Department of Health and Human Services
Departmental Appeals Board
QUALITY CONTROL REVIEW PANEL
SUBJECT: New York State
Department of Social Services
Docket No. A-94-207
Decision No. QC76
DATE: December 30, 1994
DECISION
The New York State Department of Social Services (New
York) appealed an
August 4, 1994 quality control (QC)
review determination of the Regional
Administrator of the
Administration for Children and Families (ACF) in State
QC number 691829. In that case, ACF found an overpayment
of $40.00
based on two errors: a carfare allowance of
$32.50 and receipt of
$8.00 in Retirement, Survivors and
Disability Insurance benefits. New
York conceded the
error relating to the $8.00 benefits amount, but
contested the overpayment finding relating to the $32.50
carfare
payment. New York admitted that the carfare
allowance was not properly
made under the Aid to Families
with Dependent Children (AFDC) program, but
argued that
it was a proper payment under the Emergency Assistance to
Families (EAF) program. Since claims by New York on both
programs
are paid at the same rate of federal
reimbursement, New York argued that it
should not be
penalized by finding an overpayment merely because of the
"technical" error of charging the wrong federal program.
New York
Br. at 2.
We conclude that the AFDC payment in this case was
erroneous because of
the inclusion of the carfare
payment. Therefore, we sustain the
Regional
Administrator's determination.
Facts
The facts underlying this case are undisputed. The
budget on which
the AFDC payment was based for the review
month included a carfare allowance
of $32.50 for the
mother in the assistance unit (AU) to look for an
apartment. New York's AFDC state plan provisions do not
permit a
carfare allowance for this purpose. In some
circumstances, such an
allowance is permissible under New
York's EAF state plan provisions.
Legal Background
Title IV, Part A of the Social Security Act (Act)
establishes the AFDC
program to provide assistance to
specified needy children and their
caretakers. Section
408(a) of the Act requires states to establish a
quality
control system in order to determine the amount of any
erroneous
AFDC payments made by a state in administering
the AFDC program. The
AFDC QC system consists of a state
review of a sample of the state's AFDC
payments during a
given period and a federal re-review of a subsample of
the sample.
Pursuant to this statutory mandate, the Secretary has
issued regulations
for the AFDC QC system, which require,
among other things, that the state
operate its AFDC QC
system in accordance with applicable regulations and
with
the policies and procedures prescribed in the QC Manuals
issued by
the Department of Health and Human Services.
45 C.F.R. �
205.40(d)(1). The regulations set forth the
scope of the QC system for
AFDC which is "designed to
reduce incorrect expenditures by identifying the
nature,
magnitude and causes of all errors and to improve the
accuracy
of the AFDC and Adult Assistance programs." 45
C.F.R. �
205.40(a)(1). To this end, the QC reviews seek
to identify any
"overpayments." An overpayment is
defined as:
a financial assistance payment received by or
for an assistance
unit, for the review month,
which exceeds by at least $5.00 the amount for
which that unit was eligible under permissible
State practice in effect
on the first day of
the review month.
45 C.F.R. � 205.40(b)(9);
see Section 3040 of the QC
Manual (nearly identical language).
Section 402 of the Act requires each state to submit for
the Secretary's
approval a state plan for aid to needy
families with children meeting
certain requirements. The
QC system reviews AFDC payments against
permissible state
practice (PSP). PSP is defined, in relevant part, as
"written rules and policies relating to eligibility and
payment that are
in accordance with existing, approved
State plan provisions." 45
C.F.R. � 205.40(b)(12); QC
Manual � 3131.
Analysis
Since both the AFDC and EAF programs are established
under title IV-A of
the Act, and since the federal
government matches the New York's costs in
each program
at the same rate, New York argued that no overpayment
should be found where the AU was eligible for the funds
regardless of
which program should have been the source.
New York argued that its position was supported by the
definitions of
overpayment and of PSP, because neither is
expressly limited to payments
made with AFDC funds or
under the approved State plan relating to AFDC
only. New
York asserted that the definitions in the regulations and
the Manual apply to "several titles of the Act, including
Title IV-A,
which provides for both the AFDC and EAF
programs," and that nothing in the
definitions requires
the payment to be funded under any particular
program.
New York Br. at 2-3. In this case, New York concluded
there was no "overpayment" within the meaning of 45
C.F.R. �
205.40(b)(9) because the AU was eligible for the
carfare allowance under the
PSP established by the
provisions of New York's EAF state plan.
