Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Rhode Island Department of Children, Youth and Families
Docket No. A-96-91
Decision No. 1599
DATE: September 23, 1996
DECISION
The Rhode Island Department of Children, Youth and Families
(Rhode Island) appealed a determination by the Administration
on Children, Youth and Families (ACYF) in the Administration
for Children and Families disallowing $361,194 in federal
financial participation (FFP) claimed by Rhode Island under
title IV-E of the Social Security Act (Act).
The disallowance was based on a review performed by ACYF of
foster care maintenance payments made by Rhode Island during
the period October 1, 1987 through September 30, 1988. The
title IV-E review guidelines prescribe a two-stage review
process using a random sample of foster care maintenance
payments made by a state during a given period. First, ACYF
reviews 50 payments in the sample. If the Stage I dollar-
error rate and payment-error rate exceed 10 percent, ACYF
proceeds to Stage II and reviews a minimum of 150 additional
payments. If a Stage II review is performed, ACYF
extrapolates the errors to the universe from which the sample
was drawn and disallows FFP in the payments found to be in
error.
In the Stage I review of the first 50 cases here, ACYF
determined that Rhode Island's dollar-error rate and payment-
error rate exceeded 10 percent and that ACYF would conduct a
Stage II review. At the conclusion of the Stage II review,
ACYF determined that 49 of 264 maintenance payments having a
value of $40,685 failed to meet title IV-E requirements and
were unallowable. ACYF then extrapolated the results of the
review of sample payments to the universe of 6,024
maintenance payments and found that there was a 95 percent
probability that at least $658,512 ($361,194 FFP) was
inappropriately charged to the title IV-E program. ACYF
issued a disallowance determination for $361,194.
Rhode Island appealed ACYF's disallowance to the Board. It
argued that Rhode Island was entitled to a review of ACYF's
error findings in the Stage I cases; that such a review would
establish that Rhode Island's Stage I dollar-error rate did
not exceed 10 percent; and that, therefore, the disallowance
resulting from the Stage II review should be reversed.
For the reasons discussed below, we uphold ACYF's authority
to issue a disallowance pursuant to a Stage II review of
Rhode Island's title IV-E program whether or not the Stage I
review correctly resulted in a dollar-error rate and payment-
error rate in excess of 10 percent. Further, we uphold
ACYF's error finding for the Stage I sample payment contested
by Rhode Island in this appeal and therefore conclude that
Rhode Island's dollar-error rate and payment-error rate in
Stage I exceeded 10 percent. Accordingly, we uphold the
disallowance in full.
Below we first discuss ACYF's authority to impose a
disallowance pursuant to a Stage II review and then we
discuss Rhode Island's challenge to ACYF's error finding for
the sample payment at issue.
I. ACYF was entitled to disallow title IV-E funds
pursuant to a Stage II review even if the final
dollar-error rate from Rhode Island's Stage I review
did not exceed 10 percent.
The title IV-E review process used in this review was 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) and "Title IV-E Foster Care - Financial Reviews,"
ACYF-IM-85-4 (January 25, 1985). (ACYF-IM-85-25 is included
in the record as Rhode Island Exhibit 1.) The guidelines
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, ACYF reviews 50 payments.
If the dollar-error rate (determined by dividing the dollars
in error by the total dollar value of the payments reviewed)
is greater than 10 percent, then ACYF determines the payment-
error rate (determined by dividing the number of payments in
error by the number of payments reviewed). If the latter
rate exceeds 10 percent, ACYF proceeds to Stage II and
reviews a minimum of an additional 150 payments. If ACYF
performs only a Stage I review, only individual ineligible
payments identified in that stage are disallowed. 1/ If a
Stage II review is performed, ACYF 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.
Rhode Island took the position that a disallowance should not
have been taken pursuant to the results of a Stage II review.
Rhode Island contended that it had provided evidence prior
to the Stage II review which established that at least one
Stage I payment found ineligible by ACYF was in fact
eligible, and that consequently its Stage I dollar-error rate
did not exceed 10 percent. Rhode Island argued that the
disallowance resulting from the Stage II review should
therefore be reversed. Rhode Island cited no legal authority
for its position and chose not to reply to ACYF's brief
discussing the Board's prior construction of ACYF's title IV-
E review policies.
