GAB Decision 280
April 22, 1982 Washington Department of Social and Health Services;
Docket No. 81-159-WA-HD Ford, Cecilia; Garrett, Donald Teitz,
Alexander
The Washington Department of Social and Health Services (DSHS or
Grantee) appealed a $1,600,000 disallowance, by the Office of Human
Development Services (OHDS or Agency), of federal financial
participation (FFP) in costs claimed for benefits for children found to
be ineligible for Aid to Families with Dependent Children -Foster Care
(AFDC-FC).
This case involves the issue of eligibility of a foster child when a
court order directs that a private non-profit organization, rather than
the Grantee or another public organization, be responsbile for placement
and care of the child. The Grantee maintained that it still had
ultimate control over the children in such a manner that would entitle
it to claim FFP in the costs related to the children.
There are no material issues of fact in dispute. We have, therefore,
determined to proceed to decision based on the written record. For
reasons stated below, we conclude that the Grantee did not have control
sufficient to meet the statutory and regulatory requirements and,
therefore, we sustain the disallowance.
Background
Title IV-A of the Social Security Act, section 408, provides for
foster care payments for eligible children under the AFDC program. /1/
The AFDC-FC program was established as an alternative method of care
when a judicial determination has been made that continuing care in the
home of a relative would be contrary to the welfare of a child.
In order for a child to be eligible for assistance under the AFDC-FC
program, the Title IV-A agency or some other public agency must maintain
responsibility for the placement and care of that child. (Section
408(a) of the Social Security Act)
(2) The AFDC-FC program is administered at the federal level by the
Administration for Children, Youth and Families within OHDS. /2/ Under
the Washington State plan, eligibility determinations of individuals and
payments for foster care assistance for this program are the
responsibility of DSHS.
The HHS Office of Inspector General auditors performed an audit of
the Grantee to determine whether federal funds were properly claimed on
behalf of dependent children who were placed in foster homes and
childcare institutions. (Audit Control No. 10-10262)
The auditors found that certain children for whom FFP had been
claimed were ineligible because, among other reasons, the court orders
removing the children from their homes directed organizations other than
DSHS to be responsible for the placement and care of the children.
(Audit Report, p. 5) The auditors found that the Grantee had claimed at
least $1.6 million of FFP, during the period July 1, 1976 through
December 31, 1979, for children who did not meet eligibility
requirements. /3/
In regard to the court orders, the audit report stated,
None of the Court Orders . . . stated that DSHS was responsible for
placement and care of the children. While the Court Orders varied in
style and content, they included terms such as: "unconditional and
permanent custody," "temporary care, custody and control," and
"care,
custody and supervision" to order te placement of the children with
organizations other than DSHS. For example, one Court Order stated that
"it is further ordered and adjudged that (names of children) hereby are
committed to the sole, unconditional and permanent custody of (name of
nonprofit organization) and that full power and authority is granted to
(name of nonprofit organization) to place said minors for adoption and
to consent to the adoption of said children." Another (3) Court Order
stated that "temporary care, custody and control of said child is hereby
placed with (name of nonprofit organization) for placement in a suitable
foster home pending full and complete hearing herein."
(Audit Report, p. 7)
Grantee's Position
DSHS agreed with the other reasons for which the auditors found that
payments were ineligible, but disagreed that payments were ineligible
because court orders directed organizations other than DSHS to be
responsible for the placement and care of the children. The Grantee
argued that it effectively retained responsibility for the care and
placement of children in the custody of non-profit, private agencies.
The Grantee based its position on the following factors:
(1) That DSHS has both the power and responsibility to develop the
State Child Welfare Program for the Dependent children pursuant to RCW
74.13.
(2) That DSHS has the power to issue, deny, or revoke private agency
licenses if the agencies fail to comply with the DSHS regulation
pursuant to RCW 74.15.
(3) That DSHS has made payment pursuant to contracts with the
private, non-profit child care agencies and that said contracts have
mandated that the private agencies comply with all state regulations.
Additionally, DSHS has the power to control the case plan for individual
children in the custody of private agencies through the quarterly
progress report mandated by the contract.
(4) That the current DSHS practices have been reviewed by HHS in the
past, and allowed. Further, HHS recognizes the supervisory relationship
of DSHS with the private agencies through other programs administered
through the Social Security Act.
(5) That pertinent policy guidance from HHS regarding eligibility of
children in the custody of private agencies was not received by the
Department of Social and Health Services.
