GAB Decision 427
Docket No. 82-178
May 24, 1983
Alabama Department of Pensions and Security;
Ford, Cecilia; Settle, Norval Garrett, Donald
The Alabama Departent of Pensions and Security (State) appealed the
disallowance of $61,102 by the Associate Commissioner for Family
Assistance, Office of Family Assistance, Social Security Administration
(Agency) in costs for the State's 1980 Low Income Energy Assistance
Program (EAP). The disallowance represents payments totalling $60,981
made to 141 ineligible households and overpayments totalling $121 made
to four households.
Under Alabama's State Plans, energy assistance funds were distributed
as grants to (1) Aid to Families with Dependent Children (AFDC)
assistance units that were "receiving assistance under Title IV-A of the
Social Security Act for the month of December 1979" (State Plan A,
Appeal File, Tab B) and (2) all "non-SSI (Supplemental Security Income)
State Supplementation recipients eligible for State Supplementation in
December 1979" (State Plan D, Appeal File, Tab C). EAP payments were to
be made in February 1980. Alabama was required to operate the EAP in
accordance with the provisions of the relevant Program Instruction
(SSA-AT-79-42, dated November 27, 1979) and the provisions of its State
Plans.
Based on the record in this appeal, we uphold the disallowance.
The State's Implementation of Its State Plans
Pursuant to Alabama's Plans a computerized system generated a list of
those eligible for AFDC/State Supplementation in December of 1979. This
list was then used as the master list to determine those eligible to
receive energy assistance payments in February of 1980.
After this master list was printed for the energy assistance
payments, the county departments sent in PSD-90's (hold orders) for some
of the AFDC and State Supplementation checks (2) for recipients on this
list. These hold orders did not authorize the cancellation or
termination of a case, but rather stopped transmissing of the check to
the recipient pending investigation into and resolution of whatever
circumstances caused the hold order to issue. In order to determine the
final disposition of the cases which had hold orders issued to them, the
State would have had to implement a manual operation. The State decided
that this manual recheck of the computer generated list would have been
burdensome and inaccurate in addition to being expensive, so the State
did not check the hold orders and sent EAP checks to those people whose
AFDC/State Supplementation checks were being held. The federal auditors
manually checked a sampling of 200 of those cases that had hold orders
on them. They found erroneous payments in 171 cases. This figure was
reduced (as was the disallowance amount recommended by the auditors and
adopted by the Agency) to 141 upon proof of eligibility of 30 households
by the State. The State did not argue that the 141 households were in
fact eligible for AFDC/State Supplementation payments and, therefore,
for EAP payment. Nor has it argued that overpayments were not made to
four households. Instead, it argued that there should be no
disallowance regardless of the fact that there were erroneous payments.
WHESTHER THE EAP ALLOWS A STATE TO CLAIM FFP IN PAYMENTS TO ADMITTEDLY
INELIGIBLE HOUSEHOLDS OR IN PAYMENTS IN INCORRECT AMOUNTS
A section of Action Transmittal SSA-AT-79-42(OFA) at Tab E,
specifically incorporated into the State Plans, 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.
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
or for payments in incorrect amounts.
Tolerance levels were instituted in the early 1970's in the AFDC
program as part of a required quality control system for measuring and
reducing errors made in determining recipient eligibility and payment
amounts. Tolerance levels (3) 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, when the questioned expenditures
are so small that the cost of attempting to avoid those errors arguably
would be 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 standards 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 or in incorrect amounts. 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;
2. any portion of an EAP assistance payment which exceeds the amount
set forth in the State plan...
7. any expenditures which are not made in accordance with the State
plan....
The transmittal was subsequently published in the Federal Register,
and the Alabama State Plans incorporate these statements.
Read in conjunction with these statements in the State Plans, 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 audit.
Even assuming that the State may have done its best given the short
time frame involved, that it made very few incorrect payments (possibly
as small as a 2% error rate) 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 or in excess of the allowable
payments. /2/ Furthermore, at the time the (5) State issued the EAP
checks in question, it knew there was a likelihood that at least some of
the households whose AFDC/State Supplementation checks were being held
would be determined not be eligible for these programs.
The State's final argument analogized its situation to one covered by
an Agency policy interpretation, applicable to another HHS program,
which concerned the recovery of erroneous EAP payments by the states
where a recipient is presumed eligible but later determined ineligible.
The policy interpretation cited by the State as substantiation for
its claim is inapplicable to the situation here. That interpretation is
as follows:
(if) an EAP is based upon presumptive SSI eligibility and it is later
determined that the recipient was ineligible for the SSI, and therefore
ineligible for the EAP payment, what is the policy concerning recovery
of the EAP?
This is up to the State.
HHS Action Transmittal, SSA-OFA-79-44, quoted at Appeal Brief, p. 5.
We assume that the State was implying that if a state does not
recover an EAP payment in this situation, the Agency cannot recover the
payment from the State.
As the Agency pointed out, that interpretation is applicable only to
distribution of energy assistance payments to SSI recipients, and an
SSI-EAP payment may be based on presumptive SSI eligibility. Under
Alabama's State Plan A, eligibility for an EAP payment is based on
receipt of AFDC which in turn is based on documented eligibility for
AFDC. Under Alabama's State Plan D, EAP eligibility is based on receipt
of aid from such programs as "Old Age Pension, Aid to the Blind, and Aid
to the Totally and Permanently Disabled" (Audit Report, p. 2) which in
turn is based on documented eligiblity for these programs.
We, therefore, find no basis to adopt the State's interpretation of
the Action Transmittal, to analogize the circumstances here with the
question of the recovery of EAP (6) payments from people ultimately
found to be ineligible for SSI payments, and find that the State is
responsible for payment errors. /3/
Conclusion
For the reasons stated 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. 236, 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 estabished 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 eligibililty or overpayment
errors. Maryland v. Mathews, 415 F. Supp. 1206 (D.D.C. 1976).
/3/ Although the State did not develop the argument, it did contend that
"the questioned payments were made to recipients that were eligible at
the time of the generation of the master list" (Appeal Brief, p. 6). We
assume that the State is implying that the disallowance is improper
because the people were eligible and were receiving assistance in
December 1979, in accordance with the State plans. We disagree with the
State's contention on two grounds. First, even if the households were
eligible for assistance in December 1979, they did not receive that
assistance; their checks were held and not distributed. Second, we
agree with the Agency that implicit in the term "receiving assistance"
is that the households must have been determined eligible for that
assistance. The State has not argued that, ultimately, the 141
households were determined eligible for AFDC or State Supplementation.
In fact, by asserting specifically that 30 of the original sample were
ultimately found to be eligible, the State has impliedly conceded that
the rest of the sample were found not to be eligible.
JULY 07, 1984