Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Alabama Department of
Human Resources
Docket Nos. A-92-4
A-92-39
DATE: May 22, 1992
DECISION
The Alabama Department of Human Resources (State)
appealed two quality
control (QC) review determinations
by the Regional Administrator for the
Administration for
Children and Families (Agency) that two Aid to Families
with Dependent Children (AFDC) grant recipients were
overpaid as a
result of the failure of both recipients to
report employment and
earnings. 1/ The State agreed
that the recipients had been
overpaid, but the State
asserted that it had not committed errors for QC
review
purposes because information that would have put the
State on
notice that the recipients had income was
unavailable as of the State QC
review dates.
For the reasons discussed below, we reverse the Agency's
determination.
Applicable Authority
Section 408(a) of the Social Security (Act) provides:
In General.--In order to improve the accuracy of
payments of
[AFDC], the Secretary shall establish
and operate a quality control system
under which the
Secretary shall determine, with respect to each
State,
the amount (if any) of the disallowance
required to be repaid to the
Secretary due to
erroneous payments made by the State in carrying out
the State plan approved under this part.
Further, the Act requires each State to review a sample
of cases in which
AFDC payments were made during the
review period in order to determine the
level of
erroneous payments. Subsequently, the Act provides that
the Secretary shall review a subsample of the cases
reviewed by the
State, and notify the State of any case
in the subsample which the Secretary
finds involves
erroneous payments. See Section 408(b)(1)(A) of the
Act.
Section 402(a)(7)(A) of the Act requires the State
agency, in determining
need, to take into consideration
any income and resources of any child or
relative
receiving AFDC payments. Further, 45 C.F.R.
233.20(a)(3)(ii) provides that all income and resources,
after all
policies governing the reserves and allowances
and disregard or setting
aside of income and resources
have been uniformly applied, shall be
considered in
determining need and the amount of assistance payment.
The Cases of A.S. and H.W.
In the first case, the case of A.S. 2/, the review date
was
December 1, 1990. As of that date, the State QC
reviewer found the
case correctly paid $93. The Federal
QC reviewer found the case
totally ineligible for a
payment. A December 18, 1990 Income and
Eligibility
Verification System (IEVS) report regarding A.S. showed
no
income, no history of work, and no information to
indicate possible
employment. However, an IEVS report
dated March 1991 obtained by a
Federal QC reviewer showed
that A.S. had earnings in the third quarter of
1990.
Further investigation revealed that the recipient had
been
employed with Tyson Foods beginning August 2, 1990,
and that she was still
employed there as of May 3, 1991.
The State contended that, as of the review date, there
were no other
indications that would reasonably have put
the State QC reviewer on notice
that A.S. was working.
For example, a letter from the Birmingham
Housing
Authority, where A.S. lived, showed no wages.
Additionally, a personal reference stated that there were
no
wages. Finally, State QC investigation did not reveal
any bank
accounts. The Agency alleged that the State
should have been aware
that the recipient was often away
from home during work hours.
However, the State
responded that there was nothing in the record to suggest
that the recipient was often gone, since the reviewer was
able to
schedule an interview with only one contact.
The State did not dispute that the recipient was
employed, nor that her
income would make her totally
ineligible for assistance. However, the
State contended
that it was unreasonable to treat this case as an error,
since the information relied upon by the Federal QC
reviewer was
unavailable to the State at the time it made
its QC review.
In the second case, the case of H.W. 3/, the State
reviewer
determined through independent means that H.W.
was working at National
Industries and had not reported
this employment. The State reviewer
verified that the
recipient received earnings in September, October and in
the review month, November 1990. Based on this
information, the
State QC reviewer determined that H.W.
received an overpayment of $154 as of
November 1, 1990.
However, the State reviewer was not informed, and
did not
discover, that H.W. was also employed by Manpower, Inc.
None of H.W.'s employment information was available to
the State
reviewer through the IEVS reporting system.
The Federal QC reviewer found the recipient's employment
with Manpower,
Inc., based on an IEVS report that was not
obtained by the State until
February 25, 1991. The
February 1991 IEVS report showed that H.W. had
earnings
in the third quarter of 1990 with both Manpower, Inc.,
and
National Industries. The State maintained that only
after the later
IEVS report was the Federal QC reviewer
able to obtain information regarding
the recipient's
employment with Manpower, Inc.
Moreover, the State argued that an IEVS report obtained
by the State QC
reviewer on December 11, 1990, showed
that H.W.'s last employment was in the
second quarter of
1988. Thus, there were no omissions or oversights by
the
State QC reviewer.
