Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Colorado Department of Social Services
DATE: October 21, 1991
Docket Nos. 90-222, 91-2, 91-21, 91-57, 91-87, and 91-144
Decision No. 1277
DECISION
The Colorado Department of Social Services (Colorado or State)
appealed
six determinations by the Administration for Children and Families
(ACF
or Agency) disallowing federal financial participation (FFP) claimed
by
Colorado under the Aid to Families with Dependent Children
(AFDC)
program, Title IV-A of the Social Security Act (Act). 1/ The
amount of
FFP in dispute in the six appeals is $1,057,115. 2/
Colorado claimed
the costs of its AFDC fraud control program at an enhanced
75 percent
FFP rate. The disallowed amount represents the difference
between the
75 percent FFP rate and the 50 percent FFP rate available
generally for
administrative costs under section 403(a)(3)(D) of the
Act. ACF
disallowed Colorado's claims at the higher rate because it
found that
Colorado failed to meet certain federal requirements for receiving
the
enhanced 75 percent FFP rate.
ACF initially questioned whether the State's optional fraud
control
program was in operation statewide and whether its claims at the
75
percent rate were supported by its approved cost allocation plan and
by
an adequate time reporting system. However, it became clear at
the
hearing that these appeals presented the more fundamental question
of
whether Colorado's AFDC fraud control program met the basic
requirements
for enhanced reimbursement. The parties presented evidence
at the
hearing as well as post-hearing briefing on this issue so that
no
further record development is required. As we explain further below,
we
uphold the disallowances based on our conclusion that Colorado did
not
operate a qualifying optional program for fraud control during
the
quarters at issue here. Accordingly, Colorado can receive only the
50
percent rate generally available for administrative costs for its
fraud
control activities.
Statutory Background
In section 9102 of the Omnibus Budget Reconciliation Act of 1987,
Public
Law 100-203, Congress set forth provisions, effective April 1, 1988,
for
a state, in the administration of its AFDC State plan, to establish
and
operate an optional fraud control program. Section 416 of the
Act.
Under this program any individual who is a member of a family
applying
for or receiving AFDC benefits and who is found guilty of
having
committed an intentional program violation for the purpose
of
establishing the family's AFDC eligibility or increasing the amount
of
the family's benefits is ineligible to participate in the AFDC
program
for a period of six months for the first offense, 12 months for
the
second offense, and permanently ineligible for a third offense.
Section
416(b). The state agency is required to proceed against any
individual
accused of an intentional program violation either through
an
administrative hearing or by referring the matter to the
appropriate
authorities for civil or criminal action in a court of law.
Section
416(c). The statute further provides that a state which elects
to
establish and operate a fraud control program must provide
written
notice of the penalties for fraud to all applicants at the time of
their
application for aid. Section 416(f).
Any state which elects to operate an AFDC fraud control program must
have
a State plan which provides that the state will submit to the
Secretary a
description of and budget for its program and will operate
its program in
full compliance with section 416. Section 402(a)(40).
As an incentive for states to establish such a fraud control
program,
Congress authorized the Secretary to pay a state an enhanced rate
of
FFP, 75 percent, for the costs of carrying out an optional fraud
control
program, including costs related to the investigation, prosecution,
and
administrative hearing of fraudulent cases and the making of
any
resultant collections. Section 403(a)(3)(C).
In Action Transmittal FSA-AT-88-12, issued May 31, 1988, the
Agency
detailed the features and requirements of an optional AFDC fraud
control
program. The Action Transmittal described section 416 as
providing an
option to states to "implement a fraud control program which
would
disqualify intentional program violators from participation."
The
Action Transmittal further stated that this optional program
"exceeds
current requirements" by virtue of the disqualification sanction
for
intentional program violations and the availability of 75 percent
FFP
for a section 416 program. Concerning section 416(f), the Agency
wrote:
Under section 416(f) of the Act, each State agency
"which has
elected to establish and operate a fraud
control program . . . must
provide all applicants .
. . at the time of their application for
such aid,
with a written notice of the penalties for fraud . . .
."
Because these penalties apply to all individuals
in the caseload
(i.e., recipients as well as
applicants), State agencies need to
also provide a
notice of the penalties for fraud to recipients as
well. The notice to recipients should be given no later than
the
next redetermination. 3/
State Ex. A (emphasis added).
