GAB Decision 500
Docket No. 83-46
January 25, 1984
Ohio Department of Public Welfare;
Ford, Cecilia; Settle, Norval Teitz, Alexander
The Ohio Department of Public Welfare (State) appealed the final
billing made by the Social Security Administration (SSA) for mandatory
minimum supplements paid during January through June 1974 under the
Supplemental Security Income program (SSI). SSA billed the State for
$551,357.67 under a written agreement between the State and the
Secretary of the Department of Health, Education, and Welfare (now
Health and Human Services). The agreement provided for federal
administration of the supplements on behalf of the State; SSA agreed to
make the mandatory supplemental payments to persons residing in the
State and the State agreed to reimburse SSA for the payments. The
dispute over the amount of the final billing concerns how the
Secretary's federal fiscal liability (FFL) for payment errors should be
determined.
We conclude that FFL should be determined according to the terms of
the agreement, and that under those terms, the Secretary is liable only
for errors individually identified, either by the Secretary or by the
State with verification by the Secretary. We also conclude that the
parties did not modify the agreement. Finally, we conclude that the FFL
should be determined taking into account the errors individually
identified and reported by federal and state auditors during an audit
performed for the period in question, but that, on the facts of this
case, the Secretary is not liable for errors estimated on the basis of
projections from the errors found in the samples examined in the audit.
Although the Board offered the State an opportunity for an oral
hearing, the State waived that opportunity. /1/ Therefore, this
decision is based on the written record.
(2) Background
The 1973 Amendments to the Social Security Act, Pub. L. No. 93-66,
section 212, July 9, 1973, required states to supplement federal
Supplemental Security Income benefits. The statute provided that states
could avoid the burden of administering the program by entering into a
contract with the Secretary for federal administration of the
supplemental payments on behalf of the states. This State and the
Regional Administrator of SSA, on behalf of the Secretary, entered into
a written agreement dated November 20, 1973. Under Article IX of the
agreement, SSA assumed liability for erroneous payments made in
state-funded supplements to individuals, provided the errors were
identified in a manner set out in Article IX. Moreover, the State was
guaranteed the right, under Article VIII, to conduct its own audit. The
agreement provided that the parties could modify the agreement in
writing by mutual consent (Article XII). These provisions will be
discussed in more detail in the analysis which follows.
SSA and the 31 states which had entered into similar agreements
encountered a number of problems during the initial period of federal
administration of mandatory supplemental payments (January - June 1974).
These problems resulted in a large number of payment errors. SSA Brief,
pp. 3-4. SSA concluded that determination of FFL under Article IX of
the agreement would be time-consuming and expensive, so it proposed, and
the states agreed, that the HEW Audit Agency (HEWAA) would perform
audits for the period January - June 1974 in anticipation of using those
results to negotiate FFL. Letter from Regional Audit Director, November
13, 1974; (3) State's Exhibit 9. The audits were conducted under the
auspices of the Intergovernmental Audit Forum, an association of federal
and state auditors, and state auditors participated in the audits. The
methodology for the audits was selected in consultation with the
American Public Welfare Association and the states did not contest the
methodology. Memorandum from Director of HEWAA, September 27, 1974;
State's Exhibit 3. The audits projected for each state, based on
extrapolation from samples, the amount of erroneous payments made by
SSA. After the audit reports were issued, SSA offered to modify Article
IX of the written agreement on how FFL would be determined. SSA offered
to accept liability for the amount of the extrapolated results of the
audits, with certain adjustments. The primary adjustment involved
relieving SSA from liability for a certain percentage of errors
(referred to as a tolerance level). For this State, the proposed FFL
was $663,360.30, and the final billing would have resulted in SSA owing
the State $76,741. Letters from Regional Commissioner, May 20, 1977 and
May 18, 1978; State's Exhibits 10 and 2. This State refused to accept
the proposal and also refused to determine FFL under the terms of the
agreement. /2/ The State proposed to SSA, and later argued in (4) this
appeal, that the extrapolated results of the audit should be used, but
without the tolerance level adjustment. The State alleged that this
method would result in FFL of $1,334,996 and that SSA owed the State
$748,327. SSA refused to accept this proposal, and when the State did
not accept SSA's proposed modification of the written agreement, SSA
withdrew that proposal and issued the final billing appealed here. SSA
determined the final billing amount by deducting the amount already paid
by the State and $5261.63 for errors identified individually in a
quality assurance review performed by SSA from the amount of money paid
by SSA on behalf of the State. This resulted in SSA's request that the
State pay SSA $551,357.67. The State contested this billing to the
Commissioner of Social Security, who reviewed and upheld the billing.
