GAB Decision 585
Docket No. 83-80
November 16, 1984
New York Department of Social Services;
Ballard, Judith; Teitz, Alexander Ford, Cecilia
The New York State Department of Social Services (State) appealed a
determination by the Social Security Administration (Agency) disallowing
$47,263,552 claimed under title IV-A of the Social Security Act (Act).
The amount in dispute is now $44,688,108 since the State did not submit
documentation for the remaining amount disallowed. (Agency's
post-hearing brief dated June 29, 1984, pp. 4-5) The claims were for
payments made by social services districts (i.e., various counties and
New York City) within the State during the period March 1971 through
December 1981. /1/ The payments were claimed as increasing adjustments
on the State's quarterly expenditure reports for the quarter ended
September 30, 1980 and subsequent quarters. The claims were made
following a review by the State of public assistance payments to
determine whether the State could have claimed federal financial
participation (FFP) in the payments under the Aid to Families with
Dependent Children (AFDC) program established by title IV-A of the Act.
The State alleged that although some of the payments were made to
individuals classified as eligible for the State-funded Home Relief
program, the individuals had in fact been eligible for AFDC. The State
further alleged that some of the payments were made to individuals who
had been classified as AFDC-eligible but were, through administrative
error, paid under the Home Relief program.
(2) The State therefore reclassified these payments as AFDC payments
and claimed FFP on a retroactive basis. The Agency found, however, that
the State's claims were unallowable on the ground that federal policy
requires that there be an authorization of award which states a
determination that a payment qualifies as an AFDC payment prior to or
simultaneous with the issuance of the payment. The Agency took the
position that this requirement was found in section 403(a) of the Act,
the implementing regulations at 45 CFR Parts 206 and 234, and, more
specifically, in Section 5214 of Part IV of the Handbook of Public
Assistance Administration (HB-IV-5214).
Although we find that HB-IV-5214 constituted a binding federal
policy, we disagree with the Agency's position that this policy requires
that an authorization of award be specifically labeled as an
authorization to pay AFDC. The Agency applied HB-IV-5214 to deny FFP in
some otherwise properly authorized payments to AFDC eligible individuals
simply because the authorization was not labeled as AFDC. As applied by
the Agency, HB-IV-5214 placed limits on FFP not reasonably required by
the statute and regulations. As is explained more fully below, we
conclude that FFP is available pursuant to an authorization of award
which need not specify the type of assistance authorized but which must
be supported by a determination in the case record that the individual
was either conclusively or presumptively eligible for AFDC. Since we
also reject some of the State's arguments about when FFP can be paid,
our decision will not support the wholesale reclassification of Home
Relief payments to AFDC payments. Accordingly, we remand the appeal to
the Agency to determine which claims were allowable. /2/
Basis for Disallowance
In support of the disallowance, the Agency relied principally on
Section 5214 of Part IV of the Handbook of Public Assistance
Administration (HB-IV-5214). HB-IV-5214, (3) dated August 5, 1963, /3/
is captioned "Federal Financial Participation," and states:
All disbursements of assistance payments must be supported by a prior
(or simultaneous) authorization of award signed by the official or
officials charged with this responsibility. Such authorization of
award, which shall be dated, shall be an affirmative statement
indicating that the eligibility of each applicant has been established
and that a decision has been made, effective on a specific date, to
grant assistance of a specified amount as OAA, AB, AFDC, APTD or AABD.
(Agency's Exhibit G) The Agency contended that section 403(a)(1) of
the Act provides a "clear basis" for the policy articulated in
HB-IV-5214. (Agency's brief dated August 26, 1983, p. 10) Section 403(
a)(1) provides that--
(the) Secretary of the Treasury shall pay to each State which has an
approved plan for aid and services to needy families with children, for
each quarter, . . . an amount equal to the sum of the following
proportions of the total amounts expended during such quarter as aid to
families with dependent children under the State plan. . . . (Emphasis
added.)
