GAB Decision 135
November 28, 1980 New Jersey Department of Human Services; Docket No.
80-43-NJ-CS, 80-48-NJ-CS, 80-56-NJ-CS Coster, Clarence; Przybyzlinski,
Donald Settle, Norval
The New Jersey Department of Human Services (State) requested
reconsideration pursuant to 45 CFR Part 16, Subpart C (1978), of
disallowances of Federal financial participation (FFP) claimed under
Title IV-D of the Social Security Act (Act) for the provision of child
support enforcement services to the persons not eligible for the Aid to
Families with Dependent Children (AFDS) program. The issue presented is
whether the State's claim, totalling $1,571,364, was properly disallowed
on the ground that non-AFDC recipients who had previously applied for
and received services under a wholly State-funded program did not file
new applications for the services on or after the date on which the
State began to participate in the Title IV-D program. The same issue
was presented, in the context of similar facts, in New York Department
of Social Services, DGAB Docket Nos. 78-66-NY-CS, 78-162-NY-CS,
79-36-NY-CS, 79-234-NY-CS, Decision No. 101, May 23, 1980. Noting that
the Board in Decision No. 101 upheld the disallowances, the Board
Chairman issued an Order in the instant cases directing the State to
show cause why its appeal should not be denied based on the earlier
decision. We do not find the arguments in the State's response to the
Order persuasive, and conclude that the disallowance should be upheld.
Title IV-D of the Act makes available Federal funding for the
operation of an approved state plan for child support. Under Title
IV-D, a state must furnish child support enforcement services to AFDC
recipients, whose rights to support must be assigned to the state in
order to receive AFDC benefits under Title IV-A. Title IV-D further
requires that a state plan provide that --
(the) child support collection or paternity determination services
established under the plan shall be made available to any individual not
otherwise eligible for such services upon application filed by such
individual with the State . . . . (Section 454(6)(A)).
The dispute in this case focuses specifically on the meaning of the
requirement in this section for the filing of an application by non-AFDC
recipients, who are "not otherwise eligible" for child support
enforcement services.
Title IV-D funding became available effective July 1, 1975. Child
support enforcement services (including services to non-AFDC recipients)
were provided by the State through local probation departments prior to
that date, however. After it began to participate in the Title IV-D
program, the State continued to provide those services through the
probation departments, pursuant to purchase of service agreements with
the Department of Human Services. The State maintains that applications
filed when the program was wholly State-funded satisfy the requirement
in Section 454(6)(A) for the filing of applications. The Agency, on the
other hand, takes the position that the costs of continued services to
non-AFDC recipients are not eligible for FFP because new applications
for such services were not made on or after the effective date of the
Title IV-D program.
In Decision No. 101, the Board found that Section 454(6)(A) was
ambiguous with respect to how a state's pre-existing child support
enforcement caseload was to be handled. The Board rejected the Agency's
argument that the application required by Section 454(6)(A) is for
"services established under the plan," and thus could only be submitted
after the effective date of Title IV-D, which provided a legal basis for
the plan. The Board also found no support in the legislative history of
Title IV-D for the proposition that Congress clearly intended that new
applications be filed. The Board stated, however, that in the absence
of an express reference in Title IV-D to services provided prior to the
effective date of that title, it could not clearly be inferred that new
applications are not required in those cases. The Board further stated
that it will defer to the Agency's interpretation of a statutory
provision unless it is inconsistent with the statute or frustrates the
Congressional policy underlying the statute. Finding that the State did
not make a sufficient showing that either of these conditions pertained
in its case, the Board sustained the disallowance.
In its response to the Order in the instant case, the State disputes
the Board's conclusion in Decision No. 101 that Section 454(6)(A) is
ambiguous and that the Agency's requirement for new applications is
merely interpretive of the statute. The State argues instead that the
requirement for new applications constitutes a legislative rule creating
new law which is invalid because it was not properly promulgated as well
as because it is inconsistent with the statute and frustrates
Congressional intent.