Agency's Position 4/
The Agency maintained that since at least 1982, Congress'
primary
objectives for the QC review system have been (a)
in individual yearly
reviews, to determine whether AFDC-
ineligible families received more than
they were due, and
(b) in the long run, to improve the accuracy of AFDC
payments. Agency's February 5, 1992 submission. In
support
of this argument, the Agency cited the Senate
Finance Committee Report on
the Tax Equity and Fiscal
Responsibility Act of 1982, which stated:
"the purpose
of the provision is to provide a strong incentive for
improved program accuracy and to avoid federal
participation in
erroneous payments." 1982 U.S. Code
Cong. & Admin. News 781, 827
(emphasis added).
Further, the Agency asserted that the QC Manual requires
that State
reviewers "independently" verify in each
sample case whether the AFDC
recipient was "in fact"
eligible and, if so, was paid the correct
amount. Thus,
the Agency reasoned, the aim of the Manual's procedures
is to determine whether erroneous payments occurred, not
whether AFDC
eligibility workers mistakenly relied in
good faith on incorrect or
incomplete data. 5/ The
Agency also relied on the Federal
Monitoring Manual,
which, according to the Agency, outlines the role of
federal QC reviewers in the AFDC QC system. Section 3120
of the
Federal Monitoring Manual provides, in pertinent
part:
Each element of eligibility and payment will be
reviewed against
the QC methodology required in the
AFDC QC Manual, Section 3 . . . . Both
the State QC
file and the local agency case record will be
carefully
examined and analyzed for the following
factors:
. . . 3. Leads provided in the local agency case
record which
were overlooked by the State QC
reviewer or were not in the case record at
the time
of the State QC review.
This manual is not provided to states; however, its
contents and access
to them are not privileged. 6/
The Agency argued that since the State does not dispute
that the
unreported income of A.S. and H.W. made their
family units ineligible for
AFDC, by definition the AFDC
payments to their units were "erroneous
payments" under
the controlling statutory scheme. Further, the Agency
asserted that the QC review statute does not contain an
exception for
payments made in reliance on any specific
information source -- unless the
Secretary was the
source. The Agency reasoned that Congress was aware
that
states had IEVS when it created the statutory exceptions
and since
Congress made no exception for mistaken
reliance on IEVS, Congress did not
intend such an
exception for states.
Analysis
We agree with the Agency that the AFDC QC Review system
has two main
purposes: 1) to provide a strong incentive
for improved program
accuracy; and 2) to avoid federal
participation in erroneous payments.
See Senate Finance
Committee Report, Tax Equity and Fiscal Responsibility
Act of 1982, reprinted in 1982 U.S. Code Cong. & Admin.
News 781,
827. However, we disagree with the Agency that
the letter and purpose
of QC review require that the
State be cited for an error where the State
complied with
the directives of the QC Manual in verifying a
recipient's
eligibility and failed to discover unreported
income only because wage
information had not yet been
posted to the State's IEVS in the ordinary
course of
business. The result we reach is fully consistent with
the purposes of AFDC QC Review. Citing a state with an
error when
it complied with all relevant portions of the
QC Manual (and could not
reasonably have avoided the
error without the generous benefit of hindsight)
is less
an incentive to achieving accuracy than a merely punitive
action. Further, the federal government will not be
forced to
participate in erroneous payments because all
open AFDC cases are matched
through IEVS on a continuous
basis and thus ineligible cases will be
discovered when
wage information becomes available.
Section 3551 of the QC Manual 7/ provides, in part:
B. Negative Allegation
When an individual states that he/she has no
earnings, further
development is necessary. . . .
Routinely review wage records from the appropriate
State agency or
agencies, as well as Federal wage
matching sources available to the
reviewer.
Although the information obtained from these sources
may
not always be current, it can provide leads for
possible sources of income
for the review and other
relevant months.
If information from these sources indicates
employment within the
past year, check with the
recipient and past employers to verify the
employment situation as of the review date. If
these records do
not indicate employment within the
past year, and there is no information to
the
contrary, no further verification is required.
Primary Evidence
1. State agency wage records, State employment
security records, State income tax records
2. Data obtained from IEVS (emphasis added)
3. SSA records
In both cases, the State reviewers asked the individuals
if they had
obtained employment. Once the reviewers
received denials, they
complied with the QC Manual's
instructions by checking with personal
contacts, checking
the IEVS, and, in the case of H.W., calling a business
where the recipient said that she had applied for
employment.
In the case of H.W., State QC review discovered a portion
of the
recipient's income through leads in the file as of
the review date.
However, as of the review date, IEVS
did not reflect, and the State did not
discover, that
H.W. had additional income from a second job. In the
case of A.S., as of the review date, there were no leads
in the file to
indicate possible employment, and the IEVS
report indicated no
wages. 8/
In response to the Panel's inquiries, the State supplied
detailed
information about the operation of its IEVS.
