Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: South Carolina
Department of
Social Resources
Docket Nos. A-92-96
A-92-201
Decision No. QC37
DATE: February 5, 1993
DECISION
The South Carolina Department of Social Resources (South
Carolina, or
State) appealed two determinations, dated
February 3, 1992 (Docket No.
A-92-96) and June 11, 1992
(Docket No. A-92-201), by the Regional
Administrator of
the Administration for Children and Families (ACF), that
two Aid to Families with Dependent Children (AFDC)
recipients were
overpaid for their review months because
the State failed to discover income
from unreported
employment. In both cases, ACF discovered the
unreported
employment earnings from State records which South
Carolina
asserted had not been available at the time that
it conducted its QC
reviews. Because these appeals
presented similar facts and the same
legal issue, whether
a QC error could be established on the basis of
information not available to the State at the time of its
QC review,
they were consolidated by the Panel.
Proceedings in these appeals were stayed pending ACF's
request for
reconsideration of the Panel's decision in
Alabama Dept. of Human Resources,
DAB QC13 (1992), which
involved a similar issue. In Alabama, the Panel
found
that the State had not committed a QC error where it
complied with
the relevant provisions of ACF's QC Manual
(QCM) for verifying income, and
where the information on
unreported employment earnings that formed the
basis of
ACF's error determination had not become available
through the
State's Income Eligibility and Verification
System (IEVS) at the time that
the State conducted its QC
review. The Panel sustained its Alabama
decision on
October 14, 1992. Alabama Dept. of Human Resources, DAB
QC13 (1992), Decision on Reconsideration. The parties
here were
given an opportunity to submit comments based
on the Panel's decisions in
Alabama.
As explained below, we find that, unlike in Alabama, the
record does not
clearly establish that South Carolina
complied fully with the procedures in
the QCM.
Accordingly, we sustain ACF's error determinations in
both cases.
Background
In Docket No. A-92-96 (State QC Review No. 21372) South
Carolina's QC
review determined that the recipient's
assistance unit received a correct
payment of $252 for
the review month of July, 1991. The State review
noted
that the recipient had begun employment during the review
month,
and determined that income from this job did not
result in a QC error.
ACF discovered that the recipient
had also been employed at a different job
from April 24
to June 17, 1991, and determined that the State made a
$209 overpayment by failing to consider the income from
this previous
employment in the budget month of May, 1991
In Docket No. A-92-201 (State QC
Review No. 21077), South
Carolina's QC review determined that the
recipient's
assistance unit received a correct payment of $210 for
the
review month of April, 1991. ACF discovered that the
recipient had
been employed from January 7 through April
27, 1991, and determined that the
State had made a $130
overpayment for failing to consider the income from
that
employment in the budget month of February, 1991.
The Alabama Decisions
In Alabama, the Panel concluded that the State did not
commit a QC error
where it fully complied with the QCM's
requirements for investigating
income, where the client
claimed to have no income. In the two cases
that were
the subject of Alabama, ACF obtained information on the
unreported employment income through the State's IEVS.
Because of
the time required for employment information
to be reported by employers to
various State agencies and
processed into the IEVS, the information on the
recipients' employment had not become available on the
IEVS at the time
that the State conducted its QC review.
The Panel found that the State QC reviewers had complied
with the QCM's
instructions for processing a case where
an AFDC recipient denies having
earnings from employment.
The Panel observed that the QCM cited the
IEVS as a
primary source of evidence in cases where recipients deny
earning income, and that federal law required states to
have an IEVS but
did not specify the time permitted for
processing information. The
Panel concluded that the
State did not commit a QC error where there were no
leads
indicating employment that the State failed to
investigate, and
where the IEVS wage information had been
unavailable because of the normal
time it took for
information to be provided to State agencies and
processed into the IEVS.
In denying ACF's request for reconsideration, the Panel
noted that, in
the QCM, ACF had impliedly adopted a
policy that technically erroneous
payments resulting from
income not yet reported to the IEVS would not be
counted
in determining a state's error rate. The Panel noted
that
ACF was free to modify this policy.
In these appeals, ACF argued that the only instance in
which an error
caused by incorrect information is not
considered a QC error is when
erroneous information about
matters of fact is supplied by the Secretary of
the
Department of Health and Human Services, as provided in
section
408(c)(3)(B) of the Social Security Act (Act).
ACF argued that its
longstanding policy is that errors
caused by incorrect information supplied
by a client, or
other such "client-caused errors," are to be included in
determining a state's QC error rate. Congress was aware
of this
policy when it enacted the current QC provisions
at section 408 of the Act,
ACF asserted, but did not
include client-caused errors among those that the
statute
exempts from a state's error rate. ACF maintained that
the
statutorily prescribed error rate tolerance levels,
below which no
disallowances are taken, are intended to
account for client-caused and other
errors over which the
state has no control.
