Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: California Department
of Social Services
Docket Nos. 92-62; 92-73; 92-118; 92-130
Decision No. QC34
DATE: December 31, 1992
DECISION
The California Department of Social Services (State)
appealed four
quality control (QC) review determinations
by the Regional Administrator for
the Administration for
Children and Families (Agency). 1/
The Agency
determined that, in four separate cases, the State
underpaid 2/ a total of $546 because of its failure to
include all of the individuals living in those households
as members of
the assistance units (AUs). 3/ For the
reasons below we
conclude that the State did not underpay
the AUs in these four cases.
Relevant Statutory and Regulatory Provisions
Section 402(a)(38) of the Social Security Act (Act)
provides that, in
making the AFDC-related determination
of need for a dependent child's
assistance unit:
... the State agency shall ... include -- (A) any
parent of
such child, and (B) any brother or sister
of such child ... if such parent,
brother, or sister
is living in the same home as the dependent child,
and any income of or available for such parent,
brother or sister shall
be included in making such
determination and applying such paragraph with
respect to the family.
45 C.F.R. � 206.10(a)(1)(vii) provides:
... [I]n order for the family to be eligible, an
application with
respect to a dependent child must
also include, if living in the same
household and
otherwise eligible for assistance:
(A) Any natural or adoptive parent or
stepparent..., and
(B) Any blood-related or adoptive brother or
sister...
Permissible State Practice (PSP) is defined at 45 C.F.R.
� 205.40(a)(8)
as:
... 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. In all
instances where
written instructions are not
consistent with the State plan or proposed
State
plan amendments, permissible State practice means
the provisions
of the State plan.
The State's Eligibility and Assistance Standards Manual
(EAS)
40-118 4/ provides:
The following individuals, if living in the same
household as the
child for whom the aid is requested
shall be included on the appropriate
Statement of
Facts after an application, redetermination, request
to add
a person or request for restoration:
Natural or adoptive brothers and sisters (including
half brothers
and half sisters) of the child for
whom aid is requested who are themselves
potentially
eligible children. A potentially eligible child is
any
child living in the home of his/her caretaker
relative ... who meets the age
requirements of
section 42-101, and for whom any basis of
deprivation in
section 41-401.1 has been
established....
EAS 44-205.42 states that "a person who is required to
apply for aid
under [EAS] 40-118 ... who wishes to
decline assistance ... shall be
excluded from the FBU...
However, his/her income and resources shall be
considered." 5/
Agency's Arguments
The Agency's position is that the State's policy of
allowing a member of
an AFDC AU to decline to receive aid
is contrary to the language and intent
of the Act, the
applicable regulations, and Agency policy. The Agency
also contends that the State's regulations do not
constitute PSP as
defined at 45 C.F.R. � 205.40(a)(8)
because the State's regulations are
contrary to the
intent and language of the federal statutory and
regulatory provisions.
The Agency contends that section 402(a)(38) of the Social
Security Act
(Act), 45 C.F.R. � 206.10(a)(1)(vii), and
Action Transmittal SSA-AT-86-1,
dated January 13, 1986
(Transmittal 86-1) mandate that every member of a
household who is eligible to be included in the AU must
file together as
a unit and actually receive AFDC
benefits. In Transmittal 86-1, the
Agency states that
under section 402(a)(38) of the Act, an application for
AFDC assistance on behalf of a dependent child must
include as
applicants certain potentially eligible
relatives living in the same
household as the dependent
child. The Agency considers those
individuals who are
living in the same household as constituting the
AU. The
Agency's position, as stated in Transmittal 86-1, is that
section 402(a)(7) of the Act mandates that any income and
resources of
these relatives be counted in making the
determination for AFDC
benefits.
The Agency contends that because a member of the AU did
not receive AFDC
assistance payments in accordance with
45 C.F.R. � 206.10(a)(1)(vii) and
section 402(a)(38) of
the Act, there was an underpayment in each of these
four
cases. The Agency also argues that the State's
regulations at
EAS 44-205.42 and 40-118 do not constitute
PSP in accordance with 45 C.F.R.
� 205.40(a)(8).
The Agency's PSP Review Procedures elaborate on the
provisions of 45
C.F.R. � 205.40(a)(8) by stating the
following:
Permissible State Practice as defined at 45 C.F.R. �
205.40(a)(8)
means State written policy instructions
that are consistent with the State
plan or written
amendments .... Where the State plan does not
contain
specific language relating to a mandatory
Federal requirement, the QC review
will be conducted
against Federal regulations and implementing Federal
policy interpretations....