The Agency also contended that the requirement for prior or
simultaneous authorization of award is "specifically embodied" in
regulations at 45 CFR Part 206 and Part 234. (Agency's brief dated
August 26, 1983, p. 21) Section 206.10(a)(4) (1972) provides in
pertinent part that--
Adequate notice shall be sent to applicants and recipients to
indicate that assistance . . . has been authorized (including the amount
of financial assistance) or that it has been denied or terminated.
(4) Section 206.10(a)(6)(i)(A) (1973) provides that--
Assistance shall begin as specified in the State plan, which:
(i) For financial assistance.
(A) Must be no later than:
(1) The date of authorization of payment, or
(2) Thirty days in . . . AFDC . . ., from the date of receipt of a
signed and completed application form, whichever is earlier:
Provided, that the individuals then met all the eligibility
conditions, . . . .
Section 234.11 (1971) provides that--
Federal financial participation is available in money payments made
under a State plan under title . . . IV-A . . . to eligible families and
individuals.
Section 234.120 (1969) provides in pertinent part that--
Federal financial participation is available in assistance payments
made under a State plan under title . . . IV-A . . . to any family or
individual for periods beginning with the month in which they meet all
eligibility conditions under the plan and in which an application has
been received by the agency.
Whether HB-IV-5214 Was Binding on the State
The State took the position that the Agency could not rely on
HB-IV-5214 as a basis for the disallowance on the ground that that
provision was not published in the Federal Register as a regulation in
accordance with the Administrative Procedure Act (APA). (State's brief
dated July 15, 1983, p. 20) The APA provides, at 5 U.S.C. 553, that
general notice of proposed rule making must be published in the Federal
Register, and that after such notice, the Agency must give interested
persons an opportunity to participate in the rule making through
submission of written comments with or without opportunity for oral
presentation. Although this provision includes an exemption for matters
relating to grants, the Department (5) stated (in a notice published in
the Federal Register on February 5, 1971) that "effective immediately,"
it was waiving the statutory exemption for grants and would require
public participation in accordance with the APA when formulating rules.
(36 Fed. Reg. 2532) Nevertheless, we do not agree that this action
rendered HB-IV-5214 invalid. As noted previously, the Agency relied on
the version of HB-IV-5214 dated August 5, 1963. This pre-dated the
enactment of the APA in 1966 (Pub. L. 89-554, September 6, 1966) as well
as the Department's 1971 waiver of the APA's exemption for grants. The
State did not contend that HB-IV-5214 was not binding on it prior to the
time that notice and comment rule making was required for the
Department's grant programs. In any event, prior to that time,
provisions of the Handbook of Public Assistance Administration were
accorded the same force and effect as regulations by the Court in King
v. Smith, 392 U.S. 309, 319 (1968), where, in referring to "regulations
of HEW," the Court specifically cited provisions of the Handbook. Thus,
the question presented is whether the APA required, or the Department in
1971 intended, that all existing rules be re-promulgated pursuant to
notice and comment rule making procedures in order to remain valid. The
State provided no evidence to show that the APA or the Department's 1971
waiver of the exemption for grants was intended to be other than
prospective in application. A contrary interpretation would clearly
have placed a staggering administrative burden on federal agencies.
Accordingly, absent such evidence, we find that when the APA became
applicable, HB-IV-5214 remained valid even though it was not promulgated
in accordance with APA procedures.
The State also argued, however, that HB-IV-5214 was revoked in 1975
with the issuance by the Agency of an action transmittal revoking
documents known as "State letters." State letters were used to announce
revisions to the Handbook of Public Assistance Administration beginning
in 1966. The Handbook itself was not republished after that date, when
the Department undertook a long-term project, not yet completed, of
revising selected Handbook provisions for publication in the Federal
Register. /4/ (Transcript of (6) February 15, 1984 hearing, pp. 17-18;
State Exhibit 23) The action transmittal relied on by the State stated
as follows:
This is to advise that all numbered and unnumbered State letters are
hereby revoked except for State Letters 580, 961 and 962. These three
State letters on the Cuban Refugee Program remain in effect, and are not
being reissued in current format because it is expected the program will
eventually be discontinued. Any content to be retained from the State
letters has been transferred to Federal Regulations, Program
Instructions, Information Memorandum, or other current issuance format.
