Final

Issued by: Administration for Children and Families (ACF)

Issue Date: September 12, 2000

To:

State Agencies Administering a Temporary Assistance for Needy Families (TANF) Program under Title IV-A of the Social Security Act and Other Interested organizations, Agencies and Individuals

Subject:

Collecting and Reporting of Overpayments Made to Families Under the TANF Program and the Former Aid to Families with Dependent Children (AFDC) Program

Purpose:

The purpose of this instruction is to clarify ACF policy with regard to treatment of overpayment recoveries received by the State agency from individuals who received cash assistance benefits to which they were not entitled, either under the former AFDC program or the current TANF program.

ACF has issued two Program Instructions for overpayment recoveries.  They were TANF-ACF-PI-99-2 published on March 9, 1999 and TANF-ACF-PI-99-2 (Revised) published on May 1, 2000.  This Program Instruction rescinds both of the these previous PIs and replaces them with the overpayment recovery policy contained in this Program Instruction.

This transmittal is effective for recoveries made after 9/30/96.  Recoveries made prior to the date of this transmittal will be evaluated on reasonable interpretation of statutory requirements or any previous guidance provided by ACF.

Background:

Under the TANF Program or the former AFDC Program, individual recipients might, on occasion, receive a monthly TANF Assistance or Maintenance Assistance Payment to which they are not entitled.  We refer to this as an overpayment.  The State IV-A agency should attempt to recover the overpayment either by recouping it from the recipient through a reduction in the recipient’s payment in one or more future months or by collecting cash repayment(s) from the recipient (or former recipient) under a lump sum or periodic repayment plan.

Federal regulations in the former AFDC Program required States to collect overpayments until the full amount of the overpayment was collected.  Although the AFDC Program was repealed and replaced with the TANF Program, a number of AFDC overpayments remain outstanding, and the requirement to pursue and recover the remaining uncollected AFDC overpayments remains in place.  There has been no change in the former AFDC program requirement. States must return to the Federal government the computed Federal share of recoveries that are made on outstanding AFDC overpayments occurring prior to October 1, 1996.  The process by which the Federal share of those overpayments must be computed and the vehicle through which such Federal share should be returned to ACF are discussed in the Action section of this instruction.

Federal regulations in the former AFDC Program required States to collect overpayments until the full amount of the overpayment was collected.  Although the AFDC Program was repealed and replaced with the TANF Program, a number of AFDC overpayments remain outstanding, and the requirement to pursue and recover the remaining uncollected AFDC overpayments remains in place.  There has been no change in the former AFDC program requirement.  States must return to the Federal government the computed Federal share of recoveries that are made on outstanding AFDC overpayments occurring prior to October 1, 1996.  The process by which the Federal share of those overpayments must be computed and the vehicle through which such Federal share should be returned to ACF are discussed in the Action section of this instruction.

In situations where a current or former recipient is making repayments for overpayments that occurred both prior to October 1, 1996 under the former AFDC program and after October 1, 1996 either under the AFDC or the TANF program, the oldest arrearage must be credited first.  States must be mindful that the Federal share of all overpayments made prior to September 30, 1996 must be returned by check to ACF.  Collections of amounts for AFDC or TANF overpayments made after October 1, 1996 are discussed below.

Action:

The procedures below outline how recoveries of overpayments are to be treated and reported, depending on when the overpayment occurred and whether the overpaid amounts were made with AFDC or TANF funds.

1.  Recoveries for AFDC Overpayments Occurring Prior to October 1, 1996

These AFDC overpayment recoveries will be made either through recoupment from recipients’ current TANF grant if they are still receiving cash assistance or through a cash repayment from former recipients.

For recoveries of former AFDC program overpayments made before October 1, 1996, States are required to repay to the Federal government the Federal share of these recoveries.  These rules apply regardless of the fiscal year in which the recoveries are collected and received by the State.  The Federal share of these recovered overpayments must be calculated by multiplying the total amount recovered by the Federal Medicaid Assistance Percentage (FMAP) rate in effect for the State during fiscal year 1996.  States should not use the FMAP rate in effect during the year in which the overpayment occurred or the FMAP rate in effect during the year in which the recovery is made.

State practice on the treatment of these overpayment recoveries during the period between October 1, 1996 and August 21, 1998 (when the final ACF 231 was due) has varied.