Rhode Island's argument that the disallowance resulting from
the Stage II review should be reversed is flawed in several
respects. First, Rhode Island incorrectly assumed that its
evidence established that it was entitled to title IV-E
reimbursement in the Stage I sample case challenged in this
proceeding. As explained later in this decision, we agree
with ACYF that this payment was in fact ineligible for title
IV-E reimbursement. Accordingly, there is no basis for Rhode
Island's contention that its Stage I dollar-error rate did
not exceed 10 percent and that the error rate criteria for
proceeding to the Stage II review were not met. 2/
Second, Rhode Island is mistaken that ACYF's policy allows
ACYF to proceed to a Stage II review only if a state meets
the Stage I error rate criteria. As the Board previously
decided in West Virginia Dept. of Health and Human Services,
DAB No. 1257 (1991) and Illinois Dept. of Children and Family
Services, DAB No. 1564 (1996), while this is one basis for
proceeding to a Stage II review, ACYF's issuances establish
that the decision whether to conduct a Stage II review is a
matter of agency discretion. ACYF's review guide states in
pertinent part that --
[i]f 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.
ACYF-IM-85-25, at 6. In addition, the earlier information
memorandum states in pertinent part that --
[t]he Commissioner of the Administration for Children,
Youth and Families 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 3. Thus, ACYF's policy would have permitted
it to proceed to a Stage II review in this case even if it
had believed that Rhode Island did not meet the Stage II
error rate criteria.
Third, at the time ACYF proceeded to the Stage II review, it
had determined that Rhode Island's dollar-error rate and
payment-error rate exceeded 10 percent. There is no formal
administrative review process for the resolution of findings
in the Stage I review. Rather, the guidelines provide that
if the Stage I review "indicated errors in excess of
established error rates", a Stage II review would be
performed. ACYF-IM-85-25, at 6 (emphasis added). Thus, ACYF
clearly had the discretion to proceed with a Stage II review
even though Rhode Island continued to dispute one or more
findings in the Stage I review.
Finally, once ACYF decides to proceed with a Stage II review,
it may rely on the Stage II results (which necessarily would
be more precise given the larger size of the sample)
regardless of whether ACYF may have erred in its findings in
one or more cases in the Stage I sample. As we stated in
West Virginia and reaffirmed in Illinois in concluding that a
disallowance was properly based on the results of a Stage II
review --
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.
West Virginia, at 8. Therefore, once ACYF had determined
through a Stage II review that federal funds were misspent,
it would be improper for it to fail to disallow reimbursement
for the established unallowable expenditures.
II. ACYF correctly determined that the sample case
challenged by Rhode Island was not eligible for title
IV-E reimbursement.
In its appeal before the Board, Rhode Island challenged
ACYF's error finding in one sample case which was reviewed in
the Stage I review. Both parties agreed that if this case
were found to be eligible for title IV-E reimbursement, Rhode
Island's dollar-error rate in the Stage I review would not
exceed 10 percent.
Below we discuss the title IV-E requirements for
reimbursement and why the payment in the sample case was not
eligible for title IV-E reimbursement.
A. Statutory Background and ACYF 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, ACYF
addressed questions regarding the requirement for a judicial
determination as to reasonable efforts (RE). 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, at 4.
Further, the "Financial Review Guide for On-Site Reviews of
the Title IV-E Foster Care Program," ACYF-IM-85-25, issued
in 1985, instructed 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." 3/ 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, at 2-3.
The checklist for title IV-E reviews included in ACYF-IM-85-
25 gave rise to additional questions about the judicial
determination requirement which were addressed in ACYF-PIQ-
86-02 (May 8, 1986). Among other matters, that issuance
addressed the situation in which "the petition preceding the
court order contains the language required in the law, but
the final court order does not refer to the petition or
include the necessary determination." ACYF explained that
such a petition by itself would not satisfy the requirements
of section 472(a)(1). ACYF wrote that --
[t]he signed court order or a transcript of court
proceedings may be used to satisfy the requirement in
section 472(a)(1) if the judicial determination in
relation to removal is included; however, the petition
which requests a hearing could not anticipate the
findings and conclusions to be made by the court at a
time in the future and cannot be used in lieu of the
judicial determination.
Id. at 5.