(SS-AT-75-4(APA), dated April 15, 1975 (State Exhibit H-28) The State
argued that since the Handbook had been maintained as a current document
through the medium of State letters, the Handbook as well as the State
letters was revoked by SS-AT-75-4(APA).(State's post-hearing brief dated
June 28, 1984, pp. 4-5) The Agency argued that the action transmittal
"only shows that State letters were not intended to be the mechanism for
transmitting policy interpretations and instructions to the States any
longer," and that it "does not establish that the Handbook was
rescinded." (Agency's post-hearing brief dated June 29, 1984, p. 21)
We find no basis for the State's view that SS-AT-75-4(APA) revoked
HB-IV-5214. The action transmittal states only that the State letters
are revoked. While it seems reasonable to conclude that the portions of
the Handbook which were the subject of State letters were thereby
revoked, it does not follow that the portions of the Handbook which were
never updated or changed by means of State letters were also revoked.
/5/ A notice published in the Federal Register (7) shortly after the
issuance of the action transmittal confirms the view that not all of the
Handbook was affected. This notice revokes Parts I, II, and VI as well
as Supplements A, B, and C of the Handbook, clearly implying that those
parts of the Handbook not listed were left intact.(40 Fed. Reg. 33697,
dated August 11, 1975, with an effective date of August 11, 1975 (State
Exhibit 18)) Further support for the conclusion that HB-IV-5214 was not
revoked by SS-AT-75-4(APA) is provided by the fact that in 1976, the
Agency published a notice of proposed rule making which included a
provision that clearly was derived from HB-IV-5214. The preamble read,
in pertinent part, as follows:
The purpose of the proposal is to transfer to the Code of Federal
Regulations policies now contained in the Handbook of Public Assistance
Administration. . . .
The basis for the proposal is the need to formalize, rationalize and
clarify the several policies that affect Federal sharing. . . .
(Emphasis added)
(41 Fed. Reg. 8066, 8067, dated February 24, 1976) This indicates
that HB-IV-5214 was at the time of the proposed rule making regarded as
a viable policy. The State argued that the Agency's failure to publish
this notice as a final rule showed that HB-IV-5214 was no longer in
effect. (State's post-hearing brief dated June 28, 1984, p. 7) However,
since the publication of a notice of proposed rule making does not
change applicable law, the failure to finalize a proposed rule would
likewise be without legal effect.
The conclusion that the Handbook was not revoked by SS-AT-75-4 (APA)
is reinforced by the fact that, in an action transmittal issued in July
of 1978, the Agency stated its intention to review "all policy issuances
including those in the Handbook of Public Assistance Administration for
incorporation into regulations or into a policy guide." (SSA-AT-78-28,
July 11, 1978) This suggests that as late as 1978 the Handbook was still
regarded as viable.
(8) We note nevertheless that the State introduced much evidence
designed to show that the Department regarded the Handbook as an
obsolete document. This included a 1966 letter from an HEW Commissioner
to the State which stated that the Handbook as a whole would no longer
be generally distributed in view of the Agency's intention to publish it
in the Federal Register (although copies were to be made available to
interested parties). (State's Exhibit 23) In addition, the former
Administrator of the Social and Rehabilitation Service (SRS), who in
1976 was responsible for administering the AFDC program, testified on
behalf of the State that the Handbook was then regarded as out of date
and as superseded by regulations and action transmittals. (Transcript
of February 14, 1984 hearing, pp. 15-16) A State employee also testified
that he had been recently advised by Agency employees in three regional
offices that the Handbook was outdated and no longer used. (Transcript
of April 9, 1984 hearing, pp. 57-60) In addition, the State attempted
to show that regional officials responsible for reviewing the State's
claims were not at the time they initiated the review familiar with the
Handbook and did not know of the existence of HB-IV-5214 in particular.
