Department of Health and Human Services
Departmental Appeals Board
FDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Illinois Department of
Public Aid
Docket Nos. A-92-202, A-93-019 and A-93-101
Decision No. QC48
DATE: July 6, 1993
DECISION
The Illinois Department of Public Aid (Illinois) appealed
three quality
control (QC) review determinations of the
Regional Administrator of the
Administration for Children
and Families (ACF). The Panel consolidated
the
proceedings in these three appeals since they involve
similar facts
and raise the same issue. 1/ ACF asserts
that in all three
appeals Illinois improperly calculated
the initial payment amount of Aid to
Families with
Dependent Children (AFDC) to the three recipients by
prorating their initial AFDC payment from the date of the
recipients'
approval for AFDC until the day before their
cases were placed on Illinois'
regular automated payment
roll (the initial prorated entitlement or IPE
period)
where the IPE period in the three cases was longer than
one
fiscal month. ACF asserts further that, instead of
paying for the
month of application and the next fiscal
month (which made up the IPE
period) on a prorated basis,
Illinois should have prorated that part of the
payment
which consisted of the days remaining in the application
month
and then paid a flat grant for the part of the
payment which represented the
next fiscal month.
Illinois asserts, however, that its IPE methodology
is
consistent with the Social Security Act (Act), federal
regulations,
the AFDC Quality Control Manual (QCM), 2/
and its own State
plan. 3/
For the reasons discussed below, we sustain ACF's
determinations that
Illinois improperly calculated the
IPE payment in all three cases.
However, we remand
Docket No. A-93-101 to ACF to determine whether the
income received by the recipient during the review month
should be
applied in full or only in prorated part
against the AFDC payment for which
the recipient was
eligible for the review month.
Factual Background
There is no dispute as to the facts in these three
appeals.
Illinois' May 21, 1993 Reply Brief, page 1.
The facts of each case are
summarized below.
In the first case (docketed as No. A-92-202), ACF found
that an AFDC
recipient was overpaid for the 40-day period
from the date she became
eligible for AFDC to the date
she was placed on Illinois' regular automated
payment
roll (which included nine days in the February
fiscal/review
month and 31 days in the March fiscal
month). Illinois made a payment
of $329 for this period
which was calculated using a daily prorated amount
(determined by dividing the monthly flat grant by 30).
ACF
determined that Illinois should have paid the
recipient on a prorated basis
only for the days remaining
in the February fiscal month 4/ in
which she became
eligible for AFDC, and that Illinois should have paid the
recipient the flat grant amount for the March fiscal
month. This
would have resulted in a total payment of
$321 ($74 at the prorated rate and
a $247 flat grant)
instead of the $329 paid by Illinois.
After the appeal in this case was filed, ACF contended
that although it
had advised Illinois that it could
appeal the Regional Administrator's
determination to the
Panel, the case was not properly before the
Panel. ACF
argued that the Regional Administrator had specifically
found that $74 was correctly paid for the last nine days
of the February
fiscal month and that there was an error
only in the amount paid for the
March fiscal month.
Therefore, ACF contended that there was no difference
determination for the Panel to review, since the review
month was
February. ACF took this same view in Docket
No. A-93-19. We
disagreed and found that we did have
jurisdiction to hear the appeal.
February 1, 1993 Ruling
on Jurisdiction. See also n. 1, supra.
In the second case (docketed as No. A-93-19), the
recipient was paid at a
daily prorated rate for the 54-
day period from the date she became eligible
for AFDC to
the date she was placed on Illinois' regular automated
payment roll (which included 23 days in the July
fiscal/review month and
31 days in the August fiscal
month). ACF initially determined that
this case should
have been dropped from the sample because the payment was
made after the review month. However, on
reconsideration, ACF
determined that $205 was correctly
paid for the 23 days remaining in the
July fiscal month
in which the recipient became eligible, based on the
daily prorated rate. Thus, despite its view that the
$482 payment
made by Illinois for the entire 54-day
period was incorrectly calculated,
ACF found no error in
the review month. As indicated above, however,
we found
that we did have jurisdiction to hear the appeal.
