GAB Decision 408
Docket No. 82-183
April 26, 1983
New Jersey Department of Human Services;
Ford, Cecilia; Settle, Norval Garrett, Donald
On May 12, 1982, the Associate Commissioner for Family Assistance,
Social Security Administration (Agency) disallowed $24,637.51 in costs
for the New Jersey Department of Human Services' (State) fiscal year
1980 Energy Assistance Program (EAP) and indicated that the State could
appeal the disallowance to the Commissioner of Social Security. On June
16, 1982, the State appealed. On October 5, 1982, however, the
Commissioner transferred jurisdiction to this Board to review
disallowances under the EAP. The Board has considered this appeal in
accordance with its procedures at 45 CFR Part 16 (1981). The
disallowance was based on a financial review of New Jersey's EAP
(State's Exhibit 11). The reviewers recommended the disallowance of
payments made to 338 ineligible households in four counties.
Based on the record in this appeal, we uphold the disallowance.
NEW JERSEY'S IMPLEMENTATION OF EAP
Public Law (Pub. L.) 96-126 was signed into law on November 27, 1979.
A section of that law provided $1.2 billion for fiscal year 1980 in low
income supplemental energy funds to be channeled by the Department of
Health and Human Services to the states. The funds were to be used for
the low income population for emergency heating assistance during the
winter of 1979-80.
On November 27, 1979, the Associate Commissioner for Family
Assistance distributed to all states the final program instructions
(SSA-AT-79-42). In those Instructions, states were advised that they
had until December 27, 1979 to submit their Plans for the administration
of the EAP. The states had the option of selecting any one, or a
combination of, pre-printed plans developed by the Department, or of
developing their own plan subject to federal approval. Under Plan A,
energy assistance funds were distributed as flat grants to recipients of
aid under the Aid to Families with Dependent Children program (AFDC)
during a prior month specified by the state. Under Plan B, funds were
distributed to recipients of food stamps, AFDC, and statewide general
assistance. Under Plan C the responsibility for the administration of
the EAP funds rested with the Community Services Administration. Under
Plan D, the states were given latitude to develop their own (2) plan
subject to Agency approval. States submitting plans A, B, or D were
required to include the general administrative requirements, referred to
as "Tab E." New Jersey chose to proceed under Plan D and submitted
its
Plan on or about December 6, 1979 (State's Exhibit 3). The Plan was
approved on January 1, 1980 (State's Exhibit 5).
Under the State Plan, the State was to make automatic case payments
to all AFDC and General Assistance recipients on January 1, 1980,
February 1, 1980, and March 1, 1980. Additional payments were to be
made "in order to provide for emergencies for families with children who
become ineligible for emergency assistance from ECAP (Energy Crisis
Assistance Program) or when ECAP funds are exhausted." (State's Exhibit
3, p. 51a) To determine when such emergencies would be deemed to exist,
the Plan further provided that:
County welfare agencies will be instructed to provide emergency
energy payments to such families which pay their own heating bills when:
total monthly energy costs exceed 20% of the monthly assistance
standards plus that months energy assistance payments, and
the family is unable to meet its heating bills, and
no other resources (i.e., ECAP) are available.
(State's Exhibit 3, p. 51a)
The State admitted that some County Welfare Boards incorrectly
implemented these instructions, resulting in some ineligible households
receiving EAP payments (Appeal Brief, p. 3). The State has not disputed
the factual findings of the review. Instead, it argued that there
should be no disallowance regardless of the fact that payments were made
to ineligible households.
WHETHER THE EAP ALLOWS A STATE TO CLAIM FFP IN PAYMENTS TO ADMITTEDLY
INELIGIBLE HOUSEHOLDS
A section of Action Transmittal SSA-AT-79-42(OFA) at Tab E,
specifically incorporated into the State Plan, states:
For purposes of the EAP, AFDC Quality Control Regulations do not
apply; however, States will exercise the same care in program
administration as is required under the AFDC program.
