GAB Decision 472
Docket No. 83-63
October 31, 1983
Ohio Department of Public Welfare;
Garrett, Donald; Settle, Norval Teitz, Alexander
The Ohio Department of Public Welfare (State) appealed a
determination by the Commissioner, Administration for Children, Youth
and Families, Office of Human Development Services, that the State was
ineligible for fiscal year 1981 funds under section 427 of the Social
Security Act (Act). That section provides that a state may receive
additional funds for child welfare services beyond the amount available
to each state under section 420 of the Act /1/ if the State meets
certain requirements for the protection of children in foster care. On
July 30, 1981, the State submitted a form certifying that it met the
requirements for additional funds under section 427. (State's appeal
file, Exhibit 2) On September 28, 1981, the State was awarded additional
funds in the amount of $1,074,514, of which the State subsequently
obligated $17,814. (Agency's brief dated August 24, 1983, p. 25;
State's reply brief dated September 12, 1983, p. 1) On February 15,
1983, following a "Section 427 Eligibility Verification Review"
conducted by the Agency during the last half of calendar year 1982, the
Agency advised the State that it had been found ineligible for the FY
1981 funds. The State was also advised by the Agency that it could
appeal the finding of ineligibility to this Board. (State's appeal
file, Exhibit 16) The State appealed on April 11, 1983, and the Board
accepted the appeal after a Memorandum of Understanding with the
Commissioner, Administration for Children, Youth and Families, gave the
Board jurisdiction over such appeals. /2/
For the reasons discussed below, we uphold the Agency's determination
that the State was ineligible for the section 427 funds awarded for
fiscal year 1981. Accordingly, the State must repay the $17,814 which
it obligated under this section. /3/
(2) Summary of State's Arguments
On appeal, the State acknowledged that it did not comply with one of
the requirements upon which eligibility for the section 427 funds was
conditioned, but disputed the Agency's finding that it failed to comply
with section 427 in other respects. The State argued that its conceded
violation was a technical one and that the State was in substantial
compliance with section 427. (State's reply brief dated September 12,
1983, pp. 9-11) Further, the State argued that the Agency's finding of
non-compliance was defective because it relied on standards which were
issued after fiscal year 1981 and which were not published in accordance
with the Administrative Procedure Act. (State's brief dated July 18,
1983, p. 4; State's reply brief dated September 12, 1983, pp. 7-9) The
State argued, moreover, that section 427 required that the Agency
determine prior to awarding any funds whether a state was eligible for
the funds, and that there was no authority in the statute or regulations
for a retroactive determination that a state was ineligible. (State's
brief dated July 18, 1983, pp. 3-4; State's reply brief dated September
12, 1983, pp. 2-5) In addition, the State argued that the Agency was
estopped from finding the State ineligible for the section 427 funds
since the Agency had in fact determined prior to awarding the funds that
the State was eligible and the State had relied on the Agency's
determination in obligating the funds in question. (State's brief dated
July 18, 1983, p. 5; State's reply brief dated September 12, 1983, pp.
5-7) These arguments are addressed below.
A. Whether the State's Conceded Violation of the Statute Was Technical
and May Be Disregarded.
As one of the conditions for eligibility for section 427 funds,
section 427(a)(2) requires that a state "has implemented and is
operating to the satisfaction of the Secretary" --
(B) a case review system (as defined in section 475(5)) for each
child receiving foster care under the supervision of the State. . . .
Section 475(5) provides that --
(the) term "case review system" means a procedure for assuring that
--
* * *
(B) the status of each child is reviewed periodically but no less
frequently than once every six months by either a court or by
administrative review (as defined in paragraph (6)) in order to
determine the continuing (3) necessity for and appropriateness of the
placement, the extent of compliance with the case plan, and the extent
of progress which has been made toward alleviating or mitigating the
causes necessitating placement in foster care, and to project a likely
date by which the child may be returned to the home or placed for
adoption or legal guardianship. . . .
