Illinois Department of Children and Family Services, DAB No. 1564 (1996)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

SUBJECT: Illinois Department of Children and Family Services

DATE: February 27, 1996
Docket No. A-95-61
Control No. A-05-92-00075
Decision No. 1564

DECISION

The Illinois Department of Children and Family Services
(Illinois or DCFS) appealed a determination by the
Administration for Children and Families (ACF)
disallowing $5,046,580 in federal financial participation
(FFP) claimed by Illinois under title IV-E of the Social
Security Act (Act). The disallowance was based on an
audit performed by the Office of Inspector General (OIG),
Department of Health and Human Services, of foster care
maintenance payments. Using a random sample of 200
cases, OIG determined that in 37 cases the court orders
failed to meet title IV-E requirements, primarily the
requirement in section 472(a)(1) of the Act for a
determination that reasonable efforts (RE) were made to
prevent the child's removal from his or her home. Using
a standard scientific estimation process, OIG arrived at
the disallowance amount by projecting the results of the
OIG review to the universe from which the sample was
drawn.

The OIG audit covered title IV-E foster care maintenance
payments by Illinois for the period October 1, 1988
through September 30, 1990. Illinois Ex. 8. The 200
sample payments were drawn from a population of 274,163
maintenance payments claimed by Illinois during the
period having a total value of approximately $106 million
(approximately $53 million in FFP). The audit report
found that 37 maintenance payments (18.5 percent of the
200 sample cases) failed to meet title IV-E eligibility
requirements.

OIG then extrapolated its results to the universe of
274,163 maintenance payments and found that there was a
95 percent probability that at least $10,093,160
($5,046,580 FFP) was inappropriately charged to the title
IV-E program. ACF then adopted the OIG findings and
issued a disallowance determination. Illinois Exs. 10
and 12.

Illinois appealed ACF's determination to this Board.
Illinois conceded that six of the questioned payments
were ineligible for FFP, but contended that the other 31
payments were eligible for FFP. Based on evidence
submitted with Illinois' brief and supplemental brief,
ACF found that three cases met the RE requirement and
therefore passed.

After the oral argument held in this appeal, ACF found
that three more cases should pass: two cases were found
to have met the RE requirement, and the RE requirement
was found not applicable to another case.

ACF has not provided a revised disallowance amount
reflecting the six cases that were originally found
ineligible but have now been passed by ACF. At the oral
argument held in this appeal, ACF estimated that the
approximate value of each case in determining the amount
of the disallowance was $140,000. Tr. at 51.

Thus, there are now 25 cases in dispute between the
parties.

In addition to raising a wide range of arguments
concerning the 25 contested cases, Illinois argued that
this disallowance was contrary to congressional policies
and that extrapolation of the sampling results to the
universe of title IV-E payments would be inappropriate
under the circumstances here.

For the reasons discussed below, we uphold ACF's findings
on seven of the contested cases and reverse the findings
on 18 cases. We reject the other arguments raised by
Illinois concerning whether this disallowance is contrary
to congressional policies and whether it is appropriate
here to extrapolate the sampling results to the universe
of title IV-E payments. Accordingly, we direct ACF to
recalculate the amount of the disallowance in light of
our findings concerning the seven failed cases and the
six additional cases conceded by Illinois.

Statutory Background and ACF Interpretations

Under title IV-E of the Act, federal matching of state
foster care maintenance payments is available for
children in foster care who would otherwise be eligible
for Aid to Families with Dependent Children (AFDC) under
title IV-A of the Act. Prior to the enactment of title
IV-E (in the Adoption Assistance and Child Welfare Act of
1980, Public Law No. 96-272), funding for foster care
maintenance payments was available under title IV-A.
States were given until October 1, 1982 to begin
operating under approved title IV-E plans.

Section 472(a) provides in pertinent part that foster
care maintenance payments will be available for --

a child who would meet the [AFDC eligibility]
requirements . . . but for his removal from the home
of a relative . . . , if--

(1) the removal from the home . . . was the
result of a judicial determination to the effect
that continuation therein would be contrary to the
child's welfare and (effective October 1, 1983) that
reasonable efforts of the type described in section
471(a)(15) of this title have been made. . . .

Section 471(a)(15) in turn requires that, effective
October 1, 1983, a state plan under title IV-E must
provide that --

in each case, reasonable efforts will be made (A)
prior to the placement of a child in foster care, to
prevent or eliminate the need for removal of the
child from his home, and (B) to make it possible for
the child to return to his home.

The legislative history of Public Law No. 96-272 makes
clear that Congress was concerned that children were
being removed from their homes unnecessarily and placed
in foster care. In discussing the requirement for a
judicial determination, the relevant Senate committee
report described such a determination as "an important
safeguard against inappropriate [state] agency action."
Sen. Rep. No. 336, 96th Cong., 1st Sess. 16 (1979).

Regulations at 45 C.F.R. Part 1356 implementing Public
Law No. 96-272 contained provisions requiring that states
provide preplacement preventive services and describe in
a child's case plan the services offered and provided.
47 Fed. Reg. 30,925 (1982) and 48 Fed. Reg. 23,115
(1983). The regulations did not elaborate on the
statutory judicial determination requirement.

In a policy announcement issued on January 13, 1984, the
Administration for Children, Youth and Families (ACYF), a
subagency of ACF, addressed questions regarding the
requirement for a judicial RE determination. The policy
announcement explained:

The court, after hearing the evidence, must be
satisfied that reasonable efforts . . . have been
made. Review and approval of the [state] agency's
report and recommendation alone are not sufficient
to meet the requirements of the Act; the court must
make a determination that the agency's efforts were,
in the judgment of the court, reasonable for
preventing placement.

With regard to emergency situations, if the agency's
judgment was that services could not have prevented
removal of the child, the court at the time of the
adjudicatory hearing must find that the lack of
preventive efforts was reasonable.

ACYF-PA-84-1, ACF Ex. 1, 4th page.

ACYF also issued an information memorandum transmitting
a copy of ACYF's "Financial Review Guide For On-Site
Reviews Of The Title IV-E Foster Care Program." ACYF-IM-
85-25 (August 14, 1985), Illinois Ex. 2. The review
guide explains to reviewers that the court order (in
other than voluntary placements) "must contain a
statement to the effect that continuation of residence at
home is contrary to the welfare [CTW] of the child or
that placement is in the best interests of the child." 1/
The guide also explained that, after October 1, 1983, the
court order must state either that "reasonable efforts
were made to prevent removal from the home" or "it was
not appropriate or in the best interests of the child to
prevent removal from the home." ACYF-IM-85-25,
Attachment A, Title IV-E Foster Care Eligibility Review
Checklist Guide, at 2-3.

ACYF-IM-85-25 also provided guidance on the question of
subsequent judicial determinations:

. . . subsequent court orders (but no later than the
month being reviewed) should be investigated to
determine whether there has been a judicial
determination to the effect that reasonable efforts
had been made to reunite the child with the family.
If there is such a determination, the child becomes
eligible from the beginning of the month in which
that determination is made.

Attachment A at 3.

