GAB Decision 715
January 6, 1986
Illinois Department of Public Aid;
Ford, Cecilia Sparks; Garrett, Donald F. Settle, Norval D.
Docket No. 85-170
The Illinois Department of Public Aid (State) appealed a decision by
the Office of Family Assistance, Social Security Administration
(Agency), disallowing $59,192 in federal financial participation (FFP)
claimed by the State under title IV-A of the Social Security Act (Act)
for expenditures made in its Special Assistance program. The
disallowance was based on the State's failure to file its claim within
two years of the calendar quarter in which the expenditures were made,
as required by section 306(a) of Pub. L. 96-272. The State contended on
appeal that the two-year time limit was not applicable because its claim
fell within the statutory exception to that time limit for claims
resulting from an audit exception.
As explained below, we find that the State's claim did not result from
an
audit exception. Instead, the claim was initiated by the State when
it
realized, based on a review by the Agency of a related title IV-A
program
administered by the State, Emergency Assistance, that a
restriction on FFP
available for Emergency Assistance payments had
mistakenly been applied to
Special Assistance payments. Accordingly, we
uphold the disallowance on the
ground that the claim was not timely
filed.
Factual Background
The State's title IV-A plan in effect during the period involved in
this
case, under the heading of Crisis Assistance Programs, provided for
both
Special Assistance (SA) and Emergency Assistance (EA) payments.
The SA
program made available cash payments for shelter, food,
furniture,
clothing, household furnishings and household equipment required
when
the individual is homeless or has suffered personal property damage
due
to a fire, flood or other disaster, or has a court-ordered eviction
for
other than non-payment of rent. The EA program provided assistance,
in
the form of both cash payments and services, to individuals
with
emergency needs resulting from lost or stolen cash,
court-ordered
eviction,(2) malfunctioning of major appliances, emergency
shelter
requests and non-medical needs related to essential medical
care.
(State's brief dated October 7, 1985, Exhibit 1, pp. 5-6) The
programs
were similar and, in some instances, the same individuals were
eligible
for payments under either program (although there is no allegation
here
that the SA payments could have been made as EA payments
instead).
However, federal regulations make FFP available only for EA which
the
state authorizes during one period of 30 consecutive days in any
12
consecutive months. (45 CFR 233.120(b) (3)) There is no such
limitation
on properly authorized SA payments.
In 1984, two staff members from the Agency's Regional Office
(including
one person identified as a "State Program Specialist") conducted
a
review of the State's EA program which was based on a random
statewide
sample of EA cases. The Agency's report on its review, dated
November
1984, concluded that "(the) major problem identified by our review
was a
weakness in the State's control procedures which are intended
to
restrict EA authorizations to once in twelve months and to
prevent
erroneous Federal claims." (Report on Administrative Review of
the
Emergency Assistance to Needy Families with Children (AFDC-EA)
in
Illinois, State's brief dated October 7, 1985, Exhibit 1, p. 7)
The
report identified payments within the sample which were unallowable
for
FFP based on the restriction in 45 CFR 233.120(b) (3) noted above
and
recommended that the State notify the Regional Office of the amount
of
the adjustment in its claim required because of unallowable EA
payments.
(Id., p. 9 and Attachment I)
In a quarterly statement of expenditures for the quarter ending
December
31, 1984, the State showed a decreasing adjustment of $121,422 in
FFP
for EA for the period May 1980 through December 1984. The State
also
claimed $75,974 in FFP for SA as an increasing adjustment for a
period
ending December 1984. /1/ The reason given by the State for the
latter
adjustment was that, due to a mistake in computer coding, it
previously
withheld claims for SA payments based on the limitation found at
45 CFR
233.120(b) (3). (State's brief dated October 7, 1985, p. 3, n.2)
The
Agency accepted the decreasing adjustment for EA but disallowed
$59,192
of the(3) increasing adjustment for SA on the ground that that
portion
of the claim, which covered expenditures from January 1981
through
December 1982, was not timely.
Statutory and Regulatory Background
Section 1132(a) of the Act requires claims by states for
expenditures
during a calendar quarter under the various public assistance
programs
to be filed "within the two year period which begins on the first
day of
the calendar quarter immediately following such calendar quarter,"
or
payment will not be made. It further provides that this requirement
is
not to be applied "so as to deny payment with respect to any
expenditure
involving court-ordered retroactive payments or audit exceptions,
or
adjustments to prior year costs."