(3) The State argued that the import of this section is that since
quality control rules (including tolerance levels for errors) do not
apply, a state should not be liable for eligibility determination
errors. Tolerance levels were instituted in the early 1970s in the Aid
to Families with Dependent Children program (AFDC) as part of a required
quality control system for measuring and reducing errors made in
determining recipient eligibility and payments amounts. Tolerance
levels were part of the system where a sample of cases is taken and
examined, and the results are then extrapolated to the universe of a
state-wide caseload, but within the set tolerance level, no disallowance
is taken. /1/ The State's position is that this Action Transmittal
section expresses a recognition on the part of the federal government
that states were subject to constraints in their efforts to swiftly
implement the EAP and that, therefore, although states should attempt to
minimize incorrect payments, they would not be held to the same quality
control standards set up in the AFDC program. Implicit in the State's
argument is the idea that it was impossible to develop and implement its
EAP without errors and that a reasonable error rate is a necessary cost
of doing business, a cost which should not be borne solely by the State.
This tolerance of errors is especially appropriate, according to the
State, either when the misexpenditures are unavoidable or when the
questioned expenditures are so small that the cost of attempting to
avoid those errors would be arguably greater than the errors themselves.
We do not agree with the State's interpretation of this provision or
of its responsibilities under the EAP.
Pub.L. 96-126 requires that eligibility standars be promulgated
within certain specified criteria and that proof of income eligibility
be required of all applicants. It does not provide for federal payment
where payment is made to an ineligible household. It also provides that
an annual audit be made of the EAP.
The action transmittal (AT-79-42) sent to the states on the date of
the enactment of the legislation alerted the states to the fact that
federal payments would not be made for assistance to households
ineligible under a State plan. This section, also a part of Tab E,
states that:
(4) (the) following expenditures are not subject to Federal
reimbursement and will not be claimed:
1. EAP assistance payments to households not meeting the eligibility
requirements under the State plan...
7. any expenditures which are not made in accordance with the State
plan....
The transamittal was subsequently published in the Federal Register,
and the New Jersey State plan incorporates these statements.
Read in conjunction with these statements in the State plan, the
section relied upon by the State can not be read to set a tolerance
level for payment errors. To adopt the State's position would mean
that, since no specific error rate is mentioned, any percentage of
errors would have to be accepted by the Agency, a clearly unreasonable
result.
In the context of the quality control regulations and the EAP Action
Transmittal, the meaning of the section relied upon by the State becomes
clear. The State need not set up an elaborate system of quality control
for its EAP program such as the one required in its AFDC program.
However, it still must take action to prevent errors from occurring and
remains responsible for errors such as those found here by the financial
review.
Even assuming that the State may have done its best given the short
time frame involved, that it made very few incorrect payments (in this
case where 75% of the payments were made in the four counties reviewed,
there was a total of $24,637.51 disallowed out of a total of $1,102,089
expended state-wide for emergency energy assistance payments (Appeal
Brief, p. 4)), and that it saved the federal government money because it
spent relatively little money on administrative costs does not defeat
the fact that the statute and rules do not allow federal payments to
ineligible households. /2/
We, therefore, find no basis to adopt the State's interpretation of
the Action Transmittal and find that it is responsible for payment
errors.
(5)
CONCLUSION
Based on the analysis above, we uphold the disallowance. /1/ For
fuller discussions of the history and uses of the quality
control system, see California Department of Health Services, Decision
No. 170, April 30, 1981; California Department of Social Services,
Decision No. 235, January 7, 1982; Maryland Department of Human
Resources, Decision No. 246, January 18, 1982; California Department of
Social Services, Decision No. 319, June 30, 1982. /2/ In a court case
which found that the tolerance levels in federal regulations for the
AFDC program were arbitrarily established at 3% and 5% and, therefore,
the regulation was framed in an arbitrary and capricious manner and as
an abuse of discretion, the court did not say that the Secretary must
use tolerance levels or that in the absence of levels set up by the
Secretary, states were not responsible for eligibility or overpayment
errors. Maryland v. Mathews, 415 F. Supp. 1206 (D.D.C. 1976).
JULY 07, 1984