Transmittal 86-1 provides that, "All of the income and
resources of the
individuals required to be included in
the assistance unit must be
considered in determining
eligibility and payment for the assistance
unit."
Transmittal 86-1 at 3.
The Agency argues that the State's regulations at EAS 44-
205.42 and EAS
40-118 do not comply with either 45 C.F.R.
� 206.10 (a)(1)(vii)(A) and (B)
or Transmittal 86-1, all
of which require certain persons to be members of
the AU.
Accordingly, the Agency takes the position that the
State's regulations are contrary to what the Agency
contends is a
mandatory federal requirement that all
persons who are eligible to be
members of the AU be
included in the AU and actually receive AFDC
benefits.
The Agency therefore concludes that the State regulations
do not constitute PSP and therefore, the QC review was,
in each of these
four cases, properly conducted using
applicable federal regulations.
State's arguments
The State argues that its policy is that potential AU
beneficiaries
should not be forced to accept AFDC
benefits that they do not want.
According to the State,
the purpose of the federal mandatory inclusion
provision
(section 402(a)(38) of the Act) is to prevent families
from
electing to exclude members with income or resources
for purposes of
financially benefitting the remaining
members. In the past, a member
of an AU could circumvent
the intent of the statute and maximize benefits by
declining to receive aid. 49 Fed. Reg. 35,588 (September
10,
1984).
The State contends that its regulations respect the
intent of the statute
and federal regulations and so
constitute PSP. Specifically, the State
points to EAS
44-205.42 as support for its position that all income and
resources of a person who declines assistance shall be
considered for
purposes of determining AFDC benefits to
the AU. The State also
contends that EAS 40-118 mirrors
the section 402(a)(38) requirement for
mandatory
inclusion of certain individuals in the AU.
According to the State, in each of the four cases at
issue here, all
potentially eligible members of the AU
were included on the application for
AFDC benefits. The
State asserts that EAS 40-118.2 requires denial of
AFDC
benefits if the applicant refuses to include a potential
AU member
on the application. Therefore, the State
contends that eligibility for
AFDC is in keeping with the
Federal eligibility requirements because it is
based on
the total income and resources of persons on the
application,
with no financial advantage to the AU if a
member declines benefits.
EAS 44-205.42 and 49 Fed. Reg.
at 35,589.
The State contends that its regulations ensure that all
information
required to determine eligibility is provided
in accordance with the
statute. The State's position is
that since its regulations (EAS
44-205.42 and 40-118) are
intrinsically similar to Federal regulations and
intent,
they represent PSP as defined in 45 C.F.R. �
205.40(a)(8).
Moreover, since the Act is silent
regarding recipients declining assistance
to which they
are entitled, the State posits that it has merely honored
an AU member's request to decline AFDC benefits, without
giving a
corresponding financial advantage to the AU or
violating the statutory
framework. The State concludes
that the Agency's determination of
underpayments in these
four cases is erroneous.
Factual Background
A. The case of L.L., Docket No. 92-62. 6/
L.L. is the mother of three children. As of the initial
application
date, two of the children met the AFDC
criteria for deprivation, because
their father was absent
from the household. The third child, S.H., is
the
daughter of L.L. and J.H., a man who currently resides
with
L.L. At the time of the initial application, S.H.
was not included in
the AFDC grant because her father,
J.H., was employed full-time and the
criteria for
deprivation were not met. However, on November 20, 1990,
J.H. became disabled, which meant that S.H. met the
criteria for
deprivation and, as such, was entitled to be
included in the AFDC
grant. Nevertheless, L.L.
specifically requested that S.H. and J.H.
not be included
in determining the amount of the AFDC payment to the AU.
On April, 10, 1991, the State QC Unit conducted a review
in which it
reported that the AU was being correctly paid
$694 for the sample review
month of February 1991. The
Federal QC review differed with the State
in finding that
the AU was underpaid $246 in the review month because
S.H. and her father J.H. should have been included in the
grant.
On November 7, 1991, the State appealed the ACF
Regional Administrator's
finding. In a letter dated
January 5, 1991, the ACF Regional
Administrator upheld
the Federal QC finding.
The Regional Administrator determined that the State did
not comply with
the regulations outlined in 45 C.F.R. �
206.10 (a)(1)(vii)(A) and (B) or
with Transmittal 86-1.
Furthermore, the Agency contends that the State
regulations were not PSP under 45 C.F.R. � 205.40(a)(8),
and therefore,
the federal regulations at 45 C.F.R. �
206.10(a)(1)(vii) should have been
used by the State in
making its determination.