In support of its position that the requirement for new applications
is a legislative rule, the State asserts that Section 454(6)(A)
"manifestly does not specify that the applicant have filed her request
for aid subsequent to July 1, 1975 or that the application be filed with
any particular agency of the State." (Response to Order, p. 4.) It also
asserts, in a similar vein, that neither Title IV-D nor the implementing
regulations "purport to limit the type of document or the date by which
it must be filed . . . ." (Response to Order, p. 5.) We do not find this
approach persuasive. The July 1, 1975 date is not plucked out of thin
air. It is the effective date of Title IV-D and is the date beginning
on which all applications would clearly have to be filed if there were
no pre-existing caseload. Since the Act does not deal separately with
the pre-existing caseload, it is arguable that Section 454(6)(A)
requires that applications be filed on or after July 1, 1975, in those
cases as well as in all others. While we agree with the State that
Section 454(6)(A) does not specify the nature of the application, we
note that the Agency has not based its disallowance on a finding that
the documents offered by the State as applications would not have been
acceptable even if filed after July 1, 1975. Furthermore, although
Section 454(6)(A) provides only that the application is to be filed
"with the State," the implementing regulations, the validity of which
is
not challenged by the State, specifically provide that the application
is to be filed with the IV-D agency. 45 CFR 302.33(a). Accordingly, we
reaffirm our conclusion in Decision No. 101 that the requirement for new
applications is merely an interpretive rule.
This conclusion renders nugatory the State's argument that in order
to be enforceable, the requirement for new applications would have been
published in proposed form in the Federal Register for public comment
prior to its adoption by the Agency, in accordance with the
Administrative Procedure Act (APA), 5 U.S.C. 553(b). This section of
the APA is not applicable to interpretive rules. The State also argues
that even if the requirement for new applications is deemed to be only
an interpretive rule, it must still be published in the Federal Register
under 5 U.S.C. 552(a)(1)(D), although it need not be preceded by notice
and comment rulemaking. The State appears to have overlooked, however,
the further provision that "(except) to the extent that a person has
actual and timely notice of the terms thereof, a person may not in any
manner be required to resort to, or be adversely affected by, a matter
required to be published in the Federal Register and not so published."
5 U.S.C. 552(a)(1)(E). In the instant case, the State concedes that it
received actual notice of the Agency's requirement for new applications
on July 19, 1976. The State's contention that the notice was not timely
is addressed later in this decision. We note here, however, that any
defect as to timeliness can be cured by delaying the date as of which
the requirement was enforceable.
In view of our conclusion that the requirement for new applications
was an interpretive and not a legislative rule, we also find the State's
reliance on Reser v. Califano, 467 F.Supp. 446 (W.D. Mo. 1979),
misplaced. In its response to the Order, the State cited Reser in
support of its contentions that Congress "chose not to restrict the
manner of compliance (with the application requirement) given the
anticipated diversity of program administration in the various states,"
and that the Agency "here has imposed an absolute and unreasonable
pre-condition to receipt of federal funding for costs Title IV-D was
enacted to provide . . . ." (Response, p. 4)
In Reser the court held invalid a regulation prohibiting FFP in
administrative costs incurred by courts providing child support
enforcement services on the ground that the regulation conflicted with
the legislative intent that monies be expended for Title IV-D
activities. The court stated that the concerns which the Agency alleged
in support of the regulation, including that courts would be unable to
allocate administrative costs between Title IV-D and non-Title IV-D
activities, would justify a strict approach to auditing State requests
for FFP, but not a blanket prohibition on FFP in administrative costs.
Reser can be distinguished from the instant case, however, since the
Agency in Reser did not purport to derive the prohibition on
administrative costs from any specific language in the Act.
The State's argument that the requirement for new applications
frustrates the Congressional policy underlying Title IV-D was also
considered in Decision No. 101. In that case, the State contended in
support of its position that individuals who applied for child support
enforcement services prior to the effective date of Title IV-D would not
be willing to reapply for them even though they would otherwise have
wished to continue to receive the services, thus frustrating the
Congressional intent that the scope of the services be expanded.
(Decision, p. 4.) The Board found, however, that the State had provided
no proof to that effect, and further, that "the effort involved in
filing a new application is so minimal that a failure to do so might
arguably reflect the absence of any serious desire for continued
services in which case the provision of services would frustrate
Congressional intent." (Decision, p. 6.) Here, the State makes the same
contention that individuals would not reapply for the services,
supported by an affidavit of Fred Fant, Assistant Director for Probation
of the New Jersey Administrative Office of the Courts, dated March 15,
1978. (Reconsideration record, attachment to Brief in Support of
Petitioner's Application for Reconsideration, submitted under cover of
letter dated March 16, 1978.)
The affidavit states in pertinent part:
In monitoring the success of the probation departments' efforts to
comply with the HEW directives, this office's auditors have reported the
departments' difficulties in obtaining signed applications from all
non-AFDC recipients on an expedited basis due to a variety of factors:
inordinate numbers of applicants to contact; changes in addresses noted
in probation department files and; recipient refusal to sign the
applications based upon advice of counsel.
We do not find this documentation sufficient to warrant a finding
that the requirement for new applications acted to frustrate
Congressional intent. The record indicates that, as of March 31, 1977,
the State had obtained new applications for 65 percent of its non-AFDC
caseload. (Notification of disallowance dated February 19, 1980, p.