(Grantee's appeal file, Question In Dispute, page 6 of 6 unnumbered
pages)
DSHS conceded the point that individually none of the above-mentioned
factors would ensure control over the placement and care of the
dependent children, but DSHS contended that the intent of the Social (4)
Security Act was fulfilled by the mechanisms of licensing, contracting
and eligibility determination.
Additionally, the Grantee argued that DSHS had legal authority for
the placement and care of all dependent children either directly or
indirectly by providing services or purchasing services for the
children. (Grantee's appeal file, Statement of Position, p. 1)
Discussion
We conclude that the Grantee incorrectly claimed FFP, under the
AFDC-FC program, for children whose responsibility and care were given,
by court order, to private, non-profit agencies.
This conclusion is based on four general points that will be
discussed in detail later: (1) The Agency's interpretation is a
reasonable one and is supported by the statute. (2) Although the
Grantee provided evidence to show that it maintained a certain amount of
control over the dependent children through regulation of the private,
non-profit agencies, this control is insufficient. (3) The Grantee had
sufficient notice of the requirements necessary to claim AFDC-FC
benefits for dependent children. (4) The Grantee has not shown that the
Agency approved its policy of claiming AFDC-FC benefits for children who
were, by court orders, placed with private, non-profit organizations,
nor has the Grantee shown that it was in any way misled by any of the
Agency's actions or information.
1. The Agency Interpretation
Section 408(a) of the Social Security Act (the Act) provides that
AFDC-FC payments are available for certain dependent children --
(2) whose placement and care are the responsibility of (A) the State
or local agency administering the State plan approved under section 402,
or (B) any other public agency with whom the State agency administering
or supervising the administration of such State plan has made an
agreement which is still in effect and which includes provision for
assuring development of a plan, satisfactory to such State agency . . .
The applicable regulation in this case, 45 CFR 233.110(a), basically
restates the language of the statute. The issue in this case is what
constitutes responsibility as required by the Act and the regulations.
The Agency interpretation is that the responsibility for placement
and care of a state agency must be derived from the court order and
enable the state to directly affect the placement and care of the
individual (5) child and that a state does not have this type of
responsibility where the court order grants direct control to a private
agency. This interpretation is a reasonable one, supported by the
statute when read as a whole. /4/
The statue specifically provides that if the IV-A agency itself does
not have responsibility for placement and care of the foster child, the
responsibility may be that of another public agency under a contract
with the IV-A agency. Private, non-profit agencies are not mentioned in
this context, although there are references to such agencies elsewhere
in the section. See, e.g., sections 408(b)(1) and (2). The absence of
any reference in section 408(a) to private, non-profit agencies suggests
that Congress did not intend that the IV-A agency's role could be
carried out through a contractual or regulatory relationship with a
private, non-profit agency.
Moreover, it is clear from the statute that, in providing funding for
needy foster children, Congress sought to ensure that such children
would be placed in a suitable environment where they would receive
quality care, under an individual plan of care. Contracts with other
public agencies had to include provisions "for assuring development of
a
plan, satisfactory to such State agency, for such child." Section
408(a)(2)(B)(emphasis added). To receive reimbursement for costs
connected with foster care children, a state had to use the services of
employees of the state child-welfare agency "in placing such a child in
a foster family home or child-care institution . . . ." Section 408(f)
(emphasis added). Also, by definition, a foster family home or
child-care institution receiving payments for an AFDC-FC child had to be
licensed by the appropriate state agency Thus, it is reasonable to read
the statute as requiring state agency involvement with placement and
care of each child of a more direct nature than what a state would have
merely by virtue of its regulatory authority over all foster care
agencies and institutions.
2. The Grantee's Lack of Responsibility for Placement and Care of
the Children
The Agency pointed out, and the Grantee did not deny, that under the
court orders reviewed by the auditors DSHS did not have the authority to
make final decisions or changes regarding a child's placement and care,
and so had no real control over the child. The Grantee could have
requested or encouraged the private agency to make changes, or the
Grantee could have discontinued payments to that agency, but could (6)
not effect a change in a child's placement or care without a court
order. We agree with the Agency that this undermines Grantee's argument
that it had the requisite responsibility.
Moreover, while the Grantee has provided numerous state regulations
which give it some control over the dependent children of the state (see
Grantee's appeal file), we do not think this amounts to "responsibility
for placement and care" of the children as contemplated by the statute.
