Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Delaware Health and
Social Services
Docket No. A-94-058
Decision No. QC65
DATE: May 4, 1994
DECISION
Delaware Health and Social Services (Delaware) appealed
the October 27,
1993 quality control (QC) review
determination of the Regional Administrator
of the
Administration for Children and Families (ACF) that an
Aid to
Families with Dependent Children (AFDC) recipient
1/ was
ineligible for the assistance payment he received
in the review month of
April 1993. Delaware did not
dispute that the recipient had unreported
earnings in the
review month which rendered him ineligible for that
month. However, Delaware contended that an exception
found in the
QC Manual (QCM) justified Delaware QC's
finding of a regular overpayment of
$319 in this case.
For the reasons discussed below, we conclude that
the
exception cited by Delaware is inapplicable to this case.
Therefore, we uphold ACF's determination that the case
was
ineligible.
Applicable authority
Section 402(a)(7) of the Social Security Act (Act)
requires that a state
plan for AFDC determine applicants'
need taking into consideration the
income and resources
of children and relatives required to be included in
the
AFDC assistance unit (AU). Section 402(a)(18) provides
that an
AU is ineligible for AFDC in any month in which
total earned income exceeds
185% of the state's standard
of need.
The regulations, at 45 C.F.R. � 233.33, require that
eligibility for AFDC
be determined prospectively for all
payment months. The regulation
explains, "Thus, the
State agency shall establish eligibility based on its
best estimate of income and circumstances which will
exist in the month
for which the assistance payment is
made."
If an AU is eligible for assistance, income is again
considered in
determining the amount of assistance the AU
receives. The AU's income,
less certain "disregards," is
subtracted from the state's payment standard
to arrive at
the assistance payment to the AU. States may compute
payments to recipients in ongoing cases based on either
"prospective" or
"retrospective" budgeting of income.
Prospective budgeting, similar to
prospective eligibility
determination, requires the state to compute the
payment
amount based on its best estimate of the income and
circumstances which will exist in the payment month. 45
C.F.R. �
233.31(b)(1). Retrospective budgeting permits
the state to calculate
the amount of assistance for a
payment month based on the actual income
which a
recipient earned in a previous "budget" month. 45 C.F.R.
�
233.31(b)(2). States may adopt either one-month
retrospective
budgeting, in which the budget month is the
month immediately preceding the
payment month, or two-
month retrospective budgeting, in which the budget
month
is two months prior to the payment month. 45 C.F.R. �
233.32.
If an AU which has been receiving AFDC becomes
ineligible, payment must
be terminated and the AU must
reapply if it again becomes eligible for
AFDC. However,
the QC Manual (QCM) provides for an exception to this
general rule:
[I]f the AU is being retrospectively budgeted and
the period of
ineligibility is expected to last only
one month, the State may choose to
suspend . . .
assistance for the payment month corresponding to
the month of ineligibility. The most common
circumstance resulting
in suspension occurs when an
extra weekly or bi-weekly paycheck is received
which
results in case ineligibility for only one month.
Suspension must be limited to a one month period
unless the AU
becomes ineligible for a second
consecutive month for a different
reason. The two-
month suspension rule does not apply if the unit was
ineligible for two consecutive months for the same
reason.
QCM � 3430. However, the QCM directs the reviewer to
assume
termination in cases where suspension is
inapplicable, i.e., where the AU is
ineligible for two
consecutive months for the same reason:
If the budget month, intervening month, or review
month's income
and circumstances result in
ineligibility and suspension is not appropriate,
assume termination, revert to prospective budgeting,
and use actual
review month income to determine the
amount of payment for the review
month.
EXCEPTION: Do not revert to prospective budgeting
and actual
review month income if the local agency
incorrectly budgeted the income
received in the
budget month, there was a subsequent change in that
circumstance first occurring in the PAL period and
ineligibility
occurs. Remain in retrospective
budgeting and code the error as a
regular
discrepancy in the appropriate income element.
