Department of Health and Human Services
Departmental Appeals Board
QUALITY CONTROL REVIEW PANEL
SUBJECT: Iowa Department of
Human Services
Docket No. A-93-188
Decision No. QC53
DATE: October 7, 1993
DECISION
The Iowa Department of Human Services (Iowa) appealed a
May 26, 1993
quality control (QC) review determination by
the Regional Administrator,
Region VII, of the
Administration for Children and Families (ACF). ACF
determined that Iowa's state QC review had erred in
finding that an Aid
to Families with Dependent Children
(AFDC) grant recipient had been overpaid
$63 because the
recipient had unreported earnings and self-employment
income during the review period. The federal QC review
determined
that the actual amount of the overpayment was
$163 because of other
unreported earnings.
For the reasons discussed below, we reverse
ACF's
determination.
Applicable Authority
Section 408(a) of the Social Security Act (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. The Act then provides that the
Secretary shall review a subsample of the cases reviewed
by a state, and
notify the state of any case in the
subsample which the Secretary finds
involves an erroneous
payment. See section 408(b)(1)(A) of the
Act.
Section 402(a)(7)(A) of the Act requires a 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.
Factual Background
The state QC review conducted a review of the status of
AFDC recipient
L.G. as of July 1, 1992. 1/ A state QC
review examination
of L.G.'s case file indicated that her
only employment was as a housekeeper
for one individual.
When a state QC reviewer visited L.G., she
reported that
also had a new employer beginning in June 1992. The
reviewer asked L.G. if she had any additional earnings
and she stated
none.
The state QC review verified wages and dates of
employment by contacting
L.G.'s reported employers. The
state QC review then accessed the Iowa
Department of
Employment records and found no record of earnings for
L.G. An Income and Eligibility Verification System
(IEVS) report
on L.G. failed to reveal any employment
information. The state QC
review compared L.G.'s
reported living expenses against her household income
and
found nothing to indicate additional unreported income.
L.G.
reported no checking or savings account so that the
State QC review was
unable to review any banking activity
on L.G.'s part.
After the state QC review had completed its review of
L.G. on October 6,
1992, L.G.'s employment as a
housekeeper with another individual was
discovered,
verified, and documented in her case file. In reviewing
the case file, the federal QC review found the earnings
L.G. had not
reported to the state QC review. The
federal QC review's determination
that L.G. had received
an overpayment of $163, rather than $63, was based on
the
newly discovered earnings.
The Parties' Arguments
Iowa agreed with ACF that the recipient had earned income
in excess of
that determined in the state QC review.
Iowa argued, however, that its
QC review had done
everything possible to determine L.G.'s
circumstances.
Iowa contended that, given L.G.'s work as a
housekeeper,
there were no adequate checks to prove her earned income.
Iowa maintained that it had questioned L.G., but L.G.
had
lied. Iowa argued that its investigation and
verification on L.G. met
all the standards set forth by
ACF in its Quality Control Manual (QCM) and
that it
should not be penalized for information which did not
become
known until after the state QC review had been
completed.
While not disputing Iowa's claim that it correctly
followed procedures
set forth in the QCM, ACF
nevertheless argued that Iowa admitted that an
error did
occur in the case of L.G. ACF stated that its argument
with Iowa concerns whether this error should be counted.
ACF
insisted that the error must be counted because of
the requirements set
forth in section 402(a)(7)(A) of the
Act and 45 C.F.R. �
233.20(a)(3)(ii). According to ACF,
these provisions require that all
income must be
considered in determining the amount of AFDC assistance a
recipient receives. ACF contended that this concern for
accuracy
is reflected in section 3100 of the QCM:
The reviewer's role is to verify every element of
eligibility for
the review month. This manual
outlines the steps involved in this
process and the
standards for verification, but the QC reviewer's
role
goes beyond the collection of documentation.
The QC review involves
the following steps. After
being assigned a case, the reviewer first
examines
the local agency case record. This process is
called a
desk review. The second step is the field
review, which consists of a
face-to-face interview
with the recipient and contacts with collateral
sources of information. Finally, the reviewer
determines whether
the case is correct and, if not,
determines the nature of the error and the
dollar
amount which was incorrectly paid.
ACF stated that the only error exclusion provided for in
the QCM is for
the payment adjustment lag period, which
was not present in L.G.'s
case. ACF argued that section
3420 of the QCM requires that actual
budget month income
be used to determine the amount of payment for the
review
month.
ACF contended that the procedures outlined in the QCM are
designed only
to assist state and federal QC in reviewing
AFDC cases and that adherence to
these procedures has no
effect on whether a particular case was paid
correctly.