Factual Background
In Colorado, social services are administered locally by the 63
counties
under the supervision of the State. Since 1977, prior to the
enactment
of Public Law 100-203, Colorado had operated an AFDC fraud
control
program, known as the Control of Fraud and Abuse Program
(CFA).
Colorado was being reimbursed for the costs of this program at an
FFP
rate of 50 percent. Because this fraud control program
was
county-administered, there were variations in the implementation of
the
CFA program (for example, there were differences with regard to
the
involvement of district attorney staff or other county
investigative
staff in fraud control activities).
On December 30, 1988, Colorado submitted to ACF an amendment to its
AFDC
state plan electing to operate an optional AFDC fraud control
program
pursuant to section 416 of the Act. Plan amendment 89-2, State
Ex. E.
Attached to this plan amendment was a document entitled "Fraud
Control
Program Overview" which stated that "[t]he enhanced FFP will be
passed
through to local offices based on Cooperative Reimbursement
Agreements
submitted by county offices and approved by state staff."
Id. The
document continued, "[c]ounties that wish to receive 75% pass
through
funding will be required to submit a Cooperative Reimbursement
Agreement
to the State Department, the remaining counties use the regular
80/20
state match funding." 4/ Id. The State subsequently entered
into
Cooperative Reimbursement Agreements only with Denver and
Boulder
Counties. State Exs. BB and CC.
On May 16, 1989, ACF approved Colorado's AFDC plan amendment, effective
to
October 1, 1988. In its approval, the Agency stated that it
was
"imperative that [Colorado's] procedures include proper notice
to
applicants and recipients in order to comply with the tenets of
the
fraud control program." Agency Ex. 7. With its claim for the
quarter
ending June 30, 1989, Colorado began claiming FFP at the enhanced
75
percent rate for its AFDC anti-fraud activities.
Discussion
Upon review of Colorado's claims for FFP in its CFA expenditures,
the
Agency determined that FFP was not available at the enhanced 75
percent
rate because: (1) Colorado's fraud control program was not
statewide
since only two counties had entered into a Cooperative
Reimbursement
Agreement, an element of Colorado's approved State plan; (2)
Colorado
had failed to provide procedures and instructions to counties on how
to
differentiate between administrative activities allowable at a
75
percent FFP rate and those allowable at a 50 percent FFP rate; and
(3)
Colorado had failed to amend its cost allocation plan (CAP) to
identify
activities subject to different rates of FFP.
The parties directed their briefs to these three issues. At the
hearing
held for these appeals the parties' presentations again focused on
these
issues -- whether the State's program was in operation
statewide,
whether the State provided training to the counties to assure
proper
claiming of activities that qualified for the enhanced rate, and
whether
an amendment to the State's CAP was required to state the
procedures
used to allocate fraud control expenditures which qualified for
the 75
percent rate.
At the hearing, however, a more fundamental issue emerged
concerning
whether Colorado had actually established and operated an
optional
program and thus qualified for the enhanced 75 percent rate.
Colorado admitted that, other than informing new AFDC applicants of
the
penalties for fraud, it had not adopted any new procedures to
either
notify recipients of the penalties for fraud or impose
the
disqualification sanctions required by section 416. Colorado
declared
.that, while it began in May 1989 to include a notice on its
AFDC
applications of the possible sanctions for fraud as mandated by
section
416(f), it had not yet (as of the hearing held from May 21-23 of
1991)
provided notice of the sanctions to current AFDC recipients. Tr.
at
542. Colorado explained that it was delaying issuing such a
notice
until the State had promulgated new regulations to be effective July
1,
1991. Tr. at 68 and 542. Thus, during the time at issue here,
only new
AFDC applicants, and not the thousands of existing AFDC
recipients,
received notice of the penalties for fraud. A Colorado
official further
confirmed that once the enhanced rate was available,
Colorado simply
claimed its ongoing CFA activities at the new rate rather
than at the
ordinary administrative rate. Tr. at 569.