B. The Case of W.W., Docket No. 92-73.
W.W. is the mother of four children, J.B., T.B., C.Y.,
and T.N. All
four of these children met the deprivation
criteria because their respective
fathers were absent
from the mother's home. W.W. did not want to be
included
in the AU. Also present in the household is one other
child, Ja.W., who is the son of W.W. and J.W. Since J.W.
was
present in the household and employed, Ja.W. was not
included in the AU.
State QC completed review of this case on August 14,
1991, and reported
that the AU was correctly paid for the
review month of May 1991. In a
letter dated November 21,
1991, Federal QC differed with the State's
findings,
citing an underpayment of $116 because the agency
improperly
excluded the mother, W.W., from the AU.
On December 20, 1991, the State appealed the Federal QC
finding to the
ACF Regional Administrator. The State
argued that the federal
regulations at 45 C.F.R. �
206.10(a)(1)(vii) require that the natural parent
be
included in the application but do not require the
natural parent to
actually receive the aid.
The Regional Administrator determined that 1) the State
did not follow
the SFU requirements when it excluded W.W.
from the AU; and 2) the State was
not in compliance with
45 C.F.R. � 206.10(a)(1)(vii)(A) and Transmittal
86-1.
C. The Case of J.M., Docket No.
92-118.
This case involves J.M., the natural mother of two
children, T.M. and
T.O. Both of J.M.'s children met the
criteria for deprivation because
their respective
fathers, Th.M. and R.M.O., were absent from the home.
J.M. did not want to include T.O. in the AU because the
child was
receiving $50/month in support from R.M.O.
State QC completed review of this case on October 25,
1991, and reported
the AU was underpaid $50 for the
review month of August, 1991. Federal
QC differed with
the State's finding of a $50 underpayment, instead
finding that the AU was underpaid by $184. The Federal
QC finding
was based on 1) the State's failure to include
T.O. in the AU, and 2)
California's EAS manual 44-205.42
allegedly not being in compliance with 45
C.F.R. �
206.16(a)(1)(vii)(B), which requires all categorically
eligible
parents and siblings of AFDC children in the
household to be included in the
AU.
The State disagreed with the Federal QC finding and
appealed to the
Regional Administrator. The State
contended that excluding members
from the AU at their
request was permissible, because there is no provision
that requires a person to receive assistance against
his/her will.
The State also contended that even if
there was an underpayment, the
underpayment was $134, and
not $184.
In a letter dated March 19, 1991, the ACF Regional
Administrator upheld
the Federal QC finding. The
Regional Administrator concluded that the
State's
instructions did not constitute PSP in accordance with 45
C.F.R.
� 205.40(a)(8). Therefore, the Administrator
concluded that 45 C.F.R.
� 206.10(a)(1)(vii)(A) was
controlling. However, the Regional
Administrator did
find that the amount of underpayment was $134, as the
State had contended.
D. The Case of C.A., Docket No. 92-130.
This case involves two children, N.A. and B.A., who were
living with
their paternal grandmother. The father of
the children, L.V., also
lived in the household. The
children met the criteria for deprivation
due to the
absence of their mother, C.A. The children's father
declined to be added to the AU.
State QC completed review of this AFDC case on July 30,
1991 and reported
the AU as being correctly paid for the
review month of May 1991. In a
letter dated February 18,
1992, Federal QC found that the father was
improperly
excluded from the AU and that his needs should have been
considered as part of the AU. The Federal determination
was again
based on 45 C.F.R. � 206.10(a)(1)(vii)(A) and
(B) and Transmittal 86-1,
which the Agency interpreted to
require certain potentially eligible persons
to be
members of the AU.
On March 19, 1992, the State appealed the Federal QC
finding to the ACF
Regional Administrator. Again, the
State contended the father was
considered as a member of
the AU as required by 45 C.F.R. �
206.10(a)(1)(vii)(A),
but could not be forced to be a part of the AU and
accept
AFDC benefits which he did not want to receive. The
State
argued it demonstrated a practical solution in an
area where the Federal
regulations were silent. On March
26, 1992, the ACF Regional
Administrator upheld the
Federal QC finding on the basis that the State
underpaid
the AU by $134 in the review month, by failing to include
the
father in the AU.