We find no merit in New York's position. On the
contrary, New
York's arguments ignore the scope and goals
of the AFDC QC process and merge
two programs (AFDC and
EAF) which have different requirements for
eligibility
and payment.
The statutory purpose of the AFDC QC program is to
"improve the accuracy
of payments of aid to families with
dependent children." Section
408(a) of the Act (entitled
"AFDC Quality Control System"). It is
designed to assess
the correctness of payments under AFDC, not under all
federal assistance programs or Title IV programs. While
the
definitions of PSP and overpayment do not repeat the
limitations of an
AFDC-funded payment, they occur in the
context of a system which reviews
only the correct
application of AFDC standards to AFDC payments. Such
repetition would have added nothing. Therefore, the
absence of a
limitation in those definitions to the AFDC
QC process does not imply, as
New York suggested, that an
overpayment only occurs when the net payment to
an
assistance unit is more than the total for which it would
have been
eligible "regardless of the source of the
funding," under any title in the
Act covered by 45 C.F.R.
Part 205. Cf. New York Br. at 3.
A review of the process by which AFDC payments are tested
in the AFDC QC
demonstrates the unreasonableness of New
York's construction of the terms
"overpayment" and "PSP."
o Each month a random sample of AFDC
cases is
identified for review. The QC manual states that a
claim
for FFP "through the AFDC program is essential
for a case to be included in
the AFDC QC universe."
The QC Manual further explicitly instructs
that:
"All emergency assistance cases should be dropped as
'Listed in
Error.'" QC Manual � 3250; see also �
2421.1. EAF payments are
thus expressly excluded
from review in the AFDC QC sample.
o Once a case is part of the AFDC QC sample, its
subjected to a
methodical and exhaustive review in
which each aspect of AFDC eligibility
and payment is
tested. The review process examines 570 "elements"
which are keyed to the regulations governing AFDC
eligibility and
payment. The elements are limited
to AFDC standards.
o AFDC QC reviews payments of AFDC as they were made
by the states,
without adjusting for recoveries or
collections from other sources. In
determining
disallowances resulting from QC error rates, the
preamble to
the QC regulations points out that AFDC
expenditures are defined as --
total payments of aid to families with
dependent
children. It is this amount that is
reviewed in the QC sample and not
the paid
amount less child support collections and AFDC
recoveries or
cancellations.
57 Fed. Reg. 46,799 (October 13, 1992).
While the
kind of collections and recoveries mentioned are not
the same
as recasting a claim to a different Title
IV federal program, the principle
involved is
similar. The amount on which any potential
disallowance is to be calculated is tied to the
accuracy of the total
payments which are subject to
review in the AFDC QC process, i.e., only AFDC
payments, regardless of any other source from which
a state may be able
to recover the funds.
Therefore, the fact that the definitions of overpayment
and PSP do not
state that they are limited to AFDC
payments or eligibility under AFDC state
plans does not
mean that AFDC payments must be tested under all other
Title IV PSPs before they could be determined to be
overpayments.
Besides overlooking the narrow scope of the AFDC QC
system, New York's
argument glosses over the very
substantial differences between AFDC and
EAF. For
example, New York acknowledged that the two programs have
distinct state plan provisions. The most relevant
distinction is
the undisputed fact that, while the state
plan for EAF permits payment of a
carfare allowance, 1/
the state plan for AFDC does not allow
such a payment.
New York Br. at 3; ACF Br. at 1. More generally,
the EAF
program serves a constituency which is not coextensive
with that
of the AFDC program. An AU may be ineligible
for AFDC, but may
nevertheless qualify for EAF benefits
in some circumstances.
2/ On the other hand, only a
subset of AFDC AUs qualify for EAF
benefits. AFDC
eligibility centers on a "dependent child," as defined
in
the Act. Section 406 (a) of the Act; see also section
406
(b). A dependent child must be under 18 (unless a
student), deprived
of parental support or care due a
parent's death, absence or incapacity, and
living with a
specified relative. Id. "Aid to families with
dependent
children" means payments made with respect to such a
child. EAF, by contrast, is generally available, for no
more than
30 days in a year, to "needy families with
children" under age 21. The
child in an EAF family must
be or have been within a specified period living
with
specified relatives, "but only where such child is
without
available resources, the payments, care, or
services involved are necessary
to avoid destitution of
such child or to provide living arrangements in a
home
for such child," and the need did not result from a
relative's
refusal to work. Section 406 (e)(1) of the
Act. It is evident
that evaluating the accuracy of an
EAF payment would necessitate reviewers
gathering
information about a number of circumstances that are not
relevant to eligibility for AFDC.