The State then appealed the billing to this Board under 45 CFR Part 16
and the disputes clause of the agreement.
The Issues
The central issue is how federal fiscal liability (FFL) for erroneous
payments made on behalf of this State is to be determined for the period
January-June 1974. The State argued that the agreement had been
modified to provide for determination of FFL by using the extrapolated
audit results without a tolerance level. The State also argued that, in
the alternative, Article IX of the written agreement could be
interpreted to mean that FFL could not be based on projections from
errors found in quality assurance reviews or reported by the State in
writing, but that the State was not limited to individual identification
of errors where the State established error by other means. SSA, on the
other hand, argued that Article IX of the agreement provided for
liability based only on individually identified errors and that the
parties did not modify the written agreement.
We first consider the meaning of the written agreement as it was
intended by the parties. Then we consider whether the parties did agree
to a modification, and, finally, we consider how FFL should be
determined in this case for the period January-June 1974.
(5) Discussion
The meaning of Article IX, A.1.
This portion of the agreement stated:
A. For the period beginning January 1, 1974, and ending December 31,
1974, the Secretary shall be liable for any State-funded mandatory
minimum supplements made on behalf of the State which are erroneously
paid to any individual provided that:
1. Any such erroneous payment is identified on an individual basis.
This provision will apply only to cases identified or discovered during
quality assurance reviews or reported by the State in writing and
verified by the Secretary.
The Board asked the parties about the meaning of Article IX, Para.
A.1. SSA argued that the paragraph meant that the Secretary would be
liable only for errors identified on a case-by-case basis. SSA pointed
out that it had agreed to conduct a quality assurance review and that
Article IX, A.1. provided that the Secretary would be liable for any
errors identified during such a review. Moreover, SSA argued, the
paragraph provided that the State could identify individual errors and
submit those in writing to the Secretary for verification. How the
State identified the errors was not specifically spelled out in the
paragraph, but SSA pointed out that the State could have used an audit
or the monthly recipient eligibility and payment data provided to the
State by SSA, which when read with State records provided a record of
individual payments. SSA Supplemental Memorandum, October 27, 1983, pp.
2-3.
The State's initial briefing before the Board acknowledged that a
strict application of the agreement would require the State to submit
case-by-case information to establish federal error. State's Brief, May
18, 1983, p. 9. The State argued, however, that the agreement had been
amended by the subsequent agreement to have HEWAA perform an audit and
that the State was no longer bound to perform case-by-case
identification. After the Board asked the parties to clarify the
meaning of Article IX, A.1., the State argued, for the first time, that
Para. A.1. meant that the State was limited to individual identification
of errors only in quality assurance reviews or for cases reported by the
State in writing. The State argued it was not limited to individually
identified errors in other instances, such as in audits. State's
Supplemental Brief, October 23, 1983, pp. 3-5. Thus, the State argued,
even if the written agreement was not modified, Article IX did not limit
the determination of federal liability to individual identification of
errors.
(6) Although we think that the State's proposed interpretation is
somewhat strained, we think that a possible ambiguity exists in the
language of Para. A.1. Therefore, we apply rules of contract
interpretation to determine the meaning of Para. A.1. These rules are
well settled. The fundamental principle is that the intention of the
parties to the contract controls what interpretation is placed on the
agreement. Firestone Tire & Rubber Co. v. United States, 444 F.2d 547,
551 (Ct. Cl. 1971); Brezan v. Prudential Ins. Co. of America, 507 F.
Supp. 962 (E.D. Pa. 1981). Thus, we must try to determine what the
mutual intent of the parties was at the time they signed the agreement.
The interpretation of a contract by the parties should be based,
where possible, on the circumstances surrounding the formation of the
contract and the parties' subsequent actions. Medtronic Inc. v.
Catalyst Research Corp., 518 F. Supp. 946, 951 (D.C. Minn. 1981),
affirmed and remanded, 664 F.2d 660 (8th Cir.); Sanchez v. Maher, 560
F.2d 1105, 1108 (2d Cir. 1977). There is nothing in the record which
shows the parties' intent at the time they signed the agreement. The
record does contain correspondence written after the agreement was
signed and before the parties disagreed on how FFL should be determined.