Paragraph (6) states that --
(the) term "administrative review" means a review open to the
participation of the parents of the child conducted by a panel of
appropriate persons at least one of whom is not responsible for the case
management of, or the delivery of services to, either the child or the
parents who are the subject of the review.
In a document describing how it complied with the requirement for a
case review system, the State cited a rule of the Ohio Department of
Social Services (5101:2-33-01(E)(1)(d)) requiring that the county
children services agency "assure that in each case, a case plan is
developed, monitored, and evaluated at an administrative level within
the agency at a minimum of every six months." (State's appeal file,
Exhibit 3, p. 3) The State acknowledged that, "to the extent that rule
5101:2-33-01 failed to specify the composition of the review team," the
State "lacked a technically qualified administrative review. . . ."
(State's reply brief dated September 12, 1983, p. 11) Moreover, in
response to the Board's question whether the State in fact had
technically qualified review teams at six-month intervals, the State
stated that it could not show that the necessary neutral person was on
each team. The State asserted instead that the burden was on the Agency
to show that the State did not comply with this requirement in actual
practice. (Confirmation of telephone conference call, dated October 24,
1983, p. 2) However, in specifying that a state must have "implemented
and be operating" a case review system as a condition of eligibility,
the statute itself requires that the state comply in actual practice.
Thus, it is reasonable to conclude that the burden is on the State to
show actual compliance. Moreover, since the State's written procedures
did not implement the requirement in question, it seems reasonable to
presume that the State did not comply in actual practice, and to require
that the State rebut this presumption. Accordingly, we conclude that
the State did not satisfy the requirement that its case review system
use "appropriate persons."
(4) The question presented here is whether, as argued by the State,
this was a technical violation of the statute which may be excused. The
State asserted that, viewed in the context of the State's extensive
system of review of children in custody, this violation was a minor one.
/4/ The State also asserted that section 427 does not call for "perfect"
or "absolute" compliance, and that there were "good policy reasons"
for
not requiring perfect compliance. (State's reply brief, dated September
12, 1983, p. 11)
The State's argument that section 427 does not call for 100%
compliance in order for a state to be eligible for additional funds is a
plausible one. The statute requires that a state, in order to be
eligible for funding, have implemented and be operating a case review
system "to the satisfaction of the Secretary." It is arguable that
this
language gives the Agency discretion to waive minor violations.
However, the Board has held that it will not substitute its discretion
for that of the Agency when the Agency's decision is in accordance with
the rules and the Agency's exercise of its discretion is reasonable.
Social Science Education Consortium, Inc., Decision No. 163, April 28,
1981, p. 7. In this instance, the Agency's decision was based on a
specific statutory requirement. If there had been a substantial degree
of compliance with this requirement, perhaps a waiver might have been
warranted. However, the State not only had no written procedures for
semi-annual court or administrative reviews, but failed to show that in
actual practice it conducted any appropriate reviews in alternate six
months. Thus, we cannot say that the Agency's decision to enforce this
requirement was unreasonable. Accordingly, we conclude that the Agency
could properly have found the State ineligible for the section 427 funds
on the basis of this violation alone.
B. Other Violations of the Statute.
We find, moreover, that the State failed to comply with at least one
additional provision of section 427, so that its violation of the
statute was clearly not de minimis. Section 427(a)(2)(A) provides that a
state is not eligible for payment of additional funds under section 427
unless it has implemented and is operating to the satisfaction of the
Secretary--
a statewide information system from which the status, demographic
characteristics, location, and goals for the placement of every child in
foster care or who has been in such care within the preceding twelve
months can readily be determined. . . .
