Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Missouri Department
of Social Services
Docket No. A-92-103
Decision No. QC27
DATE: November 6, 1992
DECISION
The Missouri Department of Social Services (State)
appealed a March 4,
1992 quality control (QC) review
determination by the Regional Administrator
for the
Administration for Children and Families (ACF).
In its QC review process, the State identified an
overpayment error with
respect to a July 1991 Aid to
Families with Dependent Children (AFDC) grant
to R.D.
1/ The error was a result of income earned by R.D.
in
the review month. ACF agreed with the State's finding of
an
overpayment, but disagreed with the State's
calculation of the amount of the
overpayment. ACF
determined that the overpayment was $135 while the
State
argued that the overpayment was actually $153.
For the reasons discussed below, we uphold ACF's
determination.
Background
Missouri calculates AFDC grants on a prospective, as
opposed to a
retrospective, basis. This means that
grants are based on a
caseworker's "best estimate" of the
recipient's future income and
circumstances. See State
Submission of May 7, 1992, Missouri AFDC
State plan,
Attachment 2.3-J.
In this case, R.D. was redetermined to be eligible for
AFDC in September
1990. At that time she had no earned
income. R.D.'s September
through July grants were based
on an estimate of no earned income. In
May 1991, R.D.
became employed. The recalculation of R.D.'s grant to
reflect her earnings was not effective until August 1991.
Since
R.D.'s July 1991 grant was based on an estimate of
no earned income, both
the grant and the estimate for
July were wrong.
Because ACF and the State used different methods to
calculate the monthly
value of R.D.'s bi-weekly earned
income, they disagree about the amount of
the July error.
In the review month, R.D. received two paychecks
totaling $322.47. ACF used the "actual income" figure of
$322.47
to calculate R.D.'s monthly income. In contrast,
the State applied a
conversion factor of 2.166 to R.D.'s
biweekly income. The conversion
factor adjusts
fluctuations in income resulting from the fact that some
months contain three pay periods while other months
contain only
two. As a result of the conversion factor,
the State determined that
R.D.'s income was $349.22 for
the review month. This higher income
figure led to the
State's higher overpayment figure. The question
presented by this case is whether the State is entitled
to apply its
conversion factor in calculating the amount
of this error.
Quality control reviews are conducted pursuant to the
AFDC Quality
Control Manual (QC Manual). In
prospectively budgeted cases, Section
3420 of the QC
Manual sets forth the following process for reviewing the
accuracy of estimates and calculating the amount of any
errors.
First, the reviewer compares the actual review month
income to the income
estimate used by the local agency.
If these figures differ, the
reviewer must determine
whether the difference is due to (1) a change in
circumstances, (2) an inaccurate State estimate, or (3)
simply a
fluctuation in income. Section 3420. A change
in circumstance is
an event which happens after the State
authorizes the initial payment.
Section 3420 B. An
inaccurate State estimate involves circumstances
which
existed at the time the State authorized the initial
payment. Id. A fluctuation in income results from
external
circumstances, such as months with differing pay
periods, which do not
affect the recipient's base income.
Supplement of Administration for
Children and Families
(August 11, 1992). In this case, the difference
between
the September 1990 estimate and R.D.'s July 1991 income
resulted
from a change of circumstances, i.e., R.D.'s
employment which began in May
1991.
Once there has been a determination that an error is the
result of a
change in circumstances or an inaccurate
State estimate, the QC Manual sets
out a process for
establishing the amount of an error in ongoing
cases.
Section 3420 C.2. It instructs the reviewer to determine
whether the estimate was current or expired. If the
estimate was
expired, the QC Manual instructs the
reviewer to use "actual review month
income" to calculate
the amount of the error. If the estimate was
current but
a change of circumstances occurred after the date of the
estimate, the QC Manual also instructs the reviewer to
use "actual
review month income" to calculate the amount
of the error.
Parties' Arguments
ACF argued that, because the original estimate was more
than six months
old, the estimate had expired.
