Department of Health and Human Services
Departmental Appeals Board
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Texas Department of
Human Services
Docket No. A-95-21
Decision No. QC80
Date: March 24, 1995
DECISION
The Texas Department of Human Services appealed the
quality control (QC)
review determination of the Regional
Administrator (RA) of the
Administration for Children and
Families (ACF) in State No. CPO318.
ACF determined that
the assistance unit (AU) in the sample case was
ineligible for Aid to Families with Dependent Children
(AFDC) because of
excess resources. ACF therefore
concluded that Texas made an
overpayment error of $158.
Whether or not the AU had excess resources turns on the
value of a mobile
home which the caretaker recipient
owned but did not live in. Based on
the evidence in the
record, we conclude that Texas failed to prove by a
preponderance of the evidence that the resources of this
AU, including
the mobile home, were within the $1,000
resource limit established by
section 402(a)(7) of the
Social Security Act (Act). We therefore
sustain ACF's
error determination.
Background and Arguments
Section 402(a)(7) of the Act requires a state to
determine an AU's need
for AFDC by considering the income
and resources of the unit's
members. As to resources, an
assistance unit may retain real and
personal property to
meet current and future needs and remain eligible for
AFDC benefits if its non-exempt property does not exceed
$1,000 in
equity value. Section 402(a)(7)(B); 45 C.F.R.
§
233.20(a)(3)(i)(B). Equity value is defined as the
fair market value
of the item less encumbrances. 45
C.F.R. §
233.20(a)(3)(ii)(F)(4). Fair market value is
defined as the price an
item of particular make, model
size, and material or condition will sell for
on the open
market in the geographic area involved. Id.
The Quality Control Manual (QCM) provides that QC
reviewers are to follow
state procedures to determine
fair market value. QCM § 3543.
Texas did not cite any
state procedures for determining fair market
value. The
Texas definitions of fair market value and equity are
essentially parallel to the federal definitions. Section
512 of
the Texas Income Assistance Handbook defines fair
market value as the amount
the resource would bring if
sold on the current local market. Section
513 of the
Texas Income Assistance Handbook defines equity as the
amount
of money that would be available to the owner
after the sale of a resource
after deducting money owed
on the item and the costs normally associated
with the
sale and transfer of the item.
During the review month (January 1994), the recipient
lived in Monihans,
Texas but owned an unencumbered mobile
home located in Sierra Blanca,
Texas. The recipient and
her child had lived in the mobile home until
September
1993 when they moved to Monihans. The recipient's AFDC
file in Monihans did not reflect her ownership of the
mobile home so the
eligibility worker had not ascertained
its value. When Texas QC
reviewers analyzed the case,
they found that the recipient owned the home
along with a
non-functioning second vehicle valued at $225.
Recognizing that ownership of an unoccupied mobile home
could mean that
the recipient had excess resources, the
Texas QC reviewers attempted to
ascertain the mobile
home's equity value.
As set out below, the evidence and arguments concerning
the equity value
of this mobile home have evolved as the
case worked its way through the QC
system.
o Initially, the Texas QC reviewers contacted a
mobile home
dealer in Lubbock, Texas. She
stated that a mobile home such as the
recipient's might bring $2,000. The QC
reviewers also talked with
two people in the
Hudspeth County Appraisal District where Sierra
Blanca
is located. The first person said the
trailer had a tax valuation of
$6,244. The
second person said there were no realtors to
consult
in Hudspeth County about the value of
the mobile home and that she did not
think
there was a market for the recipient's mobile
home in the County
as the County was very
small. The Texas QC reviewers concluded
that
". . . the value of client's mobile home is
$2,000, but there
is no market. QCA will
exempt client's homestead as it is not
marketable." "Report of Quality Control
Finding," Att. to Texas
Notice of Appeal at
unnumbered page 8.
o The federal QC reviewers contacted the General
Manager of
Ideal Mobile Homes in El Paso,
Texas, 90 miles from Sierra Blanca who said
that the home had a "base book value" of
$8,612, depending upon
condition. According
to ACF, the reviewer informed the General
Manager of the description of the condition of
the mobile home in the
state QC review. (Our
record does not contain the state QC reviewer’s
description.) Based on the description, the
General Manager said
that he would pay no more
than $2,000 for this home if it was in very
good shape and that no lender would finance a
mobile home of this
age. Federal QC also
contacted an employee at the bank in Sierra
Blanca who said that most mobile homes for the
area were purchased in El
Paso, Texas. Based
on its findings, federal QC determined that the
home had a fair market value of $2,000 and this
AU was ineligible
because of excess resources.
o Texas appealed federal QC's determination to
the RA.
