Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
AFDC QUALITY CONTROL REVIEW PANEL
SUBJECT: Colorado Department of Human Services
Docket No. A-95-181
Decision No. QC97
DATE: March 19, 1996
DECISION
The Colorado Department of Human Services (Colorado) appealed a July 12, 1995 quality control (QC) determination by the Assistant Regional Administrator of the Administration for Children and Families (ACF) in State Quality Control Review No. 94004 (Federal Quality Control No. 26). 1/ The Assistant Regional Administrator sustained the federal QC review finding that the assistance unit (AU) received an Aid to Families with Dependent Children (AFDC) overpayment of $349 for the October 1993 review month. The overpayment involved several different elements. Colorado appealed two portions of the overpayment to the Quality Control Review Panel. First, Colorado contended that its supplemental payment of $71 on October 21 for a baby born to a minor mother in the AU was proper. Second, Colorado contended that the portion of the overpayment attributable to the mother's income was a Payment Adjustment Lag (PAL) error rather than a regular error.
For the reasons discussed below, we uphold ACF's determination that the AU was overpaid $349 in the review month. In the first section, we set forth the relevant federal authority. In the second section, we set forth the facts, parties' arguments, and our analysis as to why the supplemental payment was incorrect. In the third section, we set forth the facts, parties' arguments, and our analysis as to why the portion of the error attributable to the mother's earnings was a regular error.
I. Relevant Federal Authority
Title IV, Part A of the Social Security Act (Act) establishes the AFDC program to provide assistance to needy children and their caretakers. Under section 408(a) of the Act, the Secretary of the Department of Health and Human Services must establish a quality control system to determine the amount of any erroneous AFDC payments made by a state. Under this system, states review a sample of AFDC payments made during the review period in order to determine the level of erroneous payments. The Act then provides for federal QC re-review of a subsample of the cases reviewed by the state. See section 408(b) of the Act. Pursuant to this statutory mandate, the Secretary has issued regulations for the operation of the federal and state AFDC QC systems. 45 C.F.R. §§ 205.40 through 205.43. Those regulations provide that a state agency must operate its QC system in accordance with applicable regulations and the policies and procedures prescribed in the Quality Control Manuals (QCM) issued by the Department. 45 C.F.R. § 205.40(d)(1).
QC reviews are conducted against permissible state practice (PSP). 45 C.F.R. § 205.42(b). PSP is defined as "written rules and policies relating to eligibility and payment that are in accordance with existing, approved State plan provisions or with proposed plan amendments submitted to, but not acted upon, by the Department." 45 C.F.R. § 205.40(b)(12).
In arguing that its supplemental payment was correct, Colorado relied on section 402(a)(38) of the Act. Section 402(a)(38) makes certain individuals mandatory or required members of an AU and requires certain combinations of individuals to be consolidated into one AU. Under section 402(a)(38), all AFDC State plans must provide that, in making eligibility and payment determinations with respect to a dependent child,
the State agency shall . . . include [in the AU]--
(A) any parent of such child, and
(B) any brother or sister of such child, if such brother or sister meets the conditions described in clauses (1) and (2) of section 406(a) or 407(a)
if such parent, brother or sister is living in the same home as the dependent child . . .
A payment discrepancy resulting from a change in circumstance is classified as either a regular error or as a PAL error. A regular error is a countable error while a PAL error is not countable. QCM § 3300, at III- 1. As to the PAL/regular issue, Colorado relied on revisions to section 3420 and Appendix A of the QCM which became effective for cases reviewed as of October 1995. Under these revisions, Colorado asserted that the error attributable to the mother's income should be classified as a PAL discrepancy.
II. Supplemental Payment Issue
A. Facts
The first issue in this case involves whether Colorado correctly issued a supplement payment for the needs of a baby born to a minor mother in the AU. The facts concerning this issue are as follows.
o On October 1, Colorado made a payment in the sample case based on an AU of two adults and three children. The two adults were a mother and her daughter (the minor mother), who had had a baby on September 9. The three children were the children of the mother and the siblings of the minor mother. As of October 1, the new baby's needs had not yet been added to the grant although a request for assistance for the baby had been made prior to October 1.
o On October 6, the minor mother moved out of the mother's household and took the baby.
o On October 12, the minor mother applied for an AFDC grant for herself and her baby.
o On October 13, the local agency received a monthly report from the mother saying that the minor mother and baby had moved out of her house on October 6.
o On October 15, an application for a Social Security number for the baby was received by local agency.
o On October 20, the local agency authorized a supplemental payment of $71 to the mother to add the baby's needs to mother's AU for month of October.
o On October 21, the local agency issued the supplemental payment of $71.