The correspondence is of two types: letters about how the HEWAA audit
would be performed and possible use of the results, and letters
referring to negotiations conducted by the parties after the audit. The
correspondence about the performance of the audit is from members of the
Audit Agency and does not specifically address the meaning of the
written agreement, but suggests that the audit results be used as a
basis for negotiating federal liability. The correspondence about the
negotiations is more specific, however. In particular, a letter from
the Regional Commissioner for SSA, dated May 20, 1977 (State's Exhibit
10), offered to modify the written agreement and stated:
If we do not reach agreement on this settlement proposal we must then
proceed with settlement under the terms of the existing agreement that
provides for FFL on a case-by-case basis only.
Enclosure 3 to that letter, setting out the background to the
settlement negotiations, characterized the agreement as providing that
SSA would accept fiscal liability for individually identified erroneous
payments discovered during quality assurance reviews or reported by the
State in writing. Enclosure 3, p. 1, said:
It was intended by SSA that this provision (Article IX, A.1) would be
used to credit the States for erroneous payments discovered in the
normal course of operations and reported to SSA during the period
involved.
(7) The State never contradicted this view of the agreement. In
fact, the State's Director of the Department of Public Welfare, in a
letter dated September 19, 1977 (SSA Exhibit C, November 23, 1983),
stated.
I recognize that our contract provides for case-by-case submission
(Article IX, A.1.), as originally signed.
The Director also explained that he believed the agreement had been
modified by a letter from the HEW Audit Director (referred to above as
correspondence from the Audit Agency).
Nowhere in the record is there any evidence, through statements or
actions by either party, that Article IX, A.1. was intended by the
parties to make SSA liable for errors other than on an individually
identified basis. The correspondence between the parties during their
negotiations about FFL shows that both parties believed that SSA's
liability under the agreement was for cases identified individually, and
that their negotiations were for the purpose of altering that agreement.
Although the State argued in the later stages of this appeal that the
language of Article IX, A.1. is ambiguous, the record does not show that
the State ever indicated such a belief to SSA. If the State was unclear
about the meaning of Article IX, it had an obligation to seek
clarification. Blount Brothers Construction Co. v. United States, 346
F.2d 962, 972 (Ct. Cl. 1965). The unexpressed, subjective, unilateral
intent of one party is not binding on the other. Firestone Tire, supra,
at 551.
The State also argued that the interpretation it advanced should be
upheld because an ambiguous provision should be construed in favor of
the non-drafting party, here the State. Construing a contract against
the author is not an alternative to construing a contract as the parties
intended, but is a rule which only applies where the ambiguity exists
because the mutual intent of the parties is unclear. Board of Trade of
San Francisco v. Swiss Credit Bank, 597 F.2d 146, 149 (9th Cir. 1979);
Blount Brothers Construction Co. v. United States, supra. In this case,
there is no evidence that either party intended the State's proposed
alternative interpretation to be the meaning of Article IX, A.1.
Therefore, any ambiguity which may exist when reading the language of
the provision by itself is removed by the evidence in the record
concerning the parties' mutual intent. There is no longer an ambiguity
which could be construed against SSA.
Thus, we conclude that the record shows that both parties intended
Article IX, A.1. to mean that the Secretary would be liable for any
individual instances of federal error discovered by the Secretary during
quality assurance reviews or submitted in writing to the Secretary by
the State. The provision does not specifically address the means by
which (8) the State could discover the errors it reported to the
Secretary, but Article VIII does provide the State with the right to
audit.
Modification of the agreement by the parties
The State argued that the written agreement had been modified to make
SSA liable for errors on the basis of the HEWAA auditors' projections
from audit samples. SSA, on the other hand, argued that although it
proposed to the State a modification of the agreement, the State did not
accept the proposal and, therefore, the parties were still bound by the
original agreement.
The agreement provided in Article XII, B., that it could be modified
in writing at any time by mutual consent of the parties. The State
argued that even if an agreement stipulates that it must be modified in
writing, the parties may, by mutual consent, modify a contract in
another manner, such as by parol or a subsequent course of dealing. The
State argued that the agreement that HEWAA would conduct an audit was a
modification. Generally, courts have held that parties can modify a
contract other than by the terms of the agreement, Goshey v. ITT Life
Ins. Corp., 590 F.2d 737, 740 (8th Cir. 1979); however, this does not
alter the fundamental principle that any modification of the agreement,
in writing or otherwise, must have been by mutual consent of the
parties, and that there must be evidence of that mutual intent. Union
Pac. R. Co. v. Chicago M. St. P. & P.R. Co., 549 F.2d 114, 118 (9th Cir.