ACF noted that its policy on IEVS data was explained in
the preamble to
the current QC regulations which were
published October 13, 1992.
Several comments on the
proposed rules had been received requesting that the
exemption for errors caused by reliance on incorrect
information
supplied by the Secretary be expanded to
include a specific reference to
errors caused by reliance
on IEVS data. ACF replied that the exemption
mandated by
408(c)(3)(B) of the Act applies only to information
supplied
by the Secretary, whereas the IEVS, although
mandated by federal law, is
operated by and under the
administrative oversight of the state. 57
Fed. Reg.
46782, 46791-92. ACF argued that even though the
preamble to the new regulations was not available at the
time that it
made its argument in the Alabama decision
and request for reconsideration,
it still clearly
indicates that there was never an intent to create an
implied exception for erroneous payments resulting from
the use of IEVS
data.
The Parties' Arguments
In both appeals, South Carolina agreed that the
recipients were overpaid,
but argued that under the
Panel's holding in Alabama, no QC error should be
cited,
since it took all appropriate action under section 3552
of the
QCM to determine whether the recipients were
employed. ACF asserted
that South Carolina failed to
comply with the QCM's requirements for
investigating
income, and so was not entitled to rely on the absence of
employment information from the IEVS as in Alabama.
Although South Carolina initially asserted that ACF
learned of the
recipients' unreported employment earnings
through its IEVS, as in Alabama,
it subsequently agreed
with ACF that the information was obtained from the
State
Employment Security Commission. The distinction between
the
two sources of information does not appear to be
material to this appeal,
since ACF did not dispute South
Carolina's assertion that, as with the IEVS,
the
employment information had not yet become available
through the
State Employment Security Commission at the
time that South Carolina
conducted its QC reviews, and
since it appears that the IEVS obtains
information from
the State Employment Security Commission.
1/ South
Carolina reported that at the time of the QC reviews,
employers were required to report totals of wages paid
during a quarter
to the State Employment Security
Commission by the end of the following
quarter, and that
this information did not become available through the
IEVS until approximately the second weekend after the end
of the
quarter. In both cases, South Carolina asserted
that ACF's QC review
would not have discovered the
unreported earnings but for the information
received from
the State Employment Security Commission.
Docket No. A-92-96
South Carolina stated that the recipient, while admitting
employment
beginning in the review month, also told the
QC reviewer that she had not
worked in approximately 30
years prior to obtaining the job commencing
during the
review month. The recipient also signed a statement for
the State QC review affirming that she had no income in
May and June,
1991. The recipient subsequently admitted
that she had deliberately
withheld information about her
employment because the county lost her food
stamps for
three months and failed to replace them.
South Carolina reported that employers were not required
to report wages
paid during the second quarter of 1991
until the end of September, 1991, and
that this
information did not become available through the State's
IEVS
until the second weekend of October, 1991. South
Carolina reported
that it first requested an IEVS report
on September 9, 1991, and completed
its QC review on
October 2, 1991. The State noted that any request by
ACF
for data would have to have been made after ACF requested
the case
for re-review on October 25, 1991, and that wage
data provided to ACF by the
State Employment Security
Commission was dated November 18, 1991. ACF
Exs. 1 & 2.
ACF asserted that the collateral contact forms used by
South Carolina in
its QC review asked only about the
recipient's current work status and not
work history, and
did not specify dates during when the recipient may have
been known to have worked. ACF also maintained that the
State
failed to adequately address questions regarding
the recipient's money
management practices that were
raised by the following information in the
records
supplied by the State: (1) the recipient's family was
buying its
home despite documented monthly income of only
$379 though AFDC and SSI
(plus sporadic employment); (2)
the specifics of the mortgage were not
disclosed in the
State's case records; (3) a 1990 Ford automobile was
listed in the recipient's name with a balance of $6,515
owed; and (4)
the State did not verify the client's
allegation that the car actually
belonged to her son.
ACF noted that the State, in verifying bank
account
information for the recipient, failed to comply with the
instructions of QCM section 3544, which requires that
bank contacts must
cover the payment and budget months.
ACF reported that South Carolina
never followed up on its
unanswered request to the bank for information, and
that
its form requested information only as of the first day
of the
review month.
South Carolina replied that it routinely compares monthly
income and
expenses in all assistance cases, and that the
recipient's household's
expenses, including the $344
mortgage, did not exceed its income.