The checklist for title IV-E reviews included in ACYF-IM-
85-25 gave rise to questions about the judicial
determination requirement which were addressed in ACYF-
PIQ-86-02 (May 8, 1986), Illinois Ex. 3. That issuance
explained circumstances which warranted a finding that
the appropriate judicial determination had been made,
even where the court order itself did not contain
language to satisfy the statutory requirements. The
issuance stated in pertinent part:

The fact that State laws include generic provisions
referring to a class of children is not sufficient
to satisfy the requirements of section 472, which
relate to an individual determination for each
child. However, if State law unambiguously requires
that removal may only be based on a determination
that remaining in the home would be contrary to the
child's welfare (and in the appropriate
circumstances, that removal can only be ordered
after reasonable efforts to prevent removal have
been made), it must be assumed that a judge who
orders a child's removal from the home in accordance
with that State law does so only for the reasons
authorized by the State statute. This conclusion
can be drawn only if the State law clearly allows
removal under no other circumstances except those
required under section 472(a)(1) of the Act. If a
State can show that it has such a clear and
unequivocal State law, and if the court order is
expressly based on that law, then the order can be
accepted as sufficient evidence that the required
determinations have been made.

ACYF-PIQ-86-02, at 2-3 (emphasis in original). The
issuance also explained that language in a petition
submitted to a court would not suffice to meet the
requirements unless the court order expressly adopted the
relevant language of the petition and made clear that a
judicial determination had been made. Id. at 5.

On August 11, 1986, Dodie Livingston, Commissioner for
ACYF, issued a memorandum to Regional Administrators and
Regional Program Directors (the Livingston memorandum).
Illinois Ex. 4. The Livingston memorandum noted that,
prior to the transfer of the foster care program from
title IV-A to title IV-E, ACYF's policy, set out in SRS-
PIQ-75-21, dated April 2, 1975 (ACF Ex. 4), was that the
requirement for a best interests determination was
satisfied where there was "a petition to the court
stating the reason for the agency's request for custody,
followed by a court order granting the agency's petition
for custody . . . ." Illinois Ex. 4, at 2. The
Livingston memorandum further stated that, because some
state agencies believed, until the issuance of ACYF-PIQ-
86-02 on May 8, 1986, that this practice continued to be
acceptable in the title IV-E program --

disallowances will not be taken where the State
agency was following the precedent established in
1975, in cases in which the child entered care prior
to October 1, 1986. This will allow States time to
advise their courts that proper documentation of the
judicial determination must be available for each
child removed from his home by the court in order to
be eligible under title IV-E. Payments will not be
considered in error for a title IV-E financial
review for this reason, either for purposes of
disallowance or for a decision on a stage two review
until after that date.

Id. (emphasis in original).

The Board examined the import of the Livingston
memorandum in Pennsylvania Dept. of Public Welfare, DAB
No. 1508 (1995). During the proceedings in that case,
ACF stated that the requirement for a RE determination
could also be met under the circumstances specified in
the Livingston memorandum, even though both that
memorandum and ACYF-PIQ-86-02 referred solely to CTW
determinations. Pennsylvania at 18. The Board
accordingly held that under the Livingston memorandum "a
petition for the child's removal stating reasons which
could support a CTW or RE determination, together with a
court order granting that petition, is sufficient
evidence that a CTW or RE determination was made if the
child entered foster care before October 1, 1986." Id.
at 3. In order to find a RE determination under the
policy set forth in the Livingston memorandum, the
petition granted by the court must contain allegations
which would support a determination that reasonable
efforts were made or that the lack of preventive efforts
was reasonable. To support the latter determination, the
petition would have to allege what were in effect
emergency situations, under which it would not have been
appropriate or in the best interests of the child to
prevent removal.

Analysis

At the outset, we discuss the validity of the general
principles Illinois would have us apply to the resolution
of a large number of these cases. Illinois argued
primarily that explicit court findings that the RE
requirement was satisfied were not required in these
cases because a court order contained language which
paralleled or tracked a specific state statute that
mandated a RE determination. Following our discussion of
the general principles, we examine each of the 25
contested cases in the sample. We then discuss whether
the disallowance was contrary to congressional intent.
We conclude with an examination of whether extrapolation
of the error rate to the universe of title IV-E payments
is proper to determine the amount of the disallowance
here.

I. A court order may provide sufficient evidence that
the court was acting pursuant to a statute that requires
the court to make a RE determination if the court order
follows or tracks language that is highly significant or
unique to that statute and if there exist other indicia
that the court is applying the statute.

Illinois argued that ACF's own policy, as set forth in
ACYF-PIQ-86-02, allows a state to establish compliance
with section 472 judicial determination requirements
despite the absence of express wording in a court order
itself that the requisite determinations were made.
Illinois noted that ACYF-PIQ-86-02 provided that a state
could establish that a CTW determination was made by
showing that a court order was "expressly based" on "a
clear and unequivocal State law" which "requires that
removal may only be based on a determination that
remaining in the home would be contrary to the child's
welfare." (Emphasis in original.)

In West Virginia Dept. of Health and Human Services, DAB
No. 1257 (1991), the Board found that a court order could
be "expressly based" on a state law within the meaning of
ACYF-PIQ-86-02 even if it did not specifically cite the
state law, as long as there was other evidence in the
court order that the court intended to rely on that law.
At 13; see also Pennsylvania Dept. of Public Welfare, DAB
No. 1392 (1993). In West Virginia, the Board found cases
eligible where a court, while not citing a statute, used
language in its order which closely followed the language
in a statute which required a RE determination. At 24-
25, 33-34.

Illinois argued that during the period at issue its
Juvenile Court Act (37 Ill. Rev. Stat. 707-1, et seq.
(1983)) required Illinois courts to make determinations
that removal of a child from his or her home was in the
best interests of the minor and that reasonable efforts
were made to prevent or eliminate the need for removal of
the child from the home.

Illinois asserted that throughout the period at issue a
child in Illinois who was in need of intervention would
likely undergo various types of judicial hearings in the
process of being removed from the home and placed in
foster care, including a Shelter Care or Temporary
Custody (TC) Hearing and a Dispositional Hearing (DH).

Regarding the TC hearing, Illinois asserted that a court
could not prescribe shelter care unless it made a
finding, pursuant to 37 Ill. Rev. Stat. 703-6(2)
(1983), "that it is a matter of immediate and urgent
necessity for the protection of the minor or of the
person or property of another that the minor be . . .
placed in a shelter care facility or that he is likely to
flee the jurisdiction of the court . . . ." Illinois
argued that the CTW determination was necessarily
included in the "matter of immediate and urgent
necessity" language of 703-6(2). 2/

The statute was then amended, effective January 14, 1985,
to provide:

(2) . . . If the court finds that it is a matter of
immediate and urgent necessity for the protection of
the minor or of the person or property of another
that the minor be detained or placed in a shelter
care facility or that he or she is likely to flee
the jurisdiction of the court, and further, for
minors described in Sections 2-3, 2-4 and 2-5 3/
finds that reasonable efforts have been made or good
cause has been shown why reasonable efforts cannot
prevent or eliminate the necessity of removal of the
minor from his or her home, the court may prescribe
detention or shelter care and order that the minor
be kept in a suitable place designated by the court
or in a shelter care facility designated by the
Department of Children and Family Services or a
licensed child welfare agency . . . otherwise it
shall release the minor from custody. . . .

37 Ill. Rev. Stat. 703-6(2) (1985) (emphasis added by
Illinois, quoting statute at p. 15 of its brief). Thus,
Illinois concluded, as of January 14, 1985, courts in
Illinois were required by statute to make a RE
determination as a necessary prerequisite to prescribing
shelter care for a minor. Illinois therefore maintained
that any Temporary Custody Order (TCO) in which there is
sufficient evidence that the court was acting pursuant to
703-6(2) (1985) must be assumed to include the findings
required by the statute, and that those findings are
sufficient to satisfy the section 472 judicial
determination requirements.