An Agency official testified that even if Colorado had instituted its
CFA
program on a statewide basis, had trained the counties on the proper
rates to
be claimed for various activities, and had amended its CAP to
reflect the
different rates of FFP for various activities, the Agency
would still
question reimbursement at the enhanced 75 percent FFP rate
because of
Colorado's failure to meet the statutory requirements for an
optional
program. Tr. at 541. The Agency official testified, however,
that
he regarded Colorado's failure to adhere to the provisions of
section 416 to
present a potential program compliance matter to be
decided by the ACF
Regional Administrator after discussions with ACF
headquarters. 5/
Id.
Nevertheless, the Agency in a post-hearing submission took the
position
that among the issues presented by these appeals is --
Whether, for the period of the disallowances,
Colorado complied
with the Federal requirement of
section 416 of the [Act] that, as a
part of an
optional AFDC fraud control program that qualifies
for
enhanced Federal funding, a State prescribe and
impose sanctions
for individuals determined by a
Federal or State court to have
[c]ommitted
intentional program violations involving fraud?
Thus, as presented by the Agency, the case also encompasses
the
fundamental question of whether the State had established and operated
a
qualifying fraud control program during the quarters at issue here.
The
State objected and asserted both that it was not given proper notice
of
this issue in the disallowance letter and that this is a
program
compliance issue which cannot properly be considered in the context
of a
disallowance action. After consideration of the points made by
the
State, we conclude that the State's objection is without merit.
The Board has previously held that it can decide issues not
explicitly
raised in the Agency's disallowance letter. See e.g., New
York State
Dept. of Social Services, DAB No. 151 (1981) (disallowance
reversed
based on an issue not raised in the disallowance notice); Illinois
Dept.
of Public Aid, DAB No. 724 (1986). This is particularly
appropriate
here where the issues actually stated raised questions concerning
the
State's overall administration of its fraud control program so that
the
State clearly had notice of the aspect of its program activities
for
which expenditures were disallowed, and where there was a two and
1/2
day hearing including extensive testimony concerning the CFA
program.
Also, the issue which the State asks us not to reach is
inextricably
intertwined with the more specific .questions initially briefed
by the
parties since all these questions relate to whether the
State
implemented federal requirements and qualified for enhanced FFP.
6/ In
this regard, the issues in a case sometimes are refined and
clarified
during a hearing, as occurred here. Moreover, the Board's
regulations
provide for a fair, impartial, quick, and flexible process for
resolving
disputes. 45 C.F.R. 16.1. It is inconsistent with the
Board's own
regulations to fail to consider a potentially dispositive issue
which
the parties have had the opportunity to address. (After both
parties
submitted post-hearing issue statements, the Board held a
telephone
conference and requested that the parties address this issue in
their
post-hearing briefs.) 7/ Considerations of administrative
economy
require that this issue be addressed without requiring the Agency
to
formally amend its disallowance notice.
Furthermore, we conclude that this issue can properly be addressed in
the
context of this disallowance action. An issue that could, in
one
context, be considered a question of program compliance, could,
in
another context, be properly considered a basis for a
disallowance.
This proceeding concerns whether the State qualifies for
enhanced FFP
claimed for prior periods; it is, therefore, a highly relevant
inquiry
whether the State met basic federal requirements.
We have in certain prior decisions discussed at length
the
compliance/disallowance distinction, including consideration of
the
holdings in relevant court decisions. See New Jersey Dept. of
Human
Services, DAB No. 259 at 6-20 (1982); Massachusetts Dept. of
Public
Welfare, DAB No. 438 at 22-27 (1983). We rely on but do not
repeat the
lengthy analyses in those prior cases. In a recent case the
Board held
that the Agency could properly use a disallowance action to
recover
prior period expenditures claimed for FFP on the basis of a state
plan
amendment which was disapproved by the Agency after a hearing
as
provided for at 45 C.F.R. 201.6 and 213 (the procedures for
compliance
matters). In that case, the Board stated --
. . . in a disallowance the Secretary may determine
that "any item
or class of items on account of which
Federal financial
participation is claimed" shall be
disallowed. Section 1116(d) of
the Act.
Under section 403(b)(2) of the Act, the Secretary is
required to reduce a state's current payment "by any sum by
which
he finds that his estimate for any prior
quarter was greater . . .
than the amount which
should have been paid to the State for such
quarter
. . . ." See also 45 C.F.R. 201.5(c). The
Secretary's
remedy in a disallowance is
retrospective and limited, i.e., the
recovery of
discrete sums which have previously been paid to a
state in excess of the amount to which the state was entitled.
