Ohio Department of Human Services, DAB No. 858 (1987)

DEPARTMENTAL GRANT APPEALS BOARD

Department of Health and Human Services

SUBJECT:  Ohio Department of Human Services

Docket No. 86-65
Audit Control No. 05-50274
Decision No. 858

DATE:  April 8, 1987

DECISION

The Ohio Department of Human Services (State) appealed a deter- mination
by the Office of Human Development Services (Agency), disallowing
federal financial participation (FFP) in the amount of $772,758 claimed
under the Aid to Families with Dependent Children-Foster Care (AFDC-FC)
program funded by Title IV-A of the Social Security Act (Act).  1/
Based on an audit for the period July 1, 1979 through September 30,
1982, the Agency found that the State improperly claimed $761,013 FFP
for institutional foster care costs not documented as aid or maintenance
expenses. The Agency found that, instead, the State claimed social
services costs unallowable under Title IV-A.  In addition, the auditors
found that of the $761,013 claimed under Title IV-A, $253,643 had also
been claimed as social services costs under Title XX. Finally, the
Agency found that the State had claimed $11,745 FFP in AFDC-FC costs for
children in unlicensed institutions.

The major issues raised by this appeal are (1) whether the costs which
the State claimed under section 403(a)(1) of the Act as maintenance
costs, were, in fact, social services costs unallowable under section
403(a)(3) of the Act; (2) whether the 403(a)(3) prohibition against
federal reimbursement of social services costs can be applied to claims
made under section 403(a)(1); (3) whether the State may make duplicate
claims for costs under both Title IV-A and Title XX; (4) whether the
Agency should be estopped from taking the disallowance by its approval
of an amendment to the state plan which approved "pass-through" costs;
and (5) whether the State made claims for FFP for children in
institutions that were unlicensed.

Based on the reasons stated below, we conclude that the State claimed
social services costs under section 403(a)(1).  Moreover, we conclude
that the claiming bar at section 403(a)(3) applies to these claims, thus
rendering the social services costs unallowable under Title IV-A.
However, we also conclude that it is likely that the State's claim also
included some allowable maintenance costs.  We uphold the entire
$761,013 disallowance, subject to a possible reduction, based on the
Agency's finding that it could not separate the allowable maintenance
costs from the unallowable social services costs.  We allow the State an
opportunity to submit to the Agency its proposed method for determining
its allowable Title IV-A maintenance costs claim within 30 days of the
date of this decision.  Further, we conclude that the State could not
properly make duplicate claims under Title IV-A and Title XX.  To the
extent that the State makes a showing to the Agency that any of these
costs are maintenance costs under Title IV-A, the State must reduce any
Title XX claim made for those costs.  We also conclude that the State
has not shown that the Agency should be estopped from taking a
disallowance.  Finally, we conclude that the State has provided evidence
of certification to show that one institution was licensed during the
disallowance period.  Therefore, we reverse, in part, the disallowance
for unlicensed institutions.

I.  Applicable Authority

Prior to October 1975, social services for AFDC-FC children were claimed
by states as administrative costs under Title IV-A. Effective October 1,
1975, Pub. L. 93-647 established a new Title XX for financing social
services for low-income children and families.  Title IV-A retained as
its primary purpose the provision of maintenance payments for families
with dependent children.  Pub. L. 93-647 included a provision amending
section 403(a)(3) (the authority for paying states for administrative
expenditures under IV-A) to prohibit FFP under Title IV-A for
expenditures made in connection with any of the Title XX services
described in the statutory provision defining the scope of Title XX,
section 2002(a)(1) of the Act.  2/  Pub. L. 93-647 also imposed a cap on
the amount of funding available to each state under Title XX.  During
the disallowance period, section 408(b) of the Act provided that aid to
families with dependent children included payments for foster care
provided in the foster family home of an individual or in a child care
institution.  The implementing regulation is found at 45 CFR 233.110.

Historically, the payments for aid to needy families with children
described at section 403(a)(1) of the Act have been referred to as
"maintenance payments."  The pertinent section of 403(a)(1) provides, in
part:

      From the sums appropriated therefor, the Secretary of the Treasury
      shall pay to each State which has an approved plan for aid and
      services to needy families with children . . . (1) . . . an amount
      equal to the sum of the following proportions of the total amounts
      expended during such quarter as aid to families with dependent
      children under the State plan. . . .

