GAB Decision 431
Docket No. 82-181
September 13, 1983
Mississippi Department of Public Welfare Request for Consideration;
Ford, Cecilia; Settle, Norval Garrett, Donald
In Mississippi Department of Public Welfare, Decision No. 431, May
31, 1983, the Board upheld a decision of the Social Security
Administration disallowing federal financial participation (FFP) in
costs for the State's fiscal year 1980 Low Income Energy Assistance
Program (EAP). The Board found that although the State may have done
its best in administering the program at low cost and with few errors,
the EAP statute and rules did not allow federal participation in
payments to ineligible households or in amounts in excess of the amount
set forth in the State Plan.
By motion dated June 10, 1983, the State requested that the Board
recall the decision. The Board denied the motion on July 6, 1983. The
State then filed a motion for reconsideration on July 18, 1983. A
telephone conference call was held to discuss the motion on August 18,
1983, and a transcript was sent to the parties.
The State argued that, in drafting its decision, the Board addressed
issues not presented by the State and did not address issues that were
presented by the State. In addition, the State asked that the Board
stay implementation of the decision pending a determination by the
Agency whether to allow the State to offset the disallowed costs against
a future block grant award. The State wants the Board to reconsider its
decision that it would not substantively address the offset question and
to decide that the State may offset the disallowance.
Under the Board's rules at 45 CFR Part 16, the Board has the power to
reconsider a Board decision "where a party promptly alleges a clear
error of fact or law." 45 CFR 16.13. When a party submits a request for
reconsideration in a timely manner, as here, the Board must first
examine the allegations made to determine whether reconsideration of the
issues in the case is warranted. Here, we conclude that the State's
allegations concerning Decision No. 431 are simply incorrect. The Board
did not address irrelevant issues nor did it overlook relevant ones. In
addition, the Board did not err in proceeding to decision and properly
determined not to consider the offset question. Accordingly, for these
reasons, developed more fully below, we deny the State's motion.
(2) 1. The Board did not address irreleant issues.
The State alleged that because pages 3 and 4 of the Mississippi
decision mirror the language in New Jersey Department of Human Services,
Decision No. 408, April 26, 1983, the Board addressed irrelevant issues,
although the State provided no examples of such issues. We find no
basis for this argument.
The decision's description of the State's arguments was synthesized
from comments made in the State's Appellant's Brief (see, e.g., 2nd
paragraph on p. 3, first paragraph on p.8, 3rd paragraph on p. 9, top of
p. 10, and top of p. 11) and "Appellant's Reply Brief" (see, e.g.,
bottom of p. 2 and top of p. 3). In addition, the State admitted that
the legal issue in its case was the same as that in New Jersey
(Transcript of August 18, 1983 Telephone Conference Call, p. 6). The
two pages in question discuss that issue.
2. The Board did not fail to address relevant issues.
The State argued (see, e.g., Transcript of August 18, 1983 telephone
conference call, p. 3) that the main thrust of its appeal was its
attempt to offset the disallowance against a future grant and that the
Board did not fully consider this issue.
The main substantive focus of the appeal was whether the costs in
question were allowable. In its decision the Board discussed the
substantive issue at length and rejected the State's offset argument in
footnote 1 as a question over which the Board has no authority. There
was no need to discuss it at greater length.
The State argued (see, e.g., Transcript of August 18, 1983 telephone
conference call, p. 3) that facts were never fully set out in the
decision, although the the State provided no examples of omitted
material facts.
The categories of payments found by the Agency to be unallowable were
briefly described in the second paragraph of the decision. Given the
Board's conclusion that the EAP statute and rules do not permit FFP in
excess or unallowable payments, there was no need to set forth the facts
in any greater detail.
In addition, contrary to the State's assertion (Transcript of August
18, 1983 telephone conference call, p. 6), the Board did address on page
4 of the decision the effect of the fact that Mississippi complied with
the EAP rule that the state exercise the same care in its EAP program as
in its AFDC program.
(3) Finally, the State argued (Transcript of August 18, 1983
telephone conference call, p. 6) that the Board ignored the State's
argument in its appeal and reply briefs that the Administrative
Procedure Act had been violated.
The State did not cite where in its briefs it had made such an
argument, and we cannot find it. In addition, there is no ground for
finding that the Administrative Procedure Act had been violated, based
on the assertions made during the August 18, 1983 telephone conference
call.
3. The Board will not withdraw the decision or delay implementation of
it.
The State argued that because the State had proposed a method of
repayment which the Agency is considering, the Board should have delayed
issuing a decision, and now should either withdraw its decision or delay
its implementation. We are not persuaded to do either.
As was stated on page 2, the substantive issue in dispute was the
question of whether certain payments were allowable; the Agency found
that they were not, the State argued that they were. The Board upheld
the Agency. During the course of the appeal, the State decided to
pursue an alternate path and explore ways to refund the disallowed
amount to the Agency.