. . . the Secretary's compliance remedies and
disallowance
remedies are not mutually exclusive and serve different
purposes
. . . . The compliance remedy grants the Secretary
sweeping
powers when a state is in substantial noncompliance with
program
standards. In a compliance action, the Secretary is
authorized
to terminate all funding to the state in order to give
it
compelling incentive to bring its .program back into
compliance.
In keeping with the coercive nature of the remedy, the
amount of
money the Secretary may withhold is not necessarily related
to
the actual costs of the noncompliance at issue. In contrast,
a
disallowance action provides a specific and focused
remedy
pursuant to which the federal government may disallow
precisely
identified amounts which were not spent in accordance
with
program requirements.
New York State Dept. of Social Services, DAB No. 1246 (1991) at 6.
We emphasize, in addition, the following points.
o Although a regional program official testified that he
regarded
this as a potential compliance matter, there has been no
finding by
the Secretary that Colorado's failure to actually implement
an
optional fraud control program was a substantial noncompliance
with
program requirements. Moreover, there is no basis in this
record to
conclude that this failure has continued after Colorado's
new
regulations effective July 1, 1991. Therefore, this
disallowance does
not implicate the administration of Colorado's AFDC
program as a
whole. It in fact relates only to the narrow
question of whether
Colorado met certain requirements necessary to
qualify for enhanced
funding for fraud control activities. These
appeals then concern
discrete expenditures over a limited period of
time.
o Compliance actions are prospective
only. There is no
alternative other than a disallowance
available to the Agency to
recover improper amounts claimed during
prior periods. In this
regard, it is significant that
disallowance actions also have a
statutory basis in section 1116(d) of
the Act. The Board's procedures
for reconsidering disallowances
provide substantially the same
protections as the compliance
procedures. 8/
Therefore, for the reasons stated above, we conclude that we may
consider
whether the State actually established and operated an optional
fraud control
program by providing notice of the penalties for fraud to
its AFDC recipients
and by implementing the required sanctions.
While Colorado disputed whether issues it characterized as
program
compliance were properly before this Board, Colorado also argued that
it
had substantially complied with all the requirements of the
fraud
control program. It asserted that beginning in May 1989 it had
given
all AFDC applicants notice of the potential penalties for
fraud.
Colorado asserted that the Act requires notice only to applicants,
with
no statutory requirement for notice to current AFDC recipients.
The
State contended that any regulation that required notice to
and
disqualification of current recipients is beyond the statutory
authority
of the Agency and therefore void. In any event, Colorado
continued, the
Agency has failed to issue any such regulations requiring
notice to
current AFDC recipients. Colorado argued that the Agency's
only
authority is its own transmittal FSA-AT-88-12, which fails to give
any
rationale for the additional notice requirement.
We disagree with Colorado's assertion that the requirement stated
in
FSA-AT-88-12 that current recipients of AFDC assistance, as well as
new
applicants, be notified of the sanctions for fraud is beyond
the
Agency's statutory authority. Section 416(b) of the Act
explicitly
states that the sanctions apply to individuals applying for or
receiving
AFDC. It is thus consistent with the statute to provide for
notice both
to applicants and to recipients. It is not necessary to
construe the
reference in 416(f) to "applicants" to preclude an Agency
interpretation
requiring notice to recipients as well. The
legislative history of
section 416 reinforces this conclusion since
recipients of assistance
were clearly a focus of congressional concern:
Recipients found to have committed an intentional
program
violation would be ineligible . . . .
H.R. Rep. No. 391, 100th Cong., 1st Sess., pt. 2, at 895, reprinted
in
1987 U.S. Code Cong. & Admin. News, 2313-512 (emphasis added).
The House bill . . . would disqualify from
eligibility
recipients found to have intentionally violated the program
. .
. .
H.R. Conf. Rep. 495, 100th Cong., 1st Sess. 813, reprinted in 1987
U.S.
Code Cong. & Admin. News, 2313-1559 (emphasis added).
Requiring that states notify recipients of the sanctions for fraud at
the
time of the redetermination of their AFDC eligibility or some
other
appropriate time is a reasonable interpretation of section 416.