(Transcript of April 10, 1984 hearing, pp. 158-159, 184; State's
post-hearing brief dated June 28, 1984, p. 9)
However, we are aware of no requirement that a federal agency
periodically reaffirm the applicability of program materials which were
earlier understood to be binding. The State acknowledged that
HB-IV-5214 was binding on it during the early part of the period covered
by the claims (although it did not agree that its application bars
payment of these claims). If the State had some doubt as to whether
HB-IV-5214 remained a valid program requirement, it could have sought
official clarification from the Agency. Furthermore, although the State
may have legitimately expected that HB-IV-5214 might at some point be
rendered obsolete, we are not persuaded that there is any specific point
in time as of which this provision was clearly inapplicable. The fact
that the Department intended to cease using the Handbook in the
administration of its public assistance programs once Handbook
provisions were incorporated in regulations does not prove that the
Handbook did not remain in force during the period covered by the
claims. The fact that federal officials may not have been conversant
with the Handbook during this period or thereafter tends to indicate
that the Handbook was no longer regarded as a major source of program
requirements; however, it does not provide a basis for determining that
the (9) Handbook had no legal status whatsoever as of a date certain.
We do not accord much weight to the testimony of the former
Administrator of SRS "that (in 1976) the Handbook was hopelessly out of
date and it was no longer worthwhile to try to keep it up." (Transcript
of February 14, 1984 hearing, p. 15) His testimony was apparently based
solely on his personal recollection and was general in nature. Since
HB-IV-5214 was at one time clearly a binding federal policy and since
the State has not identified any Agency action which can reasonably be
viewed as revoking that policy, we find that it remained in effect
during the period covered by the State's claim. /6/
Meaning of Requirement in HB-IV-5214 for Prior or Simultaneous
Authorization as AFDC
The Agency took the position that FFP is available under HB-IV-5214
where, at or before the time payment is made, an authorization of award
specifically identifies the assistance awarded as AFDC. We see nothing
in the language (10) of HB-IV-5214 that requires that the designation
"AFDC" actually appear on an authorization of assistance payments.
HB-IV-5214 requires only that an authorization reflect "a decision . .
. to grant assistance . . . as . . . AFDC." This requirement would be
satisfied as long as the authorization was supported by a determination
in the case record that the individual met the criteria for AFDC
eligibility, regardless of the label used in the case record or the
authorization or ultimately assigned to the payment. An adequate
determination for this purpose might consist of a notation in the case
record indicating that documentation or information submitted by the
individual was reviewed or verified and was regarded as establishing
that AFDC eligibility requirements had been met. /7/
The State argued that an authorization to grant assistance under its
Home Relief program was tantamount to an authorization specifically
labeled AFDC. It argued that it therefore complied with HB-IV-5214
since all Home Relief payments were authorized at or before the time
they were made. In support of its position, the State asserted that the
standard of need for Home Relief was the same as for AFDC and that the
amount of assistance granted was generally the same for similarly
situated individuals under both programs.(State's post-hearing brief
dated June 28, 1984, pp. 18-19) However, while AFDC is available for
"(n)eedy children" who are "(deprived) of parental support or
care by
reason of the death, continued absence from the home, or physical or
mental incapacity of a parent, or unemployment of a father . . .," (45
CFR 233.10(b)(2) (ii)), these "deprivation factors" were not required
in
order for an individual to be eligible for Home Relief. (State's
post-hearing brief dated June 28, 1984, p. 21) Thus, an authorization to
grant Home Relief would not necessarily reflect a determination that the
individual was eligible for AFDC, and the wholesale reclassification of
Home Relief payments to AFDC payments cannot be justified on that basis.