In the third case (docketed as No. A-93-101), the
recipient was paid at a
daily prorated rate for a 45-day
period from the date she became eligible
for AFDC to the
date she was placed on Illinois' regular automated
payment roll (which included 14 days in the July
fiscal/ review month and
31 days in the August fiscal
month). ACF originally determined
that the case should
have been dropped from the sample because no payment
was
made in the review month. However, on reconsideration,
ACF
determined that the recipient was ineligible for the
July review month.
Specifically, ACF found that the
recipient was eligible for a 14-day
prorated grant in the
amount of $188. However, during that month the
recipient
received $280 in income (child support payments). After
this was reduced by a $50 pass-through disregard, the
recipient had $230
in unearned income, which income
exceeded the prorated grant amount.
This caused the case
to be ineligible for AFDC for the review month.
Illinois disagrees with ACF, contending that the
recipient in this case
was not ineligible for an AFDC
grant and that, instead, there is a $77
overpayment in
the case. Illinois contends that the QC review should
encompass the entire IPE period and that any income
received during that
period should be applied to the
grant for the entire period. Illinois
QC had determined
that the recipient was entitled to a $604 AFDC payment
for the 45-day IPE period, calculated on a prorated
basis.
Illinois QC then applied two months of child
support payments, totalling
$460, against the $604 AFDC
grant for which the recipient was otherwise
eligible, and
determined that the recipient was eligible for a $144
grant. Illinois had originally found the recipient
eligible for a
$221 AFDC grant. Subtracting the $144
correct grant amount found by
Illinois QC from the $221
incorrect grant amount originally issued to the
recipient
would leave a $77 overpayment. Illinois' January 28,
1993 Brief at page 3.
Illinois' Position
Illinois argues generally that: 1) its methodology for
determining
the IPE is consistent with its approved State
plan and with federal law,
regulations, and QCM
provisions; 2) it has been Illinois' longstanding
practice to consider the IPE period as covering the date
of approval
through the day before the case is placed on
the regular automated roll, and
there has never been any
indication in its State plan or elsewhere that this
period is limited to no longer than 30 days; and 3) the
Family Support
Administration (FSA), ACF's predecessor,
expressed approval of Illinois'
calculation of the IPE
when it approved Illinois' sampling methodology, as
well
as by taking other actions. Illinois contends further
that
the federal method of calculating an IPE will
unfairly lead to a finding of
an error whenever income is
budgeted. This is because Illinois applies
the income
received during the IPE period to the grant for the
entire
IPE period, whereas ACF applies income to the
fiscal month it is, or is
anticipated to be, received.
Moreover, Illinois contends that
complying with ACF's
interpretation and changing its sampling plan would
mean
changing the way that its computer system calculates the
IPE both
in the proration methodology and the method by
which income from the IPE is
applied. Illinois alleges
that to do so would be very costly and
time-consuming.
ANALYSIS
The principal issue in these appeals is whether
Illinois
improperly calculated the initial payment amount of AFDC
for
the three recipients in question by prorating their
initial payment amount
from the date of their approval
for AFDC until the day before their cases
were placed on
Illinois' automated payment roll where this period was
longer than 30 days. We find, after carefully
considering the
parties' arguments, the documentary
evidence submitted by the parties, and
the law, that
Illinois' position does not conform with the Act, federal
regulations, the QCM, or Illinois' own State plan. As
discussed in
detail below, we conclude that the
applicable authorities cannot reasonably
be construed to
permit payment for the month of application on a prorated
basis for a period longer than 30 days.
Under Title IV-A of the Act, payment to an AFDC recipient
is based upon
that individual's needs for a particular
"month." Act, sections
402(a)( 7)(B) and (C) and (8)(A)
and (B). For states that pay for the
month of
application, federal regulations allow proration of that
payment for the number of days which remain in the month
of
application. Section 206.10(a)(6)(i)(D) of title 45
C.F.R. states:
In AFDC, States that pay for the month of
application must prorate
the payment for that month
by multiplying the amount payable if payment were
made for the entire month including special needs in
accordance with
Sec. 233.34 by the ratio of the days
in the month including and following
the date of
application (or, at State option, the date of
authorization
of payment) to the total number of
days in such month. The State plan
may provide for
using a standard 30-day month to determine the
prorated
amount.