B. Parties' Arguments
Relying on section 402(a)(38) of the Act and section 3536 of the QCM, Colorado argued that the baby was a "required member of the assistance unit as of the date of her birth." Colorado Appeal at 4. Colorado asserted that its October 21 payment was correct because, under section 3536 of the QCM, it was required to add the baby to the AU and make a retroactive payment on the baby's behalf after the baby met the enumeration requirement. Colorado argued that
The issue of whether the child left [the mother's] home on October 6, 1993 does not negate the child's retroactive eligibility for AFDC. The supplemental payment issued reflected all the circumstances for the review month, that is, the child was an eligible member of the AU for the month of October 1993, having been "deemed" eligible retroactive to October 1, 1993 and remaining eligible for AFDC through the entire review month of October 1993.
Colorado Appeal at 4.
ACF argued that section 402(a)(38) did not make the baby a mandatory member of the assistance unit because the baby was neither the parent nor the sibling of a dependent child in the AU. 2/ Because the baby was not a mandatory member, ACF argued that section 3536 of QCM was inapplicable and a request for assistance had to be made for the baby. ACF also argued that, since the baby left the mother's house prior to the supplemental payment, 45 C.F.R. § 206.10(a)(6)(i)(A)(2) and (C) precluded payment because the baby was not an eligible member of the AU during the entire retroactive period of the initial payment coverage. ACF relied on Action Transmittal ACF-AT-93-13 (September 10, 1993). ACF Response at 3.
In its reply, Colorado represented that a request for assistance had been made for the baby in September 1993 and that "in requesting assistance, [the baby] became a required member of the unit since her parent . . . was a required member of the unit." (Emphasis added.) Colorado Reply at 2. Colorado argued that 45 C.F.R. § 206.10(a)(6)(i)(A)(2) was not applicable to this case because the minor mother and baby were required members of the AU. Id. Colorado represented that its State plan "requires assistance be granted from the date of application . . . and further allows cases to be closed at the end of the month if ineligibility is due to a change of circumstances." Id. Colorado concluded that "in accordance with Colorado's State Plan, assistance for [the baby] was appropriately authorized from the date of application and Colorado was not required to remove either her needs or those of [the minor mother] until the end of October." Id.
C. Analysis
Colorado offered two arguments as to why its supplemental payment was proper. Initially it argued that the payment was proper under section 3536 of the QCM because the baby was a mandatory member of the existing AU by virtue of her birth. In its reply, it appeared to shift its position somewhat, arguing that, upon the request for assistance, the baby was a mandatory member of the AU and that Colorado's State plan authorized payment in the circumstances presented by this case. Below we consider both these positions.
As to the impact of section 402(a)(38) of the Act and section 3536 of the QCM, we conclude that (1) the baby was not a mandatory member of the existing AU by virtue of her birth; (2) upon a request for assistance for the baby, Colorado had to consolidate the minor mother/baby's AU with that of the mother; and (3) Colorado was not required to redetermine eligibility and payment of this consolidated AU under section 3536 of the QCM because the baby was not a mandatory member of the AU prior to the request for assistance. Our conclusions are based on the plain language of section 402(a)(38) and the implementing regulations.
Section 402(a)(38) requires a state, in determining the eligibility of and payment for a dependent child, to include in the child's AU certain potentially eligible relatives living in the same household as the child. These potentially eligible relatives include the parent(s) of a dependent child and the siblings of a dependent child who are themselves dependent children. In implementing section 402(a)(38), ACF has promulgated the following requirements:
o First, an application on behalf of a dependent child must include a request for assistance for these potentially eligible relatives. This requirement is described in section 45 C.F.R. § 206.10(a)(1)(vii). Further, a relative who is a mandatory member of an AU "will be considered to be included in the application as of the date he is required to be included in the assistance unit." 45 C.F.R. § 206.10(a)(1)(ii). See 57 Fed. Reg. 30,135 (1992).
o Second, ACF has interpreted section 402(a)(38) to impose a duty on a state when the state learns of a mandatory member who is in a household but who has not been included in the AU. In such circumstances, a state must redetermine the AU's benefits from the time the mandatory member joined the household. Pursuant to that redetermination, the state must then impose an overpayment or provide a corrective payment for those months in which this individual satisfied all conditions of eligibility and payment. This duty is set forth in 45 C.F.R. § 233.20(a)(1)(iv) and reflected in the standards articulated in section 3536 of the QCM. See 57 Fed. Reg. 30,138 (1992).
o Third, multiple AUs in a household in which an individual is required, pursuant to section 402(a)(38), to be in more than one of the AUs must be consolidated into a single AU. This requirement is described at 45 C.F.R. § 233.20(a)(1)(iii). See 57 Fed. Reg. 30,136 (1992).