ACF argued that section 408(a) of the Act and its
implementing regulations support ACF's position that the
review must
focus on payment accuracy rather than on an
evaluation of a state's QC
practices.
Analysis
In the most basic terms, Iowa's position here is that it
complied with
all the QCM requirements and that
therefore it did not commit an error
for QC purposes and
should not be penalized for failing to find an error
beyond its ability to detect. ACF's position is that,
notwithstanding Iowa's efforts, Iowa's QC review's
failure to find
L.G.'s additional income constituted an
error that resulted in an erroneous
payment which must be
charged to Iowa.
This very question, a state's best efforts to comply with
QCM
requirements versus AFC's insistence on an error-free
QC review, was
examined by the Panel in Alabama Dept. of
Human Resources, DAB QC13 (1992),
aff'd on
reconsideration, DAB QC44-R (1992). Iowa here relied on
Alabama to support its position, while ACF contended that
if the
decision in this appeal followed Alabama, the
purpose of federal Quality
Control would be undermined.
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. ACF obtained
information on
the unreported 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 client's
employment had not yet become available on the
IEVS at
the time the state conducted its QC review.
The Panel found that the state QC review had complied
with QCM's
instructions for processing a claim where an
AFDC recipient denies having
earnings from employment:
We conclude that where . . . 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. 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.
Alabama at 9-10.
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 IEVS would not be counted in
determining a state's error rate. The Panel noted that
ACF was
free to modify this policy. 2/
The factual development in this appeal is not nearly as
extensive as was
the case in Alabama, yet ACF has not
disputed Iowa's representation of what
its QC review did
to ascertain L.G.'s status and the review's reliance on
the IEVS data. And while the factual situation here is
slightly
different from that in Alabama -- there AFDC
recipients claimed no
employment income, while here L.G.
underreported her employment income --
the Panel's
reasoning in Alabama is nevertheless applicable here.
During the time period in question here, section 3551 of
the QCM (now
section 3552 under the October 1992 revision
to the QCM) provided that the
state QC review, in
determining a recipient's wages and earnings, was, in
the
case where the recipient acknowledged income, first to
make contact
with the recipient's employer and then to
check pay stubs covering relevant
months if there was no
indication of other employment. If the
recipient stated
that he/she had no earnings, the state QC review was to
examine as primary evidence state agency wage records,
state employment
security records, state income tax
records, data obtained from IEVS, and SSA
records;
secondary evidence to be examined included past
employer's
records and bank loan information.
Here ACF has not challenged Iowa's assertions that its QC
review checked
with L.G.'s known employers, consulted the
Iowa Department of Employment
records, requested an IEVS
report, checked L.G.'s living expenses against
her
household income, and reviewed L.G.'s banking activity to
the extent
possible. ACF has thus not alleged that Iowa
failed to comply with the
QCM directives.
Therefore, this case is readily distinguishable from
South Carolina Dept.
of Social Services, DAB QC37 (1993).
There South Carolina, also
relying on the holding in
Alabama, argued that it should not be cited with a
QC
error because it took all appropriate action under
section 3552 of
the QCM to determine whether recipients
were employed. In rejecting
South Carolina's argument,
however, the Panel noted that the exemption to a
state's
error rate permitted under Alabama was "narrowly drawn to
apply
only where a state could demonstrate that it
complied with the relevant
instructions in the QCM."
South Carolina at 8. The Panel agreed
with ACF's
arguments that South Carolina had failed to comply with
such
specific QCM instructions as obtaining comprehensive
bank reports (section
3544) and evaluating inconsistent
evidence (section 3510).
In the absence of any allegation by ACF that Iowa failed
to abide by the
QCM in its QC review, we find, based on
our holding in Alabama, that ACF's
determination that
Iowa committed a QC error in the case of L.G. should be
reversed.
Conclusion
For the reasons discussed above, we reverse ACF's
determination that Iowa
should be cited for an error in
the case presented here.
_________________________
Thomas D. Horvath
_________________________
Peggy McFadden-Elmore
_________________________
Leslie A. Weyn
* * * Footnotes * * *
1. We identify the
recipient by her initials to
protect her privacy. The state quality
control review
number is 091192.
2. In promulgating new QC regulations in
October 1992, ACF
effectively changed this policy when it
published in the preamble to the
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.
46,782, 46,791-92 (October 13, 1992). Since the
review in L.G.'s case
was completed on October 6, 1992,
before the announcement of this
interpretation by ACF, we
do not find that Iowa was bound in this case by
ACF's
modification of its policy.
(..continued)