(5) The Agency found that the State did not comply with this
requirement because its statewide information system, as described in
the "Explanation of State Certification. . .," was required to be
updated only on an annual basis. The Agency took the position that
under the State's system, the status of each child could not "readily be
determined" within the meaning of the statute. (Federal appeal file,
Exhibit 17; Agency's brief dated August 24, 1983, pp. 15-16) The State
responded that it complied with the statute since "the initial report on
every child is completed within 60 days of the child's commitment to a
county child welfare agency and this report is then entered into
appellant's central data system." (State's reply brief dated September
12, 1983, p. 10) The Agency argued, however, that, even assuming this to
be the case, a child could be in the system for up to ten months without
current information, and that this was inadequate to comply with the
statute. The Agency also took the position that 60 days was too long a
period for the filing of the first report on a child. (Agency's
response to State's reply brief, dated September 30, 1983, p. 7)
We find the Agency's interpretation of the statute to be a reasonable
one. It is implicit in the concept of a statewide information system
that current information can quickly be retrieved from some central
location or locations in the state. In this case, for a child who
entered foster care simultaneous with an annual update of the
information system, current information would be entered in the system
only once during a twelve-month period -- with the filing of the initial
report. For the ten months from the filing of the initial report until
the annual update, it appears that the child's individual case file
would have to be consulted to determine his or her current status and
other relevant information. In our view, this does not comport with the
concept of a statewide information system or with the statutory
requirement that certain information be "readily" available. We note
that section 427(a)(2)(B) requires a court or administrative review of
the status of each child "no less frequently" than every six months.
Since the statewide information system specified in section 427(a)(2)(B)
might well be used in conducting such reviews, it seems reasonable to
conclude that the statewide information system should be updated at
least every six months. Accordingly, we uphold the Agency's finding
that the State did not meet the requirement for a statewide information
system as described in section 427(a)(2)(A).
The Agency also found that the State did not satisfy other aspects of
the case review requirement in addition to that described in the
previous section of this decision. (State's appeal file, Exhibits 11
and 12; Agency's brief dated August 12, 1983, pp. 16-17) However, in
view of our findings here, we do not consider these other alleged
violations.
(6) Whether the Finding of Ineligibility Was Based on Impermissible
Standards.
The State asserted that the Agency's decision finding it ineligible
for section 427 funds was defective because it relied on "standards
and(Illegible Word) issued by respondent long after the close of fiscal
year(Illegible Word) and without adherence to the rulemaking
requirements of the Administrative Procedure Act." (State's brief dated
July 18, 1983, p. 4) The State noted that the Agency's report prepared
as part of the Section 427 Compliance Review stated in part that "(the)
State of Ohio has neither a Statewide Information System nor a Case
Review System in place within the definitions provided by the Sec. 427
Guidance issued to interpret P.L. 94-272." (Emphasis added.) (State's
reply brief dated September 12, 1983, p. 8) The Guidance referred to
(found at State's appeal file, Exhibit 15) was an ACYF Staff Instruction
addressed to Regional Program Directors and was designed to "provide
regional staff with a format for conducting the (section 427 compliance)
reviews and reporting on State eligibility." (State's appeal file,
Exhibit 15, p. 2)
We find no significance in the report's reference to the Guidance.
The "definitions" referred to in the report merely repeat the
requirements of the statute. In any event, since the State violated
requirements which are clear on the face of the statute, the fact that
these requirements are repeated in the Guidance is irrelevant. (See,
Social Service Board of North Dakota, Decision No. 166, April 30, 1981,
p. 4) Thus, we do not judge the Agency's finding of non-compliance
defective despite its reference to an unpublished staff instruction
issued after the year for which the funds in question were awarded.
C. Whether a Retroactive Finding of Ineligibility is Authorized.
The State argued that the determination whether a state was or was
not eligible for additional funds under section 427 was required to be
made prior to the award of funds. It relied on the language in section
427 stating that "a State shall not be eligible for payment . . .
unless such State . . ." has complied with the requirements specified
therein. (State's reply brief dated September 12, 1983, p. 2) However,
we do not see anything in this language which would preclude the Agency
from awarding additional funds under section 427 based on assurances by
a state that it complied with the applicable requirements and proceeding
at some later date to verify the state's assurances.