In the argument put forth in its appeal request, Colorado is relying on the second requirement of section 402(a)(38) as the basis of its appeal. It argued that it was required to retroactively include and pay for the baby's needs once the baby had satisfied the enumeration requirement because, at the time of his birth, the baby was a mandatory member of the mother's assistance unit. Colorado asserts that this duty is set forth in section 3536 of the QCM.
For the following reasons, we conclude that these provisions do not support Colorado's position. Section 45 C.F.R. § 233.20(a)(1)(iv) and section 3536 of the QCM are applicable in situations in which a state learns of the presence of a mandatory member who it failed to include in the assistance unit because it was not aware of that individual's presence. That regulation provides:
For AFDC, when a State learns of an individual who is required to be included in the assistance unit after the date he or she is required to be included in the unit, the State must redetermine the assistance and eligibility and payment amount, including the need, income, and resources of the individual. This redetermination must be retroactive to the date that the individual was required to be in the assistance unit either through birth/adoption or by becoming member of the household. Any resulting overpayment must be recovered or corrective payment made pursuant to § 233.20(a)(13).
Section 3536 of the QCM reflects this requirement. 3/
Neither 45 C.F.R. § 233.20(a)(1)(iv) nor section 3536 of the QCM are applicable to this case because this baby was not a mandatory member of the AU by virtue of her birth. The baby was not a mandatory member because she was neither a parent of a dependent child in the AU nor the sibling of a dependent child in the AU. 4/ Therefore, she did not become, by virtue of his birth, an individual who was required to be included in the assistance unit and of whom Colorado learned after the date she was required to be included in the unit. Rather Colorado was required to include her in the unit, assuming other conditions of eligibility was satisfied, from the point a request for assistance was made, i.e., at the point Colorado learned of the baby.
ACF does not dispute that the third requirement of section 402(a)(38) did became applicable to this case when a request for assistance was made for the baby. At that point, a request had been made for a dependent child (the baby) whose minor mother was required to be in two possible AUs in this household. 5/ However, while the baby had to be included in the mother's AU at the point assistance was requested for her, Colorado did not identify any authority which would take the processing of the baby's request for assistance outside the standard requirements for determining eligibility and initial payment. Below we consider those requirements and explain why the supplemental payment was in error under those requirements. We also review portions of the Colorado State plan and discuss why those provisions do not support the supplemental payment.
ACF relied on ACF-AT-93-13. That action transmittal discusses regulations governing AFDC eligibility determinations and initial payments. Specifically, it addresses the problem of whether "an applicant and other members of the assistance unit must be eligible on the date payment is authorized." ACF Ex. 1, at 2. The action transmittal provides:
Federal financial participation (FFP) is available for the initial assistance payment in accordance with an approved State plan timeframe described at 45 CFR 206.10(a)(6) provided that all of the eligibility conditions have been met for the period of the initial payment as required by 45 CFR 206.10(a)(6)(i)(A)(2) and (B) and (C). 6/ This means that each individual in the assistance unit must be eligible on the date that payment is authorized and also that each individual in the assistance unit authorized or payment was eligible during the entire retroactive period of initial payment coverage. Therefore, in the instances when a child moves out of the home during the application processing time prior to decision, the child would not be included in the payment because eligibility for the child would not exist at the time payment is authorized.
(Bold emphasis added).
In its Reply, Colorado argued that § 206(a)(6)(i)(A)(2) was not applicable to this case because the baby was a required member of the AU. It also cited the fact that the Colorado State plan requires assistance to be granted from the date of application, and further allows cases to be closed at the end of the month if ineligibility is due to a change of circumstances. Colorado concluded that "[t]herefore, in accordance with Colorado's State plan, assistance for [the baby] was appropriately authorized from the date of application and Colorado was not required to remove either her needs or those of her mother . . . until the end of October." Colorado Reply, at 2.