Section 403(a)(1)(A)(i) provides that such aid be in the form of money
payments.

Prior to, and during, the disallowance period, the Agency issued Action
Transmittals (AT) for the purpose of clarifying the statute and
implementing regulation concerning allowable and unallowable costs under
Title IV-A, AFDC-FC.  Of particular relevance to this case are two
action transmittals, AT 78-21 and AT 81-18.

Action Transmittal 78-21, issued May 19, 1978, provides, in part:

      Allowable costs for FFP under Title IV-A include the costs of
      personnel such as child care staff, social workers, maintenance
      and food preparation workers, and other institution staff whose
      work assignments include functions that keep the AFDC foster care
      program operating on a day-to-day basis, or that meet the child's
      need for parenting, supervision, direction, protection, emotional
      support, and care. . . .  However, only those administrative and
      operational costs which are attributed to and support the care and
      maintenance of a child in AFDC-FC are allowable under the statute
      and regulation.

Action Transmittal 81-18, issued on June 24, 1981, provides, in part:

      FFP under Title IV-A for AFDC-FC is limited to the provision of
      foster care maintenance payments and related activities, e.g.,
      determining initial and continuing eligibility, rate setting, and
      maintaining the case in payment status.  Section 403(a)(3), as
      amended by P.L.  93-647, prohibits FFP under title IV-A for social
      services described in Section 408(f), including placing the child,
      the cost of developing, reviewing, supervising and monitoring a
      plan of care, as well as carrying out the services provided for in
      that plan of care (e.g., drug and alcohol abuse counseling,
      homemaker and chore services) and recruitment of foster family
      homes and institutions.

II.  Social Services Costs

The Disallowance and Parties' Arguments

The Department of Health and Human Services (HHS) Office of Inspector
General (OIG) conducted an audit of costs claimed by the State for
institutional foster care of dependent children during the audit period
noted above.  Under this category of costs, the auditors recommended a
disallowance of $1,381,148 ($761,013 FFP) because these costs were not
documented by the State to be for aid or maintenance expenses.  The
audit report, at pages 7 through 10, provides a complete explanation of
how the auditors reached the disallowance amount.  However, the Agency
in its brief provides a summary:

      First, the auditors were auditing only pass-through costs, i.e.,
      costs of institutional foster care for which the counties
      contracted to pay to institutions on behalf of individual
      children, minus the basic state AFDC standard of need level.  The
      state negotiated with HHS to [claim FFP for pass-through costs]
      under Title IV-A as a foster care maintenance payment.  . . .
      However, when the auditors reviewed actual documentation on the
      pass-through costs, they concluded that a substantial portion, if
      not all, of the pass-through costs constituted social services
      costs, not costs for room, board, food, clothing and the like,
      i.e., they were not aid or maintenance costs.  To reach that
      conclusion, the auditors reviewed several sources of
      documentation, one of which was contracts for services between
      some of the foster care institutions and their respective counties
      which provided for two rates -- one for room and board and a
      second, all-inclusive rate for social services, therapy, and room
      and board.  The auditors for such cases subtracted the room and
      board rate from the all-inclusive rate to obtain a figure for
      social services costs.  Agency brief, p. 3, n. 5.

 


Additionally, the auditors noted that:

      Our detailed examination of . . . reported payments by 10 CDHSs
      (County Departments of Human Services) to 10 institutions,
      disclosed . . . a duplicate claim of $460,332 ($253,643 FFP) under
      the Title XX Social Services program.  Audit report, p. 10.

The State made a number of arguments as to why this portion of the
disallowance should be reversed.  However, all the arguments focused on
one central theme.  The State maintained that the costs disallowed by
the auditors were not social services costs governed by section
403(a)(3) of the Act, but that the costs were actually maintenance costs
claimed under section 403(a)(1) and as such are not barred by the
statute.  Further, the State appeared to argue that the guidance in the
Action Transmittals only interpreted the definition of social services
costs under section 403(a)(3) and did not apply to maintenance costs
claimed under section 403(a)(1).