1976).
The State acknowledged that it had rejected SSA's proposed
modification, involving the use of the projected results of the audit
with a tolerance level. State's Brief, p. 12. The State based its
rejection of the proposal on its belief that adjusting the audit results
by using a tolerance level was unreasonable. The State argued, however,
that the agreement was modified by the parties' agreement to conduct an
audit, and, as evidence of the modification, the State pointed to
letters from the Audit Agency and to the Audit Report. In addition, the
State submitted three affidavits from State employees about their
understanding of the use of the audit for determining FFL.
The evidence pointed to by the State consisted of the following: two
letters from Audit Agency personnel, one internal memorandum from the
Audit Agency, the Audit Report, a letter from the Regional Commissioner
concerning SSA's settlement proposal, and an enclosure to that letter
outlining essential principles for the settlement proposal. Below we
discuss the weight we accord each piece of evidence (9) in determining
whether the parties intended to modify the agreement.
* We reject the letters and internal memorandum written by Audit
Agency personnel as evidence that the parties intended to modify the
written agreement. Nothing in the letters purports to modify the
agreement. The internal audit memorandum (State's Exhibit 3) sets out
the audit procedures to be used and refers to the states' right to
conduct their own audits and to accept or reject the results of the
HEWAA audit. The two letters from the Regional Audit Director (State's
Exhibits 9 and 11) do not discuss the meaning of the written agreement;
the letters suggest that the results of the audit be used by the parties
for negotiating settlement and that the states were free to use the
results of the audit rather than conduct their own audits. The letters
in no way bind either party to using the results for determining FFL.
Similarly, the Audit Report simply recommends that the audit projections
be considered during settlement negotiations. Audit Report, p. 4; SSA
Exhibit 3. Thus, it seems that the Audit Agency believed that it was
reasonable for the parties to consider such a modification and that the
audit was a satisfactory substitute for state-performed audits. We do
not find, however, any evidence in these documents of an intent by
either party to modify the written agreement at that time. Moreover, we
find no evidence in the record that the Audit Agency personnel had
authority to negotiate contract modifications on the Secretary's behalf.
The written agreement was signed by the Regional Commissioner of SSA for
the Secretary. SSA asserted in this appeal that the Audit Agency
personnel had no contract authority in this instance, and the State has
not rebutted that assertion.
* The letter from the Regional Commissioner of SSA (State's Exhibit
10) and its Enclosure 3 propose that the projected audit findings, with
certain adjustments, be used as a basis for determining FFL. The
documents show that SSA offered to modify the agreement. The letter
specifically requested that the State sign the written proposal and
return the copies. As the State acknowledged, it did not agree to this
proposal. However, the State pointed to a statement set out in
Enclosure 3 which says that FFL for FY 1974 would be based on the
findings of the HEWAA audit. This statement was included in a section
of Enclosure 3 entitled Principles Essential to SSA's Settlement
Proposal. p. 2. The statement sets out what would occur under the
proposed modification. (10) Thus, we do not consider the letter and
Enclosure 3 evidence of a mutually agreed-upon modification.
* The affidavits from three State employees (State's Exhibits 6, 7,
and 8) are substantially identical with each other. Each indicates that
the affiant had an "understanding" that the audit was to determine
final
liability under the contract for erroneous payments, without the need
for additional auditing by the State or the submission of case-by-case
information. The affiants to not indicate on what basis they formed
this understanding, such as that they had participated in discussions
with SSA in which they or others had agreed to modify the agreement on
this basis. Therefore, we do not think that the affidavits show a
mutual intent to modify the agreement.
In summary, then, the correspondence pointed to by the State merely
shows that the parties intended to avoid performance of individual state
audits by using a joint federal-state audit, and that the purpose of
this jointly-performed audit was to avoid the time and expense involved
in verifying case-by-case information. The correspondence also
indicates that the states could elect to perform audits themselves and
that they could reject the results of the HEWAA audit at any time.
Thus, we see no evidence that the parties had agreed to do anything but
perform an audit; the parties did not definitively elect to use the
results of that audit. We conclude that there is no evidence that the
parties modified the method, as agreed to in the November 20, 1973
contract, by which FFL would be determined.