In some cases, States continued to report AFDC overpayment recoveries during this period via submission of ACF-231 Quarterly Expenditure Reports.  In these situations, the Federal share of the amounts recovered were reported on Lines 9 and/or 10, as appropriate, depending on whether the recoveries were made via recoupment from current cash assistance payments or via cash repayment.  For States that followed these procedures, negative AFDC program grant awards were issued to effect the "repayment" of the Federal share of the overpayments recovered.

In other cases, States tracked overpayment recoveries during this period, computed the Federal share, and remitted the computed amount to ACF via check.

In still other cases, States may have used a combination of the above-described procedures to "repay" the Federal share of AFDC overpayment recoveries received to ACF.  For example, for the period between October 1, 1996 and August 21, 1998 overpayment recoveries were "repaid" via inclusion on the ACF-231 report and subsequent negative grant award.  After August 21, 1998 the Federal share of recoveries was accumulated and periodically sent to ACF via check.

In some cases, States may have taken no action to ensure that the Federal share of AFDC recoveries on overpayments occurring prior to October 1, 1996 was returned to ACF.  Effective with the issuance of this Program Instruction, the following actions should be taken to ensure that the Federal share of all AFDC overpayment recoveries has been or is returned to ACF.

A.  States that have been properly tracking receipt of all AFDC overpayment recoveries and have been making periodic "repayments" to ACF for all of those recoveries through one of the methods described above or a combination of those methods should continue to make such "repayments" to ACF via check.

B.  States that have been diligent in tracking AFDC overpayment recoveries but have not returned all or any of the Federal share of such amounts recovered to ACF should remit the Federal share of the total accumulated amounts to ACF via check no later than October 31, 2000.

C.  States that have not been properly tracking recovery of AFDC overpayments that occurred prior to October 1, 1996 must perform an analysis of their accounts receivable systems to identify all such recoveries received both via recoupment of AFDC or TANF benefits and via cash collections.  Upon completion of such analysis, the Federal share of the accumulated amounts recovered should be remitted to ACF via check.  Both of these processes should be completed no later than December 31, 2000.

D.  Once States have become current with ACF with regard to past due remittances, checks should be submitted to ACF no less frequently than quarterly.

E.  For all recoveries of AFDC overpayments that occurred prior to October 1, 1996, States must use the applicable FMAP rate for fiscal year 1996 to compute the Federal share of such recoveries.

F.  States should maintain complete documentation to support the amount of AFDC overpayments received, the period to which the overpayments relate, and the computation of the Federal share to be returned to ACF.  This documentation should not be submitted with remitted checks but must be available for ACF Regional Office review, upon request.

G.  All checks should be made payable to the U.S. Department of Health and Human Services, and should be sent to the following address:

Administration for Children and Families
Office of Child Support Enforcement
c/o Director, Office of Mandatory Grants
370 L'Enfant Promenade, SW
4th Floor
Washington, DC 20047

2.  Recoveries for AFDC or TANF Overpayments Occurring on or After October 1, 1996

These overpayment recoveries will be made either through recoupment from recipients’ current TANF grant if they are still receiving cash assistance or through a cash repayment from former recipients.

A.  For recoveries of former AFDC program overpayments where the overpayment occurred after October 1, 1996, States are not required to repay to the Federal government the Federal share of such recoveries.  Instead, the full amount of these recovered overpayments is to be retained by the State and used for TANF program costs during the grant year in which they are recovered, or later.

B.  Similarly for recoveries of TANF program overpayments where the overpayment occurred anytime after a States’ implementation of the TANF program, States are not required to repay any portion to the Federal government.  These TANF overpayment recoveries must likewise be used for TANF program costs during the grant year in which they are recovered, or later.

C.  Recoveries of either former AFDC program or TANF program overpayments that are made anytime after October 1, 1996 are to be treated as follows with regard to their distribution between Federal and State funds:

(1) Recoveries of former AFDC overpayments shall be distributed between the Federal and State shares using the FMAP rate in effect for the State during Federal fiscal year 1997.  The Federal share should be credited against the current grant in the fiscal year in which the overpayment was recovered.

(2) Recoveries of TANF overpayments may be distributed between the Federal and State MOE funding sources in one of two methods, at States’ options:

(a) In the same proportions that the original expenditure was made, or

(b) In the same proportion as the aggregate final Federal/State MOE ratio for the fiscal year in which the original expenditure was made.