Regarding the statutory provisions relating to a DH,
Illinois' pertinent statute provided:

(1) If the court finds that the parents, guardian
or legal custodian of a minor adjudged a ward of the
court are unfit or unable, for some reason other
than financial circumstances alone, to care for,
protect, train, or discipline the minor, or are
unwilling to do so, and that appropriate services
aimed at family preservation and family
reunification have been unsuccessful in rectifying
the conditions which have led to such a finding of
unfitness or inability to care for, protect, train
or discipline the minor, and that it is in the best
interests of the minor to take him from the custody
of his parents, guardian or custodian, the court may

***

(f) in the case of a neglected or dependent minor
under 18 years of age adjudged a ward of the
court under Section 2-4 or 2-5, commit him to the
Department of Children and Family Services for
care and service.

37 Ill. Rev. Stat. 705-7(1) (1983) (emphasis added by
Illinois). 4/

Illinois asserted that this statute clearly and
unambiguously required, in order for a child to be placed
with DCFS as a result of a DH, that a court make a
determination of "reasonable efforts." Illinois
contended that any Dispositional Order (DO) that clearly
evidences that the court was acting pursuant to 705-
7(1) must be held sufficient to establish compliance with
the RE requirement of section 472.

Illinois further contended, based on ACYF-PIQ-86-02 and
the Board's holding in West Virginia, that the language
in the court orders at issue here so followed or tracked
the language of the above Illinois statutes that it can
reasonably be concluded that the courts in fact made RE
determinations.

ACF did not contest Illinois' interpretation of its state
statutes as requiring RE determinations. Instead, ACF
asserted that Illinois was unable to show any express
reliance on any of the state statutes containing RE
language quoted above as none of the statutes were cited
in any of the court orders in the contested sample cases.
ACF referred to Pennsylvania where the Board, citing its
Ruling on Reconsideration of DAB No. 1392, stated that
"the mere existence of a statute which required a
`contrary to the welfare' determination . . . does not
establish that the court in fact made such a
determination in any particular case . . . ."
Pennsylvania at 25.

Notwithstanding ACF's arguments, we conclude, in 17 of
the contested cases discussed in Part II, that the court
orders tracking or following significant or unique
language of statutes requiring RE determinations provide
sufficient evidence that the court was acting pursuant to
the requirements of the statute, and thus had made a RE
determination, when it removed the child from his or her
home. The two statutes relied upon by Illinois as having
been applied by the courts in the contested cases were
the only Illinois statutes relating to the type of foster
care removals under consideration here -- either the
removal of the child to shelter care or the placement of
the child with the Department of Children and Family
Services. Both of these statutes contained requirements
that the judge make a RE determination.

In each of the cases where Illinois argued the court
applied one of those statutes, the court used significant
or unique language tracking or paralleling the particular
statute. With respect to Illinois' TCOs, the most
telling indicator that the court was relying upon 703-
6(2) was its recitation of the statutory language that
"it is a matter of immediate and urgent necessity for the
protection of the minor . . . that the minor be . . .
placed in a shelter care facility . . ." With respect to
DOs, the strongest indicators that the court was relying
upon 705-7(1) of the Juvenile Court Act are findings
that "the parents of a minor . . . are unfit or unable,
for some reason other than financial circumstances alone,
to care for, protect, train or discipline the minor, or
are unwilling to do so . . . and that it is in the best
interest of the minor to take him from the custody of his
parents, guardian or custodian . . . "

Moreover, in each case there were one or more of the
following indicia that the court was applying the
particular statute:

o The structure of the order tracked the statutory
structure.

o The orders listed all or most of the various
disposition options set out in the statute.

o The dispositions pursuant to these orders were
consistent with the dispositions authorized by the
statutes.

Thus, we conclude that when the contested court orders
contain language that tracks or follows significant or
unique language from one of the two statutes relied upon
by Illinois and when there are other indicia that the
court was applying the particular statute, these cases
may be viewed as having complied with the RE
determination. As we discussed above, this approach is
consistent with prior Board decisions. See West
Virginia; and Pennsylvania, DAB No. 1392, at 11, 13. We
also agree with Illinois that ACF's reliance on
Pennsylvania, DAB No. 1508, and on the Board's Ruling on
Reconsideration of DAB No. 1392 for a contrary result is
misplaced. Although the Board did find in that Ruling
that the state had not proved that its court orders
relied on a particular state statute, the basis for the
Board's conclusion was that Pennsylvania sought to rely
upon the court's use of a single word, the word
"dependent," to show reliance on the statute. Ruling at
6. The Board found use of the word "dependent" to be
insufficient because, among other things, it was used in
other state statutes and thus did not necessarily refer
to the statute in question. The Board did not require
express citation to the statute and did not reject the
principle that reliance upon a particular statute can be
shown by the use of parallel language and other factors.

II. The Individual Cases at Issue

Below we review the individual sample cases at issue,
dividing them, as Illinois did in its arguments, between
the "Livingston" and "post-Livingston" cases, i.e., cases
where the children entered care before October 1, 1986 or
on or after that date.

There are 18 "Livingston" cases in dispute: Sample Nos.
6, 14, 44, 50, 51, 52, 60, 66, 76, 85, 87, 91, 100, 103,
153, 172, 179, and 183.

There are six "post-Livingston" cases in dispute: Sample
Nos. 21, 33, 37, 88, 126, and 137.

ACF found that all of the above 24 cases were ineligible
because of the court's failure to make a RE
determination; Sample No. 21 was also failed for the lack
of a CTW determination.

One case, Sample No. 15, involves only the issue whether
the foster home in which a child was placed was properly
licensed during the month the title IV-E payment was
made.

In the Livingston cases, Illinois adopted a two-pronged
approach as to why the Board should find that the court
made a RE determination. Illinois, relying on
Pennsylvania, DAB No. 1508, argued that the petition
showed either that reasonable efforts had been made or
that an emergency situation existed, in which event the
court could have found that the lack of reasonable
efforts was justified. Furthermore, Illinois argued that
a TCO or DO in some cases satisfies the RE requirement
because it tracks the language of an Illinois state
statute that calls for a RE determination.

In the post-Livingston cases, Illinois contended that the
requirement for a RE determination was met because a TCO
or DO tracked the language of an Illinois state statute
requiring a RE determination.

In examining these cases we note preliminarily that the
issue is whether Illinois has met the burden of
documenting its claims for FFP in the payments.
Irrespective of the fact that the courts operated
independently of DCFS, Illinois was responsible for
assuring that there was adequate documentation of the
determinations required by section 472(a)(1) of the Act.
As the Board stated in West Virginia:

The denial of FFP in those cases where there is
inadequate documentation does not necessarily mean
that the court's action was unsound or that the
proper social work was not done, but simply
represents a finding that the state agency has
failed to document that its claims met the
conditions Congress established as a prerequisite
for title IV-E funding.

At 10.