Equitable considerations
The State argued that it would be unfair to hold the State to
case-by-case identification of errors and that the HEWAA audit should be
used to determine final liability for erroneous payments. The State
also argued that it is unreasonable to adjust those results through the
use of a tolerance level, as proposed by SSA. The State asserted that:
* SSA offered to substitute the audit results for case-by-case
identification because of the time and expense which the parties would
incur if case-by-case identification of errors was used to determine
FFL. Letter from Regional Commissioner, May 18, 1978, State's Exhibit
2.
* The audit was performed in accordance with governmental standards
for audits, and the methodology was approved by representatives of the
states. Both (11) federal and state auditors participated in the audit,
and neither party has questioned the validity of the methods used or the
reliability of the results.
* The parties clearly contemplated the use of the audit results for
determining FFL. The purpose of the audit was to eliminate the need for
the states to conduct their own audits and establish federal liability
on a case-by-case basis.
* The Agency offered the State a "take it or leave it" proposal
(State's Brief, p. 9) when it proposed the use of either the audit
adjusted with a tolerance level or case-by-case identification, and that
this was unfair, in view of SSA's acknowledgment that case-by-case
identification was impractical.
* The proposed use of a tolerance level was not reasonable because
the proposed percentages were not supported by any factual basis. The
State cited as support for this argument the holding in Maryland v.
Mathews, 415 F. Supp. 1206 (D.D.C. 1976). In that case, the United
States District Court for the District of Columbia determined that SSA's
proposed tolerance levels for disallowances under the federally-mandated
Quality Control program for state errors in AFDC eligibility
determinations were arbitrary and capricious because they were not
supported by empirical evidence.
In response to these equitable arguments by the State, the Board
asked the parties whether the Board should reform the agreement. Both
parties argued that reformation was inappropriate because none of the
requisite conditions for reformation, such as mutual mistake or fraud,
existed here. Briefs of State and SSA, November 23, 1983. We also
conclude that the parties cannot be relieved from using the agreed-upon
method for determining FFL simply because it is now impractical. The
contract has been performed by SSA and the parties assumed the risk that
it would cost more to perform than they anticipated. Transatlantic
Financing Corp. v. United States, 363 F.2d 312, 315-16 (D.C. Cir.
1966). Thus, we see no basis upon which the written agreement can be
modified other than by mutual consent of the parties. As we concluded
above, the parties did not agree to modify the contract, and as noted in
fn. 1 above, SSA has refused to accept the State's latest offer to
settle.
(12) How FFL should be determined in this case for the period January -
June 1974
We concluded above that both parties intended Article IX, A.1. to
provide for federal liability determined on the basis of individually
identified errors, and that the identification of errors could be done
by SSA through quality assurance reviews or by the State through several
different means, including quality assurance reviews, audits or review
of payment records. The agreement did not restrict State in how it
could discover the errors, but required the State to report the errors
in writing. We also concluded above that the parties did not agree to
modify this provision, though they negotiated about proposed
modifications.
Thus, the final billing must take into account any individually
identified errors discovered by SSA or that the State reported in
writing and SSA verified. The record shows that SSA already credited
the State with the amount of $5251.63 for errors SSA identified in a
quality assurance viview. SSA Brief, p. 5; Letter from SSA Regional
Commissioner, State's Exhibit 2.