Finally, prior to discussing the facts of the sample case at
issue, we note that, in determining whether Rhode Island was
entitled to receive FFP for the payment in this case, we do
not consider whether the removal of the child from home was
appropriate. Congress was concerned that children were being
moved too quickly into a foster care system where they would
then sometimes languish for years. Thus, as a check on the
judgment of state agency personnel or others petitioning to
have children placed in the state's custody, Congress made
title IV-E funds available only for cases in which the court
issuing the removal order specifically determined that
continuation in the home was contrary to the child's welfare
and that reasonable efforts had been made to prevent the
child's removal from the home. Accordingly, the issue before
us is not whether the court could have made the requisite
determinations, but whether Rhode Island documented that the
requisite determinations were in fact made by the court, and
the conditions for title IV-E funding met.
B. Sample No. 38 (the RC case) did not meet the
requirements of section 472(a)(1) and was not
eligible for title IV-E reimbursement.
ACYF determined in the course of its Stage I review that
there had been no judicial determination of CTW and RE in
Sample No. 38 and therefore the title IV-E payment in the
review month of September 1988 was not eligible for
reimbursement. Rhode Island Ex. 6. The judicial proceeding
at issue in this sample case occurred May 14, 1987. 4/
Rhode Island challenged ACYF's finding. Rhode Island
maintained that portions of the judge's statements in the May
14 hearing transcript constituted a judicial determination as
to CTW and RE. Rhode Island relied on ACYF-PIQ-86-02 for the
proposition that a transcript statement could satisfy the
requirements of section 472(a)(1).
The documentation submitted by Rhode Island shows the
following. This case involved a child (RC) who had come into
Rhode Island's custody in 1984 along with his two brothers
(JP and AP). Community based services were provided to the
mother, who was divorced from the father, so that the
children could be returned to her. On November 26, 1986, RC
was returned to his mother's care. At that time, the mother
had a live-in boyfriend. On February 4, 1987, JP was
returned to the mother's home. On March 18, 1987, AP was
returned to the mother's home. Services were provided to the
family to facilitate the children's return. The three-year-
old child, AP, evidenced tremendous distress about returning
to his mother's home by crying, refusing to go in for visits,
and becoming enuretic.
On April 2, 1987, Rhode Island received a call alleging that
the live-in boyfriend had repeatedly hit AP with a hair brush
in the head and the mother had not intervened.
A Rhode Island services worker went to the home and
interviewed the children, the mother and the boyfriend.
According to the worker's report, the children said that they
had been subjected to excessive and inappropriate discipline,
particularly AP, who had two black eyes and other injuries to
his body. The boyfriend denied hitting the children but
expressed "in an inappropriate vulgar manner" a current
desire to hit AP in the head "to crack it open." "Summary of
Facts to Substantiate Allegations of Abuse", Rhode Island Ex.
10, at 3-4. The mother was passive in the face of the
boyfriend's hostile statements towards the children. The
worker transported the children to the hospital for
examination. No injuries were found as to RC and JP. AP had
numerous lacerations and contusions which were consistent
with abuse. The doctor "placed a 72 hour hold" on the
children "due to the injury found on" AP. Id. at 4.
On May 7, 1987, Rhode Island filed a "Motion to Amend Case
Plan" requesting that "the caseplan agreement be amended to
address excessive and/or inappropriate discipline." Rhode
Island Ex. 13, at 3. The children's Guardian Ad Litem filed
a motion requesting the court to order Rhode Island to file a
motion for termination of parental rights. Rhode Island Ex.
14.
On May 14, 1987, a hearing was held before a judge. The
record contains the transcript of the proceeding. Rhode
Island Ex. 15. At the hearing, the case was continued so
that the mother, who was contesting the removal of the
children, could prepare for a hearing on Rhode Island's
motion to amend the case plan. In the course of discussing
the procedural status of the case, the attorney for Rhode
Island stated that he did not believe the mother was entitled
to a hearing prior to the removal of the children from her
home because, in a January 1987 order, Rhode Island was given
discretion to place the children. In response, the judge
stated as follows. (The portions of the transcript on which
Rhode Island relied for CTW and RE determinations are
underlined.)
You placed the children and I know it is your
discretion and you have to remove them. It doesn't
mean they're not entitled to a hearing. Suppose it
turned out these events never happened, you mean to
tell me that at your discretion you have a right to
take the children and never have a hearing. These
things never happened and you removed them for the
protection of the child based upon the report that you
received from the doctor -- and I understand that and
I think it is appropriate -- but in essence when [the
lawyer for the mother] says I want a hearing for an
amendment of the Case Plan, which is what he is saying
to the Court, it is like these things never happened;
so if the Court finds these things never happened and
the Case Plan is not amended, in effect then the
children are back home.