Therefore, ACF asserted that the QC
Manual required the
overpayment be calculated on the basis of the "actual
review month income" which R.D. received during the month
of July.
ACF argued that the term "actual review month
income" meant the exact amount
of income received by the
recipient during the review month rather than a
converted
figure.
The State presented two alternative arguments. First, it
argued
that the estimate, under its State plan, did not
automatically expire in six
months and was therefore
current. Because the estimate was current,
the QC
Manual's directive to use "actual review month income"
was not
relevant to this case. Second, the State argued
that, even if the
estimate was expired, its use of a
conversion factor constituted a
"permissible state
practice" and the QC Manual term "actual review month
income" should be read to mean actual converted income.
DISCUSSION
We conclude that the QC Manual's directive to measure
this error by
"actual review month income" is relevant to
this case for at least two
reasons. First, under the
terms of Missouri's State plan, the estimate
was expired.
For expired estimates, the QC Manual directs the use of
"actual review month income." Second, even if the State
was
correct that the estimate at issue was current, this
was an error caused by
"change of circumstance." In such
cases, the QC Manual also directs
the use of "actual
review month income."
In arguing that this estimate was current, the State
cited Attachment
2.3-J of its State plan. 2/ It argued
that under this
provision, the estimate was current until
a reinvestigation occurred and did
not expire every six
months. It cited a history of correspondence
between
itself and ACF over the language of this plan provision.
It represented that its express intention in amending
its plan
with this provision was to avoid the six month
expiration standard of the QC
Manual.
Contrary to the State's argument, we conclude that the
estimate at issue
was expired because of a change in
circumstances. 3/ Under
the terms of the State plan,
an estimate is to be recalculated when
"claimant becomes
employed." Here, R.D. became employed May 7,
1992. The
caseworker was aware of this employment at least by
May
24, 1992 when R.D. signed an IM-12 form authorizing
release of information
from her employer. State
Submission of August 21, 1992, Attachment
3. R.D.'s
employer submitted income information to the caseworker
on June 12, 1991. Id. While we are not deciding here
whether
there is a minimum time in which the State must
recalculate an estimate
based upon a recipient's
obtaining employment, we do find that the time
which
elapsed in this case was sufficient for the caseworker to
have
recalculated the estimate.
Further, even if the State was correct that its estimate
here was current
under its State plan, the QC Manual
still provides that the amount of the
error should be
calculated pursuant to "actual review month income."
Section 3420 C.2. provides:
If the estimate is current but a change in
circumstance occurred
after the date of the latest
estimate, but prior to the payment month, use
actual
review month income to determine the amount of the
error.
Here there was a change in circumstances (employment)
occurring after the
September estimate. Therefore, the
QC Manual directs the use of
"actual review month
income."
Having determined that the QC Manual's directive to use
"actual review
month income" applies in this case, we
must consider the State's argument
that its use of a
conversion factor constitutes a permissible state
practice which requires the term "actual review month
income" to mean
actual converted review month income. As
discussed below, we conclude
that Missouri has not
established that use of conversion factors in
calculating
overpayments is one of its permissible state practices.
The term "permissible state practice" is defined in the
QC
Manual. 4/ Permissible state practice "means State
written
policy instructions that are consistent with the
State plan or with plan
amendments which have been
submitted to, but have not been acted upon by the
Department." Section 3130. Missouri argued that use of
its
conversion factors constituted a permissible state
practice for the
following reasons:
o Its AFDC State plan specifically authorizes use
of
conversion factors " . . . in anticipating and
converting income to a
monthly average . . . ."
State Submission of March 23, 1992, Missouri
AFDC
State plan, Attachment 2.3-H. This plan amendment
granted
Missouri a waiver from the budgeting
provisions of 45 C.F.R. � 233.31
through .37 for
purposes of compatibility between the Food Stamp and
AFDC programs. The conversion factors are
prescribed by the Food
Stamp guidelines.
o The State instructs its State QC reviewers to use
converted
review month income in calculating the
amount of an error. State
Submission of March 23,
1992, Roadmap for AFDC Prospective Budgeting.