THE LIVINGSTON CASES

Sample No. 6 -- ineligible

A February 22, 1984 Petition alleges that "the minor is
neglected in that the minor's parent does not provide the
care necessary for the minor's well-being" and that "the
minor is dependent in that the minor is without proper
care due to the mental and/or physical disability of the
parent." A February 23, 1984 TCO finds probable cause
that the minor is neglected and that "[i]t is a matter of
immediate and urgent necessity that a temporary custodian
or guardian be appointed for the protection of the
minor." Illinois argued that the language of the TCO
parallels 703-6(2). Illinois further argued that the
granting of the Petition and the finding of "immediate
and urgent necessity" indicate that this was an emergency
situation in which reasonable efforts were not required
to be made.

Illinois' reliance on 703-6(2) is misplaced. The
version of that provision which contains the RE language
did not become effective until January 14, 1985. The TCO
provided here was issued nearly a year earlier.
Furthermore, the Livingston policy would not apply to
this case as it is not obvious from the Petition that an
emergency situation existed here. Here there is
insufficient detail either in the Petition or in the TCO
to establish that this was such an emergency that the
court would have to have determined that the lack of
reasonable efforts to prevent the child's removal was
justified. This case is therefore ineligible.

Sample No. 14 -- eligible

An April 19, 1985 Petition alleges the minor child is
"neglected in that the minor's parent does not provide
the care necessary for the minor's well-being" and that
"the minor is abused in that the minor's environment is
injurious to the minor's welfare." The Petition further
states that the minor is abused in that "his parent
commits or allows to be committed . . . a sex offense . .
." and "his parent inflicts excessive corporal punishment
. . . ."

An April 19, 1985 TCO finds probable cause that the minor
is neglected and that "[i]t is a matter of immediate and
urgent necessity that a temporary custodian or guardian
be appointed for the protection of the minor."

An October 1, 1986 DO contains the following language
from 705-7(1): "the parent, guardian, or legal
custodian is unfit, unable for some reason other than
financial circumstances alone to care for, protect, train
or discipline the minor, or is unwilling to do so, it is
in the best interest of the minor to take him from such
custody." The DO then lists options, which track
paragraphs (a) through (f) of 705-7(1), with the option
of custody to DCFS being checked.

Illinois argued that it could be inferred from the
Petition that reasonable efforts had failed or that this
was an emergency in which the lack of efforts was
reasonable. Illinois further argued that the RE
requirement is satisfied because both the TCO and the DO
track the language of state statutes requiring a RE
determination.

Although the TCO does not refer to a petition, the fact
that the TCO and the Petition bear the same date support
a reasonable inference that the TCO was based on the
Petition. The Petition alleges such neglect and abuse
that what could be considered an emergency situation has
arisen, so that the Livingston policy would apply to
support a finding that the RE requirement was met.
Furthermore, the language of the TCO tracks language in
703-6(2), which we found above in Part I of this decision
requires a RE determination. Additionally, the language
of the DO tracks the language of 705-7(1), which we
also found above requires a RE determination. Therefore,
this case is eligible on several grounds.

Sample No. 44 -- eligible

A February 27, 1984 Petition alleges that the "minor is
neglected as to the care necessary for the minor's well-
being and is abandoned" and that "[i]t is in the best
interest of the minor and the public that the minor be
adjudged a ward of the court." An April 26, 1984
Supplemental Petition alleges that "[o]n or about March
12, 1984, mother made a plan for her grandmother to watch
the minor overnight. Mother failed to return until March
20, 1984."

An April 30, 1984 TCO states that the appointment of a
temporary custodian is "a matter of immediate and urgent
necessity." A March 12, 1986 DO contains the following
language from 705-7(1): "the parent, guardian, or
legal custodian is unfit, unable for some reason other
than financial circumstances alone to care for, protect,
train or discipline the minor, or is unwilling to do so,
it is in the best interest of the minor to take him from
such custody." The DO then lists options which track
paragraphs (a) through (f) of 705-7(1), with the option
of custody to DCFS being checked.

While the TCO on its face refers to a petition and the
Petition does allege neglect, there is no evidence of
either reasonable efforts having been made or of an
emergency based on which a court could determine that the
lack of efforts was reasonable. Thus, there is no basis
for finding that there was an RE determination under the
Livingston policy. The language of the subsequent DO,
however, tracks the language of a statute which requires
a RE determination. Therefore this case is eligible,
based on our discussion in Part I of this decision, as it
can reasonably be inferred that the court relied on this
statute and made a RE determination. Furthermore, under
the policy set forth in ACYF-IM-85-25, the child became
eligible for title IV-E assistance from the beginning of
the month in which the DO was issued, March 1986.

Sample No. 50 -- eligible

A September 17, 1984 DO contains the following language
from 705-7(1): "the parent, guardian, or legal
custodian is unfit, unable for some reason other than
financial circumstances alone to care for, protect, train
or discipline the minor, or is unwilling to do so, it is
in the best interest of the minor to take him from such
custody." The DO then lists options which track
paragraphs (a) through (f) of 705-7(1).

The language of the DO tracks the language of a statute
which requires a RE determination. The DO contains all
the options contemplated by 705-7(1), so that the court
was obviously acting pursuant to that statute.
Therefore, this case is eligible, based on our discussion
in Part I of this decision, as it can reasonably be
inferred that the court relied on that statute and made a
RE determination.

Sample No. 51 -- ineligible

An August 28, 1986 DO places the minor under the
guardianship of DCFS. Illinois stated that the date of
the DO established that it is subject to the Livingston
policy, and said that Illinois was reserving the right to
try to prove eligibility by reason of the petition.
Illinois failed, however, to provide a petition or any
other additional documentation for this case.

Accordingly, this case is ineligible.

Sample No. 52 -- eligible

A November 27, 1984 Petition states that the minor "is
neglected as to care necessary for his well-being in that
. . . the minor was hospitalized with a diagnosis of
failure to thrive having lost weight over a three-week
period just prior to admission." A November 27, 1984 TCO
finds that "[i]t is a matter of immediate and urgent
necessity that the minor be detained or placed in shelter
care" and orders that the minor be placed in the custody
of DCFS. Illinois argued that it can be inferred that
reasonable efforts had failed or that this was an
emergency in which the lack of efforts was reasonable.

A January 8, 1985 Order of Adjudication, finding the
minor to be neglected, orders the parents "to cooperate
with DCFS in preparing a plan for learning a nutritional
program to care for the minor and or parenting classes"
and orders DCFS "to work out a reunification case plan
including a diary to be kept as to what the child
consumes and include regular medical examination of the
minor."

A February 5, 1985 DO, in adjudging the minor to be
neglected, finds that "the parents, guardian or legal
custodian of said minor are unfit or are unable, for some
reason other than financial circumstances alone, to care
for, protect, train or discipline said minor, or are
unwilling to do so, and that it is in the best interest
of said minor and the public to take said minor from the
custody of said minor's parents, guardians or
custodian . . . ." Three options for the disposition of
the minor follow, with the option to DCFS being checked.
This language tracks the beginning language of 705-
7(1), which clearly requires a RE determination.

The language of the DO parallels a statute which requires
the court to make a RE determination. Therefore, this
case is eligible, based on our discussion in Part I of
this decision, as it can reasonably be inferred that the
court relied on the statute and made a RE determination.
Moreover, the language in the DO requiring the parents
"to cooperate with DCFS and all programs or counseling
established for them" is not incompatible with the court
having made a RE determination since the court could be
focusing on the possibility of a subsequent reunification
of the child and family.