Moreover, the Agency asserted, and the State did not dispute, that it
would not have been possible to award the section 427 funds to all
eligible states in a timely fashion if the Agency first had to conduct
compliance reviews. (Agency's brief dated August 24, 1983, p. 14) Thus,
it was reasonable for the Agency to award the funds based on states'
assurances of compliance (7) ("self-certifications"), and to verify
the
self-certifications at a later date. While it would perhaps have been
desirable for the Agency to have expressly advised the states at the
time of award that their self-certifications remained subject to
verification, the states should have realized that to be the case,
since, as the Agency stated, "(to) hold that a party's own assertion of
compliance in fact constitutes compliance would make a mockery of the
clear statutory conditions in Sec. 427 for . . . (eligibility for) the
additional funds." (Agency's brief dated August 24, 1983, p. 14)
Furthermore, the Comptroller General of the United States has held
that the government must recover all funds awarded from grantees
subsequently determined to be ineligible for a grant under applicable
law and regulations, except in certain unusual situations such as where
the statutory or regulatory provisions governing eligibility are
unclear. (51 Comp. Gen. 162 (1971); B-146285, B-164031(1), April 19,
1972) The first opinion cited explained the rationale as follows:
In our view, not to require repayment of funds in the hands of an
ineligible grantee could have the effect of binding the United States to
the improper and erroneous initial award determination and would in
effect, constitute the giving away of United States funds without
authority of law.
(51 Comp. Gen. 162, 165 (1971)) Accordingly, we conclude that the
Agency had authority to void the grant on the basis that the State was
ineligible for the funds under the terms of section 427. /5/
(8) The State argued, however, that the Agency's action finding it
ineligible on a retroactive basis was inconsistent with the purpose of
title IV-B to enable state public welfare agencies to establish, extend,
and strengthen child welfare services. (State's brief dated July 18,
1983, p. 4) In addition, the State cited language in the legislative
history of section 427 expressing a concern that states be able to "plan
for this program in an atmosphere of certainty as to the funding that
will be available. . . ." (State's reply brief dated September 12, 1983,
p. 4, quoting from S. Rep. No. 96-336, 96th Cong. 1st Sess. 18 (1979))
However, the State did not show how either of these references had any
bearing on the timing of the Agency's determination regarding a state's
eligiblity for section 427 funds. The(Illegible Word) Report quoted was
discussing a provision of the committee bill under which appropriations
would become available for expenditure in the fiscal year following the
fiscal year to which the appropriation act applied, and clearly does not
pertain to eligibility determinations.
D. Whether the Agency Is Estopped from Recovering the Funds.
The State argued that the Agency should be estopped from finding it
Ineligible for the grant because the State provided the Agency with "all
information needed for a determination of appellant's eligibility for
the additional funding." The State asserted that "(respondent)
subsequently indicated its approval of this information and appellant
reasonably relied on this approval in obligating the disputed funds."
The State noted that the Agency at no time indicated that final judgment
regarding its eligibility for the funds was being reserved. (State's
reply brief dated September 12, 1983, p. 6)
The relevant facts as shown by the record are as follows. The
State's assurances of compliance with section 427 were submitted to the
Agency by letter dated July 30, 1981. (Federal appeal file, Exhibit 4)
On August 24, 1981, the State forwarded "material requested by . . .