The State's IEVS
activities routinely involve matches
with seven files of federal and State
agencies: Social
Security Administration (SSA) enumeration files,
Bendex
benefit files, Bendex earning exchange record, the State
Data
Exchange (SDX), the Alabama Department of Industrial
Relations (DIR)
unemployment compensation files and wage
files, and the Internal Revenue
Service (IRS) unearned
income file. 9/ State's February 4,
1992 submission.
The State explained that matches are accomplished by
creating a tape of applicants/recipients by name and
Social Security
number and submitting [the tape] to the
matching agency. That agency
then runs the tape against
its files and creates a return tape of "hits"
which is
then processed through IEVS for on-line display. These
tapes are generally processed within 24 - 48 hours after
receipt.
Specifically, as to the availability of wage information,
the State
explained that DIR requires employers to report
employees' wages within 30
days from the end of each
calendar quarter. The information provided
by promptly
complying employers is posted to the files within the
following 60 days. In the case of employers whose
reports are
delinquent, processing will obviously be
slower. This means that under
the best of circumstances,
income earned by a recipient in a given calendar
quarter
will not be available to DIR, and by extension, to IEVS,
until
roughly 90 days following the close of that
calendar quarter.
In the present cases, the review month fell within the 90
day window
within which IEVS data were as yet unavailable
to the State. For
example, in the case of A.S., federal
QC review revealed that A.S. had begun
working on August
2, 1990. Her employer would not have been required
to
report her earnings to DIR until 30 days following the
close of the
calendar quarter in which she began work,
i.e., September 30, 1990.
Thus, the employer had until
October 30, 1990, to make its report to
DIR. The State
has explained that processing the employers' reports
typically requires another 60 days. Therefore, under the
best of
circumstances, the information that would have
put the State on notice that
A.S. was working would not
have been available through IEVS until
approximately
December 30, 1990. The IEVS report available to the
State QC reviewer was dated December 18, 1990.
Similarly, in the case of H.W., federal QC review
revealed that H.W. had
begun working at her second job on
September 12, 1990. Her employer
would not have been
required to report her earnings to DIR until October 30,
1990. Once the 60-day processing period is factored in,
the
information on H.W.'s additional wages would not have
been available until
approximately December 30, 1990.
The review date for H.W.'s case was
November 1, 1990.
Therefore, even if her employer had reported her
wages on
October 30, 1990, it is unlikely that the State would
even have
received the information by the November 1
review date. It was
therefore a virtual impossibility
for the State to have access to the
additional wage
information through IEVS by the review date.
We find it particularly significant that the QC Manual
cites IEVS as a
primary source of evidence for the states
in investigating cases where AFDC
recipients have alleged
they have no earnings. 10/ We note
that federal law
requires states to implement an IEVS system, but does not
specify parameters (for example as to frequency of
updates) within which
such systems are to be operated.
See Section 1137 of the
Act. 11/ We conclude that
where, as here, there were no
leads indicating employment
that the State failed to investigate and where
wage
information was unavailable through IEVS because that
information
had yet to be processed in accordance with
the proper administration of the
responsible State
agency, the State did not commit an error for AFDC QC
review purposes. 12/ This result reflects our view
that citing the State with an error in the circumstances
of these cases
would not serve the program goal of
improving accuracy of payments, because
no feasible
action by the State would be capable of discovering
income
that has not yet been reported to the State.
Moreover, the fear that the federal government will
participate in
erroneous payments in these circumstances
is also unfounded. The State
points out that a tape of
all current AFDC recipients is sent to DIR monthly
for
matching with the wage file. Thus, in the ordinary
course of
administering the program, recipients who have
wages will be discovered once
the wage information is
posted to DIR files. We note that in the case
of A.S., a
State of Alabama Department of Pensions and Security
Overpayment Form was completed on March 21, 1991,
following a March 12,
1991 IEVS report which revealed
that the recipient had wages in the third
quarter of
1990. See Agency Submission of November 5, 1991, Ex. 6.
The Overpayment Form indicates that the overpayment was
as a
result of suspected fraud or intentional program
violation. Id.
It thus appears that State mechanisms to
recoup overpayments, including
possible criminal
prosecution, were set in motion by the IEVS match which
occurred after the State QC review date.
Section 3120 of the Federal Monitoring Manual appears to
conflict with
the result we reach here, as it apparently
contemplates that federal QC
workers will use information
that was not available to State QC workers in
making
error determinations. We do not hold that federal QC
reviewers may never rely on information that was
unavailable to State QC
reviewers in making error
determinations. However, on the present
facts, following
the Federal Monitoring Manual would be inequitable
because it would result in an error even though the State
fully complied
with the QC Manual and even though the
income information was unavailable to
the State at the
time of the QC review. This is especially true given
that the states are not given copies of the Federal
Monitoring Manual
and hence were not on notice that their
practices would be expected to
conform to the Federal
Monitoring Manual in addition to the QC Manual.