These statutory provisions are implemented by 45 CFR Part 95, Subpart
A
(1981). The regulatory provisions on time limits in general track
the
statutory requirements. Section 95.19(b) states that the time
limits do
not apply to "any claim resulting from an audit exception." The
term
"audit exception." The term "audit exception" is defined at section
95.4
as "a proposed adjustment by the responsible Federal agency to
any
expenditure claimed by a State by virtue of an audit."
Parties' Arguments
The State argued that the Agency's report on its review of the EA
program
created an audit exception which made the two-year time limit
inapplicable to
the State's SA claim. The State cited specifically
Findings 3. and 4.
of the report, which provide as follows:
3. The major problem identified by our review was a
weakness in the
State's control procedures which are intended to restrict
EA
authorizations to once in twelve months and to prevent erroneous
Federal
claims. The reasons for the erroneous EA claims relate to the
following
factors:
a. Misunderstanding by some local office staff regarding
control
procedures with reference to the once in 12-month limitation.
For
example, some staff believed that "stolen cash" could be replaced once
a
year irregardless of any other EA granted.
b. Special Projects Unit staff, who authorize over 80
percent of EA
payments, have no responsibility for assuring that the time
limitation
requirement is met. Although in some areas of the State
special
referral forms are used which include a report of prior EA
authorized,
the Cook County(4) Special Projects Unit maintains no controls
(even on
payments for which it has assigned responsibility) to prevent
duplicate
EA payments.
c. The Springfield vouchering unit revised the "need
codes" for some
cases causing Hardship Assistance authorizations to be
claimed under the
EA program.
d. The computer control system intended to prevent
erroneous Federal
EA claims did not properly exclude unallowable
payments.
4. Attachment I lists the payments identified from the
review as
unallowable for Federal matching. Attachment II is a recap by
needs
codes of Crisis Assistance payments (including Emergency Assistance)
for
the months of January, February, March 1984, the period covered by
our
review.
On September 18, 1984 State staff reviewed the preliminary
findings
(Attachment I) on unallowable payments and agreed to determine
the
extent of the problem and make proper adjustment to the Federal
claim.
The State indicated that its adjustments for the EA program and the
SA
program were based on these findings, and contended that the Agency,
in
allowing a portion of the SA adjustment, "also accepted the
audit
finding relating to the State's underclaiming $59,192 in FFP for
the
Special Assistance Program. . . ." (State's brief dated October 7,
1985,
pp. 8, 11; State's reply brief dated December 2, 1985, p. 2) The
State
also argued that it would be "fundamentally unfair" to allow the
federal
government to recover overpayments without any limitation on time
while
denying claims for underpayments beyond the two-year limit.
(State's
brief dated October 7, 1985, pp. 11-12)
The Agency took the position that it had not conducted an audit but
merely
a program review, so that there could be no audit exception. The
Agency also
contended that even if its report on its review of the EA
program were
considered an audit, the report did not address the SA
program expenditures
at issue in this appeal. The Agency further
contended that two years
was a reasonable amount of time for states to
develop and submit claims, and
argued that since the decision to place a
time limit on claims by the states
but not on the recovery of
overpayments was made by Congress, this was not
the appropriate forum to
question the wisdom of that decision.(5)
Discussion
1. Was There An Audit?
It is not clear that the document on which the State relies was an
audit
for purposes of the "audit exception" exception to the two-year
time
limit. Neither the statute nor the regulation providing for the
audit
exception define the term "audit." However, an audit is
commonly
understood to involve the formal inspection of accounting or
financial
records. (See definition of "audit" in Black's Law
Dictionary, Fifth
Edition; Webster's New World Dictionary, Second
College Edition) The
case records for recipients of EA payments which were
examined by the
Agency here would not generally be considered financial or
accounting
records. Moreover, the Agency's report appears to be a
review within
the meaning of regulations at 45 CFR Part 201, Subpart B,
(applicable to
all of the public assistance programs), which distinguish
between
reviews, which are conducted directly by the Agency /2,/, and
audits,
which are conducted by the DHHS Audit Agency and are reviewed by
the
Agency. The distinction made by these regulations between reviews
and
audits is somewhat blurred in this case, however, because the
Agency's
report on its review recommended adjustments in the State's title
IV-A
claim although the regulations contemplate that only audits conducted
by
the Audit Agency will propose such adjustments. Thus, although
what
took place was identified by the Agency as a review and not as an
audit,
it might arguably be considered an audit for purposes of the
audit
exception since the practical effect was the same. We need not
decide
this question, however, in light of the discussion below.
