Department of Health and Human Services
Departmental Appeals Board
QUALITY CONTROL REVIEW PANEL
SUBJECT: South
Carolina
Department of Social
Services
Docket No.
A-95-186
Decision No.
QC95
February 13, 1996
DECISION
The South Carolina Department of Social Services (South
Carolina)
appealed a July 14, 1995 quality control (QC)
determination by the Regional
Administrator of the
Administration for Children and Families (ACF) in State
Quality Control Review No. 020440 (Federal Quality
Control No.
ASC-402-138). The Regional Administrator
sustained the federal QC
review finding that the
assistance unit (AU) received an Aid to Families
with
Dependent Children (AFDC) overpayment of $131 for the
February 1994
review month. Her decision was based on a
finding that South
Carolina's most recent best estimate
was inaccurate, resulting in a regular
error because the
payment discrepancy in the review month was linked to the
inaccurate estimate. South Carolina had found that the
best
estimate was accurate and determined that the case
was correctly paid.
It had classified the discrepancy
between the AU's actual income for the
review month and
the estimated income as a payment adjustment lag (PAL)
error.
For the reasons discussed below, we find that the error
in question
constituted a regular error rather than a PAL
error. Accordingly, we
uphold ACF's determination that
the AU was overpaid in the review month.
Facts
As of the February 1994 review month, the AU consisted of
the client and
two children. The case was prospectively
budgeted pursuant to an
estimate certified by the local
agency on January 21, 1994. The
estimate was based on
zero earned income because the client stated that she
was
not employed at the January 10, 1994 redetermination
interview. An AFDC payment of $200 was authorized for
the
AU.
The following facts are undisputed. The client was
interviewed on
January 10, 1994 for her biannual
redetermination of eligibility. The
client was
unemployed and reported no income at this time. The
client began working on January 19, 1994. On January 21,
1994, the
redetermination of the best estimate of the
AU's circumstances was certified
with no income budgeted.
The client reported her employment to the
local agency
on January 25, 1994. The client received her first
paycheck on January 28, 1994. Upon notification by the
client on
January 25, 1994 of her employment, the local
agency sent a Request for Wage
Information to the
client's employer. The form was completed by the
employer on January 28, 1994 and received by the local
agency on
February 3, 1994. The case was rebudgeted by
the local agency on
February 7, 1994, effective March
1994, to reflect the client's
employment.
South Carolina QC found the January 21, 1994 estimate
accurate, with a
change in circumstance occurring after
the redetermination was
completed. State QC determined
that as of the January 21, 1994
estimate, no income was
budgeted and no income was received because, even
though
the client went to work on January 19, 1994, she did not
receive
her first paycheck until January 28, 1994, after
the redetermination was
completed. State QC reasoned
that according to State policy the client
was required to
report her earnings within ten days of the receipt of her
first paycheck, meaning that in this case, the client had
until February
7, 1994 to report her employment in a
timely manner. State QC found
that the change occurred
on January 28, 1994, the date the client was first
paid.
State QC therefore concluded that the discrepancy
resulted
from a change in circumstances occurring after
the redetermination and that
any payment discrepancy was
a PAL error.
Federal QC determined that the estimate was inaccurate
because it did not
consider the fact that the client had
become employed prior to the
certification of the
estimate. Federal QC recalculated the estimate
using
South Carolina's methodology for estimating earned
income.
Applying the appropriate disregards to the
projected earned income, federal
QC determined that the
client was entitled to a grant of $69 rather than
$200.
It classified the $131 overpayment as a regular error
because it concluded that the error resulted from an
inaccurate
estimate.
Relevant Federal Authority
Title IV, Part A of the Social Security Act (Act)
establishes the AFDC
program to provide assistance to
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 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)
QC reviews are conducted against permissible state
practice (PSP).
45 C.F.R. � 205.42(b). PSP is defined
as "written rules and policies
relating to eligibility
and payment that are in accordance with existing,
approved State plan provisions or with proposed plan
amendments
submitted to, but not acted upon, by the
Department." 45 C.F.R. �
205.40(b)(12).
States use prospective budgeting of income and income-
related factors to
determine eligibility for AFDC and
have the option of using that method to
determine the
amount of AFDC assistance payments. 45 C.F.R. � 233.31.
Under prospective budgeting, a local agency computes the
amount of
assistance for current and future months based
on the agency's best estimate
of income and income-
related factors which will exist in the payment
month.