QCM � 3430, 5.
When state or federal QC reviewers determine that a case
received an
incorrect payment or that payment was made to
an ineligible case, the
reviewer must determine whether
the discrepancy is "regular," which is
countable in the
state's error rate, or "payment adjustment lag" (PAL),
which is not countable as an error. A PAL error "results
from a
change in circumstances that first occurred in the
review month or the month
immediately preceding the
review month." QCM � 3300.
The QCM defines a change in circumstance as:
any status-changing event which will result in
ineligibility or a
different amount of assistance
when reviewed against PSP [permissible state
practice] (the basis for the QC review). Examples
of changes in
circumstance generally include changes
in income (start of/end of), changes
in employment
status (full/part-time, loss of, promotion/demotion,
etc.), changes in resources, changes in conditions
of eligibility.
QCM � 3300. However, the QCM specifically provides that
"fluctuating income is not considered a change in
circumstance."
Id.
Background
The recipient, LL, applied for AFDC on November 25,
1992.
2/ In his application, LL did not report that he
was employed.
Delaware approved the application on
December 31, 1992, with no employment
income budgeted.
Delaware uses two-month retrospective budgeting.
LL's case was selected for QC review for the month of
April 1993.
Delaware had paid assistance to LL for April
based on the budget month of
February 1993, for which the
State had budgeted no income. During the
QC review,
State QC discovered that LL had unreported wages during
the
fourth quarter of 1992 and during the first quarter
of 1993. LL's
employer verified that he had started
working on November 24, 1992 and was
still employed as of
May 20, 1993. In the budget month, February 1993,
LL was
paid wages of $597.99; during March 1993, the intervening
month,
he was paid $905.10; and in the payment month of
April 1993, he was paid
$628.43.
LL's AU consisted of three persons. An applicant or
recipient is
ineligible for AFDC if income exceeds 185%
of the standard of need.
Section 402(a)(18) of the Act.
In Delaware, 185% of the standard of
need for three
persons was $625. Thus, LL was prospectively
ineligible,
based on earned income, for the months of March and
April,
1993. Delaware did not contend that LL was, in
fact, eligible for AFDC
for the month of April. Instead,
Delaware argued that the exception
found in section 3430,
paragraph 5 of the QCM permitted it to continue to
apply
retrospective budgeting on the facts of this case.
Relying on this exception, Delaware QC determined that LL
was overpaid
$319 for April 1993. On re-review, federal
QC determined that the case
was ineligible. In its
request for reconsideration to ACF, Delaware
initially
contended that there was a change in circumstance that
would
invoke the exception in QCM section 3430, since LL
had changed from
part-time to full-time employment during
the PAL period. However,
federal QC contacted LL's
employer, who stated that LL had remained a
part-time
employee at all times. ACF Exhibit (Ex.) 3. The
employer stated that LL's income fluctuated based on the
number of hours
he worked. Id. In its appeal to this
panel, Delaware then argued
that LL's income first
exceeded the payment standard in March 1993.
Delaware
contended that the exception thus should apply because
this
change in circumstance occurred in the PAL period.
In its response,
ACF cited section 3300 of the QCM to
support its contention that LL's
increased income did not
qualify as a change in circumstance.
Analysis
Delaware did not dispute that LL was prospectively
ineligible for AFDC
for the review month, April 1993.
Delaware's only contention before us
was that the
exception in section 3430 of the QCM permitted State QC
to
apply retrospective budgeting to arrive at the finding
of a $319 overpayment
rather than the finding of
ineligibility which ACF maintains is
proper. The single
issue in this case is whether the change in the
recipient's income for March 1993 constituted a change in
circumstance
which would invoke the exception. We
conclude that such a change in
circumstance did not
occur. Therefore, we uphold ACF's finding that
the case
was ineligible.