The Grantee referred to state regulation RCW 74.13, which gave it the
power and responsibility to develop the State Child Welfare Program, and
to state regulation RCW 74.15, which empowered DSHS to govern the
licenses of private agencies. /5/
The Agency argued that the fact that DSHS is charged with developing
the State's Child Welfare Program means only that it is the Title IV-B
aency for the State of Washington. Further, the Agency argued that
state regulation RCW 74.13031(5) indicates that DSHS merely has the duty
to "monitor out-of-home placements," which means that DSHS serves
as an
observer who perhaps can make suggestions, but this is not equivalent to
controlling where a particular child should be placed, or determining
the type of care the child requires.
Commeting on the Grantee's licensing power pursuant to RCW 74.15, the
Agency argued that DSHS can only try to assure that a variety of types
of private agencies (and foster homes run by the agencies) are available
and meet a minimum standard of quality and safety.
Washington rule WAC 388-70-012(2)(h) authorizes the Grantee to have
supervision over foster care agencies with whom it has contractual
arrangements. The rule states, in part,
Supervision of the foster care placement. This may be direct
supervision through departmental casework services; or indirect
supervision through evaluation of periodic reports . . . from private
child caring agencies . . . with whom the department has contractual
arrangements.
(7) The contract for private agencies states,
The contractor shall prepare and submit a quarterly progress report
for each child from whom the department is making payment. The report
is to be submitted to the Community Service Office making payment for
the child's care. The quarterly progress shall be related to the
implementatin and updating of the Individual Service Plan (ISP) for the
child's care and must justify the continued need for foster care.
The Agency argued that the contracts that DSHS has with private
agencies through which it claims control even state that at most DSHS
has only "indirect supervision" of the private agencies "through
evaluation of periodic reports." Further, review is after-the-fact and
does not amount to decision-making authority to determine, ahead of
time, appropriate placement and care for a child. (Agency's brief, p.
11)
We do not agree with the Agency's interpretation that the regulation
provides only for "indirect supervision." The specific wording of
the
regulation provided for two types of supervision: direct through
departmental casework services or indirect through evaluation of
periodic reports.
However, the Grantee argued only that it had supervision through
periodic reports, and there is no evidence to show that the Grantee
provided direct supervision through casework services. Moreover,
whether the supervision is direct or indirect, we do agree with the
Agency that the supervision is after-the-fact and, therefore, the
Grantee has no input into the decision-making process.
Additionally, this interpretation could be reasonably applied to the
contract for private agencies. The quarterly report is after-the-fact,
and the only remedy for lack of compliance would be to withhold payment.
The Grantee's reliance on its instructions for Private Agency/Child
Group Care, Manual G, Chapter 34, is misplaced for similar reasons. The
manual indicates that, when a foster child is placed in a group care
situation by a private agency, the Grantee reviews the need for such
care before approving payment and has some monitoring responsibility for
the child while in group care. This type of control, however, is
insufficient because the authority given is merely to deny payment, not
to directly affect the placement decision.
(8) The Grantee has provided a substantial amount of documentation
for its position on this case. Although some of the state regulations
submitted by the Grantee provide for inspection and monitoring, the
Grantee has not proved the most essential element, which is one of
resonsibility. The Grantee's responsibility must extend to more than
the power to withhold payment; it must also provide the Grantee with
the ability to control where a child is placed, and to alter the plan of
care without further petitioning of the court to do so.
3. Notice of the Agency Interpretation
The Handbook of Public Assistance Administration (Handbook),
effective July 24, 1963, section 3452.3, states, in part,
. . . Such finding (to remove a child from a home) must have led to a
written order giving responsibility for the placement and care of the
child to the State or local agency administering AFDC or to another
public agency under agreement with the State agency for the care of
children.
Should the court for any reason decide to award custody or
responsibility for the placement and care to a voluntary agency instead
of the public agency the child would not be eligible under the
AFDC-Foster Care program and the financing of foster care would have to
come from another source.
The Agency relied on the Handbook to provide further explanation of
the standard that must be met for claiming FFP under the AFDC-FC
program.
The Handbook has been available to the Grantee since 1963. /6/ The
Grantee did not assert that it did not have knowledge of or access to
this Handbook. Further, we find that section 3452.3 of the Handbook is
specifically applicable to the issue in this case, and the Grantee has
not presented any evidence to show why it would not apply.
In addition to the Handbook, the Agency issued Policy Interpretation
Questions (PIQs) which discussed the standards for claiming FFP, by
addressing specific questions raised by the regions, under the AFDC-FC
(9) program. The Grantee argued that it did not have knowledge or
notice of the PIQs. /7/
In light of the statute, regulation and Handbook, we need not reach
the issue of notice of the PIQs. The statute, regulation and Handbook
provided the Grantee with sufficient notice of the eligibility
requirement for the AFDC-FC program.