45 C.F.R. � 233.31(b)(1); QCM, � 3420, at IV-6.
According to the QCM, a "best estimate" of income and
income-related
factors is defined as one which: (1) is
based on a specific time frame
which the state uses to
determine the estimate; (2) accurately reflects all
facts
that occurred (whether known or unknown to the state)
during the
time frame which the state uses to determine
the estimate; (3) is calculated
correctly; and (4)
remains an accurate reflection of the likely situation in
the payment month because no change in circumstances (as
defined by PSP)
has occurred since the time frame used
for the estimate. QCM, � 3420,
at IV-6. The QCM defines
changes in income and income-related
circumstances as
those facts regarding any income received by all
individuals whose needs and/or income must be considered
in determining
the amount of the AU's assistance payment.
QCM, � 3420 B. at
IV-8. A change in income and/or
income-related circumstance is 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).
When a prospectively budgeted case is chosen for QC
review, the reviewer
must first determine whether the
local agency's best estimate was accurate
at the time it
was made. QCM, � 3420 A., B. and C. If the
estimate was
not accurate and there has been no change in
circumstances
since the estimate, the reviewer
recalculates the estimate pursuant to the
state's PSP and
calculates the amount of the error on the basis of the
revised estimate. QCM, � 3420 C.2(b) at IV-18. If there
has
been a change in circumstances since the most recent
estimate which was not
acted upon by the local agency,
the reviewer calculates the amount of the
error on the
basis of actual review month income. QCM, � 3420 C.2(c)
at IV-19.
After the amount of the error is determined, the error
must be classified
as regular or PAL. A regular
discrepancy counts towards the state's
error rate while a
PAL discrepancy does not count 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 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-8; QCM, � 3420 B. at IV-11; and � 3420
C.2.(b) and (c) at IV-18 and
19.
Analysis
For the following reasons, we conclude that South
Carolina's estimate was
inaccurate under its PSP. Since
the estimate was inaccurate, the
resulting error is
classified as regular even though the event which
produced the error occurred in the month prior to the
review month.
In order for an estimate to be accurate, the QCM provides
that it must
"accurately reflect all facts that occurred
(whether known or unknown to the
State) during the time
frame(s) which the State uses to determine the
estimate."
QCM, � 3420 at IV-6. (Emphasis added.) South
Carolina's PSP, as set forth in its State Plan,
incorporates this
requirement. ACF Ex. 3, State Plan
Attachment 2.3-J.
South Carolina's PSP establishes the following "time
frame" and
methodology for calculating best estimates:
The calculation of prospective income is based on
the combination
of the income received in the
previous eight consecutive weeks and any
changes
which have occurred or are expected to occur in the
BG's [Budget
Group] income up to the point of
certification.
Id. (Emphasis added.)
Since it is undisputed that the "point of certification"
in this case was
January 21, the time frame used by South
Carolina for its estimate extended
to January 21. The
local agency's estimate must have included "any
changes
which have occurred or are expected to occur in the BG's
income
up to" January 21.
South Carolina took the position that the client's
employment on January
19 was not a "change" that the
local agency had to take into consideration
when
estimating the client's income for February. South
Carolina
argued that the change in the client's income
circumstances occurred, not on
the day she started work,
but on the day she first received wages from the
job
(January 28). Since that income was received after
January 21,
the date of certification, South Carolina
insisted that its estimate of zero
income was correct
because the client actually had zero income during the
time frame used for the estimate.
Under South Carolina's construction of its state practice
for making
estimates, a local agency should ignore the
fact that a client had become
employed if the client's
first paycheck was expected to be received after
certification. While we think it is usually appropriate
to defer
to a state's construction of its own state
practice, we conclude that South
Carolina's construction
in this case conflicts with federal law and with the
other portions of its state plan.
In prospective budgeting, a state computes the amount of
assistance
pursuant to an estimate based on "the agency's
reasonable expectation and
knowledge of current, past or
future circumstances." 45 C.F.R. �
233.31(b)(1). This
principle is included in the South Carolina State
Plan
which provides: "For prospective budgeting, the agency
computes the assistance payment using its best estimate
of income which
will exist in the payment month. This
estimate is based on the
agency's knowledge of past and
current circumstances . . . ."
(Emphasis added.) An
estimate which ignored the fact a client was
employed
simply because the client had not yet received a paycheck
would
not reflect the local agency's "reasonable
expectation and knowledge" of the
client's current and
future circumstances as required by 45 C.F.R. �
233.21(b)(1) and the South Carolina State Plan. 1/
Therefore, while the client had zero earned income in the
previous eight
weeks, prior to January 21 she experienced
a "change" by becoming employed
on January 19. Under
South Carolina's PSP, the local agency's estimate
should
have included this change in projecting her income for
the
following month. South Carolina's budgeting
procedures at section
8.04.01 of its AFDC/FS Policy
Manual provide for how the client's income
should have
been projected.