As discussed above, however, the fact that an authorization was labeled
as Home Relief is not a basis for denying FFP if the authorization was
supported by a determination in the case record that a deprivation
factor required for AFDC eligibility existed.
(11) The State also noted that the Agency accepted the designation of
a case as presumptively eligible for AFDC, or "pending AFDC" (PG-AFDC),
as meeting the requirement for prior or simultaneous authorization, and
argued that there was no basis for distinguishing PG-AFDC cases and Home
Relief cases. (State's brief dated July 15, 1983, p. 5; State's
post-hearing brief dated June 28, 1984, p. 24) The PG-AFDC designation
was used in social services districts other than New York City where an
applicant's eligibility for AFDC had not been fully documented, but
where the State had reasonable evidence to conclude that the applicant
would be found eligible. Payments to the individual could begin before
eligibility was conclusively established, and FFP in the payments could
be claimed retroactively once eligibility was shown. (Agency's brief
dated August 26, 1983, p. 6) However, the PG-AFDC designation at least
indicates that there was a presumption that the applicant met all the
requirements for AFDC eligibility, including satisfaction of the
appropriate "deprivation factors," while, as discussed above, a
deprivation factor did not have to be established in order for a case to
be designated as Home Relief. Thus it was reasonable for the Agency to
accept, as complying with HB-IV-5214, PG-AFDC cases but not Home Relief
cases, unless the authorization to grant Home Relief was supported by a
determination in the case record regarding the existence of a
deprivation factor on the basis of which the case could properly have
been classified as PG-AFDC.
Accordingly, the State's claims are allowable where the Agency finds
on remand that the State made authorized payments supported by a
determination in the case record that the individual in fact met or
could be presumed to meet the criteria for AFDC eligibility. /8/
Consistency of HB-IV-5214 With Title IV-A Regulations
The State argued, however, that the requirement imposed by the Agency
for prior or simultaneous authorization of payments as AFDC was
inconsistent with the regulations governing the title IV-A program.
(State's brief dated July 15, 1983, pp. 10, 13) The Agency took the
position that HB-IV-5214 interprets the regulations. While we reject
the (12) Agency's position, we further find that there is nothing in the
language of the regulations which precludes the further condition on the
availability of FFP which we found is imposed by HB-IV-5214.
The Agency contended that HB-IV-5214 interprets the "authorization"
which is referred to in 45 CFR 206.10(a)(4) and 206.10(a)(6)(i)(A).
(Agency's brief dated August 26, 1983, pp. 21-22) We see no basis in the
language of either section for interpreting the term "authorization"
as
requiring that assistance payments be labeled as AFDC payments at any
particular time. Both provisions are readily comprehensible if the
words "approved" and "approval" are substituted for "authorized"
and
"authorization," respectively. Section 206.10(a)( 4) merely requires
that applicants be advised whether or not their applications for
assistance have been approved. Section 206.10(a)(6)( i)(A) merely
provides that payments must begin as soon as the application for
assistance is approved or within 30 days after receipt of the
application, whichever is earlier. We see no basis for reading any more
detailed requirements into the term "authorization" when the
substitution of a common synonym makes the provisions amply clear on
their face. The Agency also argued that the language in 45 CFR 234.11
and 45 CFR 234.120 referring to payments made "under" a title IV-A
plan
effectively requires prior or simultaneous authorization of payments as
AFDC. (Agency's brief dated August 26, 1983, p. 23) However, in our
view, these regulations merely require, as does section 403(a)(1) of the
Act, that, to be eligible for FFP, payments must have been made to
recipients who qualified for AFDC as that program is implemented by a
state's title IV-A plan.
Thus, it is apparent that there is no express indication in either
these regulations or the statute that a particular time is required for
authorizing the payment of AFDC in relation to the time of payment.