Conclusion
For the reasons stated, we reverse the Agency's
determination that the
State should be cited for errors
in the present cases.
____________________________
Peggy
McFadden-Elmore
____________________________
Leslie
A. Weyn
____________________________
Maxine
Winerman
* * * Footnotes * * *
1. The State appealed
the two determinations
separately. After receipt of the two cases, the
Panel
determined that, although the fact situations differed,
both cases
involved the same legal issue. Further, the
Panel determined that the
legal issue involved has
potential significance beyond the two immediate
cases.
Therefore, the Panel consolidated the
appeals.
2. The State
QC review number for A.S. is
312028.
3. The State QC review number for H.W. is
000172.
4. In
addition to making its arguments based on
the State's position, the Agency
was also asked by the
Panel to explain (a) what effect the Omnibus Budget
Reconciliation Act of 1989 (OBRA) has on the Federal
Monitoring Manual,
(b) how that Manual relates to the
AFDC QC Review Manual, and (c) why these
Manuals'
provisions should be regarded as binding on the
Panel.
5. The Agency
argued that the QC Manual is
incorporated by reference in present AFDC
regulations and
should be viewed as carrying the force of a
regulation.
However, the Agency also maintained that if, assuming for
the sake of argument, the QC Manual lacks the full legal
force of a
regulation promulgated by the Secretary,
nonetheless as an "interpretative"
compilation by the
Agency it is due substantial deference; the
interpretation an agency gives to the regulations and
statutes it
administers are entitled to deference.
Agency's February 5, 1992
submission.
6. The
Agency did not assert that the Federal
Monitoring Manual was adopted by
reference into the
regulation. However, the Agency did maintain that
even
if the Federal Monitoring Manual lacks the full legal
force of a
regulation promulgated by the Secretary, it
nonetheless is the Agency's
"interpretative" guidebook of
the federal QC review process, and should be
given
substantial deference as the interpretation the Agency
gives to
the QC review regulations and statutes the
Agency administers.
Agency's February 5, 1992
submission.
7. The
State has not argued that the provisions
of the QC Manual are
inapplicable. Therefore we need not
decide and take no position as to
whether the QC Manual
has been incorporated by reference into the AFDC
regulations.
8.
The Agency argued that in the case of A.S.
even the file raised
questions. The Agency said that the
December 1990 IEVS printout showed
no entries for any
period. The March 1991 IEVS printout, on which
federal
reviewers relied, reflected entries dating back to 1987.
The Agency concluded: (1) the State individual who
accessed
IEVS in December 1990 may have done so
inadequately; or (2) the State may
inadequately or
erratically update its IEVS; or (3) even if the requested
data were unavailable through IEVS in December 1990,
information as to
earnings in the third quarter of that
year may have been easily available to
State reviewers
from other sources, such as the State employment security
agency. We are not persuaded that these arguments have
merit. The Agency has offered no evidence that the State
reviewer
acted improperly or that the State inadequately
maintains its IEVS.
Additionally, for reasons discussed
below, it appears that IEVS wage data
comes from the
State employment security agency and thus, the same
reporting delays would be applicable in either
case.
9. The specific
IEVS match at issue in these
cases is with the DIR wage file. The
State described the
matches and their frequency as follows:
On a nightly basis a tape of new applicants is sent
to DIR for
matching - a response tape is received on
a daily basis; a tape of all
current recipients is
sent the 1st Thursday of each month - a response
tape is received the following Tuesday. (Federal
regulations
require a quarterly match.) At
application, the last 5 quarters of
reported data
are provided. These tapes are matched in
Montgomery,
Alabama.
State's February 4, 1992 submission.
10. The QC Manual specifies that where such
sources show
no wages for the recipient during the
preceding year, no further
investigation by the State
reviewer is required. The Agency suggests
that because,
in the case of A.S., an entry in the March, 1991 IEVS
report showed wages in the second quarter of 1988, the
State should have
been on notice that further
investigation was required. This position
conflicts with
the QC Manual which only requires further investigation
of employment history within the past
year.
11. Should
the Agency conclude that the
timeliness of IEVS updates is unacceptable for
purposes
of AFDC QC review, it is obviously free to modify the
requirements of the QC Manual or to take other action to
impose
standards for timeliness on IEVS.
12. We make no finding as to whether a State
commits an
error for AFDC QC review purposes where the
unavailability of IEVS data is
due to a failure to timely
comply with State requirements for gathering such
data.
(..continued)