In its appeal, it cited the portion of
its definition of "equity" value that
provides
that the equity value of an asset is the amount
of money
available after the sale of the
resource. Texas argued that there
would be
costs associated with selling this mobile home
which would
reduce its value below the $2,000
fair market value cited by federal
QC. Texas
represented that it had contacted the General
Manager of
Ideal Mobile Homes. Texas listed
the following costs which it
represented were
expenses "detailed" by the General Manager:
$ 300 Realtor's
Fee
$ 120 Titling
Fee
$ 16 Title
Search
$1,375 Cost to move the mobile
home
$1,811
Based on these expenses, Texas argued that the
equity value
of the home was reduced to $189
and the recipient did not have excess
resources.
o The RA rejected Texas' appeal on the grounds
that Texas had
failed to show that the listed
expenses were costs "normally associated with
the sale and transfer" of a mobile home.
o In its appeal before the Panel, Texas argued
that the
$2,000 value established by ACF was
arbitrary because it was based on a
statement
made by an El Paso mobile home dealer and was
not
substantiated by a source that was informed
about the specifics of this
particular home and
its geographic location. Texas represented
that it had recontacted the employee at the
Bank of Sierra Blanca who
said that Bank would
not finance the home and that it would be of
very
little value. Texas also represented that
it had contacted a loan
officer at the Bank who
said that the mobile home was not worth
anything. Alternatively, Texas argued that the
costs associated
with the sale of the home must
be deducted from the $2,000 value alleged by
federal QC and that deduction of those costs
would reduce its equity
value below the
resource limit.
o Based on the evidence before it, the Panel
determined that
it needed additional evidence
as to whether the costs identified by Texas
were costs "normally associated with the sale
and transfer" of a mobile
home. The Panel
requested the parties to recontact the General
Manager of Ideal Mobile homes to ascertain
whether he meant he would pay
$2,000 for a 1973
Lancer located in Sierra Blanca or he meant he
would
pay $2,000 for the trailer if it were
relocated, at the seller’s expense, to
his
mobile home lot in El Paso, Texas. The General
Manager
subsequently said that he meant that he
would purchase a mobile home of the
described
model, age and condition located in Sierra
Blanca and pay the
seller $2,000. He would not
impose any fees on the seller for the
relocation or retitling of the mobile home.
Analysis
The issue presented by this case is whether Texas
adequately verified
that the recipient did not have
excess resources as defined by section
402(a)(7) of the
Act. For the following reasons, we conclude that
Texas
failed to prove that the equity value of this AU’s
resources was
under the AFDC resource limit of $1,000.
Below we discuss the burden
of proof in QC cases and
explain why the preponderance evidence in this case
does
not support Texas’ position.
A purpose of the QC process is to test the accuracy with
which a local
agency is applying AFDC eligibility and
payment requirements. "The QC
review independently
establishes and verifies the facts about each element
of
eligibility for each case in the statistical sample."
QCM §
3020. "Verification for QC purposes is defined as
establishing the
facts regarding eligibility and payment
for the sample case as of the review
date." QCM § 3500.
As an initial matter, we note that Texas had the ultimate
burden of
verifying, or proving, the facts essential for
eligibility, i.e., that the
equity value of this AU's
non-exempt resources did not exceed the resource
limit.
Placing the burden of proof on states in the QC process
is
consistent with the fundamental principle in grants
law that the grantee has
the burden of establishing that
it is entitled to grant money. See,
e.g., New York State
Dept. of Social Services, DAB No. 204 (1983); New
Jersey
Dept. of Human Services, DAB No. 899 (1987).
Applying this standard to the evidence in this case, we
conclude that
Texas failed to satisfy this burden because
the preponderance of the
evidence establishes that the
recipient's mobile home had an equity value in
excess of
the resource limit. We reach this conclusion because ACF
offered credible evidence that the mobile home could have
been sold on
the current local market for approximately
$2,000. Below we discuss
the reasons for our
conclusion. 1/
The fair market value of a resource is defined as "the
amount the
resource would bring if sold on the current
local market." Texas
Income Assistance Handbook § 512.
Based on the arguments and evidence
presented in this
case, we conclude that the local market for this mobile
home was not limited to Hudspeth County, where Sierra
Blanca is located,
but extended to El Paso. We reach
this conclusion because the General
Manager of Ideal
Mobile Homes in El Paso represented that he buys and
sells used mobile homes in the Sierra Blanca area.
Further, the
bank employee at the Sierra Blanca bank
represented that consumer items such
as automobiles and
mobile homes are typically purchased in El Paso.
Therefore, we conclude that the local market for this
mobile home
included dealers located in El Paso, such as
Ideal Mobile Homes.
ACF provided credible evidence that this mobile home
could be sold for
approximately $2,000 within the local
market: the statement of the
General Manager of Ideal
Mobile Homes. He indicated that he would
purchase a
trailer of this make, model, age, and location, if it
were in
very good condition, for $2,000. The General
Manager's evaluation of
the worth of the mobile home is
supported by two other portions of the
record. First, in
determining what he would pay for this mobile home,
the
General Manager apparently referred to an industry
standard for the
value of this type of mobile home
(referred to in the reviewer's notes as
the "base book
value"). He said that the base book value was listed as
$8,612. The base book estimate indicates that this type
of mobile
home, even though twenty-one years old, holds
some significant value over
time. Second, the value of
$2,000 dollars proposed by the General
Manager is
consistent with the $2,000 value identified by a mobile
home
dealer located in Lubbock. (The Lubbock dealer's
opinion was reported
by the Texas QC reviewer who
determined, pursuant to the Lubbock dealer's
evaluation,
that a mobile home of this type and age had a value of
$2,000 but was not marketable in the community of Sierra
Blanca.)