For the following reasons, none of these arguments are persuasive.
o First, as discussed above, this baby was not, by virtue of her birth, required or deemed to be included in this AU. Rather, a request for assistance had to be made on the baby's behalf and 45 C.F.R. § 206(a)(6)(i) applied to resulting eligibility determination process. Therefore, the regulation and action transmittal on which ACF relied is applicable to this case because the case involves eligibility determination and initial payment pursuant to a request for assistance.
o Second, the fact that Colorado has elected to provide assistance from the date of application does not mean that the action transmittal does not apply to Colorado's eligibility determination process. Colorado makes payments from date of application pursuant to 45 C.F.R. § 206(a)(6)(i)(C). The action transmittal expressly addressed payments pursuant to 45 C.F.R. § 206(a)(6)(i)(C) and interpreted that subsection also to require eligibility during the entire retroactive period of initial payment coverage.
o Third, while Colorado asserted its State plan allows cases to be closed at the end of the month if ineligibility is due to a change of circumstances, we could find nothing in the record that indicated Colorado's State plan allowed payments to be made on behalf of an individual who was not an eligible member of the AU as of the date of payment. The provision to which Colorado appeared to be referring is section 2.2 at page 5 of its State plan. It provides for
Payment for the entire month to or for a family which, for any portion of the month met all the eligibility conditions, provided the family was eligible on the date payment was made . . . .
(Emphasis added.) The regulation to which this State plan provision cites is 45 C.F.R. § 233.10. The relevant portion of that regulation, 45 C.F.R. § 233.10(b)(3), provides:
Federal financial participation is available in assistance payments made for the entire month in accordance with the State plan if the individual was eligible for a portion of the month, provided that the individual was eligible on the date that the payment was made . . . .
(Emphasis added.) These provisions support ACF's position that this was an incorrect payment because, on October 21, when the payment was made, the baby was no longer an eligible member of the AU to which the payment was made.
For the preceding reasons, we conclude the supplemental payment for the baby was an error.
III. Classification of the Error as PAL or Regular
A. Facts
The second issue in this case involves classification of the portion of the error attributable to the fact that the mother's actual income during the review month exceeded the estimated income. Colorado classified the error as PAL; ACF as regular. The facts relevant to this issue include:
o In July 1993, the mother was injured on her job and began receiving Worker's Compensation in August. The local agency learned of the change in the mother's circumstances in the mother's Monthly Status Report which it received on September 7, 1993. On that report, the mother represented that she would return to work in September.
o The local agency determined that the AU was ineligible for assistance in August because the Worker's Compensation award exceeded the relevant need standard.
o Because the AU was ineligible in August, the local agency reverted to prospective budgeting for September and October. The local agency based its payment for those months on a best estimate calculated on the basis of the mother's prior earnings and the termination of the Worker's Compensation. The local agency assumed that the mother would have $502.53 in earned income for each month and no Worker's Compensation.
o The Colorado QC reviewer determined that the mother had both earned income of $652.89 and Worker's Compensation income of $119.72 during October 1993. Colorado determined that the mother's actual income in October resulted in an overpayment of $158. It classified the overpayment error as PAL.
o The federal QC reviewer recalculated the amount of the error by removing the mother's needs from the grant (because she was under a sanction for non-cooperation with Child Support Enforcement Unit) and adjusting the dependent care deduction. The federal reviewer classified the error as regular because the client had receive Worker's Compensation continuously since August.
B. Parties' Arguments
Colorado argued that the methodology that ACF used to calculating and classifying the payment error was unfair and unsupported by regulation. Colorado attached the revision of the QCM which is effective for cases beginning with the review month of October 1995. Colorado cited specifically to the portion of the revision which explains how to classify errors where a state does not have a defined procedure for calculating a best estimate. In such circumstances, the QCM in effect in October 1993 instructed the reviewer to use actual review month income to determine the accuracy of the review month's payment and to classify any discrepancy as regular. QCM § 3420 A., at IV-8. The QCM revision effective October 1995 amends the classification process and provides that where a state does not have a defined estimating procedure, "[a]ny income/income related discrepancies are classified as PAL or regular based on the concepts expressed in QCM § 3300 and relevant sections of part V." Colorado Attach. at unnumbered page 14. Colorado argued that, under the concepts expressed in QCM section 3300, this error constituted a PAL error and should not be counted in the determination of its payment error. Colorado Appeal at 4.
ACF responded that the authority on which Colorado relied was not effective during the October 1993 review month. Rather ACF cited the prior version of section 3420 of the QCM which provides that in a absence of specific estimating procedures, the reviewer must use actual review month income and classify any discrepancy as regular "even if the change in income or income-related circumstances occurred in the PAL period." QCM § 3420 A., at IV-8. ACF asserted that Colorado did not have a specific methodology for computing best estimates and therefore this portion of the QCM applied. ACF also asserted that the mother had been receiving the Worker's Compensation since May and therefore the change at issue did not occur in the review month or the month immediately preceding the review month. 7/
In its reply, Colorado did not respond to ACF's arguments concerning classification of the income error.