If the BG had no income in the previous eight weeks
and begins
receiving income or has a change in
circumstances . . . the [local agency
worker] must
determine and document a best estimate of monthly
income .
. .
[Specifically, for earned income] Use available pay
stubs, if
representative; or contact the employer to
verify the following if pay stubs
are not available:
1. Hourly pay rate;
2. Number of hours GB is expected to work each pay
period . .
.
For recertification/redeterminations, a new source
of income will
not affect the month of report. Use
averaged income in the following
month.
The local agency's projection of "zero income" for
February was not an
accurate projection of the AU's
current and future circumstances because it
did not
include the client's change in employment status which
occurred
during the time frame used for the estimate.
South Carolina argued that QCM, �3300 supported its
position that, for
purposes of making a best estimate, a
change occurs when the income is
received rather than
when the client becomes employed. Section 3300 at
III-5
provides:
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] assistance payment.
Based on this language, South Carolina argued that, in
on-going cases, "a
change does not occur until the income
first differs from the income used by
the local agency.
On January 21, 1994, when the redetermination was
completed there was -0- income and none was budgeted;
therefore, the
estimate was accurate." South Carolina
Appeal at 3.
We reject this argument for the following reasons.
o Section 3300 of the QCM and the specific language
on which
South Carolina relied concerns
classification of errors as regular or PAL,
not
the error determination process. The
classification process
and the error
determination process are two different QC
processes. First, a QC reviewer determines if
there has been an
error and then the QC reviewer
classifies the error. The section 3300
standards
concerning a change in circumstance are used to
classify
whether an error is regular or PAL and
do not control the determination of
whether the
estimate was accurate or whether there was an
error.
The language on which South Carolina
relied presumes the existence of an
accurate
estimate and merely explains how to date a change
in
circumstances in relation to the accurate
estimate.
o Under 45 C.F.R. � 233.21(b)(1) and South
Carolina's PSP, the
fact that the client had
become employed was information that should have
been considered in making the estimate. QCM
expressly addresses
the case in which the
estimate did not consider "all
income/income-
related circumstances that have occurred or exist
at the
time the estimate is established." It
provides that where such
information was not
considered the estimate is inaccurate and "all
income/income-related discrepancies linked to or
associated with the
inaccurate estimate are
classified as regular errors." QCM, � 3420 A.
at
IV-8; � 3420 B. at IV-11.
Therefore, South Carolina's construction of section 3300
is not
persuasive when read in the context of applicable
regulations and other
provisions of the QCM.
South Carolina also argued that, because of documentation
and advance
notice requirements, it would not have had
time to change the payment amount
for February even if it
had known of the client's employment as of January
19.
As ACF pointed out, there was no requirement that the
redetermination/estimate had to be completed in time to
affect the
February 1994 grant. 2/ However, because
the January 21
estimate was the basis for the review
month grant, QC must assess the
accuracy of that
estimate.
Conclusion
For the reasons discussed above, we conclude that the
estimate in this
case was not accurate and the resulting
payment discrepancy constituted a
regular error.
Accordingly, we uphold ACF's determination that the AU
was overpaid in the review month.
_____________________________
Sara B. Anderson
_____________________________
Thomas D. Horvath
_____________________________
Andrea M. Selzer
* * * Footnotes * * *
1. Since South Carolina
argued that the
employment "be it known or unknown" (South Carolina
Appeal at 3) should not have been used in calculating the
estimate, we
do not reach the issue of whether the
employment must be considered to be
"known" by South
Carolina even though it was, in fact, unknown. We do
note, however, that 45 C.F.R. � 233.31(b)(1) requires a
local agency to
base its estimate on its "reasonable
expectation and knowledge of current,
past or future
circumstances" and the section 3420 of the QCM requires
the QC reviewer to re-estimate on the basis of "all
information that
could have been known by the agency."
QCM, � 3420 A. at
IV-7.
2. ACF
represented that, had there been no
estimate calculated January 21 for the
February review
month, the error would have been PAL. ACF Br. at
4. The
preceding "most recent estimate," calculated September
23,
1993 would have been reviewed and found accurate
based on income and
income-related circumstances existing
at the time it was calculated.
The change in earnings in
January would have represented a change in income
occurring in the PAL period.