Further, the State maintained that the Board's previous decisions
dealing with Title IV-A disallowances are not applicable to this case
because the previous disallowances were made under section 403(a)(3).
3/  The State argued that the Board in the previous decisions did not
even discuss maintenance costs under section 403(a)(1).  Moreover, to
support its position that the disallowed costs were for maintenance
costs rather than social services, the State provided an affidavit from
a management analyst in the

 


Division of Family and Children's Services.  State's appeal file,
Exhibit E.  4/

Additionally, the State argued that the Board should apply the doctrine
of equitable estoppel in this case.  5/  The State argued that the
Agency approved both an amendment to its state plan, which added
"pass-through" costs, and its cost reports for child care institutions.
Moreover, the State argued that given


the Agency's unchanging policy in its Action Transmittals and the clear
language of section 403(a)(3), which the State interprets as saying only
costs claimed as social services are unallowable, the State had no
reason to believe that HHS would later disallow costs claimed as
maintenance.  Finally, the State argued that it relied on the
transmittals and the approval of its state plan to its detriment.  The
State argued that the present disallowance and the possibility of future
disallowances represent a substantial money amount.

The Agency argued that the State has not presented any documen- tation
for its contention that the costs claimed were in fact maintenance
costs.  The Agency maintained that the mere fact that the costs were
claimed under section 403(a)(1) does not make them maintenance costs.
Moreover, the Agency argued that the aid or maintenance required by
section 403(a)(1) can only be cash payments, and that the State's claim
that services can be "maintenance services" improperly confuses "aid"
and "services" in a manner not permitted by the Act, the regulations, or
legislative history.  The Agency pointed out that social services costs,
unallowable under Title IV-A after 1975, were always claimed as costs of
administration of the state plan, not as a component of a maintenance
payment.

Further, the Agency argued that the Board's decisions, as noted above,
are applicable to this case.  The Agency maintained that the Board's
decisions make clear that Public Law 96-272 did not leave it any
discretion but instead mandated disallowances in cases such as this one.
Although the Agency admitted that one distinction between the previous
decisions and the present case is that this case involves institutional
foster care, it  argued that both section 408(b)(2) of the Act and 45
CFR 233.110(a)(5) provide that, for children in an institution, only the
same costs as for a foster child in a private foster home would be
allowed. The Agency conceded that physical care of a child is an
allowable cost under Title IV-A, even if performed by a social worker.
It argued, however, that social services performed by that same worker
are not allowable, and that the salaries of persons who performed both
maintenance and service activities must therefore be allocated, which
the State did not even try to do in this case.  45 CFR 232.30 (1976).
Finally, the Agency argued that it should not be equitably estopped.
The Agency maintained that the Board implicitly rejected a nearly
identical argument in New York State Department of Social Services,
Decision No. 449, July 29, 1983.  The Agency argued that approval of
either a state plan or a cost allocation plan allocating costs (now
being disallowed) to Title IV-A does not mean such costs are allowable,
only that they are properly allocated.

 

Analysis

For the period covered by this disallowance, maintenance payments
described at section 403(a)(1) of the Act are allowable costs under
Title IV-A of the Act, and social services costs described at section
403(a)(3) of the Act are unallowable Title IV-A costs.  However, the
State asserted that because it claimed the costs at issue under section
403(a)(1) as maintenance payments, the claiming bar at section 403(a)(3)
does not apply to these claims.  6/  The Board has rejected this
argument in a previous decision, and we affirm that decision in this
case.  In New York Department of Social Services, Decision No. 716,
January 7, 1986, we considered the question of whether the claiming bar
at section 403(a)(3) of the Act could apply to a State's claims even
though they were submitted under section 403(a)(1).  In New York, at p.
7, we concluded that interpreting the bar to apply regardless of how a
state characterizes its claim is consistent with the legislative history
of Public Law 93-647, which added the bar.  We noted that the House
Report which accompanied Pub. L. 93-647 provided:

      Section 3(a)(3) amends section 403(a)(3) of the Act to eliminate
      federal matching under part A of Title IV for expenditures for the
      provision of services other than services required to be included
      in the State's WIN program and services provided as emergency
      assistance to needy families.  H.R. REP. No. 1490, 93rd Cong., 2nd
      Sess. 19 (1974).  (emphasis added)

Similarly, in this case, based on our past analyses of this issue and
our review of the arguments in this appeal, we conclude that the
claiming bar of 403(a)(3) applied to the social services costs
regardless of how the State characterized them when it submitted its
claims.  To interpret the claiming bar any other way would allow the
State to circumvent the intent of the statute.