Also, the rate of FFP is 50 percent for all allowable EAF
expenditures,
whereas the rate of FFP for AFDC
expenditures varies from state to
state. Section 403 of
the Act; 45 C.F.R. � 233.120 (b)(2). The
fact that New
York receives the same rate for both programs is
coincidental. 3/
Further, New York incorrectly asserted that in the
present case there was
"no dispute that the assistance
unit was eligible for the EAF
program." New York Br. at
2. ACF stated only that the payment
"would have been
allowable under EAF had it a) been timely and b) been
incurred by a homeless family seeking a permanent home."
ACF Br.
at 2. However, New York did not demonstrate
that any of the elements
included in the state or federal
QC review were directed to determining
whether the family
was homeless or whether the expenses were incurred in
search of a home. There would have been no reason for
the
reviewers to have ascertained these facts since they
would be relevant only
to a review of EAF payments,
which, as noted above, are excluded from the
universe of
AFDC QC sampled cases and not tested in the AFDC QC
review
process.
New York made an additional argument in its reply brief
based on the
two-year period provided in the Act for
filing claims for federal financial
participation (FFP).
Section 1132 of the Act. The claiming
deadline bars FFP
for any expenditure for which a claim is not filed by a
state within two years after the quarter in which the
expenditure was
made (with exceptions not relevant here).
New York argued that, under
this provision, it has until
September 1995 to file a revised claim and
receive full
payment without reduction in FFP. New York contended,
therefore, that it should be "permitted to re-claim the
amount of the
allowance under the correct program,
without loss of FFP." New York
Reply at 2.
This argument is not relevant to the issue in this case.
The issue
here is only whether New York made an
erroneous AFDC payment. Whether
or not New York may
revise its claims under EAF to recover FFP for an
expenditure originally claimed in error under AFDC does
not change the
fact that New York made an erroneous AFDC
payment. Not counting the
improper carfare allowance as
a payment error would be contrary to the
design of the
AFDC QC process for two reasons. First, as explained
above, the AFDC QC process tests only the correctness of
AFDC
payments. It provides no way to determine whether
an erroneous AFDC
payment would be allowable under some
other federal program and would
therefore be a "claiming
mistake." Second, in the AFDC QC sampling
process, this
overpayment represents other erroneous AFDC payments in
the total universe of AFDC cases. A state's AFDC error
rate is
calculated on the basis of the ratio of its
erroneous payments to its total
AFDC payments and the
national error rate is calculated on basis of the
ratio
of all erroneous payments by the states to the total of
aid paid
by the states Sections 408 (d) and (m)(1) of the
Act. Allowing states
to remove "claiming mistakes,"
while leaving the universe of AFDC payments
unchanged,
would distort the error rate formulas.
Contrary to its characterization, New York is not being
penalized
by the finding of an erroneous payment for
having made a "claiming
mistake." Cf. New York Reply Br.
at 2. The ultimate result of
the QC process may be that
New York could be penalized if its administration
of the
AFDC program permits too many errors in AFDC payments to
occur. However, we are not resolving a disallowance of
$32.50. Our task is simply to resolve whether the
payment at issue
was erroneous for purposes of the AFDC
QC difference process. We
conclude that it was.
Conclusion
We conclude that the AU was overpaid by the amount of the
carfare
allowance. Since New York conceded error in
regard to the receipt of
benefits, we sustain the federal
determination.
___________________________
Sara
B. Anderson
___________________________
Jeffrey
A. Sacks
___________________________
Leslie
A. Sussan
* * * Footnotes * * *
1. New York's EAF plan
provides for assistance
to families with minor children which is "necessary
to
avoid destitution of the children or to provide living
arrangements
for them in a home." New York Ex. 6, at 2.
New York policy permits
such assistance to include
transportation, as follows: "If otherwise
eligible,
child care and transportation may be paid under EAF for
homeless families seeking permanent housing." New York
Ex. 7 (New
York State Public Assistance Sourcebook at
X-
D-1).
2. Hence,
the regulations provide that
"eligibility conditions imposed" on EAF
recipients in a
state plan providing for EAF "may be more liberal than
those applicable" to other parts. 45 C.F.R. � 233.120
(a)(1).
3. It is
only by relying on this coincidence
that New York is able to argue here that
the total amount
of federal funds affected would not be altered by
recasting the erroneous AFDC payment as a correct EAF
payment, since
"the funding streams have the same
matching rates." New York Br. at
2. The AFDC QC program
is nationwide, however, and its scope cannot
depend on
the FFP rate that happens to apply in a particular
state.
(..continued)