Texas argued that the General Manager's evaluation was
not convincing
because he did not have personal knowledge
of the condition of this
particular mobile home. We
agree that the General Manager's lack of
personal
knowledge means that his evaluation was not fully
informed. However, in the context of this record, we
conclude that
his lack of personal knowledge does not
render his opinion unreliable for
the following reasons.
o The General Manager was
apparently given
information about the condition of the mobile
home. Both the initial federal difference
finding and the RA's
decision indicated that
the federal QC reviewer informed the General
Manager of the state QC review's description of
the condition of the
mobile home.
o Between the difference finding and its appeal
to the RA,
Texas officials talked to the
General Manager. There is no indication
in the
record that they ascertained that the General
Manager was
misinformed about the condition of
the home or tried to cause him to modify
his
estimate based on their understanding of its
condition.
o Only if in-person inspection would have caused
the General
Manager to lower his estimate to
$775 or less would the AU be within the
resources standard. 2/ Texas has offered no
evidence
to show that the mobile home was so
substandard as to reduce its value to
the
extent that the General Manager would be likely
to reduce his
estimate from $2,000 to $775.
o Texas officials implicitly conceded the
expertise and
reliability of the General
Manager by relying on him to identify the types
of costs that can be associated with selling a
mobile home.
Therefore, absent some evidence that the General
Manager's opinion was
based on misinformation or
confusion about the nature or condition of the
mobile
home, we do not believe we should disregard his opinion.
Texas argued that the opinions of the employees at the
bank located in
Sierra Blanca that the mobile home was
worth nothing or very little were
more credible than that
of the General Manager because the employees were
familiar the conditions and market in Hudspeth County.
3/ We agree with Texas that, if the market for this
trailer
consisted only of individuals in the Hudspeth
County, the bank employees
would be the better authority
for the value of the mobile home. In
Hudspeth County,
this mobile home may be worth nothing or very little
because there are few potential buyers, the potential
buyers are poor,
financing is not available, and the cost
to an individual to move this
trailer would be
significant in relation to its value. However, as we
determined above, the market for the mobile home included
mobile home
businesses located in El Paso. When the
market is expanded in this
way, the bank employees'
statements are not necessarily inconsistent with
that of
the General Manager. The General Manager's statement
shows
that a mobile home business with a larger, more
affluent pool of buyers and
the ability to relocate the
mobile home would be willing to buy this mobile
home for
an amount which exceeds the AFDC resource limit.
Therefore, we conclude that the opinion of the bank
employees was based
on the improper assumption that the
market for the mobile home consisted
only of Hudspeth
County and their evaluation does not necessarily conflict
with and should not prevail over the evaluation of the
General Manager.
Finally, Texas argued that, if the mobile home could be
sold for $2,000,
certain expenses should be deducted from
that figure as "costs normally
associated with the sale
and transfer" of a mobile home. We reject
this argument.
The General Manager said that, if he were to buy the
mobile home, his price of $2,000 would not be reduced by
these
costs. Therefore, even if these costs are normally
associated with the
sale of a mobile home, it appears
that his $2,000 estimate already accounted
for the
expenses of sale.
Conclusion
For the preceding reasons, we conclude that Texas failed
to prove by a
preponderance of the evidence that the
equity value of the AU's countable
resources was within
the resource limit established by section 402(a)(7) of
the Act and therefore ACF correctly determined that this
AU was not
eligible for benefits in the review month.
__________________________
Sara
Anderson
___________________________
Jeffrey
A. Sacks
___________________________
Leslie
A. Weyn
* * * Footnotes * * *
1. We note that this
case is based on evidence
before us and tests only Texas' verification of
the value
of this recipient's resources. Whether or not this
recipient actually has excess resources is not determined
here.
2. In order for the
AU to be below the resource
limit, the mobile home would have to have an
equity value
of not more than $775 ($225 value of the second car +
$775
value of the mobile home = $1,000).
3. In its Reply, Texas also indicated that one
of the
employees was actually familiar with this
particular mobile home.
Texas Reply at 1, 2. Texas
represented that the employee stated that
"the mobile
home is worth nothing to the client unless she moves it,
because of the age and condition of the mobile home, and
the fact that
she does not own the lot." The record
contained no further information
as to facts this
employee had about the condition of the mobile home.
From his statement, it is impossible for the Panel to
evaluate the
extent to which his knowledge of the
condition of the mobile home, as
opposed to the fact the
mobile home would have to be moved, entered into his
conclusion that its value was "$0."
(..continued)