Further, we find that given the nature of the "pass-through" claiming
process, as described in the audit report, supra, we are unable to
determine what portion of the disallowed costs might be for allowable
maintenance payments.  In prior decisions, the Board has found that a
grantee has the burden of documenting the allowability of its claim.
See  Indiana Department of Public Welfare, Decision No. 772, August 7,
1986, and the decisions cited therein.  Further, the Board has found
that in order to claim costs under a grant program, the grantee must
show that the costs are necessary and reasonable for the administration
of the grant program and are allocable to the program.  Grantees are
required to make and retain records of expenditures, and support these
records with source documentation.  New York City Human Resources
Administration, Decision No. 641, April 17, 1985.

The State has not in this case complied with the documentation
requirement.  However, since allowable maintenance costs encompass more
that the costs of room and board, it is likely that the disallowed
"pass-through" costs included both allowable maintenance costs and
unallowable social services costs.  7/ However, the State did not
provide the documentation to distinguish between the two.  The auditors
stated:

      Visits to the counties disclosed that the institutions and [the
      State's county offices] generally negotiate a contract for
      comprehensive services with a break- out of charges by service
      codes.  [State] Title XX procedures provide service codes for an
      all- inclusive rate for social services including therapy and room
      and board, and a lower rate for social services including therapy
      but excluding room and board.  The difference between the rates
      represents the charge for foster care maintenance, which is the
      amount allowable under Title IV-A FC.  The institutions bill the
      [State's county offices] the negotiated contract rates for all
      services without regard to the Federal program under which the
      children are placed.  The [county offices] then report the total
      payments made by the institutions on the . . . report, rather than
      only the maintenance or foster care portion.  We also found that,
      as a general rule, the [county offices] did not maintain
      accounting records to identify payments by program.  Audit report,
      p.  9.

Although the State provided one affidavit from one of its employees (see
note 5, above), that affidavit only describes the State's policies; it
does not provide the contemporaneous source documentation that the Board
has held is required.  See New York City Human Resources Administration,
supra.  Therefore, we uphold the Agency's disallowance.

Furthermore, we reject the State's argument that since the Agency
approved the amendment to its state plan which added "pass-through"
costs and the State's cost reports for use by child care institutions,
all of the costs claimed under the state plan are allowable.  The State
made a conclusory argument that the Agency should be estopped because
the Agency approved its "state-plan."  The State submitted a copy of an
amendment to its AFDC State Plan, which approved the "pass-through"
concept. Additionally, the State submitted blank copies of cost reports
that it provides to institutions for allocation of costs. (State's
appeal file, Ex. B)  The State has not provided any evidence to show how
a general approval of an allowable cost-charging concept could estop the
Agency from a disallowance in this case.  We have said that the Agency
must apply a policy where the statute has mandated the result.  New York
State Department of Social Services, Decision No. 449, July 29, 1983.
Clearly, a state plan which provided for claiming social services costs
under Title IV-A would be contrary to the statute. Moreover, in any
event, we are not rejecting any provision of the state plan which
provides for payment of maintenance costs under Title IV-A.  Instead, we
find that the State has not adequately identified the allowable Title
IV-A maintenance costs, which would be required by a valid state plan.
The approved State plan must be read together with the applicable
statutory provision to authorize the "pass-through" costs except to the
extent the State may attempt to claim FFP in unallowable social services
costs by means of the use of the "pass-through" claim.  Consequently,
the State has not established that approval of its State plan
constitutes the sort of affirmative misconduct by the Agency which might
support the State's estoppel argument.  See, also, n. 6 above.