Sample No. 60 -- eligible

A May 28, 1985 Petition alleged that minors are neglected
"as to care necessary for their well-being in that during
the month of March 1985 on two occasions the mother has
left the children unsupervised with inadequate food" and
that "the mother's paramour . . . threw the minor . . .
through a screen door while babysitting for the minor . .
. ."

A May 28, 1985 TCO finds that "[i]t is a matter of
immediate and urgent necessity that the minor be detained
or placed in shelter care" and orders that the minor be
placed in the custody of DCFS.

A July 23, 1985 DO, in adjudging the minor to be
neglected, finds that "the parents, guardian or legal
custodian of said minor are unfit or are unable, for some
reason other than financial circumstances alone, to care
for, protect, train or discipline said minor, or are
unwilling to do so, and that it is in the best interest
of said minor and the public to take said minor from the
custody of said minor's parents, guardians or custodian .
. . ." Three options for the guardianship of the minor
follow, with the option to DCFS being checked. This
language tracks the beginning language of 705-7(1).

Sample No. 66 -- ineligible

A July 11, 1983 Petition alleges that the minor is
neglected "due to her brother . . . had sexual
intercourse with her and that when her grandmother was
informed ignored the information." Illinois argued that
an October 31, 1983 DO granting guardianship to DCFS
"would have to have been based" on 705-7(1), which
required both a CTW and a RE determination. Illinois
also argued that the date of the DO strongly suggests
that the minor entered care initially prior to October 1,
1983 as a result of the July Petition, when the RE
requirement was not in effect.

There is nothing in the language of the DO which shows
that the court relied on a statute which requires a RE
determination or that references the Petition dated July
11, 1983. Nor is there any documentary evidence to
support Illinois' theory that the minor was removed from
the home under the care and support of the state prior to
October 1, 1983. Thus, this case is ineligible.
Illinois' arguments are based on assumptions about what
the court would likely have done under the circumstances
here, not on documentary evidence of what the court in
fact did.

Sample No. 76 -- eligible

A February 10, 1986 DO contains the following language
from 705-7(1): "the parent, guardian, or legal
custodian is unfit, unable for some reason other than
financial circumstances alone to care for, protect, train
or discipline the minor, or is unwilling to do so, it is
in the best interest of the minor to take him from such
custody." The DO then lists options which track
paragraphs (a) through (f) of 705-7(1). Illinois
argued that the court was acting pursuant to 705-7(1),
which clearly mandates a finding that satisfies the RE
requirement.

The language of the DO tracks the language of a statute
which requires a RE determination. Therefore, this case
is eligible, based on our discussion in Part I of this
decision, as it can reasonably be inferred that the court
relied on the statute and made a RE determination.

Sample No. 85 -- eligible

A March 22, 1985 Petition alleges that "the minor is
neglected in that the minor's parent does not provide the
care necessary for the minor's well-being" and that "the
minor is abused in that the minor's environment is
injurious to the minor's welfare." The Petition further
explains that "the minor is abused in that his parent
creates a substantial risk of physical injury to such
minor by other than accidental means which would be
likely to cause death, disfigurement, impairment of
emotional health, or loss or impairment of a bodily
function . . ." The Petition further alleges that "the
minor is abused in that his parent inflicts excessive
corporal punishment . . ."

A March 27, 1985 TCO finds that "[i]t is a matter of
immediate and urgent necessity that the minor be detained
or placed in shelter care" and orders that the minor be
placed in the custody of DCFS.

A June 24, 1986 DO contains the following language from
705-7(1): "the parent, guardian, or legal custodian is
unfit, unable for some reason other than financial
circumstances alone to care for, protect, train or
discipline the minor, or is unwilling to do so, it is in
the best interest of the minor to take him from such
custody." The DO then lists options which track
paragraphs (a) through (f) of 705-7(1).

Illinois argued that the court was acting pursuant to
705-7(1) which clearly requires a finding that satisfies
the RE requirement, or, in the alternative, that one
should be able to infer from the Petition that reasonable
efforts had failed or that there was an emergency
situation in which the lack of efforts was reasonable.

The TCO does not on its face mention the Petition. Since
the TCO was issued five days after the Petition, however,
it can reasonably be inferred that the TCO was based on
the Petition, which alleges such serious neglect and
abuse that an emergency situation could be inferred.
Therefore, based on the Livingston policy, we conclude
that the court made a determination that reasonable
efforts were not required. Furthermore, the language of
the DO parallels a statute which requires the court to
make a RE determination. Therefore, this case is
eligible, based on our discussion in Part I of this
decision, as it can reasonably be inferred that the court
relied on the statute and made a RE determination.

Sample No. 87 -- eligible

An October 22, 1986 DO, in finding neglect, contains the
following language from 705-7(1): "the parent,
guardian, or legal custodian is unfit, unable for some
reason other than financial circumstances alone to care
for, protect, train or discipline the minor, or is
unwilling to do so, it is in the best interest of the
minor to take him from such custody." The DO then lists
options which track paragraphs (a) through (f) of 705-
7(1).

Sample No. 91 -- ineligible

Illinois alleged that a June 10, 1986 transcript of a DH
shows that the court was making the necessary findings
under 705-7(1).

There is no language in the transcript that shows that
the court was relying on 705-7(1). While the
transcript does refer to "services to mother being
offered," there is no documentation from which it can be
inferred that the court made a finding as to whether this
constituted reasonable efforts. Therefore, it is not
documented that the court made a RE determination. The
case is accordingly ineligible.

Sample No. 100 -- eligible

A February 21, 1986 DO contains the following language
from 705-7(1): "the parent, guardian, or legal
custodian is unfit, unable for some reason other than
financial circumstances alone to care for, protect, train
or discipline the minor, or is unwilling to do so, it is
in the best interest of the minor to take him from such
custody." The DO then lists options which track
paragraphs (a) through (f) of 705-7(1).

The language of the DO tracks the language of a statute
which requires a RE determination. Therefore, this case
is eligible, based on our discussion in Part I of this
decision, as it can reasonably be inferred the court
relied on the statute and made a RE determination.

Sample No. 103 -- eligible

An April 4, 1985 Petition alleges that "the Minor is
neglected in that the minor's parent does not provide the
care necessary for the minor's well-being" and that "the
minor is dependent in that the minor is without proper
care due to the mental and/or physical disability of the
parent." An April 4, 1985 TCO finds that "[i]t is a
matter of immediate and urgent necessity that the minor
be detained or placed in shelter care" and orders that
the minor be placed in the custody of DCFS.

Illinois argued that the language of the TCO makes clear
that the court was acting pursuant to 703-6(2), which
requires a RE determination. Illinois also argued that
one should be able to infer from the Petition that
reasonable efforts had failed or that there was an
emergency situation in which the lack of efforts was
reasonable.

While the TCO does not on its face mention the Petition,
both the TCO and the Petition bear the same date. It is
therefore reasonable to assume that the TCO was based on
the Petition, which alleged the minor was neglected. The
Petition, however, neither provides evidence that
reasonable efforts had been made nor details an emergency
situation which would support a determination that lack
of preventive efforts was reasonable. This case would
therefore not qualify under the Livingston policy. The
language in the TCO does, however, track the "immediate
and urgent necessity" language of 703-6(2). As that
statute does call for a RE determination, we find this
case eligible, based on our discussion in Part I of this
decision, as it can reasonably be inferred that the court
relied on this statute and made a RE determination.