3.) The percentage of non-AFDC cases still without new applications
decreased to 10 percent in the quarter ended September 30, 1979.
(Notification of disallowance dated March 10, 1980, p. 2.) There is no
indication of the extent to which recipient refusal was responsible for
the State's failure to obtain new applications in the remaining cases.
Even if recipient refusal was responsible in most of the remaining
cases, we are not prepared to say that Congressional intent was
frustrated if less than one-tenth of the pre-existing caseload was lost.
Moreover, if, as the affidavit indicates, non-AFDC recipients refused
to sign new application on the advice of counsel, an informed decision
to forgo further services was made. Since the Act provides for the
furnishing of services to non-AFDC recipients only upon request, the
continued provision of services under such circumstances would appear to
be improper. It is not our duty to inquire into the reasons why such
advice was given by counsel.
The State also argues that the requirement for new applications
frustrates Congressional intent because ample documentation of the need
for services was available and obtaining new applications therefore
needlessly reduced the amount of funds available for providing the
services themselves.The Board stated in Decision No. 101, however, that
since there was no indication that the cost of obtaining new
applications would be significant, this was "too tenuous a connection on
which to find invalid the Agency's interpretation . . . ." (Decision, p.
7.) Moreover, the State's assertion that need is shown not by the
existence of an application, which the State argues reflects only the
applicant's situation at the time it was filed, but rather by current
reviews of the services provided, proves too much. The Act clearly
requires that an application be made; the issue here is simply whether
an application made before July 1, 1975 is acceptable.
The State also argues that affirmance of the disallowance for the
period August 1, 1976 to January 1, 1977 would be contrary to 42 U.S.C.
603(h) and 652(a)(4), which the State characterizes as providing that a
"failure to comply substantially with a State plan requirement . . .
should not be a basis for fiscal sanction prior to January 1, 1977."
(Response to Order, p. 7.) We read those sections, however, as providing
for a penalty reduction in the amount payable to a state under Title
IV-A, not Title IV-D, where the state has failed to implement an
effective child support enforcement program. (See Section 603(h) --
"the amount payable to any State under this part" -- and S. REP. No.
93-1356, 93d Cong., 2nd Sess. 2 (1974).) The penalty provision appears,
moreover, to operate independently of the disallowance process.
The State argues, finally, that even if the Board determines that the
Agency's interpretation is binding, some portions of the disallowances,
which covered the period August 1, 1976 through September 30, 1979,
should be reversed on the ground that the State did not receive timely
notice of that interpretation. The requirement for new applications was
clearly set out in an action transmittal issued by the Agency on June 9,
1976 (OCSE-AT-76-9). Despite its position that the action transmittal
was merely interpretive in nature, the Agency allowed FFP in the cost of
continued services even in the absence of new applications until August
1, 1976, thirteen months after the effective date of Title IV-D, on the
ground that the action transmittal "was not promulgated until June 1976
and not received by the States until sometime thereafter." (See citation
to record on p. 3 of Decision No. 101.) The State in the instant case
claims that it did not receive the action transmittal until July 19,
1976 and asserts that it was impossible to get 55,000 (the estimated
non-AFDC caseload as of August 1976) new applications by August 1,
1976.The State also argues that it was not notified until September 20,
1976 that the deadline for new applications was August 1, 1976.
The record shows that the State made a good faith effort to comply
with the requirement for new applications beginning July 19, 1976.
(Affidavit of Fred Fant, cited supra.) Its argument that it was unable
to obtain all of the necessary applications by August 1, 1976 thus
appears to have some merit. The State does not indicate, however, the
date as of which it would agree that the disallowance was properly
taken, assuming that the Agency's interpretation is binding. It argues
only that "the unique circumstances of this case warrant (the Agency's)
reimbursement of services provided non-AFDC families for a reasonable
period of time following August 1, 1976." (Response to Order, p. 7.)
On this state of the record, it is difficult to make any finding
regarding the date as of which the disallowance was properly taken.
Under the circumstances of this case, we suggest that 30 days from July
19, 1976, the date of the State's receipt of the action transmittal, was
a reasonable period of time within which to require the State to obtain
new applications; however, the Agency may, after discussions with the
State, set another time and reduce the amount of the disallowance to the
extent that it determines appropriate.
Conclusion
For the reasons set forth above, we conclude that the State's failure
to obtain new applications was an appropriate ground for disallowance,
but that the amount disallowed should be reduced by the Agency in
accordance with the instruction given above.
OCTOBER 04, 1983