Nevertheless, the language of the regultions and the statute is not in
our view inconsistent with the requirement of HB-IV-5214 that
eligibility for AFDC must be established when payments are made. Since
the Agency at no time stated that the regulations were intended to
supersede HB-IV-5214, the State was required to read the regulations in
conjunction with any other applicable requirements which were not on
their face inconsistent.
(13) Reasonableness of Requirement for Prior or Simultaneous
Authorization of Award
The State also argued on appeal that a requirement for prior or
simultaneous authorization of payments as AFDC was invalid on the ground
that it was not reasonably related to the purpose of title IV-A of the
Act to provide AFDC to all eligible individuals. (State's brief dated
July 15, 1983, pp. 15, 17) We disagree that HB-IV-5214, as we interpret
it here, defeats the asserted purpose of the Act. Under HB-IV-5214, FFP
is available in authorized payments supported by a determination in the
case record that the individual met or could be presumed to meet the
criteria for AFDC eligibility. There is no evidence that title IV-A was
intended to provide for AFDC payments to individuals whose eligibility
was not known to the State. We think, moreover, that the requirement
found by the Board is reasonably related to the purpose of the statute.
In essence, we regard this longstanding Handbook provision as requiring
the State to establish an orderly process whereby decisions are made
concerning eligibility for assistance and payments are authorized. The
State did not argue that it had altered its process for determining
eligibility and authorizing payment in reliance on the "obscurity"
of
the Handbook.
Furthermore, the Agency justified this requirement as necessary to
promote the efficient administration of the AFDC program in that it
avoids the difficult problem, presented by a retroactive claim, of
documenting eligibility for AFDC at a point in time far removed from the
time of payment. (Agency's post hearing brief dated June 29, 1984, pp.
12, 16-17) While the State asserted that it had overcome that difficulty
and had available adequate documentation for all the cases in question
(Transcript of May 11, 1984 hearing, p. 60), that argument would not
defeat the usefulness of the more general requirement, found by the
Board to apply, that AFDC eligibility be established when payments are
made. Accordingly, we find that the latter requirement is a reasonable
one which may be validly applied to the State.
Legality of Agency Determination as a Compliance Action
The State also argued that the requirement for prior or simultaneous
authorization was inconsistent with section (14) 404(a)(2) of the Act,
which provides that the Secretary may suspend payments to a state in
whole or in part if she finds--
that in the administration of the plan there is a failure to comply
substantially with any provision required by section 402(a) to be
included in the plan. . . .
The State argued that since the Agency never alleged either that the
State's violation of its plan was substantial or that the State breached
a requirement of section 402(a), the Agency had no basis for disallowing
the State's claim. (State's brief dated July 15, 1983, pp. 17-18)
However, the disallowance appealed from was not taken pursuant to
section 404(a)(2), but rather pursuant to section 1116(d), which
provides that--
(whenever) the Secretary determines that any item or items on account
of which Federal financial participation is claimed under . . . part A
of title IV, shall be disallowed for such participation, the State shall
be entitled to and upon request shall receive a reconsideration of the
disallowance.
(Agency's brief dated August 26, 1983, p. 10, n.) As noted by the
Agency, the Board has jurisdiction to hear appeals from disallowance but
not compliance actions. 45 CFR Part 16, Appendix A. Since the State
did not challenge the Board's jurisdiction in this matter even after
this fact was noted by the Agency, further consideration of the State's
argument that section 404(a)(2) did not provide adequate authority for
the Agency's action is not necessary.
We note in any event that the determination here seems properly
categorized as a disallowance. As this Board has previously stated, a
disallowance "is a finding that specific expenditures claimed by the
state for a discrete time period are unallowable." (Massachusetts
Department of Public Welfare, Decision No. 438, May 31, 1983, p. 22) The
disallowance here related only to those costs retroactively claimed for
the period 1971 through 1981 as AFDC with respect to which the Agency
determined there was no prior or simultaneous authorization of award.