(c) Under either option (a) or (b), the amount distributed to each funding source shall then be applied as credits against the current year’s Federal TANF grant or State MOE funds in that same proportion.

(3) Alternatively, for either AFDC or TANF overpayment recoveries received after October 1, 1996, States may choose to forgo distribution of the amounts recovered between Federal and State MOE funds, and instead credit the full amount recovered to the current year's Federal TANF grant.

D.  State MOE funds credited must be expended for State MOE purposes in the year of recovery or subsequent years.  These expenditures must be in addition to the required MOE expenditures for the year in which expensed.  The recovered MOE funds CANNOT be used to meet States MOE requirements in the current or any subsequent fiscal year.

E.  Recoveries credited to TANF must be used in the year of recovery or subsequent years. Recoveries made in the same year as the TANF overpayment expenditure can be used for any activity which meets the TANF purposes as long as the funds are obligated in that same year; those used in subsequent years may be used only for the purpose of providing assistance to TANF eligible families.

3.  Reporting and Documenting Overpayment Recoveries

Received After October 1, 1996 and Credited Against the TANF Program

States are not required to identify either the amounts recovered or the subsequent expenditures of those recoveries on any ACF-196 expenditure report.  However, States must maintain documentation for all recovered overpayments.  At a minimum, such documentation should include the period to which the overpayment applied, the program type (AFDC or TANF), the distribution methodology on the recoveries between Federal TANF and State MOE funds, and identification of the expenditures for which overpayment recoveries were subsequently used, by Federal TANF and State MOE fund source.

Example:

A $200 overpayment made in fiscal year 1997 was recovered in fiscal year 2000.  The entire $200 is credited against the State's fiscal year 2000 grant and is available to the State for expenditures for fiscal year 2000 and subsequent years.  Assuming that in fiscal year 1997 70% of the expenditures were Federal TANF funds and 30% were for the State's MOE funds, $140 of this recovery can be allocated to the State's 2000 TANF (records kept and tracked separately from the ACF 196) and $60 can be allocated to the State's 2000 MOE (must be spent in addition to FY 2000 MOE requirement or any subsequent year's MOE requirement) or if the State chooses, all of the funds can be considered TANF and credited to the fiscal year 2000 grant.

4.  Recap of Policies for Treatment of AFDC and TANF Overpayment Recoveries

For ready reference, the attached matrix provides a summary of the policies contained in this program instruction with regard to treatment of overpayment recoveries.

Inquiries:

Inquiries should be directed to the appropriate ACF Regional Administrator

Attachment:

Overpayment Recovery Policy Matrix

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Treatment of AFDC and TANF Program Overpayment Recoveries

Requirement	Program and Period In Which Overpayment Occurred
AFDC Occurring Before 10/1/96	AFDC Occurring After 10/1/96	TANF Occurring After 10/1/96
Recovered OP Funds Must Be Returned to ACF?	Yes	No	No
Recovered OP Funds Must be Used In TANF Program?	No	Yes	Yes
Alternative Bases for Federal/State Split of Recovered OP Funds?	FY 1996 FMAP Rate	FY 1997 FMAP Rate or All Recovered Funds are Federal TANF Funds	Actual Federal/State MOE Split When OP Occurred or Aggregate Federal/State MOE Split for Grant Year in Which OP Occurred or All Recovered Funds are Federal TANF Funds
Method for Repayment of Federal Share of Recovered OP Funds to ACF?	ACF-231/Negative Grant Award (Between 10/96-8/98 Only) or Combination of ACF-231/Negative Grant Award & Check or Check (Between 10/96-Present if Never Rpted Via ACF-231)	NA (Apply As Credit Against TANF Grant in Grant Year in Which OP Received and used for cash assistance expenditures in the year of recovery or subsequent years)	NA (Apply As Credit Against TANF Grant in Grant Year in Which OP Received and used for cash assistance expenditures in the year of recovery or subsequent years)
Identify Recovered OP Funds on ACF-196 TANF Report?	NA	No	No
Identify Recovered OP Funds "Reused" As Credit Toward Current TANF Expenditures on ACF-196 Report?	NA	No	No

Note: (1) OP = overpayment

DISCLAIMER: The contents of this database lack the force and effect of law, except as authorized by law (including Medicare Advantage Rate Announcements and Advance Notices) or as specifically incorporated into a contract. The Department may not cite, use, or rely on any guidance that is not posted on the guidance repository, except to establish historical facts.