South Carolina
reported that the household's monthly income was $679
including the recipient's husband's $300 pension, and not
$379, as ACF
stated. South Carolina asserted that it
pursued the question of the
automobile, and obtained a
statement from the recipient's son that the car
was
actually his, although it was registered to his mother.
South
Carolina argued that, in any event, the car
payments were within the
household's budget, even if the
car actually did belong to the recipient.
South Carolina also argued that its determination that
there was no other
employment income was reasonable in
light of other factors, such as the
recipient's written
statement denying income in the budget month of May,
1991; the absence of any work history on the IEVS; case
record
information, including a doctor's statement, that
the recipient had to be in
the home with her disabled
husband; and the fact that the unreported
employment
lasted for less than three months and so was unlikely to
have
been remembered or known by the collateral contacts.
South Carolina
stated that its representative, during a
home visit, saw a form from the
recipient's bank which
showed no unusual activity and a balance of $56 as of
July 1, 1991.
Docket No. A-92-201
As in Docket No. A-92-96, South Carolina asserted that it
completed a
full investigation of the case according to
the QCM, and took appropriate
action under section 3552
to determine whether the client was
employed. South
Carolina noted that the IEVS showed that the recipient
had not been employed since the second quarter of 1990.
South
Carolina maintained that there was no reason to
suspect that the recipient
had had subsequent employment
because of the following factors:
o The recipient's expenses did not exceed her income,
and she did
not have to pay rent.
o The recipient stated that she had not worked since
leaving her
earlier position.
o The recipient's landlord and two collateral sources
who were
contacted during the QC review did not
indicate employment for the recipient
during the QC
review period.
o Two banks that were contacted did not indicate that
the recipient
had a bank account.
o The recipient's two children were only 20 and 8
months old as of
the review date, and the recipient
indicated she was needed at home to take
care of
them.
o There were no leads of possible employment for the
recipient.
South Carolina reported that wage information for the
first quarter of
1991 was not available through the IEVS
until July 8, 1991, whereas it
obtained its IEVS report
on June 6, 1991, and completed the QC review on
June 21,
1991. South Carolina stated that fourth quarter of 1990
wages were the most recent that were available at the
time of the QC
review.
ACF asserted that the forms used to obtain information
were inadequate,
as the collateral contact form asked
only about current work status and did
not specify the
dates of the period under review, while the form used to
obtain the landlord's statement did not inquire about the
recipient's
employment. South Carolina Appeal Request,
Atts. 2, 3 & 4.
ACF also noted that both collateral
contacts answered "yes" to question 5 on
the collateral
contact form, which asked whether anyone in the
recipient's household received money other than AFDC.
ACF said
that these answers were inconsistent with the
collateral contacts' failure
to indicate employment, and
also characterized the landlord's "N/A" answer
to
questions regarding income as ambiguous.
South Carolina replied that collateral contacts sometimes
overlook the
word "other than" in question no. 5, and
think that they are being asked if
anyone in the
household receives AFDC. South Carolina reported that
collateral contacts are routinely questioned to determine
if they are
reporting other income or merely the receipt
of AFDC, and that "this matter
was cleared on this case."
South Carolina Response, December 17,
1992. South
Carolina also noted that the landlord answered "N/A" to a
question asking if rent was paid by check, where the
recipient did not
pay rent. Therefore, it was evident
that the "N/A" response to the
question as to whether the
recipient had any income meant that the landlord
believed
that she had none. South Carolina argued that the
information in the collateral contact forms had to be
viewed in
conjunction with other factors that supported
its conclusion that there were
no unreported earnings.
Analysis
Our holding in Alabama recognized an implied policy that
errors which a
state QC review fails to detect because
wage and employment information is
unavailable are exempt
from the state's error rate. However, this
exemption was
narrowly drawn to apply only where a state could
demonstrate that it complied with the relevant
instructions in the
QCM. We conclude that in both cases
on appeal here, ACF has pointed
out substantial instances
of noncompliance with the requirements of the QCM
such
that the protection afforded by the policy recognized in
Alabama
should not apply.
In Docket No. A-92-96, we concur with ACF that South
Carolina failed to
comply with the specific instructions
of section 3544 of the QCM for
verifying bank account
information for the recipient. In relevant
portion,
section 3544 provides that:
Bank contact(s) must cover the period of time
necessary to
determine eligibility and payment,
and whether any error is PAL or
regular. For
example, in a State with a two-month
retrospective
budgeting system, the bank
contact must cover at least the payment month,
the budget month and the intervening month.
. .
.