For the following reasons, we conclude that Missouri has
not established
that use of a conversion factor is a
permissible state practice in
calculating overpayment
errors in ongoing cases.
o The AFDC State plan provision cited by the State
addresses
how estimates of future income are to be
computed. It provides for use
of conversion factors
in "anticipating and converting income to a monthly
average." In contrast, overpayments involve events
which have
already occurred and income which is
actually known rather than
anticipated. Therefore,
this State plan provision does not directly
address
how a caseworker should proceed where income is
actually
known.
o The State did not submit any written material
which
would clarify the operation of this State plan
provision in the context of
an overpayment. The
AFDC State Manual material the State submitted
provided that "the eligibility factors and budget
process in effect
during the period of the claim
will be used in determining the amount of
overpayment." However, the State manual provisions
address how a
caseworker is to formulate estimates
of future income. The State
manual provisions are
silent on the specifics of overpayment calculations
and unclear as to how a caseworker proceeds when
he/she has actual
income figures.
o Missouri's AFDC conversion factors are a result
of its
policy of conforming AFDC and Food Stamp
budgeting practices. Missouri
admits that it uses
actual nonconverted income in calculating Food Stamp
overpayments. Therefore, the existence of a Food
Stamp overpayment
policy and the absence of any
explicit AFDC overpayment policy cast further
doubt
on whether caseworkers would use the conversion
factors in
calculating an AFDC overpayment while not
using them in calculating the
related Food Stamp
overpayment.
o The "Roadmap" which the State submitted does
instruct State
QC reviewers to use conversion
factors in calculating overpayment
errors. However,
the State admitted that this document was used to
train its QC reviewers and was not distributed to or
used by its
caseworkers. Therefore, it is not a
guide to how Missouri actually
administers its AFDC
program.
o Finally, R.D. had an overpayment for July which
was known
to the caseworker and which, under the
State plan and manual, should have
been recouped.
An overpayment notice predating the QC review and
reflecting conversion of R.D.'s actual July income
would support the
State's representations concerning
how its manual should be
interpreted. However, the
record contains no information about the
State's
actual practice in this case which would corroborate
the State's
interpretation of its manual.
Therefore, because the State could not identify written
policies which
support its position that caseworkers
should use conversion factors to
calculate overpayments
in cases with fluctuating earned income, Missouri has
not
established that use of conversion factors in this
context
constitutes a permissible state practice.
CONCLUSION
For the foregoing reasons, we uphold ACF's finding of an
error in the
amount of $135.
_________________________
Sara
Anderson
_________________________
Carmen
Cafasso
_________________________
Maxine
Winerman
* * * Footnotes * * *
1. In order to protect her
privacy, this
recipient is identified her initials. The State QC
Review number is 49677.
2. The pertinent provisions of Attachment 2.3-J
read as
follows:
Indicate how often the best estimate is recalculated
and under what
circumstances:
The best estimate is recalculated when there is a
change in the
base rate of pay, claimant becomes
employed or loses employment, . . .
claimant
requests an adjustment or reports a change or the
worker
discovers a need for an adjustment. The
estimate is recalculated when
one of the changes
listed above occurs and when a caseworker completes
a
reinvestigation."
State Submission of June 5, 1992, Missouri AFDC State
plan, Attachment
2.3-J.
3. Because we
conclude that this estimate expired
on the basis of a change in
circumstances, we do not
address the State's argument that its estimates
remain
current beyond the six month redetermination standard set
forth
at 45 C.F.R. � 206.10(a)(9)(iii).
4. ACF also recently promulgated a definition of
"permissible state practice" at 45 C.F.R. � 205.40(12).
See 57
Fed. Reg. 46782, 46805 (October 13, 1992).