The provision of the QCM upon which Delaware relied
states as its basic
premise that a state must revert to
prospective budgeting if circumstances
in the review
month, the intervening month, or the budget month result
in a finding of ineligibility and suspension does not
apply.
Delaware did not dispute that these conditions
are met here. LL's
gross income exceeded 185% of the
standard of need in the review month,
April, and in the
intervening month, March. Suspension does not apply
because LL was ineligible for two consecutive months for
the same
reason, excess income. Therefore, the QCM would
require prospective
budgeting based on actual review
month income, which would result in a
finding that the AU
was ineligible for the April payment. Delaware
contended, however, that it was entitled to use
retrospective budgeting,
pursuant to the exception in QCM
section 3430.
To satisfy the exception, two factors must be present.
First, the
state must have incorrectly budgeted income in
the budget month and second,
a change in circumstance
must occur in the PAL period. The first
factor is
present here, because Delaware budgeted no income for the
budget month, February 1993, and it is undisputed that LL
had income in
February. Delaware contended that the
second requirement is satisfied
because a change in
circumstance occurred in March, the month preceding the
review month (the PAL period). We do not agree that a
change in
circumstance occurred.
Delaware contended in its request for reconsideration
before ACF that
there had been a change in circumstance
because LL's employment status had
changed from part-time
to full-time in March 1993. If this were the
case, the
exception would apply. The QCM expressly identifies
changes from part-time to full-time employment as changes
in
circumstance:
Examples of changes in circumstance generally
include changes in
income (start of/end of), changes
in employment status (full/part-time, loss
of,
promotion/demotion, etc.), changes in resources,
changes in
conditions of eligibility.
QCM � 3300.
However, on reconsideration, ACF verified with LL's
employer that his
employment did not change from part-
time to full-time. The employer
stated that LL continued
to be a part-time employee, whose earnings
fluctuated
based on the number of hours he worked. ACF Ex. 3.
Before us, Delaware has not argued that LL became a full-
time employee
in March.
Instead, Delaware argued that the changes in employment
status listed in
QCM section 3300 are not intended to be
all-inclusive, as demonstrated by
the use of "etc."
Delaware argued that the increase in LL's income
above
the payment standard in March constituted a "status-
changing
event" that would qualify as a change in
circumstance. Delaware's
argument cannot be reconciled
with the QCM definition, which excludes
fluctuating
income from consideration as a change in circumstance.
The only change which occurred in LL's case during the
PAL period was the
amount of income which he earned. The
QCM makes clear that a change in
the amount of income,
without more, is not the type of status-changing event
which would qualify as a change of circumstance.
According to the
QCM, LL's status changed when he first
became employed. That occurred
in November 1992, before
his AFDC application was approved.
Thereafter, LL did
not lose his job, there is no indication that he was
promoted or that his increased income was due to an
increase in his
hourly rate of pay, and the record
demonstrates that he did not become a
full-time employee.
Thus, Delaware has not pointed to any change in
LL's
employment status, as defined by the QCM, that would
account for
his increased earnings in March. Based on
the record before us, it
appears that, as ACF asserted,
LL earned more money in March because he
worked more
hours. The fact that his increased earnings changed his
AFDC eligibility is not the type of status-changing event
encompassed by
the QCM provision.
The facts of this case fall squarely within the QCM rule
that fluctuating
income is not a change in circumstance.
Delaware has failed to
identify any change in
circumstance which occurred in the PAL period.
Accordingly, the exception permitting retrospective
budgeting does not
apply. Using prospective budgeting,
both parties agree that the case
was ineligible.
Therefore, ACF's determination must be upheld.
Conclusion
For the reasons stated, we uphold ACF's finding that LL
was ineligible
for the AFDC payment he received in April
1993.
__________________________
Peggy
McFadden-Elmore
__________________________
Jeffrey
A. Sacks
__________________________
Leslie
A. Weyn
* * * Footnotes * * *
1. The State QC review
number is 500087.
2. We
refer to the recipient by his initials to
protect his privacy.