Analysis
The issue in this case is whether the State's EAS
regulations constitute
PSP, in accordance with the
applicable federal regulations. The EAS
regulations
require that the income of all family members be included
in
calculating the amount of aid to which the AU is
entitled, but permit a
member of the AU to refuse payment
for a member of the AU. In each of
these four cases, the
State asserts, and the Agency does not dispute, that
the
income and resources of each of the four AU members who
declined to
receive benefits were calculated as available
to that person's AU. It
is also undisputed that no
financial advantage accrued to any of the four
AUs from
the members declining benefits.
The Agency's position is that every member of a household
who is eligible
to be included in an AU must actually
receive AFDC benefits. The
Agency argues that, because
members of AUs in these four instances did not
actually
receive the AFDC benefits to which they were entitled,
the
State underpaid each of the AUs. Furthermore, the
Agency believes the
State's regulations, which allow a
member of an AU to refuse payment to
which he/she is
entitled, are contrary to what the Agency views as a
mandatory federal requirement that all eligible members
of an AU receive
AFDC benefits, and so do not constitute
PSP as defined by 45 C.F.R. �
205.40(a)(8).
The State's position is that an eligible person in an AU
may decline aid,
as long as the assistance provided to
the AU is based on the income and
resources of everyone
in the AU, regardless of whether any individual
actually
receives AFDC benefits. The State argues that since
there
is no mandatory federal requirement that all
eligible members of an AU
actually receive AFDC benefits,
State regulations are in compliance with
federal
requirements and therefore constitute PSP.
After carefully considering the parties' arguments, we
find that the
Agency's determination must be reversed.
The Agency does not dispute
that, in this case, four
members of different AUs declined to receive part
of the
AFDC benefits to which they were lawfully entitled. The
regulations and statutory provisions cited by the Agency
do mandate the
inclusion of certain individuals in an AU.
However, the Agency has
cited no authority that can be
read to require that every member of an AU
must actually
receive the AFDC benefits to which he/she is entitled.
State regulation EAS 40-118.2 requires the denial of AFDC
benefits if an
applicant refuses to include a potential
member of the AU on an
application. State regulation EAS
44-205.42 specifies that all income
and resources of a
person who declines assistance shall be considered as
available to the AU. The State regulations therefore
comport with
the statutory language of section 402(a)(7)
of the Act, which mandates the
inclusion of any income
and resources of certain eligible relatives living
in the
same household for the purposes of determining the amount
of AFDC
benefits to which the AU is entitled.
Further, the State's regulations are consistent with the
Transmittal
86-1. Transmittal 86-1 makes no mention of a
requirement that every
potential eligible member of an AU
actually receive benefits. See
Transmittal 86-1 at 1 -
3. Transmittal 86-1 does track section
402(a)(38) of the
Act by requiring that certain potentially eligible
relatives living in the same household be included in the
application. Transmittal 86-1 at 1 - 3. Likewise,
Transmittal 86-1 tracks section 402(a)(7) of the Act by
mandating that
any income and resources of the eligible
relatives be included in the
assistance determination.
Transmittal 86-1 at 1 - 3. However, as
is the case with
the statute and the federal regulations, Transmittal 86-1
does not specify that a person or dependent child
included in the AU
must actually receive the benefits.
The State's regulations allow a person to decline AFDC
assistance while
the statute, the federal regulations and
the transmittal are silent
concerning this issue.
Admittedly, the practice of a member of an AU
declining
assistance in order to maximize AFDC benefits to the
entire
family had been a concern in the past. 49 Fed.
Reg. at 35,588.
The State's regulations, however,
eliminate the potential for a recurrence
of these past
concerns by mandating that a person's income will be
considered as available to the AU for purposes of
calculating AFDC
benefits even though that person
declines assistance. EAS
44-205.42. Therefore, under
the State's regulatory framework, the AU
accrues no
financial advantage when one member declines to receive
benefits.
Additionally, State regulation EAS 40-118.2 requires the
denial of
benefits if a person who would otherwise be
required to be included in the
AU declines to be
included. This provision helps to ensure that the
income
and resources of all potential AU members, including the
person
who is declining benefits, are included in the
application. An
individual who is not included in the
application, and whose income and
resources would
therefore not be calculated in the determination of
assistance benefits, runs the risk of causing the
termination of
benefits to the entire unit. In this
manner, the State regulations
remove the incentive for an
individual to try to maximize benefits by not
including
all potential members of the AU on the application.
Therefore, the State's regulations allow a person to
decline AFDC
assistance without gaining the corresponding
financial advantage of
maximizing benefits.