We think that the agreement and the subsequent correspondence about
the use of the HEWAA audit permit use of the results of the HEWAA audit
for purposes of determining FFL under Article IX, A.1. We noted above
that Para. A.1. does not specify how the State may discover errors which
it reports in writing, and that SSA specifically acknowledged that the
State could discover errors through an audit, a quality assurance review
or through the monthly recipient eligibility and payment data and state
records. SSA Supplemental Memorandum pp. 2-3. The record also shows
that the parties did intend that the HEWAA audit could substitute for
audits performed by the states, that use of the audit would eliminate
the need for reporting of errors by the states and verification by SSA,
and that neither party here has challenged the validity of the audit
results. Thus, we think that the errors identified individually by the
auditors in the sample have in effect been reported in writing and
verified by the Secretary. Therefore, we conclude that the errors
individually identified in the HEWAA audit should be used to determine
FFL and that the State should receive credit in the final billing for
the (13) amount of these errors. /3/ The Audit Report, p. 5, indicates
that individual errors were discovered in he sample in the amount of
$29,349. This amount was broken down into $7123 for state-caused
errors, $19,302 for federally-caused errors, and $2924 for errors the
cause of which could not be determined. Under the terms of Article IX,
the Secretary is liable for errors individually identified and reported,
unless the errors were caused by the State. Thus, we think the State
should receive a credit in the amount of both the federally-caused
errors and the errors for which no cause could be determined. This
amount is $22,226. /4/
(14) Conclusion
We conclude that the parties are bound by Article IX, A.1. of the
original agreement, but that the State should receive credit for any
errors individually identified by the HEWAA audit. Thus, the final
billing amount should be $529,131.67. /1/ In the State's summary of its
arguments, the State argued that the passage of time between
June 1974 and the Secretary's final billing in 1982 limited the State's
access to "arguments in addition to those already presented," p. 1,
and
that SSA was responsible for the delay and should be held accountable.
This Presiding Board Member later excluded an unsolicited submission
from SSA purporting to place blame for at least part of the delay in
this matter on the State. The Presiding Board Member's reasons for
excluding the submission were not only that the submission was filed
after the record was closed by agreement of the parties, but also that
the question of delay was not material to the question of interpreting
the agreement. The State has not shown that the passage of time altered
the parties' mutual intent regarding the agreement or modification, nor
has it suggested that evidence of their intent has been destroyed by the
passage of time, although it did indicate that it cannot locate certain
former federal employees who might have information about discussions
which took place when the HEWAA audit was suggested. We do not believe
that the State has provided us with sufficient reason to address this
argument further. /2/ During the pendency of this appeal, the
State requested and the Board urged that the parties mediate this
dispute. SSA refused to enter into mediation, but the parties did
attempt to negotiate an agreement. The Board suspended proceedings in
the appeal while the parties negotiated. In those negotiations, SSA
refused to enter into an agreement for the period in question here
unless the State also agreed to using the same method for the fiscal
year (FY) 1975. Telephone Conference Call, December 7, 1983. The State
indicated that it did not have enough information to know whether it
should accept such an agreement for FY 1975, but that it was willing to
accept SSA's previous offer for 1974, and then enter into separate
negotiations for FY 1975. The parties stopped negotiating and resumed
their briefing in this appeal. Approximately two months prior to the
issuance of this Decision, the State offered to accept the proposal SSA
had initially offered, that is, the use of the extrapolated results of
the audit with a tolerance level; SSA has not yet responded to the
offer. The Board determined, after a discussion with the parties, that
postponing a Board decision would not be useful. The offer of SSA to
settle on the basis of the extrapolated results of the audit with a
tolerance level for the period in dispute here (January - June 1974) was
originally refused by the State. A later willingness to accept an offer
once refused is in law not an acceptance but a counter-offer which the
original offeror is free to accept or reject, no matter how unreasonable
it may appear for SSA not to settle on a basis it once proposed. The
Board cannot compel SSA to accept the State's latest proposal, but this
Decision does not preclude the parties from modifying the agreement or
otherwise settling this dispute in the future. /3/ In the
State's Summary of Arguments made during its appeal, the State argued
for the first time that the projected results of audits are the legal
equivalent of the submission of individual case findings. Thus, the
State argued, a properly conducted statistical sample could be used to
determine FFL, under the terms of the agreement. Federal courts have
acknowledged that the results of valid statistical samples can be
accepted as evidence of unallowable costs. See State of Georgia v.
Califano, 446 F. Supp. (N.D. Ga. 1977); Illinois Physicians Union v.
Miller, 675 F.2d 151 (7th Cir. 1982). However, this conclusion does not
necessarily require the use of statistical samples as a substitute for
individual findings. Where the parties have agreed to accept
"individually identified" errors, they have essentially agreed not
to
use the extrapolated results of statistical samples. The term
"individually identified" clearly does not refer to errors estimated
through a process of extrapolating errors identified in samples. We
know of no law or statistical principle that equates the projected
results of statistical samples to individual identification of errors.
By its very nature, a statistical sampling method that projects errors
to a universe avoids the need to identify each error in the universe on
an individual basis. /4/ If SSA can show that it has already
credited the State with any errors identified by the audit because they
were also identified in the quality assurance review the $22,226 may be
reduced in the amount of those errors.
NOVEMBER 14, 1984