Finally, we find that the State has not shown how duplicate claims under
two federal programs could be allowed.  The State said in its response
to the audit report that as long as the charges are allowable, it has
the option to charge either the Title XX or the Title IV-A program.  As
stated above, a grantee must show how its costs are allowable and
allocable to the grant program.  The Cost Principles for State and Local
Governments, OMB Circular A-87, Attch. A, C. provides:

      1.  To be allowable under a grant program, costs must meet the
      following criteria:

            f.  Not be allocable to or included as a cost of any other
            federally financed program in either the current or a prior
            period.

 

Consequently, in light of the statutory bar, it is especially clear in
this case that the State could not claim $253,643 of costs under both
Title IV-A and Title XX.  Not only is claiming costs twice improper, it
is also clear from the applicable statute and regulation that costs
claimed under Title IV-A must only be maintenance costs and all social
services costs must be claimed under Title XX.  These charges are not,
in any event, interchangeable.  Therefore, for purposes of the costs in
this case, the State must show which costs, if any, are maintenance
costs allowable under Title IV-A, and the State must delete these costs
from its Title XX claim.

In its reply brief, the State requested that if the Board did not find
its legal argument sufficient to set aside the disallowance, that it be
given the opportunity to provide the Board with documentation which will
verify which portions of the State's claims are allowable.  Although we
find that the auditors' method of calculating the disallowance based on
the characterization of the costs in the contracts was reasonable, in
light of the State's lack of documentation, we allow the State an
opportunity to present an alternate method for calculating what portion
of these costs were unallowable social services costs.  The State
requested that the Board permit it to use a random log time study, that
is already being used in Ohio for the Title IV-E program, to calculate
the correct disallowance amount.  The Agency, in a telephone conference
call, also requested an opportunity to comment on the State's proposal.
Therefore, the Board will allow the State 30 days from the date of this
decision to present its proposal to the Agency (or such longer time as
the Agency itself allows).  8/   Also, to the extent that costs which
the State documents as maintenance costs under Title IV-A were also
claimed under Title XX, the State is obligated to reduce its Title XX
claim accordingly.  If the parties cannot agree on the methodology, the
State may return to the Board on this issue only.

 

 


III.  Unlicensed Institutions

Section 408(f) of the Act provides, in part:

      For the purpose of this section . . . the term "child-care
      institution" means a nonprofit private child-care institution
      which is licensed by the State in which it is situated or has been
      approved, by the agency of such State responsible for licensing or
      approval of institutions of this type, as meeting the standards
      established for such licensing.

This section of the statute is implemented by 45 CFR 233.110(b)(1).

The auditors stated:

      During the period July 1, 1979 through September 30, 1982, [the
      State's county offices] claimed for reimbursement unallowable
      Title IV-A pass-through supplement costs for children residing in
      unlicensed institutions. The State Agency standard reimbursement
      payments for the same unlicensed periods were questioned in our
      prior audit report (ACN 05-30250).  Audit report, p. 14.
      (emphasis added)

In its initial brief, the State alleged that once the unlicensed
institutions have been identified, the facilities will be found to have
been licensed, and even if the institutions in question prove not to
have been licensed at the time care was provided, the instant
disallowance should not be affirmed.  The State maintained that the
Board has recognized the doctrine of "equitable licensure" in Illinois
Department of Public Aid, Decision No. 634, March 29, 1985.  9/  The
State argued that its situation is different than that of Illinois,
where the Board upheld the disallowance on the grounds that Illinois had
not implemented an equitable licensure policy for the period covered by
the audit.  In the present case, the State maintained that it had a
equitable licensure policy, citing Ohio Revised Code 119.06.  The Agency
maintained in its response that the State's officials were informed of
the identity of the unlicensed institutions, attempted to find specific
documents showing valid licenses for each, but could not.  Audit report
appendix, p. 5.  10/

In its reply brief, the State submitted certificates for the Bellefaire
institution for the periods August 1, 1980 through July 31, 1983; and
for the Children's Aid Society for the periods July 22, 1978 through
August 31, 1983.  Further, the State alleged that it could not identify
a Stonegate facility, as listed by the Agency in its brief, in Cuyahoga
County.  The State submitted that it needed more information to identify
Stonegate.