Illinois contends that this regulation merely allows a
state to prorate
the payment for an IPE period based upon
a 30-day standard, and that nothing
here limits the
prorated portion of an IPE period to less than one fiscal
month. However, we find that this section, rather than
supporting
Illinois' contention, instead supports ACF's
contention that the prorated
portion of an IPE period
must be less than one fiscal month. This
section clearly
provides that a payment will be prorated for a period
less than an "entire month." It also refers to a
"standard . . . .
month." A standard calendar month
ranges from 28 to 31 days. It
is thus inconsistent with
the plain language of the regulation to prorate a
payment
for a period of 31 days or longer (an entire month).
Moreover, ACF's interpretation of this section is
supported by other
sections of the Act and of the
regulations, the QCM, and Illinois' State
plan. This is
because every authority references a standard calendar
or
fiscal month, and no authority defines that month to be
longer than
31 days.
One such authority is 45 C.F.R. � 205.40(a)(6), which
defines a "review
month" as the "specific calendar or
fiscal month" for which an AFDC payment
is received.
Illinois argues, however, that the definition of a review
month as set forth at section 205.40(a)(6) applies only
to that term as
used in section 205.40. Illinois notes
that section 205.40(a) states
that the definitions given
are only "[f]or purposes of this section,
notwithstanding
any other regulations in this chapter . . . ."
Therefore, Illinois contends that the definition of a
review month at
section 205.40(a)(6) cannot be used to
give meaning to terms used in other
sections of the
regulations, such as the regulation regarding the
calculation of the IPE period at section
206.10(a)(6)(i)(D). We
disagree. Section 205.40 is
headed "Quality control system," and, as
well as setting
forth definitions of terms, it sets forth the general
requirements for that system. These appeals came about
specifically as a result of the QC review process, and
the consideration
of budget and payment calculations for
a "review month" is integral to that
process.
Accordingly, here where the accuracy of a payment is
reviewed for a given "review month," sections involving
QC review, such
as section 206.10(a)(6)(i)(D), must be
read in accordance with section
205.40(a)(6).
We further find no authority in the QCM or in Illinois'
State plan which
would allow a month to be longer than 31
days. The QCM provides at
section 3400 that a "payment
month" is the fiscal or calendar month for
which the
State pays assistance. In addition, for a case meeting
the factors of eligibility, the AFDC payment is based
upon income and
income related factors which exist in the
budget month. Section 3310
provides that a reviewer will
verify the accuracy of all payments (including
regular,
adjusted and supplemental payments which include prorated
amounts) for the review month that were authorized prior
to sample
selection and paid in the review month.
Moreover, under Illinois'
State plan, the time period
(the budget month) to be used to determine a
recipient's
AFDC payment is a fiscal month. Illinois' caseload is
divided into fiscal months, each relating to a "warrant
mailing
schedule", where the fiscal month could run from
the first through the last
day of the calendar month, or
from the seventh through the sixth day of the
calendar
month, etc. Each fiscal month, however, runs for the
same
number of days as a calendar month (which would be
28, 29, 30 or 31
days).
Thus, no authority exists in the Act, federal
regulations, the QCM, or
the State plan which would
permit Illinois to make a payment for the month
of
application on a prorated basis for a period longer than
30 days.
Illinois contends that its methodology for computing the
IPE has been a
long-standing practice (since 1977). To
substantiate its contention,
Illinois submitted
references to this methodology as set forth in its AFDC
Policy Manual PO 600(2), State AFDC Policy Handbook Case
Action
Instructions #15, sampling plan, and in
information regarding the approval
by FSA of its computer
system for application cases, the Automated Intake
System
(AIS) which is part of its Family Assistance Management
System
(FAMIS). Illinois' January 28, 1993 submission,
Attachments IV, V,
VII, XIV. Illinois contends that its
continued use of this methodology
therefore is reasonable
and should be upheld. 5/ We
recognize that Illinois'
long-standing practice has been to calculate the
IPE in
the manner it describes. However, the fact that it has
been
Illinois' practice to calculate the IPE this way is
not relevant to our
determination that in these appeals
such calculation is unreasonable.
In essence, Illinois
is arguing that its methodology for computing the IPE
is
permissible state practice (PSP). Pursuant to Appendix W
of the
QCM (FSA-AT-90-21 (August 30, 1990)) the QC review
is to be conducted
against PSP. However, if PSP is
inconsistent with state plan
provisions, QC review is to
be conducted against the state plan. We
have found here
that Illinois' method of computing the IPE is
inconsistent with its State plan, which contemplates a
fiscal month no
longer than 31 days. Thus, review of
these appeals should be conducted
against Illinois' State
plan, which here is in accordance with federal
law.