Sample No. 153 -- eligible

A September 3, 1985 Petition alleged that "the minor is
neglected in that the minor's parent does not provide the
care necessary for the minor's well-being." September 3,
1985 and February 16, 1986 TCOs find that "[i]t is a
matter of immediate and urgent necessity that the minor
be detained or placed in shelter care" and order that the
minor be placed in the custody of DCFS.

Illinois argued that the language of the TCOs makes clear
that the court was acting pursuant to 703-6(2), which
requires a RE determination. Illinois also argued that
one should be able to infer from the Petition that
reasonable efforts had failed or that there was an
emergency situation in which the lack of efforts was
reasonable.

While the first TCO does not on its face mention the
Petition, both the first TCO and the Petition bear the
same date. It is therefore reasonable to assume that
this TCO was based on the Petition, which alleged the
minor was neglected. The Petition, however, does not
detail an emergency situation which would support a RE
determination. This case would therefore not qualify
under the Livingston policy. The TCOs have, however, the
"immediate and urgent necessity" language of 703-6(2).
As that statute does call for a RE determination, we find
this case eligible, based on our discussion in Part I of
this decision, as it can reasonably be inferred that the
court relied on this statute and made a RE determination.

Sample No. 172 -- eligible

A September 9, 1986 Petition alleges that the minor is
"abused/neglected," in that: the "minor is under 18
years of age [minor was 6 months old at the time] and is
an abused minor in that . . . said minor's father
inflicted serious physical harm upon the minor by
exposing said minor to water of such temperature that it
resulted in serious physical harm to the minor being
severe burns;" and "his parents are not providing the
medical or other remedial care recognized under State law
as necessary for the minor's well-being in that the minor
has suffered a spiral fracture of the right humerus in
the recent past and has not been provided with medical
care for said injury."

A September 30, 1986 TCO finds that "[i]t is a matter of
immediate and urgent necessity that the minor be detained
or placed in shelter care" and orders that the minor be
placed in the custody of DCFS. An October 28, 1986 DO,
in adjudging the minor to be abused, finds that "the
parents, guardian or legal custodian of said minor are
unfit or are unable, for some reason other than financial
circumstances alone, to care for, protect, train or
discipline said minor, or are unwilling to do so, and
that it is in the best interest of said minor and the
public to take said minor from the custody of said
minor's parents, guardians or custodian . . . ." Three
options for the disposition of the minor follow, with the
option to DCFS being checked. This language tracks the
beginning language of 705-7(1).

The TCO on its face refers to the Petition, which alleges
abuse and neglect. While the Petition does not identify
any reasonable efforts action, it contains allegations of
circumstances that a court could reasonably have
considered to be an emergency situation. Thus, the
Livingston policy would apply. Furthermore, the language
of the DO tracks the language of a statute which requires
a RE determination. Therefore, this case is eligible
based on our discussion in Part I of this decision, as it
can reasonably be inferred that the court relied on this
statute and made a RE determination. .

Sample No. 179 -- eligible

A May 22, 1985 DO contains the following language from
705-7(1): "the parent, guardian, or legal custodian is
unfit, unable for some reason other than financial
circumstances alone to care for, protect, train or
discipline the minor, or is unwilling to do so, it is in
the best interest of the minor to take him from such
custody." The DO then lists options that track
paragraphs (a) through (f) of 705-7(1).

Sample No. 183 -- eligible

A September 17, 1985 Petition alleges that "the minor
child [8 years old] . . . states that she was fondled and
subjected to sexual penetration by her step-father . . .
and that there is substantial risk to the minor's well-
being so long as she remains in the same household as the
step-father."

A September 17, 1985 TCO finds that "[i]t is a matter of
immediate and urgent necessity for the protection of the
minor that the minor be detained or placed in shelter
care" and orders that the minor be placed in the custody
of DCFS. The March 3, 1988 DO, in ordering that custody
of the minor be continued with DCFS, specifically refers
to 705-7 and provides that the minor's mother and
maternal grandmother would have visitation rights and
that a home study would be made of the mother's home.

Illinois argued that, in addition to the DO tracking
705-7(1), the TCO tracks the "immediate and necessary"
language of 703-6(2), which is sufficient to satisfy
the RE requirement. Illinois further argued that reasons
for removal set forth in the Petition establish an
emergency situation in which any lack of efforts to
maintain the minor in the home was reasonable.

Although the TCO does not its face mention the Petition,
it was issued the same day as the Petition. It can
therefore be reasonably inferred that the TCO was based
on the Petition. Additionally, the allegations contained
in the Petition were such that a court could reasonably
have considered this an emergency situation. Thus, the
Livingston policy would apply. Furthermore, the DO
specifically refers to 705-7, which requires a RE
determination. Therefore, this case is eligible, based
on our discussion in Part I of this decision, as it can
reasonably be inferred that the court relied on this
statute and made a RE determination.

THE POST-LIVINGSTON CASES

Sample No. 21 -- ineligible

ACF found this case ineligible for the lack of both a CTW
and a RE determination.

A November 24, 1986 Petition alleges that the minor is
abused in that the minor's mother left the minor in the
care of the minor's maternal grandmother who "then abused
[the minor] causing a spiral fracture of the left arm.
[The mother] was aware that [the grandmother] had abused
the children in the past, yet has continued to allow [the
grandmother] to care for the children." The Petition
further alleges that it is in the best interests of the
minor that she be adjudged a ward of the court.

A January 13, 1987 DO finds that the mother stipulates
that she left children with the grandmother with
knowledge of possible prior abuse. The minor was placed
with her father pending completion of home study, with
DCFS to assist the mother in seeking other housing.

Illinois argued that the court, in granting the Petition,
satisfied the best interests requirement, and that the DO
reflects that reasonable efforts were being made to
reunify the minor with her mother in that DCFS was
directed to assist the mother find alternative housing
away from the abusive relative.

Since this is a post-Livingston case, a court order
granting the Petition would not be sufficient evidence
that the order was based on allegations in the Petition,
and, in any event, the court's DO here indicates that the
court did not grant the Petition's request. Moreover,
there is no CTW or RE determination on the face of the
DO, and the DO does not contain language that tracks any
of the state statutes requiring the court to make a RE
determination. Therefore, the case is ineligible.
Illinois would have us infer that a CTW or RE
determination had been made simply because the court's
disposition here conceivably would be consistent with the
court having made the determinations.

Sample No. 33 -- ineligible

The only documentation offered by Illinois was a
transcript of a July 1, 1988 DH that shows that there was
a prior dependency petition and a delinquency, which was
being held in abeyance, while DCFS sought an appropriate
placement for the minor.

Illinois argued that the fact that the disposition
appears to be based on a dependency determination means
that the court was relying on the provisions of 802-27
(which replaced 705-7(1)), which requires a RE
determination.

There is nothing in the transcript which shows that the
court was relying on 802-27. Any nexus with an
acceptable statute must ordinarily be based on a judicial
order itself, not on ancillary material such as
transcripts. Unless ancillary material such as a
transcript specifically refers to a RE determination or
cites as applicable a statute that mandates a RE
determination or quotes the language of such a statute,
we would not consider such material to be evidence that
the statute was followed and a RE determination made.
The transcript provided by Illinois for this case fails
to do any of the above. Therefore, the case is
ineligible.