Once the briefing in the appeal was completed and the Board decided
that the disallowance must be upheld, it saw no reason to delay a
decision. The result of the Board's decision on the merits was to
reduce the Agency's share of the 1980 EAP costs by the amount
disallowed. The Board does not have the authority to review the method
by which the Agency collects an amount finally determined to be
unallowable (see further discussion below).
Although the State has alleged that due process and fairness require
that the Board withdraw the decision or delay its implementation, its
has provided nothing to persuade us that the application of these
principles must lead to either one of these results.
4. The Board properly decided not to consider the offset question.
The State has alleged that it does not have the resources to directly
pay back the amount of unallowable costs and has suggested that the
Agency should deduct the disallowed amount from a future energy grant
award (which is now part of a block grant). The Agency is considering
this proposal. The State is now arguing that the Board has jurisdiction
over the offset question under 45 CFR Part 16, Appendix A, B (a)(5) and
general principles of fairness, (4) equity, and due process; that the
Agency's silence is tantamount to a disapproval of the offset
suggestion; and that regulations and long-standing historical practice
require the Board to order the Agency to allow the offset.
The offset question here is not a dispute upon which the Board can
rule. The suggestion of an offset by Mississippi means that it is
willing to concede the unallowability of the costs.The Board's powers
over appeals and the appeals process d not authorize it to dictate how
or when a disallowance is repaid.
Notwithstanding the Board's lack of power to decide how repayment of
a disallowance is to be made, the State argued that 45 CFR Part 16,
Appendix A, B (a)(5) gives the Board jurisdiction to decide the offset
question. This section states that the Board reviews decisions relating
to "repayment and withholding under block grant programs as provided in
45 CFR 96.52."
The block grant statute and regulations use the terms "repayment"
and
"withholding" to describe the sanctions imposed when specific situations
arise in the obligation and expenditure of block grant funds. These
terms do not apply to expenditures of non-block grant funds.
Repayment is described in 45 CFR 96.51(a) as being proper when
amounts under block grants are found not to be expended in accordance
with law or the certifications provided by a state. An issue of
repayment of block grant funds is not the question here since the costs
disallowed in the appeal were not from a block grant award. *
An issue of withholding from block grant funds is also not involved
here. Section 2608(a)(1) of Pub. L. 97-35, a section of the "Low Income
Home Energy Asistance Act of 1981," states that the Secretary may
withhold funds "from any State which does not utilize its allotment
substantially in accordance with the provisions of this title and the
assurances such State provided under section 2605" (see also, 46 Fed.
Reg. 48582, 48585 (1981); 47 Fed. Reg. 29472, 29479 (1982)). The
question before this Board is not one of whether the State utilized its
block grant funds in accordance with the provisions of Pub. L. 97-35 and
the special assurances that the State must make in order to receive
block grant funds.
(5) Finally, the Board's jurisdiction extends to appeals of written
final decisions in certain kinds of disputes (see, e.g., 45 CFR 16.1;
16.3 (b); Appendix A, A). There has been no written final decision
here by an Agency official as to the permissibility of using block grant
funds in the manner suggested by the State.
Because we do not have the power to consider the State's offset
arguments, we need not discuss whether the Agency should permit such an
offset.
5. Conclusion
Based on the reasons state above, we deny the State's request for
reconsideration of Board Decision No. 431.
(6) The Mississippi Department of Public Welfare (State) appealed the
disallowance of $21,500 by the Associate Commissioner for Family
Assistance, Office of Family Assistance, Social Security Administration
(Agency) relating to costs for the State's 1980 Low Income Energy
Assistance Program (EAP).
The disallowance was based on the findings set out in a Department of
Health and Human Services Audit Report, ACN 04-10256, that there were
$20,930 in EAP payments made to "ineligible recipients" and $570 in
overpayments made to 15 households. The $20,930 is divided into four
different categories: (1) 453 households whose December 1979 Aid to
Families with Dependent Children (AFDC) checks were cancelled or voided
by the State; (2) 12 households whose AFDC checks had not cleared the
bank as of December 31, 1980; (3) four households who did not receive
December 1979 AFDC checks; and (4) four households who were eligible
only for Medicaid assistance. (Audit Report, p. 3)
Under Mississippi's EAP State Plan, energy assistance funds were
distributed to households that were receiving AFDC assistance for the
month of December 1979. (Appeal File, Exhibit K, p. A-3) The State was
required to operate its program in accordance with the provisions of the
Program Instruction (SSA-AT-79-42, dated November 27, 1979) and the
provisions of its State Plan.
Based on the record, we sustain the disallowance. /1/
(7) Analysis
The State did not dispute the Agency's findings that payments
totalling $21,500 were improperly made. The State's position was based
on equitable concerns: the State did the best it could given the short
emergency time frame involved in implementing the program; the State
spent relatively little on administrative costs; and the State
administered the program with a low error rate (.9%).
A section of Action Transmittal SSA-AT-79-42(OFA) at Tab E,
specifically incorporated into the State Plan, states:
For purposes of the EAP, AFDC Quality Control Regulations do not
apply; however, States will exercise the same care in program
administration as is required under the AFDC program.