Rhode Island Ex. 15, at 6.
Pursuant to this hearing, an order was entered which
continued until June 11 the hearing on Rhode Island's motion
to amend the case plan, and provided that "pending the
hearing, said children, are to remain in the Department for
Children and Their Families custody, for placement at the
[Department's] discretion." Rhode Island Ex. 16. There was
no mention in the order concerning a CTW or RE finding as to
any of the children. 5/
Rhode Island argued that the judge's statements in the
transcript constitute sufficient CTW and RE determinations
under section 472(a)(1). ACYF did not object to Rhode
Island's reliance on a transcript per se but argued that the
content of the statements did not constitute a determination
as to CTW and RE.
We agree with ACYF. In the portion of the transcript relied
on by Rhode Island, the judge's statement can fairly be read
to say that he thought it was appropriate that Rhode Island
removed the children pending a hearing on the question of
whether all of the children had been subjected to
inappropriate or excessive discipline. However, the judge's
statement does not satisfy section 472(a)(1) because the
judge does not state whether his view is that removal was
appropriate because Rhode Island had discretion under the
circumstances to remove the children (since Rhode Island
already had custody of the children) or because he agreed
with Rhode Island's evaluation that removal was necessary to
protect RC. The transcript as a whole indicates that the
judge viewed Rhode Island's allegations as matters to be
addressed in future findings after a hearing. Thus, the
transcript is insufficient evidence to show that the court
itself made even a tentative finding to the effect that
remaining in the home would be contrary to RC's welfare and
that reasonable efforts had been made to prevent RC's
removal.
We conclude that the documents on which Rhode Island relied
do not show that this child was removed as a result of a
judicial determination as to CTW and RE. Thus, we affirm
ACYF's finding that the case was not eligible for title IV-E
reimbursement.
III. Conclusion
Based on the foregoing, we uphold ACYF's findings in the
sample case and ACYF's authority to issue a disallowance
pursuant to a Stage II review. We uphold the disallowance in
full.
____________________________
Judith A. Ballard
____________________________
Norval D. (John) Settle
____________________________
Donald F. Garrett
Presiding Board Member
* * * Footnotes * * *
1. However, the review guide provides that "[i]f
a stage one review indicates that a child or provider is
ineligible, his/her eligibility for the entire year
should be reviewed and disallowances taken for whatever
portion of the year he/she is ineligible." ACYF-IM-85-
25, at 6. Since ACF went on to perform a Stage II review
in this case, this portion of the guide is not relevant.
2. In fact, Rhode Island's Stage I error rate
apparently understated its actual error rate. In the
Stage I review, ACYF found that Rhode Island had a
payment-error rate of 14 percent (7 out of 50 cases). At
the conclusion of the Stage II review, ACYF found that
Rhode Island had a payment-error rate of over 18 percent
(49 out of 264 cases). Further, Rhode Island accepted
ACF's error determinations in these Stage II cases by not
appealing any of ACF's individual findings to the Board.
3. 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.
4. The ACYF reviewer focused on whether the May
14, 1987 proceeding satisfied the requirements of section
472(a)(1). Rhode Island also focused on that proceeding.
Rhode Island never argued that any other proceedings or
orders were relevant to the issue of whether RC's removal
was consistent with the requirements of section
472(a)(1). Since the case relates to the period after
October 1, 1986, we do not need to address ACYF
documentation policies applicable to cases prior to that
date. See Pennsylvania Dept. of Public Welfare, DAB No.
1508, at 15-18 (1995).
5. The record contains subsequent unsigned
decrees which are dated June 11, 1987. Rhode Island Ex.
17. The first decree provided that the motion by the
guardian ad litem was "passed without prejudice"; the
mother's motion for return of custody of the children was
passed; as to JP and RC, Rhode Island's motion to amend
the case plan was granted; and that Rhode Island was "to
submit a case plan within thirty (30) days" which was "to
address issues of excessive and/or inappropriate
discipline." The case was set for further review on
October 8, 1987. The second decree purported to
voluntarily terminate the mother's parental rights as to
AP.