The
Agency's selection of the date of redetermination of eligibility is
a
logical choice since such a redetermination can reasonably be
considered
as a re-application for AFDC assistance. Such notice would
inform
recipients of a change in program policy and would serve both as
a
deterrent against fraud and as a due process protection. Without
such
notice, the State's implementation of the sanctions could
be
jeopardized.
Despite explicit instructions from the Agency, Colorado failed, during
the
period at issue here, to notify its AFDC recipients of the possible
sanctions
for fraud, thus defeating the purpose of section 416. We
conclude that
Colorado was bound by the provision of FSA-AT-88-12
requiring notice to
recipients as an interpretative rule of which the
State had actual
notice. See also 45 C.F.R. 201.2. In issuing this
provision the
Agency "engaged in the classic interpretative function of
filling in the
details not otherwise specified by the statute." See New
Jersey Dept.
of Social Services, DAB No. 1071 (1989) at 9-10 (citing
Maine Dept. of Health
Services, DAB No. 712 (1985)).
With the enactment of section 416 Congress clearly expressed its
intent
that a greater effort was needed to combat AFDC fraud and,
accordingly,
offered the 75 percent rate as an incentive. To receive
the enhanced
rate a state must carry out those "optional" fraud control
activities
mandated by Congress. Here Colorado, although claiming the
enhanced 75
percent rate, did nothing more than it had done in the
past. At the
hearing it was evident that the State personnel in charge
of instituting
the fraud control program had little understanding of the
requirements
set by Congress for an optional fraud control program. The
State
personnel believed that the fraud control program that Colorado
was
already operating, for which Colorado was receiving 50 percent
FFP,
could be converted into the enhanced 75 percent FFP program
without
significant program changes. 9/ Tr. at 569. This mistaken
belief
appears in part responsible for the parties' disputes concerning
the
adequacy of training provided concerning what activities could
be
claimed at the enhanced rate and whether a CAP amendment was required.
Colorado also argued that "[a]though no disqualification orders have
been
obtained in Colorado [Tr. cite omitted], that penalty has been
available in
Colorado by court order should prosecutors believe it
appropriate [Tr. cite
omitted] and attorneys throughout the State were
so advised [Tr. cite
omitted] . . . ." This assertion does not support
a conclusion that
Colorado was substantially meeting the statutory
requirements for an optional
control program. In fact, this argument
supports the contrary
conclusion. There is no option to apply the
disqualification
sanction. As stated in FSA-AT-88-12 --
Section 416(b) requires a State agency that elects
to operate a
fraud control program to impose the
appropriate disqualification
penalty [of 6 months,
12 months, or permanent ineligibility] . . .
.
It is clear that Colorado did not seek such sanctions and thus failed
to
meet a statutory requirement basic to receipt of the enhanced rate.
In light of the explicit directives given by the Agency in
FSA-AT-88-12,
the actions of the State are inexplicable. Colorado
admitted that since
1988, when states could elect to operate an optional AFDC
fraud program,
not one case prosecuted through either the State or federal
courts had
resulted in the disqualification of an AFDC applicant or recipient
from
the AFDC program. Tr. at 586. In short, Colorado failed to
demonstrate
that it had done anything to merit the enhanced 75 percent FFP
rate
authorized by section 416.
Colorado's failure to advise current AFDC recipients of the sanctions
for
fraud is further evidence that Colorado did not establish and
operate an
optional program during the quarters in question. Colorado
provided no
recipient notice despite the Agency's instructions in
FSA-AT-88-12 and its
advice in the plan approval letter that such notice
was imperative.
Colorado's inaction in this regard violated an explicit
requirement of the
optional AFDC fraud control program. At the hearing
and in subsequent
briefs Colorado offered no persuasive explanation for
its failure to notify
current AFDC recipients.
What Colorado failed to acknowlege here is that fraud control
activities
qualify for enhanced reimbursement only when the optional
program
consisting of notice and disqualification penalties has
been
implemented. 10/ Colorado could not properly elect to establish
and
operate an optional program, reclassify its pre-existing fraud
control
activities for the enhanced rate, and never relate those activites
to
the specific object in the statute -- the disqualification sanction
for
program related fraud. Colorado could not reasonably have
believed
based on the language of section 416 and the explicit instructions
in
FSA-AT-88-12 that its CFA program qualified for enhanced
reimbursement.