The disallowance of these costs did not implicate the State's
administration of the title IV-A program as a whole, and in fact, the
State claimed that only a portion of the disallowance should be
sustained even if there was a requirement for prior and (15)
simultaneous authorization as AFDC. Accordingly, if the State had
contested the Board's jurisdiction in this matter, we would have ruled
against the State on that issue.
Effect of Comptroller General's Decision Regarding Retroactive Payments
on Requirement for Prior or Simultaneous Authorization
The State also argued that the requirement for prior or simultaneous
authorization as AFDC was inconsistent with a decision of the
Comptroller General of the United States regarding retroactive payments
under the public assistance programs of the Act. (A-80185, 48 Comp.
Gen. 477, January 17, 1969 (State's Exhibit H-25)) That decision
modified a 1936 Comptroller General's decision and permitted FFP in a
payment by a state which covered periods prior to the month in which the
payment was made back to the date of application for assistance. The
State argued that the 1969 decision effectively required that the Agency
rescind the requirement for prior or simultaneous authorization of AFDC
payments. The State noted in particular the Agency's view, quoted by
the Comptroller Geneal, that FFP in payments covering the period back to
the date of application "should be available without technical
limitations." (48 Comp. Gen. 477, at 480) (Transcript of July 24, 1984
conference call, pp. 34-35) We disagree, however, that the decision
speaks to the issue before us. The Comptroller General's decision dealt
only with payments made after the date of authorization which covered
time periods retroactive to the date of application. The payments were
retroactive, not the claims. The term "retroactive payments" is thus
used in the Comptroller General's decision in an entirely different
sense than it is used by the State in the instant case, making the
Comptroller General's decision not directly applicable here.
Ability of State To Correct Errors Regardless of Requirement for
Authorization of Award
The State also argued that the instant claims were made "in
accordance with procedures in the State plan . . . for correcting
administrative mistakes . . . ." (State's post-hearing brief dated June
28, 1984, p. 23) The State considered as "mistakes" any failure to
make
AFDC rather than Home Relief payments during a period of time when an
individual in fact met the criteria for AFDC eligibility, even where
AFDC eligibility was not yet documented when the payments were made.
(See, State's Exhibit H-4; Transcript (16) of April 9, 1984 Hearing,
pp. 81-83) /9/ Since the State plan cited by the State is the one
effective October 1, 1976, however, this argument may not apply to that
portion of the claims covering payments made before that date. It is
also unclear to what procedures in the State plan the State had
reference. Even assuming that there were some general procedures in the
State plan for correcting errors, it is unlikely that any such provision
would take precedence over the more specific requirement in HB-IV-5214.
Since this provision requires an authorization based on all AFDC
eligibility factors, it precludes the reclassification of Home Relief
payments as AFDC unless AFDC eligibility or presumptive eligibility was
established in the record when the payments were made. In any case
where a payment failed to meet all federal requirements, including that
it be properly authorized, failure to categorize the payment as an AFDC
payment simply was not an error. Thus, the argument that general
language permitting the correction of errors allowed the State to make
wholesale reclassifications of Home Relief payments to AFDC payments is
untenable. For similar reasons, we also reject the notion that the
State's obligation to pay back federal funds which it determines were
erroneously designated as AFDC instead of Home Relief carries with it
the corresponding right in all instances to change a case designation
from Home Relief to AFDC.