Based on the audit report, and the letter from the Director of the Ohio
Department of Human Services, dated January 11, 1985, we are persuaded
that the State had notice of the unlicensed institutions and an adequate
opportunity to locate and produce their licenses.  As noted in the audit
report, the unlicensed periods for all these facilities were questioned
in a prior audit.  11/  However, as discussed below, despite many oppor-
tunities the State has only provided partial documentation to support
its claim that the questioned institutions were licensed. Moreover, even
if the State had an equitable licensure policy, it has not shown how it
would apply to the facts in this case,

 

since it has not provided applications, licensing studies, or
recommendations that licenses be issued as discussed in Illinois, supra,
as evidence that the questioned institutions were in such an equitable
licensure status.

The State submitted one-year certificates for the Bellefaire institution
for August 1, 1980 through July 31, 1983.  However, for the December
1979 through July 1980 period previously questioned by the auditors the
State submitted the certificate it had previously submitted for the
August 1, 1980 through July 31, 1981 period.  (State's appeal file, exh.
k; State's reply, exh. 4)  As a result, we must uphold the disallowance
for the December 1979 through July 1980 period.  Further, it appears
from the audit report that only the December 1979 through July 1980
period for Bellefaire was ever at issue.  The Agency should review this
portion of the disallowance to assure that costs at Bellefaire are
disallowed only for this period.

Although the State submitted that it could not identify a Stonegate
facility in Cuyahoga County, it did admit that a Stonegate facility
existed outside the State.  However, the State did not submit any
documentation on this facility.  If the State had submitted
documentation to show that a Stonegate facility was licensed during the
disallowance period, it would have been acceptable absent any further
information from the Agency.

Finally, we conclude that the State, in its reply brief, submitted
certifications to document that the Children's Aid Society was in fact
licensed for the entire disallowance period. The State presented copies
of 5 yearly licensing certificates, for the period July 22, 1978 through
August 31, 1983, for the Children's Aid Society.  Each document
certified that the Children's Aid Society was licensed by the State of
Ohio to conduct a residential care facility in accordance with specific
sections of the Revised Ohio Code (code sections changed during the
5-year period).  Further, each document contained a license number and
the name of the Department of Mental Health approving official.  State's
reply brief, exhs. 7-11.  These are the same certificates that the
Agency was prepared to accept as valid for Bellefaire (if the correct
time period had been covered). Therefore, we reverse that portion of the
disallowance for unlicensed institutions attributable to the Children's
Aid Society, and direct the Agency to adjust the disallowance consistent
with this decision.

 

 


Conclusion

Based on the foregoing, we affirm the $761,013 disallowed as social
services costs unallowable under Title IV-A, subject to a possible
reduction, as explained in this decision.  Further, as to the $11,745
disallowed for unlicensed institutions, we reverse that portion
attributable to the Children's Aid Society and affirm the remaining
portion.

 


                                ________________________________ Cecilia
                                Sparks Ford

 


                                ________________________________ Charles
                                E. Stratton

 


                                ________________________________ Norval
                                D. (John) Settle Presiding Board Member

 


1.     A new Title IV-E Foster Care and Adoption Assistance Program was
added by section 101(a)(1) of Public Law 96-272, effective October 1,
1980.  The AFDC-FC program under Title IV-A was repealed by section
101(a)(2) of that law, effective at the time a state plan under IV-E
became effective, but no later than September 30, 1982.  For purposes of
this decision, however, the provisions of Title IV-A apply.  The new
program was implemented by the State effective October 1, 1982.

2.     The pertinent section of Title XX describing the services stated,
in part:

     Services . . . include, but are not limited to, child care
     services, protective services for children and adults, services for
     children and adults in foster care, services related to the
     management and maintenance of the home, day care services for
     adults, transportation services, training and related services,
     employment services, information, referral, and counseling
     services, the preparation and delivery of meals, health support
     services and appropriate combinations of services designed to meet
     the special needs of children . . .


3.     In the Board's acknowledgment to the parties, the Board stated:

     In previous decisions (Joint Consideration:  Reimbursement of
     Foster Care Services, June 30, 1982, Decision No. 337; New York
     State Department of Social Services, July 29, 1983, Decision No.
     449; and New York State Department of Social Services, July 16,
     1984, Decision No. 552) the Board has held that costs of social
     services are unallowable under Title IV-A.  The parties are
     requested to comment on the applicability of these decisions to the
     present case.