Colorado's position is further weakened by the fact the disallowed
amounts
here represent the difference between a standard and an enhanced
rate of
FFP. An enhanced rate of FFP is an exception to the generally
available
reimbursement rates, and a state must accordingly meet a
higher standard of
proof to justify a claim at an enhanced rate. See
New York State Dept.
of Social Services, DAB No. 1008 (1989) at 3. Here
Congress
specifically authorized an enhanced rate of 75 percent FFP for
an optional
AFDC fraud control program. Before the enactment of section
416 states
could claim the costs of any AFDC fraud control efforts at a
rate of 50
percent FFP and the availability of this rate continued for
states not
operating programs in accordance with section 416. Thus,
Colorado is
not facing the alternative of receiving no reimbursement for
its anti-fraud
efforts.
The three grounds for the disallowances originally given by the Agency
are
therefore subsidiary to Colorado's failure to notify current AFDC
recipients
or pursue the disqualification sanction. We see no reason to
address
those grounds at length. We note, however, that on the issue
of
statewideness, the failure of the State to execute
Cooperative
Reimbursement Agreements with all the counties was not fatal to
its
claims here. At the hearing it was evident that the State had
not
clearly communicated to the Agency the purpose for the
Cooperative
Reimbursement Agreements. We were persuaded that these
agreements were
intended to deal with the intricacies of funding social
services
programs within Colorado. Although we do note that the State's
position
that its pre-existing CFA activities qualified for 75 percent
is
undercut by the listing of fraud related activities in the
Cooperative
Reimbursement Agreement. State Ex. H. That list
clearly encompassed
eligibility determination (precertification
investigation) activities
for which only the 50 percent FFP rate is
available.
As to the other two grounds, the training of personnel and the need
to
amend the CAP, we note that these two issues are bound up with
the
fundamental question of whether Colorado actually had implemented
an
optional program. Clearly, if Colorado, as demonstrated by
the
testimony of its personnel at the hearing, did not understand what
was
required of it to qualify for the enhanced funding, any training
based
on that misunderstanding was certainly flawed. We are not
persuaded
that the State's time reporting system reflected only the types
of
activities that would have qualified for 75 percent FFP had the
program
been operational. See Agency's post-hearing brief at 16.
Similarly,
the parties dispute about whether Colorado was required to amend
its CAP
to distinguish between activities that qualified for the 50 and
75
percent rates was affected by Colorado's misunderstanding about
the
requirements for implementing the optional program.
.Conclusion
For the reasons described above, we sustain the disallowances in
the
amount of $1,057,115.
___________________________ Norval
D. (John)
Settle 11/
___________________________ Donald
F.
Garrett
___________________________ Cecilia
Sparks
Ford Presiding Board Member
1. The disallowances were originally issued by the Family
Support
Administration. Due to recent organizational changes, ACF is
now the
administering agency.
2. Expenditures for the period October 1, 1988 through June 30,
1991
are at issue. At the hearing held in these appeals ACF revised
the
amounts of the disallowances. The revised amounts in each appeal
are as
follows:
Docket No. Time
Period Amount Disallowed
90-222
3/1/89-6/30/90
$486,846 91-2
7/1/90-9/30/90
$98,868
91-21
10/1/90-12/31/90 $125,965
91-57
prior quarter adjustments $108,029
91-87
1/1/91-3/31/91
$120,452
91-144
4/1/91-6/30/91
$116,955
Agency Exhibit (Ex.) 38.
3. The proposed regulations implementing section 416 contain
comparable
notice requirements at 45 C.F.R. 235.112(d). 55 Fed. Reg.
18912 (May 7,
1990).
4. Colorado attributed much of its disagreement with ACF to its
funding
arrangement with the counties, which Colorado admitted could be
viewed
as confusing. Colorado explained that the normal statutory
scheme for
funding the activities of local departments requires that the
counties
pay 20 percent of their costs, with the State being responsible for
the
remaining 80 percent. This scheme applied to all social
services
programs within Colorado. When the optional AFDC fraud control
program
was initiated, Colorado gave the counties the option of electing
to
receive only 75 percent State funding in lieu of the normal 80
percent
funding, in exchange for which the counties were released
from
legislative limits on staff hiring. Because this arrangement
resulted
in somewhat lessened State control over the counties, Colorado put
into
effect implementing agreements with the counties, whereby the
counties
would have to agree to abide by various State requirements.