C. Analysis
The basis for Colorado's argument that the income-related discrepancy should be classified as PAL is the revision of section 3420 of the QCM and Appendix A which is effective for cases with an October 1995 or later review month. This revision is not applicable to cases with a October 1993 review month. The QCM in effect for October 1993 provides that, where a state does not have a specific estimating procedure, any resulting income- related discrepancy is classified as regular. While we understand why the revision upon which Colorado relied is advantageous to states, we cannot apply it this case because it was not effective for this review month. The fairness of the QC review process depends on the use of the same standards for all cases. Allowing Colorado the benefit of the revised QCM in this case would not be fair to all the other cases in the system which had been evaluated pursuant to the applicable standard. Further, while Colorado argued that the methodology that ACF used to calculate the payment error was unfair and unsupported by regulations, it did not explain or support this argument with any authority other than what we have discussed. Therefore, we find this argument unpersuasive.
Conclusion
For the foregoing reasons we uphold ACF's determination that a regular overpayment error of $349 occurred in this case.
_____________________________
Sara B. Anderson
_____________________________
Thomas D. Horvath
_____________________________
Leslie A. Sussan
* * * Footnotes * * *
1. In its appeal, Colorado identified the State Quality Control Review Number as 94004. Elsewhere in the record, the parties referred to the state number as 940004. Also, while ACF identified the Federal Quality Control Number as 26 in its brief, elsewhere in the record ACF identified the federal number as 67.
2. We note, while the Assistant Regional Administrator determined that the supplemental payment was an error, he did not dispute that the baby was a mandatory member of the AU. Subsequently in its brief before the Panel, ACF took the position that the baby was not a mandatory member of the AU and that section 3536 was not applicable to this case. Because we conclude that the baby was not a mandatory member of the AU by virtue of her birth, we also conclude that section 3536 is not applicable to this case. Therefore, we do not address whether this payment would have been proper under section 3536.
3. Section 3536 of the QCM provides: When an individual later joins the AU by birth/adoption . . . the State must: redetermine eligibility and the amount of payment due for the AU considering the needs, income, and resources of the additional individual retroactive to the date that the individual was required to be included in the unit.
* * *
If s/he did meet all conditions of eligibility, then the corrective underpayment may be made back to the date the individual first should have been included in the AU. Once the individual meets all eligibility requirements, then the State may authorize an underpayment. The underpayment may then be made back to the date the individual should have been include in the unit, if the change was reported on a timely basis . . . .
4. If the mother had had a fifth child, that child would be, by virtue of his birth, a mandatory member of the AU because that child would be the sibling of a dependent child in the AU. In contrast, as the examples discussed in preamble to the rules implementing section 402(a)(38) make clear, no request for assistance had to be filed for this baby and, in the absence of a request, section 402(a)(38) did not deem the baby to be a member of the AU. 57 Fed. Reg. 30,136 (1992).
5. The basis for the consolidation of these AUs is not completely clear from the record. If the minor mother still satisfied the requirements of age, deprivation and living with a specified relative as required by sections 406(a) and 407(a) of the Act, then the minor mother and baby must be treated as members of the mother's AU under section 402(a)(38). 57 Fed. Reg. 30,136 (1992). It appears that the parties agree that section 402(a)(38) required the minor mother to be in the baby's AU because she was the baby's parent and to be in her mother's AU because she was a dependent child herself who was the sibling of other dependent children in the mother's AU. In addition to cases which are required to be consolidated by 402(a)(38), states may enact consolidation requirements in addition to the section 402(a)(38) consolidation requirements. 57 Fed. Reg. 30,136 (1992). However, while the basis of the consolidation is not clear from the record, neither party disputed that the AUs were properly consolidated while the baby resided in the mother's home.
6. 45 C.F.R. § 206.10(a)(6)(i)(A)(2) and (C) provide:
(6) Assistance shall begin as specified in the State plan, which:
(i) For financial assistance. * * *
(A) Must be not later than:
(2) Thirty days in . . . AFDC . . . from the date of receipt of a signed completed application form . . . . Provided, That the individuals then met all the eligibility conditions; and * * *
(C) In AFDC, for purposes of Federal financial participation, may be as early as the date of application provided that the assistance unit meets all the eligibility conditions . . . .
7. The record indicates the mother had been receiving the Worker's Compensation since August, not May. However, the PAL period in this case would be September and October.