Sample No. 37 -- eligible

A June 8, 1987 TCO finds that there is probable cause the
child is neglected and that "[i]t is a matter of
immediate and urgent necessity for the protection of the
minor that the minor be placed in shelter care." A
November 9, 1988 DO contains the following language from
802-27: "the parent, guardian, or legal custodian is
unfit, unable for some reason other than financial
circumstances alone to care for, protect, train or
discipline the minor, or is unwilling to do so, it is in
the best interest of the minor to take him from such
custody." The DO then lists options which track
paragraphs (a) through (d) of 802-27(1), with the
option of guardianship to DCFS being checked.

The language of the DO tracks the language of a statute
which requires a RE determination. In addition, the
language of the TCO tracks 703-6(2), which also
requires a RE determination. Therefore, this case is
eligible, based on our discussion in Part I of this
decision, as it can reasonably be inferred that the court
relied on these statutes and made a RE determination.

Sample No. 88 -- eligible

A July 12, 1987 TCO finds that there is probable cause
the child is abused and that "[i]t is a matter of
immediate and urgent necessity that a temporary guardian
or custodian be appointed for the protection of the
minor." August 24, 1988 and December 21, 1988 DOs direct
that the minor remain in the custody of DCFS and order a
number of specific services be provided to the minor and
her parents, including psychological testing and
counseling.

The language of the TCO repeats the beginning language of
703-6(2), which requires a RE determination.
Therefore, this case is eligible, based on our discussion
in Part I of this decision, as it can reasonably be
inferred that the court relied on this statute and made a
RE determination.

Sample No. 126 -- ineligible

A September 14, 1989 Petition alleges that the minor "is
without proper care due to the mental disability of his
mother" and refers to 802-4.

A September 15, 1989 TCO states that "it is in the best
interest of the minor and the public if said minor is
held in temporary custody" and awards temporary custody
to DCFS. The TCO further states that, pursuant to 802-
11, the custodian is authorized to perform all necessary
medical procedures.

Illinois argued that the references in the Petition and
the TCO to 802-4 and 802-11, respectively, establish
that the court was acting pursuant to 802-10, which
requires CTW and RE determinations. There is no direct
reference in these documents, however, to any statute
requiring a RE determination or any language in the
documents that can be said to track the language of such
a statute. Illinois' argument appears to be that if the
TCO mentions one part of the Juvenile Court Act, there is
an implication that the court considered all the other
parts of the Juvenile Court Act. Such an implication is
simply not warranted. ACYF-PIQ-86-02 requires that, in
order for a state law to be relied on for purposes of
showing compliance with the requirements of section
472(a)(1) of the Act, the state law must be unequivocal
and the court order must be expressly based on that law.
That has not been shown in this case. Accordingly, this
case is ineligible.

Sample No. 137 -- eligible

A June 5, 1987 Judgment finds that the minors are abused
"for the reason that the minors' environment is injurious
to their health." The Judgment further finds, in
awarding guardianship to DCFS, that "the mother is not
able for reasons other than financial circumstances alone
to care for, protect, train or discipline the minors, and
that it is in the best interests of the minors that the
minors be taken from the custody of the mother."
September 9, 1988 and April 12, 1990 Modified DOs repeat
these findings.

The language in the Judgment parallels the beginning
language of 705-7(1), which requires a RE
determination. Therefore, this case is eligible, based
on our discussion in Part I of this decision, as it can
reasonably be inferred that the court relied on this
statute and made a RE determination.

LICENSURE CASE

Sample No. 15 -- eligible

ACF found that this case was ineligible because the home
in which the child was placed was not licensed during the
month the title IV-E payment was reviewed. Section
472(b)(1) of the Act provides that foster care
maintenance payments may be made on behalf of a child who
is in a foster family home. "Foster family home" is
defined in section 472(c)(1) as "a foster family home for
children which is licensed by the State . . . or has been
approved by the agency of such State having
responsibility for licensing homes of this type, as
meeting the standards established for such licensing . .
. ."

According to ACF, the home in this case was licensed from
September 1986 to September 1988, but was not relicensed
until April 1989, with the review month of November 1988
falling in the unlicensed interim.

Illinois relied on Pennsylvania, DAB No. 1508. Illinois
argued that the Board held there that as long as a home
was originally approved before the month for which FFP
was claimed, FFP should be available for that month. At
32. Illinois contended that a home that had been
previously approved is not ineligible, even if that
approval was no longer current during the review month.

In regard to one particular placement in Pennsylvania,
the Board found that ACF had determined in other cases
included in the sample that the fact that a foster home
was not re-reviewed within one year was not a basis for a
finding of ineligibility. At 32. The Board held that,
consistent with ACF's treatment of the other cases, the
case should be eligible even if the re-determination was
weeks late. At 33. 5/

ACF did not here deny that the practice discussed and
applied in Pennsylvania was its practice nor did it
explain why Illinois should not receive the same
treatment under that practice as did Pennsylvania. ACF
also did not allege that it had any evidence that this
home was out of compliance with licensing standards
during the review month. Accordingly, based upon ACF's
position in Pennsylvania that a late re-approval should
not bar a finding of eligibility, we find that this
placement is eligible for FFP.

Summary

Our findings on the individual 25 cases in dispute are as
follows:

Eligible: Sample Nos. 14, 15, 37, 44, 50, 52, 60,
76, 85, 87, 88, 100, 103, 137, 153, 172, 179, and
183.

Ineligible: Sample Nos. 6, 21, 33, 51, 66, 91, and
126.

With the six cases whose ineligibility Illinois did not
contest, we find that a total of 13 cases are ineligible
for FFP.

III. The disallowance was not contrary to congressional
policy.

Illinois also noted that Congress, in section 13716 of
the Omnibus Budget Reconciliation Act of 1993, Public Law
No. 103-66, enacted a moratorium on the collection of any
title IV-E disallowance based on an OIG audit. Illinois
acknowledged that this moratorium expired on October 1,
1994, but argued that Congress, in section 202(a) of the
Social Security Act Amendments of 1994, Public Law No.
103-432, revisited its concerns about federal financial
review methodologies which are ineffective, unfair, and
unreasonably penalize states.

Illinois contended that if collections under title IV-E
based on these methodologies "are not outright unlawful,
they are clearly against stated Congressional policy and
must on that basis be deemed arbitrary and capricious."
Illinois Br. at 53.

Illinois essentially made these same arguments in a prior
case, Illinois Dept. of Children and Family Services, DAB
No. 1516 (1995). There the Board concluded that
acceptance of Illinois' arguments about congressional
concerns with the section 427 review process "would
require the Board to ignore the actual terms of existing
law." At 15. 6/ The Board further noted that Congress
did not elect, when it had the opportunity to do so in
the Social Security Act Amendments of 1994, to either
impose a new moratorium on the repayment of funds arising
from a finding of non-compliance with the section 427
requirement, or to relieve states of the obligations of
existing law. At 15-16.

Illinois has not provided any additional arguments that
would persuade us that our reasoning in DAB No. 1516 was
incorrect. We therefore find no basis for holding here
that ACF's disallowance was contrary to congressional
policy.

IV. ACF is entitled to extrapolate the percentage of
ineligible cases in the sample to the universe of IV-E
payments even if the ultimate percentage of failed cases
in the sample is less than 10 percent.

Illinois questioned whether it was appropriate, in the
event that the Board determines that Illinois had an
error rate of less than 10 percent, for ACF to still
extrapolate the actual ineligible payments to the
universe of maintenance assistance payments in
calculating the amount of the disallowance. Since we
conclude, based on our examination of the individual
sample cases, that Illinois' error rate was less than 10
percent, we address this argument here.