Illinois contends also that ACF's predecessor, FSA,
expressly approved
Illinois' calculation of the IPE.
Specifically, Illinois asserts that
FSA: 1) certified
the FAMIS system on January 14, 1988, which approval
included approval of Illinois' method of calculating the
IPE, as the
system included this methodology and FSA did
not cite a deficiency; 2)
subscribes to Illinois' AFDC
manual which, at section PO 600(2), defines the
State's
IPE methodology; 3) conducted audits up to fiscal year
1990
which revealed no problems with Illinois' IPE
calculations; and 4) approved
Illinois' sampling plan,
which included Illinois' method of calculating the
IPE,
on May 7, 1985, and continued to approve it until July
1992.
Furthermore, Illinois notes that sections
408(c)(3)(B) and (C) of the Act
provide for excluding
from consideration as an erroneous payment a payment
that
is in error solely by reason of a state's reliance upon
and correct
use of erroneous information provided by the
Secretary about matters of fact
or by the state's
reliance upon and correct use of written statements of
federal policy. Illinois asserts that this exclusion
applies here
and that ACF is therefore barred from
challenging Illinois' IPE
calculations. We do not find
these arguments persuasive.
The QCM, at Appendix W (as transmitted by FSA-AT-90-21
(August 30,
1990)), interprets reliance upon and correct
use of erroneous information to
mean that a state
depended on that information to make payment decisions,
had a reasonable expectation that the information was
timely and
accurate, and followed procedures for access
and use of the
information. For QC purposes, written
statements of federal policy
mean written policy from a
DHHS official responsible for dissemination of
such
policy in the AFDC program. This provision applies to
situations where the state's eligibility and payment
policy correctly
reflects the policy directive provided
by the Departmental official, but the
directive is
subsequently determined to be incorrect. AT 90-21 at
Appendix W, pages 2 - 3. Such is not the case here.
Illinois
did not cite any written statements or federal
policy on which it relied
other than 45 C.F.R. �
206.10(a)(6)(i)( D), which we have determined does
not
support Illinois' position. Thus, Illinois did not
establish that it fell within the scope of this statutory
exception.
Furthermore, Illinois did not establish that common law
principles of
estoppel apply here. There can be no
estoppel absent a
misrepresentation of fact, reasonable
reliance, and detriment to the
opposing party. See Rapid
City American Indian Development, Inc., DAB
1401 at 8
(1993). The record contains no evidence that ACF ever
specifically told Illinois that its method of calculating
the IPE was
permissible. Merely not objecting to a
payment calculation contained
in a State AFDC manual to
which ACF subscribes, or which is contained in
information regarding a computer system, does not
constitute approval of
such calculations. Id. at 4.
Moreover, since such materials are
in conflict with the
State plan and federal law, they cannot be relied upon
to
preclude ACF's findings in these cases.
In addition, Illinois could not reasonably have relied on
ACF's approval
of its sampling plan as approval of its
method of calculating the IPE.
Illinois' sampling plan
defines the sampling frame for supplemental payroll
payments (i.e., the type of payment in question here) as
payments which
may cover a period longer than a fiscal
month. Illinois January 28,
1993 Brief, Attachment VII
at pages 6 - 7, Attachment X at page 9. The
sampling
plan does not, however, specify what portion of the
payment
should be calculated on a prorated basis. It is
the State plan which
governs payment calculations, and
here Illinois' methodology is inconsistent
with the State
plan, as well as with federal law. 6/
Illinois contends further that, pursuant to section 2300
of the QCM, it
cannot implement a new sampling plan
without prior approval. Thus,
Illinois asserts that
until the sampling plan is changed, both Illinois and
ACF
are bound to use the current sampling plan, which
contains Illinois'
methodology for calculating the IPE.
We disagree. As discussed
above, Illinois' current
sampling plan does not specifically address how the
payment for the IPE period is to be calculated.
Illinois contends also that it should not have to change
its computer
system with regard to its IPE methodology,
as to do so would be costly and
time-consuming.