The language of section 402(a)(38) of the Act and 45
C.F.R. �
206.10(a)(1)(vii) mandate that certain
individuals be included in the AU for
purposes of making
a determination of need for a dependent child. The
State
has complied with these requirements, because the State
regulations require that the income of all eligible
persons in the AU be
considered in determining the AFDC
benefits for which the AU is
eligible.
The center of the Agency's dispute with the State,
therefore, is the
Agency's contention that a person in
the AU cannot decline benefits.
However, neither the
regulatory nor the statutory language cited by the
Agency
can reasonably be said to support the Agency's position
that a
person who is included in the AU cannot choose to
decline benefits as long
as, in doing so, there is no
financial advantage gained by the AU. In
these four
cases, not one of the AUs gained a financial advantage
from
having one of its members decline benefits.
Moreover, there is no
statutory or regulatory provision
that mandates that all of those
individuals who are
eligible to be included in the AU actually receive
benefits. The State therefore has addressed the past
problem of an
AU maximizing AFDC payments through having
one of its members decline AFDC
benefits while
maintaining the integrity of the intent of the federal
statute and
regulations.
The logical implication of the Agency's argument is that,
once a person
is determined to be an eligible member of
an AU, that person cannot refuse
to receive AFDC
benefits. The only way for a person not to receive
benefits would be for that person not to become a member
of an AU, an
avenue which might be impossible given the
filing unit definitions.
Here, the State regulations
solve a real world problem that apparently was
not
contemplated by the Act, i.e., the "problem" of a member
of an AU
refusing AFDC benefits.
CONCLUSION
The Agency's position that the State's regulations at EAS
44-205.42 and
EAS 40-118 do not constitute PSP because
they do not require that all
eligible members be included
in the AU and actually receive benefits is not
well-
founded. As stated above, the Panel finds that 1) the
State's
regulations do require all eligible members to be
included in the AU; and 2)
there is no requirement that
all eligible members of the AU actually receive
the
benefits, provided that, as in these four cases, the
income and
resources of all potential AU members are
calculated in determining how much
assistance the AU is
entitled to receive. As long as no financial
advantage
accrues to the AU when a member declines to receive
benefits,
there is no provision that would forbid a
person refusing assistance
benefits. Therefore, the
Panel concludes that the State did not
underpay the AUs
in each of these four instances. Accordingly, the
Panel
reverses the Agency's determination of underpayments in
each of
these four cases.
________________________
Leslie
A. Weyn
_______________________
Maxine Winerman
_______________________
Joseph
T.
Gatewood
* * * Footnotes * * *
1. The State
appealed the four determinations
separately. After receipt of the four
cases, the Panel
determined that, although the factual situations
differed, the cases involved the same legal issue and
accordingly
consolidated the appeals.
2. Under
section 402(a)(22) of the Social
Security Act, an AFDC grant may be reduced
to collect
"any overpayment or underpayment of aid under the State
Plan
. . . ." This statutory provision is implemented by
regulation at 45
C.F.R. � 233.20(a)(13)(i) (1990).
"Underpayment" is defined at 57 Fed.
Reg. 46,805 (October
13, 1992) as "a financial assistance payment received
by
or for an assistance unit for the review month which is
at least
$5.00 less than the amount for which the
assistance unit is eligible under
permissible State
practice in effect on the first day of the review month."
3. The Agency
defines the AU to be family
members, living in the same household, who must
file for
assistance together in accordance with 45 C.F.R. �
206.10(a)(1)(vii). The Agency determined that, in the
case of
L.L., Docket No. 92-62, the State had underpaid
the AU in the amount of $246
in the review month. In the
case of W.W., Docket No. 92-73, the Agency
determined
that the State had underpaid the AU by $116 in the review
month. In the case of J.M., Docket No. 92-118, the
Agency
determined that the State had underpaid the AU by
$50 in the review
month. In the case of C.A., Docket No.
92-130, the Agency determined
that the State had
underpaid the AU by $134 in the review month. The
total
amount of alleged underpayments for these four cases is
$546.
4. The State refers to its regulations using
the MPP (Manual of
Practices and Procedures) designation.
The Agency refers to the
identical regulations using the
EAS (Eligibility and Assistance Standards)
designation.
For the sake of simplicity, the Panel refers to the State
regulations using the EAS designation.
5. The term
"FBU" is an abbreviation for
"Family Budget Unit". The term FBU is no
longer used by
the State. The "AU" (or Assitance Unit) designation, at
EAS 80-301 has replaced the FBU
designation.
6.
We refer to the recipients by their
initials to protect their privacy.