AT-95-7, however, specifically
provides that the
revisions and clarifications in that transmittal are only
applicable effective beginning with the October 1995
review month.
Thus, we do not consider those revisions
here.
(..continued)