(the Agency) regarding our recent submission of the State Certification
of Eligibility for additional funds under Section 427 of the Social
Security Act." The State further stated that it would "be awaiting
your
decision regarding the department's eligibility for additional funds
under Section 427 of the Social Security Act." (Federal appeal file,
Exhibit 5) The material forwarded included a document entitled
"Explanation of State Certification of Eligibility for Additional Funds
Under Section 427 of the Social Security Act." On August 31, 1981, the
Regional Program Director, ACYF, advised the State in writing
(confirming (9) a prior telephone conversation) that "it appears that
the State does not meet the requirements as specified in Section 427,"
and that he would "recommend to the Commissioner of ACYF that your
request for approval of the revised CWS-101 (Annual Budget Request for
Title IV-A Funds) dated 7/30/81 be denied." (Federal appeal file,
Exhibit 5) This recommendation was based on the Agency's observation
that an application for a Special State Planning Grant for Child Welfare
Services Activities proposed the development of a comprehensive
management information system. The Agency concluded that the State must
not have met the requirement in section 427 that a state have
implemented and be operating a "statewide information system," since
it
appeared to be requesting funding to develop just such a system. In a
letter to the Regional Program Director dated October 5, 1981, the State
explained that the information system for which funding was requested in
the Special State Planning Grant application was not the same as the
information system required by section 427, which it asserted was
already in place. The State proceeded to request "your position with
respect to approval of Ohio's certification based on our submitted
justification and documentation." (Federal appeal file, Exhibit 7) In a
letter dated December 8, 1981, the Regional Program Director stated
(confirming oral advice given by program staff to the State) that the
"Acting Commissioner of the Children's Bureau, did approve Ohio's
certification of eligibility and the issuance of the grant award for the
additional 427 funds effective September 28, 1981." (Federal appeal
file, Exhibit 8) The grant award document, signed by the Acting
Commissioner, ACYF, was dated September (day unclear), 1981, and was on
a standard form entitled "Approval of Grant Award and Status of Funds,
Child Welfare Services." It contained preprinted language, with dates
inserted, stating that --
with reference to the Quarterly Statement of Expenditures, under
Approved Child Welfare Services Plan and Request for Grant Award, dated
July 30, 1981 for the quarter ending September 30, 1981, there is
approved for a grant award the amount shown on line 3b, pursuant to
Title IV, part B, of the Social Security Act as amended.
(State's appeal file, Exhibit 8) The State was not advised until
sometime in mid-1982 that a review to determine compliance with section
427 would be conducted. (Federal appeal file, Exhibit 13) The review
itself was not conducted until September 1982 (State's appeal file,
Exhibit 11) It was not until February 1983 that the Agency issued its
determination that the State had not been in compliance with section 427
and was ineligible for fiscal year 1981 funds. (State's appeal file,
Exhibit 16)
The Agency argued that, in making the award, it did not make a final
determination that the State was eligible for the section 427 funds. It
asserted that it is a routine matter to adjust a state's grant after
money has been advanced to the state and spent by it. The Agency (10)
also argued that "the State certainly knew at the time it received . .
(the grant award) document that the acceptance of its certification was
without prior verification and was based upon a facial review of the
State's submissions," and asserted that the State could therefore not
have reasonably thought the award was a final Agency decision.
Furthermore, the Agency argued that the State did not show that the four
traditional elements of estoppel were present in this case, i.e., that
the party to be estopped know the facts; that he intend that his
conduct shall be acted on or so act that the party asserting the
estoppel has reason to believe it is so intended; that the latter be
ignorant of the true facts; and that he rely on the former's conduct to
his injury. (Agency's brief dated August 24, 1983, pp. 19-23)
We find that the State could not reasonably have regarded as final
the Agency's determination that it was eligible for the section 427
funds. Although it requested additional information in support of the
State's assurances, the Agency at no time indicated that this
information was sufficient to demonstrate compliance with section 427.
Furthermore, as we discussed earlier, it was not reasonable for the
State to believe that an award made solely on the basis of a
self-certification was final. The absence of language in the grant
award document or elsewhere indicating the conditional nature of the
grant is thus not dispositive.
However, even if a final decision was made, that does not necessarily
mean that the State has made out a case for estoppel. As noted by the
Agency, one of the elements of estoppel is that the party to be estopped
be ignorant of the true facts. In our view, the State in this case knew
or should have known that it did not in fact meet all of the
requirements of section 427. The State now admits that it did not
satisfy the case review requirement since its procedures as described in
the "Explanation of State Certification. . . ." did not provide for
a
semi-annual review by a properly constituted administrative body.