The title IV-E compliance review process is set forth in
the "Financial Review Guide For On-Site Reviews Of The
Title IV-E Foster Care Program." ACYF-IM-85-25 (August
14, 1985), Illinois Ex. 2. This review process was
discussed extensively in West Virginia at pages 6-7.
Briefly, the guidelines of ACYF-IM-85-25 prescribe a two-
stage review process using a random sample of foster care
maintenance "payment units" made by a state during a
given period. In Stage I, a sample of 50 payments is
reviewed. If a state's error rate is less than 10
percent, only the individual ineligible payments
identified are disallowed. If the error rate exceeds 10
percent in Stage I, however, the audit proceeds to Stage
II where a minimum of 150 additional cases are reviewed.
If a Stage II review is performed, ACF extrapolates the
Stage II errors to the universe from which the sample was
drawn and disallows FFP in the payments found to be in
error in the universe.

It is unclear from the record here whether the OIG
auditors employed the full two-stage review process in
this case. The audit report does not mention a Stage I
audit, but only refers to a random sample of 200 title
IV-E payments. Illinois Ex. 8, at 2. In any event,
Illinois argued that extrapolation of Stage II errors was
inappropriate if an error rate of less than 10 percent
was found by the Stage II review.

Illinois suggested that extrapolation here would result
in Illinois suffering disparate treatment than other
states. Illinois offered the example of a state, found
to have an error rate of eight percent in a Stage I
review, paying a disallowance of less than $10,000 based
on the individual payments actually identified. Here we
made findings above that would give Illinois an error
rate of approximately 6.5 percent. Thus, Illinois argued
that it would be treated unfairly in comparison to the
state in its example if ACF were here to extrapolate
Illinois' error rate to the universe of title IV-E
payments and impose a disallowance of approximately two
million dollars. We disagree.

The Board examined arguments similar to Illinois' in West
Virginia. The Board rejected those arguments, holding
that under ACYF issuances the decision whether to proceed
to a Stage II review was a matter of agency discretion.
At 6. The Board relied on the language in ACYF-IM-85-25
which stated:

If the State systems do not appear to be operating
properly (i.e., there is insufficient documentation
available to support decisions on the use of title
IV-E funds) or if the stage one review indicated
errors in excess of established error rates, a stage
two review must be conducted.

At 6. The Board then cited an earlier ACYF issuance,
ACYF-IM-85-4, which stated in pertinent part that --

[t]he Commissioner of [ACYF] may also decide, for
reasons other than the established error rates, that
a stage two review is required in a given State to
adequately validate its systems and procedures, such
as a system-wide error or the recurrence of errors
found in the same State in a prior year.

ACYF-IM-85-4 at 3rd page. Both of these issuances
indicate that ACF may proceed to a Stage II review even
if the Stage I error rate does not reach the prescribed
level. In concluding that the disallowance was properly
based on the extrapolation results of a Stage II review,
the Board stated that --

it would be contrary to ACYF's obligation to ensure
that federal funds are properly expended to ignore a
Stage II review which independently established that
title IV-E payments were being made to ineligible
children.

At 8.

We conclude for reasons similar to those discussed in
West Virginia that ACF may extrapolate the sampling
results here to the universe of title IV-E payments
during the period in question. ACF's policies make it
clear that ACF may undertake full scale reviews in a
variety of contexts and that ACF need not in every case
undertake a preliminary review to determine whether a
full scale review is necessary. Nevertheless, once ACF
undertakes a full scale review, it clearly may issue a
disallowance based on valid statistical sampling
techniques. ACF's audit procedures clearly do not
require it to treat the results in the same way it would
have treated results obtained during the preliminary
review. Indeed, under ACF's policies, extrapolation to
the universe is required following a Stage II review:

Upon completion of a stage two review, disallowances
will be made based on extrapolation from the sample
to the universe of claims submitted for payment
during the review period.

ACYF-IM-85-25, Illinois Ex. 2, Attachment at 6.

Obviously, any rule to the contrary of the above rule
would strongly undercut ACF's ability to perform
preliminary reviews in its programs in order to determine
whether a problem may be serious enough to merit a full
scale review. These reviews may reasonably contain
cutoff standards for purposes of determining whether
further reviews are necessary. Nevertheless, once ACF
has determined for reasons based on these standards or
for other reasons that a full scale review is necessary,
ACF is entitled to use auditing techniques such as
statistical sampling in computing a disallowance.
Illinois has not alleged any flaws in the statistical
method ACF used. Scientifically valid sampling
techniques have been repeatedly upheld by this Board, and
indeed by the courts, for use in audits in the title IV-E
program and in other public welfare programs. See, e.g.,
New York State Dept. of Social Services, DAB No. 1531
(1995); Chaves County Home Health Service, Inc., v.
Sullivan, 931 F.2d 914, cert. denied, 502 U.S. 1091
(1992). Moreover, if ACF were required to impose the
same cutoffs it might have applied in its preliminary
reviews to the Stage II results, ACF would effectively be
required to apply a program tolerance for error rates.
This Board has previously considered the issue of error
rate tolerances in the IV-E program and concluded that no
statute, regulation or policy issuance obliges ACF to
apply a tolerance for errors before imposing a
disallowance in that program. See, e.g., New York State
Dept. of Social Services, DAB No. 1358, at 41 - 43
(1992).

Accordingly, we conclude that ACF may properly
extrapolate the sampling results here to the universe of
title IV-E payments for the period at issue.

Conclusion

Based on the foregoing, we uphold ACF's findings on seven
of the contested cases and reverse the findings on 18
cases. We reject the other arguments raised by Illinois
concerning whether this disallowance is contrary to
congressional policies and whether it is inappropriate
here to extrapolate the sampling results to the universe
of title IV-E payments. Accordingly, we direct ACF to

recalculate the amount of the disallowance in light of
our findings concerning the seven failed cases and the
six additional cases conceded by Illinois.

____________________________
Judith A. Ballard

____________________________
M. Terry Johnson

____________________________
Donald F. Garrett
Presiding Board Member

1. The phrases "contrary to the welfare of the child"
and "best interests of the child" are used
interchangeably. Both phrases pertain to the same
section 472(a)(1) judicial determination.

2. We do not need to reach that issue (concerning
this language or other language that Illinois may have
argued required a CTW determination), however, since only
one of the contested cases raises the CTW issue, and we
conclude that that case would fail for other reasons.

3. Sections 702-3, 702-4, and 702-5 of the Illinois
Juvenile Court Act refer, respectively, to a child in
Illinois who was in need of authoritative intervention,
who was neglected or abused, or who was dependent. All
of the children in the contested cases who received a TC
hearing fall within one of these categories.

4. This provision, or one essentially the same,
appeared in Illinois statutes throughout the period at
issue: 37 Ill. Rev. Stat. 705-7(1) (1985); 37 Ill.
Rev. Stat. 802-27(1) (1987).

5. Although the particular case discussed in
Pennsylvania involved a home that was re-approved during
the review month, there was no indication in that
decision that ACF would have found a case eligible only
if the length of the period during which the home's
approval had lapsed was limited to just a partial month's
time.

6. Although the section 427 review is different from
an eligibility audit, the legislative histories relied
upon by Illinois in DAB No. 1516 and here demonstrate
that Congress had essentially identical concerns about
both processes.