The State argued that the import of this section is that since
quality control rules (including tolerance levels for errors) do not
apply, a state should not be liable for eligibility determination errors
or for payments in incorrect amounts. According to the State,
Congressional intent and the Agency's requirement that the State
exercise the same care in program administration as is required under
the AFDC program clearly allows for an error rate of less than 1%.
(Appeal Brief, p. 14)
Tolerance levels were instituted in the early 1970's in the AFDC
program as part of a required quality control system for measuring and
reducing errors made in determining recipient eligibility and payment
amounts. Tolerance levels were part of the system where a sample of
cases is taken and examined, and the results are than extrapolated to
the universe (8) of a state-wide caseload, but within the set tolerance
level, no disallowance is taken. /2/ The State's position is that the
Action Transmittal section quoted above expresses a recognition on the
part of the federal government that states were subject to constraints
in their efforts to swiftly implement the EAP and that, therefore,
although states should attempt to minimize incorrect payments, they
would not be held to the same quality control standards set up in the
AFDC program. Implicit in the State's argument is the idea that it was
impossible to develop and implement its EAP without errors and that a
reasonable error rate is a necessary cost of doing business, a cost
which should not be borne solely by the State. This tolerance of errors
is especially appropriate, according to the State, when the questioned
expenditures are so small that the cost of attempting to avoid those
errors arguably would be greater than the errors themselves.
We do not agree with the State's interpretation of the Action
Transmittal provision quoted on page 2 or of its responsibilities under
the EAP.
Pub.L. 96-126 requires that eligibility standards be promulgated
within certain specified criteria and that proof of income eligibility
be required of all applicants. It does not provide for federal payment
where payment is made to an ineligible household.It also provides that
an annual audit be made of the EAP.
The action transmittal (AT-79-42) sent to the states on the date of
the enactment of the legislation alerted the states to the fact that
federal payments would not be made for assistance to households
ineligible under a State plan or in incorrect amounts. This section
states that:
(9) (t)he following expenditures are not subject to Federal
reimbursement and will not be claimed:
1. EAP assistance payments to households not meeting the eligibility
requirements under the State plan;
2. any portion of an EAP assistance payment which exceeds the amount
set forth in the State plan...
7. any expenditures which are not made in accordance with the State
plan....
The transmittal was subsequently published in the Federal Register,
and the Mississippi State Plan incorporates these statements.
Read in conjunction with these statements in the State Plan, the
section relied upon by the State can not be read to set a tolerance
level for payment errors. To adopt the State's position would mean
that, since no specific error rate is mentioned, any percentage of
errors would have to be accepted by the Agency, a clearly unreasonable
result.
In the context of the quality control regulations and the EAP Action
Transmittal, the meaning of the section relied upon by the State becomes
clear. The State need not set up an elaborate system of quality control
for its EAP program such as the one required in its AFDC program.
However, it still must take action to prevent errors from occurring and
remains responsible for errors such as those found here by the audit.
Even assuming that the State may have done its best given the short
time frame involved, that it made very few incorrect payments and that
it saved the federal government money because it spent relatively little
money on administrative costs does not defeat the fact that the statute
and rules do not allow federal payments to ineligible households or in
amounts in excess of the amount set forth in the State Plan. /3/
(10) Conclusion
For the reasons stated above, we uphold the disallowance. * Assuming
this were a "repayment" situation, if a state refuses to repay, the
amount in dispute may be offset against block grant payments to the
state (45 CFR 96.51(b)). But the Department's decision not to offset
block grant funds in this situation is not reviewable by the Board (45
CFR 96.52(b)). /1/ In its Reply Brief, th State requested that
we stay the case until the Agency responds to a "settlement offer"
made
by the State to offset the disallowance against a future grant award.
In a telephone conference call convened to discuss the State's request,
the Agency strongly objected to a stay and asked that the Board proceed
to decision. Based on the fact that the State did not provide any
information that convinces us that the propriety of such an offset is
properly before us at this time and that the Agency has agreed to
consider the State's suggestion after the Board renders its decision, we
have decided to proceed to decision. /2/ For fuller discussions of the
history and uses of the quality control system, see California
Department of Health Services, Decision No. 170, April 30, 1981;
California Department of Social Services, Decision No. 236, January 7,
1982; Maryland Department of Human Resources, Decision No. 246, January
18, 1982; California Department of Social Services, Decision No. 319,
June 30, 1982. /3/ In a court case which found that the tolerance
levels in federal regulations for the AFDC program were arbitrarily
established at 3% and 5% and, therefore, the regulation was framed in
the arbitrary and capricious manner and as an abuse of discretion, the
court did not say that the Secretary must use tolerance levels or that
in the absence of levels set up by the Secretary, states were not
responsible for eligibility or overpayment errors. Maryland v. Mathews,
415 F. Supp. 1206 (D.D.C. 1976).
JULY 07, 1984