Moreover, it should have been obvious to the State that an information
system which was required to be updated only annually could not make a
child's status "readily" available. Since the failure to meet these
requirements is clear from the face of a document which the State itself
submitted in support of its application for section 427 funds, then the
State should not be permitted to claim ignorance of the true facts at
the time the Agency awarded the funds. Accordingly, we find that the
Agency was not estopped from reversing its earlier decision that the
State was eligible for additional funds under section 427 for fiscal
year 1981.
Moreover, as the Board has noted in a previous decision, the federal
courts have never unanimously agreed that the doctrine of equitable
estoppel may be invoked against the federal government. Some courts
have held (11) that at the very least affirmative misconduct is
necessary to invoke estoppel against the government. While no
conclusive definition of affirmative misconduct has been provided, the
courts have said that there must be intentional misrepresentation or
wrongful concealment of material facts. (New York State Department of
Social Services, Decision No. 449, July 29, 1983, pp. 23-24) Here, the
State did not provide any evidence to show that any of the Agency's
actions constituted affirmative misconduct. Accordingly, we find that
the Agency was not estopped from finding the State ineligible for the
section 427 funds after the funds were awarded.
Conclusion
For the foregoing reasons, we conclude that the State did not comply
with the requirements for the receipt of additional fiscal year 1981
funds under section 427; that the Agency was not required to waive any
technical noncompliance; and that nothing precluded the Agency from
voiding the grant after funds were awarded. Accordingly, we uphold the
Agency's determination that the State was ineligible for funds awarded
in the amount of $17,814. /1/ The additional funds are a proportional
share of the amount appropriated for title IV-B which exceeds
$141,000,000. /2/ A regulation establishing the Board's
jurisdiction in this area became effective on June 22, 1983 (48 Fed.
Reg. 23104, May 23, 1983). /3/ The parties agreed that the State's
authority to expend any additional funds for fiscal year 1981 had
expired. (Confirmation of telephone conference call, dated October 24,
1983, p. 1) Accordingly, although the grant was void in its entirety,
the amount in dispute here is only $17,814. /4/ The State
asserted that an annual court review required by State law satisfied the
case review requirement in alternate six months. (State's reply brief
dated September 12, 1983, p. 11) However, since the requirement is for
semi-annual reviews, the State still fell short of satisfying the
requirement. /5/ We note that the Agency argued that recovery of
the funds obligated by the State in this case was specifically
authorized by section 423(b) of the Act. (Agency's brief dated August
24, 1983, p. 7) That section provides for payment of estimated amounts
to the states, and further as the case may be, by any sum . . . by which
. . . (the Secretary) finds that his estimate . . . for any prior period
. . . was greater or less than the amount which should have been paid to
the State . . . ." The Agency noted that a recent Supreme Court case,
Bell v. New Jersey and Pennsylvania, 103 S. Ct. 2187 (1983), held that
recovery of misspent grant funds was authorized under a similar
provision of the Elementary and Secondary Education Act. (Agency's
brief dated August 24, 1983, pp. 7-8) The State pointed out that there
is no claim in this case that the State misspent funds advanced to it;
rather, the Agency determined that the State was not eligible for the
funds ab initio. (State's reply brief dated September 12, 1983, p. 4)
However, the fact that the Court found that a similar provision
authorized the recovery of misspent funds does not necessarily preclude
the application of section 423(b) in another context. The State also
argued that, unlike the situation in Bell, where the Court found that
the Secretary had often sought repayment of misused funds, the instant
case represented the Agency's initial attempt to use section 423(b) to
void a grant. (Id., p. 4) It is not clear that the Court would have
changed its decision in Bell had it not made the finding described
above, however. In addition, the State argued that section 423(b)
contemplated only adjustments based on "simple numerical factors
demanding the use of little discretion by respondent. . . ." (Id., p. 3)
However, if the Agency relied on this section to recover misspent funds
as authorized by Bell, any adjustment would have to be Predicated on
substantive determinations not unlike those entailed in a finding of
ineligibility under section 427. Thus, the State has not shown that the
broad language of section 423(b) could not be read as authorizing the
recovery of funds advanced to an ineligible grantee.
NOVEMBER 14, 1984