If a bank account is reported by the recipient
or discovered by the
reviewer, the type of
account, account number, type of ownership,
banking activity, as needed (QCM 3557) and
balance for the review month
and previous
months, as required, must also be documented.
2/
South Carolina applies two-month retrospective budgeting,
as it uses
financial information from two months prior to
the payment (and review)
month to calculate assistance.
(South Carolina indicated that, in
Docket No. A-92-96,
the overpayment in the July, 1991 review month was due
to
excess income received in the budget month of May, 1991.
South
Carolina Response, December 10, 1992.)
Accordingly, section 3544 of
the QCM clearly required the
State to obtain bank account information not
only for the
review month, but for the two preceding months as well.
The information in the record indicated that the State
obtained only the
bank balance as of the beginning of the
review month, and that this
information was obtained by
viewing a bank statement during a home
visit. While
maintaining that the statement revealed no unusual
activity, South Carolina did not assert, and the record
does not
indicate, that it followed the instructions of
section 3544 for obtaining
bank account information,
including balance and activity, for the budget
month.
South Carolina asserted that if the bank balance as of
the review date
had exceeded the resource limit, it would
have pursued the bank balance in
the budget and
intervening months to determine whether any error was
regular or a payment adjustment lag (PAL) error.
However, section
3544 of the QCM requires that bank
account information cover the period of
time necessary to
determine the payment amount, which, in a retrospective
budgeting state, is based on financial information from
the budget
month. Thus, the State clearly did not comply
with the requirements of
the QCM for verifying the
presence or absence of resources available during
the
budget month which may have affected the payment
determination, and
may have indicated the possibility of
additional income from employment.
In Docket No. A-92-201, ACF noted that the collateral
contact forms
revealed that both contacts answered "yes"
to a question which asked whether
anyone in the
recipient's household received money other than AFDC. We
agree that the plain meaning of the question and the
responses raised
serious questions about the recipient's
claim of no employment, and that
South Carolina failed to
resolve potentially significant conflicts posed by
these
answers. South Carolina's response that collateral
contacts
frequently misread this question is speculative
and not supported by
evidence in the record. While South
Carolina subsequently provided two
forms from additional
contacts that answered "no" to question no. 5, it
offered
no evidence to support the assertion that this matter was
"cleared" with respect to the collateral contacts who
reported that the
recipient received income other than
AFDC. In failing to resolve the
seeming inconsistencies
raised by these responses, South Carolina failed to
comply with the requirements of section 3510 of the QCM
that evidence
must be evaluated to ensure that it does
not conflict with other evidence
and that the conflicts
are resolved and documented.
We make no finding here that full compliance with the
instructions in the
QCM would necessarily have resulted
in discovery of the employment income
that both
recipients failed to report. However, permitting states
to avoid accountability for errors when, unlike in
Alabama, they cannot
demonstrate compliance with relevant
program instructions would not be
consistent with the aim
of the QC program of providing an incentive for
improved
program accuracy. See Alabama, at 5.
Because we find that South Carolina failed to comply with
relevant
portions of the QCM, we do not reach ACF's
arguments against our holding in
Alabama. In our
reconsideration of Alabama, we noted that ACF was free to
modify its implied policy that states which have fully
complied with QCM
instructions will not be held
accountable for QC errors resulting from
income and
employment information not available through the IEVS at
the
time of the state QC reviews. We note that ACF
effectively changed
this policy when it published, in the
preamble to the current QC
regulations, its response to
comments seeking to exempt from a state's error
rate
those errors caused by reliance on IEVS data. 57 Fed.
Reg.
46782, 46791-92 (October 13, 1992).
Conclusion
For the reasons discussed above, we sustain ACF's
determinations that
South Carolina made overpayments in
these two cases.
Leslie A. Weyn
Maxine M. Winerman
Jeffrey A. Sacks
* * * Footnotes * * *
1. The material that ACF referred to as
information
from the State Employment Security Commission consisted
of
computer printout sheets titled wage file and employer
account
inquiries. ACF Response, Docket No. A-92-96,
April 17, 1992, Exhibit
(Ex.) 2. The materials that
South Carolina characterized as an IEVS
report included
computer printout sheets and a cover sheet apparently
completed by a computer terminal operator which indicated
that
information was gleaned from various State files,
including a category
listed on the cover sheet as "E.S.
inquiry," which presumably refers to the
employment
security commission. It thus appears that, as in
Alabama, IEVS obtained information from the State
Employment Security
Commission files used by ACF. South
Carolina Appeal Requests,
Attachment (Att.) 1.
2. Prior to
September 9, 1991, the provisions of
section 3544 appeared at section
3543.