These
Cooperative Reimbursement Agreements were modeled after
agreements
already in place for the food stamp fraud program. Hearing
Transcript
(Tr.) at 9-12.
5. Questions of program compliance arise under section 404 of the
Act.
Section 404(a) provides --
. . . if the Secretary, after reasonable notice and
opportunity
for hearing to the State agency administering . . . such
[State]
plan, finds -- (1) that the plan has been so changed as
to
impose any residence requirement prohibited by
section
402(b), or that in the administration of the plan
any
such prohibited requirement is imposed, with
the
knowledge of such State agency, in a
substantial
number of cases; or (2) that in the
administration of
the plan there is a failure to comply
substantially
with any provision required by section
402(a) to be
included in the plan; the Secretary shall
notify such
State agency that further payments will not be made to the
State
(or, in his discretion, that payments will be limited
to
categories under or parts of the State plan not affected by
such
failure) until the Secretary is satisfied that such
prohibited
requirement is no longer so imposed, and that there is no
longer
any such failure to comply. Until he is so satisfied he
shall
make no further payments to such State (or shall limit
payments
to categories under or parts of the State plan not affected
by
such failure).
6. This dispute was the subject of meetings and correspondence prior
to
the issuance of the disallowances at issue. The State represented
that
"[f]raud activities in all counties are performed as outlined
in
FSA-AT-88-12 and subsequent publications." The Agency was
concerned
about the instructions issued to the counties concerning
those
activities eligible for 75 percent FFP and stated an understanding
that
the State had not changed the procedures for its CFA program
which
pre-existed the approval of its plan amendment electing to establish
and
operate an optional program. Thus, the issue which the State asks
us
not to reach was clearly related to the general concerns underlying
the
grounds stated as bases for the disallowances. See State Exs. U, V,
and
X.
7. We note that in its post-hearing brief the State requested
aditional
time to develop evidence concerning whether Colorado was subject
to
disparate treatment. Colorado based this request on its belief
that
there had been no disallowances for other states which had failed
to
implement the notice and disqualification requirements of section
416.
We are aware of no legal or factual basis for reversal of a
disallowance
on grounds of disparate treatment. Accordingly, we decline
to grant
additional time to permit the State to develop evidence on a
matter
which is highly speculative and of questionable relevance. In
light of
the extensive testimony at the hearing concerning the State's
CFA
program as well as the post-hearing briefing, we find that the record
is
sufficient to resolve these appeals without further proceedings.
8. The U.S. Court of Appeals for the Third Circuit, in its decision
in
New Jersey v. Dept. of Health and Human Services, 670 F.2d 1284
(3rd
Cir. 1981), indicated that the Board's action there was after
an
"opportunity for a hearing" sufficient to satisfy statutory
requirements
for compliance proceedings. At note 13.
9. Prior to institution of the optional AFDC fraud program,
Colorado
was claiming the costs of its existing fraud program, at a 50
percent
FFP rate, through the use of a worker time sheet coding system called
a
Time Analysis Reporting System. County workers engaged in
fraud
detection activities were instructed to enter the code 2W01 on
their
time sheets. With the institution of the optional fraud control
program
and its 75 percent FFP rate, a State employee agreed with the
Board's
description that Colorado simply claimed the 2W01 activities for
75
percent FFP rather than 50 percent. Tr. at 569.
10. Indeed, an Agency official testified that Colorado's plan
amendment
had been approved with a "gentlemen's agreement" that Colorado
would not
begin to claim the enhanced rate until its program was
fully
operational. Tr. at 351-356.
11. As discussed above, this case concerns the State's entitlement
to
enhanced reimbursement for prior quarters. The State objected to
the
Board's deciding whether Colorado had established and operated
an
optional fraud control program during the quarters at issue and
asserted
that this was a compliance issue not properly before the
Board. If the
State's objection were regarded as a jurisdictional
issue, the Board
chair, who has specific authority to resolve such matters,
is on this
panel and thereby has determined that this issue is properly
before the
Board in the context of this disallowance matter. 45 C.F.R.
Part 16,
Appendix