Illinois' contention is not relevant to our
determination
with regard to these appeals. Once we have found that
Illinois' practice with regard to its IPE methodology is
in conflict
with its State plan, the Act, the regulations
and the QCM, we cannot sustain
that practice.
We therefore conclude that the payment for the IPE period
in each of the
cases at issue here should not have been
calculated on a prorated basis for
the entire period.
Docket No. A-93-101 also presents the question of how
income received
during the review month should be treated
in determining the recipient's
eligibility for the IPE.
Illinois applied a child support payment
received in the
review month to the grant for the entire IPE period.
ACF, on the other hand, applied this income to the grant
for the 14 days
in the review month in which the
recipient was eligible. Illinois'
methodology is
inconsistent with the authorities cited above which refer
to a standard fiscal or calendar month. However, ACF's
treatment
of the income in question in Docket No. A-93-
101 may also be
incorrect. In determining that the
recipient in Docket No. A-93-101
was ineligible, ACF
appears to have applied a full month's income to the
grant for less than a full month. This would increase
the effect
of the income on the payment for the review
month, and may have resulted in
an erroneous
determination of ineligibility. The parties did not
specifically address this issue. Therefore, we remand
Docket No.
A-93-101 to ACF to determine whether the child
support income received in
the review month should have
been applied in full against the AFDC payment
for which
the recipient was eligible in the review month (a 14-day
prorated payment) or prorated (with only 14 days of
income applied
against the 14-day AFDC payment).
CONCLUSION
For the foregoing reasons, we conclude that Illinois
incorrectly
calculated the payment for the IPE period in
each of the cases at
issue. Specifically, we conclude
that Illinois should have prorated
that part of the IPE
payment which consisted of the days remaining in the
application month and then paid a flat grant for that
part of the
payment which represented the next fiscal
month. Further, we remand
Docket No. A-93-101 to ACF to
determine whether the income received by the
recipient
during the review month should be applied in full or in
prorated part only against the AFDC payment for which the
recipient was
eligible.
Peggy McFadden-Elmore
Carolyn Reines-Graubard
Maxine Winerman
* * * Footnotes * * *
1. Prior
to the consolidation of Docket No.
A-93-101 with Docket Nos. A-92-202 and
A-93-19 (which
consolidation occurred on February 4, 1993), and before
the Panel could consider the substantive issue raised by
these appeals,
ACF objected to our jurisdiction to
consider the appeals. On February
1, 1993, this Panel
ruled that we had jurisdiction to consider the appeals.
We noted that applicable regulations provided for review
by the Panel
where there is a "disagreement between State
and Federal review findings
that affect(s) the State's
official AFDC payment error rate . . . ." 45
C.F.R. Sec.
205.42(i) (1992). We concluded that in these appeals
there existed a disagreement between state and federal
review findings
within the meaning of section 205.42(i).
We concluded further that Illinois
had persuasively
argued that the disagreement could ultimately affect its
error rate. February 1, 1993 Ruling on
Jurisdiction.
2. Each state is required to "operate the
quality control
system in accordance with policies and
procedures prescribed in the Quality
Control Manuals
issued by the Department." 45 C.F.R. Sec.
205.40(b)(1).
3. Unless otherwise indicated, in this
decision, we refer
to the Act, federal regulations, QCM,
and State plan in effect during the
relevant review
months.
4. 45 C.F.R. Sec. 233.32 requires a state to
specify the time period covered by a payment month in its
state
plan. A state can use either a calendar month or a
fiscal month.
Illinois has chosen a fiscal month payment
method, consisting of different
monthly cycles.
Illinois' January 28, 1993 Brief, Attachment
XV.
5. Illinois cites New Mexico Human Services
Dept., DAB QC5 (1991), as authority for this proposition.
In New
Mexico, the Panel reversed ACF's finding of an
overpayment based on the
state's long-standing
interpretation of its policy which the Panel found was
reasonable. Here, however, we have found Illinois' IPE
methodology
to be unreasonable as it is in conflict with
its State plan and federal
law. Thus, the New Mexico
decision does not support Illinois'
position.
6. We do not reach the question of whether,
for each case
in question here, Illinois properly used
the sampling frame specified in the
sampling plan in
selecting sample payments for the review
month.
(..continued)