4. Grantee's Reliance on Agency Action
The Grantee additionally argued that the Department of Health and
Human Services (HHS) had reviewed the AFDC-FC program in 1976 and had
allowed FFP for children in the custody of private agencies; that, as a
result of the review, an Action Transmittal stated that the single state
agency for the IV-A program has a clear responsibility to see that the
necessary services are being provided within the IV-A agency itself or
other appropriate sources; and that a letter, dated November 18, 1980,
from HHS verified the eligibility for Title XX vendor training for
foster homes supervised by private agencies.
The Agency stated that the review which HHS had conducted in 1976
encompassed the entire IV-A program for Washington, and was based on a
sample of IV-A cases taken only from AFDC cases opened during the first
quarter of 1976. Further, the Agency stated that the report of the
review did not address the allowability of payments where a court had
given responsibility for placement and care to a private organization,
so Agency action related to the review can not be read as approval of
such payments. (Agency's brief, pp. 12-13)
In reference to the Action Transmittal, the Agency stated that the
Department does not dispute the fact that the IV-A agency may use
private, non-profit agencies to provide services to foster children, but
the question in this case is who has the ultimate responsibility in
determing how private, non-profit agencies place and care for these
children. (Agency's brief, p. 14)
Additionally, the Agency responded, in reference to the Title XX
argument, that Title XX does not require that as a condition for
providing training for foster care parents DSHS have responsibility for
the placement and care of the children.
(10) The Grantee was given the additional opportunity to dispute the
Agency's position on these issues and to provide any additional
documents to support its own position, but the Grantee elected not to
file any reply to the Agency's brief.
Moreover, the Agency position is supported by the record. Page two
of the report of the review referred to by the Grantee specifically
stated that "the review was not intended to be either an audit or a
duplication of the State-Federal Quality Control Program." (Grantee's
appeal file, attachment G, p. 2) The review was not directed at AFDC-FC
payments and does not mention the type of situation involved here. We
do not think that the fact that the Agency did not address the issue of
allowability of payments such as those involved here constitutes
approval of such payments.
The Grantee also relied on language in the Agency Action Transmittal,
SRS-AT-77-22 (APA), referring to necessary services being provided by
the IV-A agency or "other appropriate sources," arguing that private
agencies were other appropriate sources, and therefore, the Action
Transmittal conflicted with the Agency's interpretation in this
disallowance.
The Action Transmittal speaks only of necessary services being
provided by sources other than the IV-A agency, however. This does not
necessarily imply that those other sources could have responsibility for
the child. We conclude, therefore, that the Action Transmittal does not
conflict with the Agency's interpretation that requirements for FFP for
foster children are not met if a court confers responsibility on a
private agency.
The Grantee's final argument, relating to the Agency letter regarding
Title XX training, has two major defects. First, the letter referred to
by the Grantee was issued subsequent to the period in question, and,
second, Title XX requirements can not be viewed as support for an
interpretation of Title IV-A regulations since these regulations are
independent of each other. Therefore, Grantee could not rely on this
letter for support of its position.
Conclusion
For the reasons stated above, we find that the Grantee incorrectly
claimed FFP for dependent children who, by court order, were placed (11)
with private, non-profit organizations. We, therefore, uphold the
disallowance of $1,600,000. /1/ A new Title IV-E Foster Care and
Adoption Assistance Program was created by section 101(a)(1) of
Public Law 96-272, effective October 1, 1980. The AFDC-FC program under
Title IV-A has been repealed by section 101(a)(2) of Public Law 96-272.
The repeal is effective at the time the State plan under Title IV-E
becomes effective, but no later than September 30, 1982. /2/
Prior to June 5, 1981, the AFDC-FC program was administered at the
federal level by the Social Security Administration. /3/ The
Agency cited several bases to support the $1,600,000 disallowance. The
State disputes only the determination that FFP is not appropriate where
the court order gives a private, non-profit organization responsibility
for the child's care and placement. It is unclear what portion of this
disallowance would be affected by a decision in the Grantee's favor.
/4/ The Agency interpretation is set out in the Handbook of
Public Assistance Administration discussed in section 3 of this
Decision. /5/ It is unclear from the regulations submitted by
the Grantee whether the regulations were effective through the entire
grant period. Some of the regulations submitted by the Grantee show
that they were amended during the grant period, while others show that
they were revised after the grant period. /6/ There is no
language in either the statute or the regulation to indicate that the
standard set out in the Handbook has been superceded. /7/
Additionally, it appears that an Information Memorandum by the Agency
exempted the states from being held accountable for the PIQs until
September 1979.
OCTOBER 22, 1983