2. Did The Claim Result From An Audit Exception?
Even if the review in question constituted an audit for purposes of
the
exception, however, we would uphold the disallowance on the ground
that
the adjustment proposed in the Agency's review was a
decreasing
adjustment for EA program expenditures and not the increasing
adjustment
for SA program expenditures at issue here. Findings 3 and 4
of the
report are concerned with "(the) reasons for . . . erroneous EA
claims,"
and refer the reader to a list of unallowable payments "identified
from
the review." It is undisputed that the Agency reviewed only "EA
cases
selected from EA listings of costs claimed for Federal
financial
participation for the months of January, February and March,
1984."
(Agency's brief dated November 1, 1985, attached Declaration of
Winifred
A.(6) Kale) A review of EA expenditures resulting in an audit
exception
does not open the door claims for other expenditures made under
title
IV-A.
The State nevertheless asserted that "(the) error . . . that occurred
in
the Special Assistance Program was directly related to the . . .
error
that also occurred in the Emergency Assistance Program." (State's
reply
brief dated December 1, 1985, p. 7) It is entirely possible that
the
State's discovery of its underclaim for SA expenditures was made
only
because the Agency had pointed out in its report that the FFP
limitation
in 45 CFR 233.120(b) (3) was not being applied to EA payments
as
required. However, even if an audit exception pertaining to the
EA
program led the State to discover an underclaim in its SA program,
this
does not alter the fact that there was no audit exception pertaining
to
the SA program. The regulatory language "any claim resulting from
an
audit exception" implies a direct cause and effect relationship
between
the audit exception and the claim. In this case, the
relationship was
so tangential that the Agency maintained without
contradiction that "it
had no evidence of any error in the computation of SA
claims" and that
its "first notice of any adjustment concerning the SA
program came as a
result of the State's Quarterly Statement of Expenditures
submitted on
February 14, 1985." (Agency's brief dated November 1, 1985, p.
6) Since
the SA expenditures were identified independently by the State and
not
by the audit process, the audit exception was not available to the
State
and the disallowance based on the two-year time limit was proper.
3. Was The Disallowance Inequitable Under The Circumstances?
The State's argument that it was inequitable for the Agency to
recover
overpayments without any time limitation while denying claims
for
underpayments beyond the two year limit has no merit. In a
prior
decision, (South Carolina Department of Social Services, Decision
No.
612, December 19, 1985), the Board stated--
(We) note that the states are given considerable discretion
in
fashioning and administering their AFDC programs. Congress allowed
the
states a reasonable amount of time, two years, to submit their
claims
for ADC programs. The State should be able to develop and
administer
its program within this reasonable deadline. The
consequences for not
adhering to the deadline are the State's
responsibility. And, as noted
below, if good cause can be shown, the
Agency can waive the two-year
filing requirement. We thus do not see
anything inequitable in the
Agency's position. (p. 8)(8)
The State did not offer any basis for reversing the position
articulated
in Decision No. 612. We note, moreover, that the different
treatment
accorded the process of recovering overpayments and the process
of
correcting underpayments is justified since a time limit on the
recovery
of overpayments would limit the Agency's ability to assure that FFP
is
available only in allowable expenditures. The imposition of a
time
limit on the filing of states' claims has no similar adverse
effect.
Finally, since the Board is bound by all applicable laws and
regulations
(see 45 CFR 16.14), it would have no authority to waive the time
limit
even if the equities favored the State.
Conclusion
For the foregoing reasons, we conclude that the two-year time limit
was
applicable and that the State's claim for $59,192 in FFP for
SA
expenditures was properly disallowed as untimely. /1/ The
State
indicated that the
increasing adjustment covered the period
beginning May 1980 (State's brief
dated October 7, 1985, pp. 4, 8),
while the Agency stated that that
adjustment covered the period
beginning January 1981 (Notification of
disallowance dated July 25,
1985, p. 1; Agency's brief dated November
1, 1985, p. 1) Since both
parties identified $59,192 as the amount in
dispute, and the claim would
be untimely regardless of which date is correct,
the discrepancy in the
date is not
significant. /2/ The regulation
refers to the Social
and Rehabilitation Services (SRS) as the cognizant
agency. SRS was
abolished prior to the time period involved in this
case and its
functions with respect to title IV-A were assumed by the Social
Security
Administration.
MARCH 28, 1987