We note that the U.S. District Court upheld the Board in appeals by the
State of Oregon, in Decision No. 337, Oregon v. Heckler, Civ. No.
83-1466 (D.C. Or., January 31, 1984), and the State of New York, in
Decision Nos. 449, 552, and 614, New York v. Bowen, Civ. No. 84-3620
(D.C. D.C., November 21, 1986).

4.                              The affidavit stated, in pertinent part:

                             *  *  *

        8.  That care includes providing shelter, food, clothing and
     personal items, recreation, education, transportation, supervision,
     counseling, general home nursing and tutoring. It also includes
     overseeing the child's well-being, confer- ring with the county
     case worker and other activities analogous to those provided by
     foster parents in foster homes.

        9.  The care provided by Ohio's Title IV-A foster care
     institutions does not include the activities conducted by county
     social workers.  Those individuals determine eligibility and
     develop the plan of care, place children in institutions or foster
     care homes, attempt to ameliorate the conditions in the natural
     family, make contact with courts where necessary, and monitor the
     child's foster care in the institution.  *  *  *

5.     In a previous Board decision, the Board has stated that four
elements must be present to establish the defense of estoppel:  (1) the
party to be estopped must know the facts; (2) he must intend that his
conduct shall be acted on or must so act that the party asserting the
estoppel has a right to believe it is so intended; (3) the latter must
be ignorant of the true facts; and (4) he must rely on the former's
conduct to his injury. Montana Department of Social and Rehabilitation
Services, Decision No. 171, April 30, 1980.  Moreover, in Shenandoah
Professional Standards Review Foundation, Decision No. 652, June 5,
1985, the Board relied on U.S. Supreme Court decisions which indicated
that where a party asserts estopel against the federal government, that
party must also show "affirmative misconduct" by the government.  See
Montana v. Kennedy, 366 U.S.  308 (1961); INS v. Hibi, 414 U.S. 5
(1973).

6.     In response to the draft audit report, the State argued that its
claims were proper under Title IV-A notwithstanding that the payments
covered some "of the same activities called social services under Title
XX."  Appendix to Audit Report.

7.     As the State pointed out, the Action Transmittals issued by the
Agency recognize that maintenance payments encompass more than room and
board.  State's brief, p. 33.  The Agency does not disagree with the
State on this point, but rather stressed the need for the State to
document any allowable costs.  (With regard to the scope of what is
covered by a maintenance payment under Title IV-A, see New York at pp.
12-16.)

8.     We note that the Board has approved the use of valid statistical
sampling techniques in past decisions.  See California Department of
Social Services, Decision No. 816, December 5, 1986, and decisions cited
therein. However, the Agency must approve any sampling methodology
proposed by the State.  We note that HHS auditors have established
guidelines for sample size, variability, etc., which the State might
wish to consult.

9.     In Illinois the State argued that in situations where an
institution was not licensed but:  (1) an application had been completed
and signed by the applicant; (2) a licensing study had been performed
and reduced to writing which indicated approval of the applicant as
meeting the licensing standards; and (3) the application had been
submitted [to the State], along with the recommendation that a license
be issued, which was signed by the licensing representative and the
supervisor but no certificate of licensure had been issued, the State
Department of Children and Family Services had extended an "equitable
right to a license."

10.     The letter from the Director of the Ohio Department of Human
Services stated, in pertinent part:

     The institutions in question were undoubtedly licensed by a state
     agency other than OHDS.  During the period of the audit, there were
     organizational changes in names and responsibilities of state
     agencies.  One of the institutions represented in the audit as
     being unlicensed, Bellefaire, was in fact licensed by the
     Department of Mental Health and Mental Retardation (a copy of that
     license is attached).  Complex research will be necessary to
     establish that licenses were in effect, including contacting other
     state agencies, some of which are now defunct.  As a result, OHDS
     will require more time to document licensure.  We are confident
     that the institutions were licensed.

11.     The sole basis for disallowing institutions as "unlicensed" was
that the State had presented only partial evidence to document the
licensure status of the questioned