Approval of Claims by Agency Officials as a Basis for Estoppel
The State also argued that the Agency was estopped from disallowing
the claims at issue here on the ground that regional officials of the
Department approved the methodology used in preparing the claims and
advised the State that if the claims were timely submitted, they would
be paid. According to the State, oral approval came when regional
officials visited State offices on several occasions in 1981 and became
aware that the State was reviewing its Home Relief caseload to establish
earlier periods of AFDC eligibility. The State alleged that it had
expended "a considerable amount of man hours and financial resources in
preparing the claim," an expenditure which (17) would not have been made
had the State been advised by regional officals that the claim would be
disallowed. (State's brief dated July 15, 1983, pp. 7, 23) The alleged
misconduct of Agency officials did not occur until after the State had
made the vast majority of the payments for which it claimed FFP (FFP was
claimed in payments made from March 1971 through December 1981) and had
submitted the first of its claims. The Agency, then, argued that there
was no reliance by the State. (Agency's brief dated August 26, 1983, p.
37; Agency's post-hearing brief dated June 29, 1984, p. 33) The State's
arguments on this point were very general. We see no basis in the
record for concluding that the State relied on the purported Agency
approval in making any of the payments at issue here. Since there was
no reliance, one of the traditional elements of estoppel, further
consideration of estoppel on this basis is not warranted. (See, New
York State Department of Social Services, Decision No. 449, July 29,
1983) Moreover, the State's reclassfication efforts have continued
despite the pending dispute over allowability of the claims. We regard
the costs incurred to generate the claims at issue here as too remote to
be a factor supporting a determination that the Agency is estopped from
denying payment of the claims. /10/
The State also contended that the Agency should be estopped on the
ground that the Agency paid other claims submitted by the State which
were identical to the instant claim with knowledge that the other claims
involved retroactive changes from Home Relief to AFDC. (Transcript of
February 15, 1984 hearing, pp. 202-208, 210, 213-220) (We do not
consider a prior period claim for $117 million, one of the claims (18)
referred to by the State at pp. 4-5 of its July 15, 1983 brief, as an
identical claim since it involved payments designated as PG-AFDC.) Once
again, the State's arguments were very general and did not establish the
traditional elements of estoppel or the affirmative misconduct that may
be a necessary element of estoppel. (See, Decision No. 449, supra;
Schweiker v. Hansen, 450 U.S. 785 (1981); and Heckler v. Community
Health Services of Crawford County, 104 S. Ct. 2218 (1984).)
Accordingly, we find no basis for concluding that actions by Agency
officials estop the Agency from disallowing the instant claims.
Inconsistent Treatment of "California Claim"
The State also asserted that the Agency had, prior to the
disallowance in the instant case, paid a claim by the State of
California which involved cash assistance made on behalf of children
under a State-only foster care program. The cash assistance payments
were sought to be retroactively authorized as AFDC-FC payments under
title IV-A of the Act. The State contended that, after a period of
years during which the Agency refused to pay the claim on the ground
that prior or simultaneous authorization was required by HB-IV-5214 and
the State sought reconsideration of the Agency's position, the Agency
advised the State that FFP was available. (State's post-hearing brief
dated June 28, 1984, pp. 27-29) The State asserted that payment of the
California claim supports the conclusion that "the demarcation of 'as
AFDC' (was not required) in order for federal matching to be available."
(State's letter dated August 30, 1984, p. 2) The Agency argued that the
State misread the document on the basis of which it concluded that the
Agency had reversed its position regarding the applicability of
HB-IV-5214, and that, when this document was read in the context of the
years of correspondence between California and the Agency, it was clear
that the Agency continued to rely on HB-IV-5214. (Agency's posthearing
brief dated June 29, 1984, p. 47)
We concluded earlier that HB-IV-5214 remained in effect for the time
periods involved here but did not require that the designation "AFDC"
actually appear on an authorization of assistance payments. Thus, our
decision is consistent with (19) the conclusion that the State seeks to
draw from payment of the California claim, regardless of whether the
Agency continued to rely on HB-IV-5214 in that case. /11/
Remand to Determine Compliance with HB-IV-5214
As noted previously, the State asserted that it in fact complied with
the requirement in HB-IV-5214 as applied by the Agency with respect to
some of the cases included in its claims, alleging that the payments
were authorized as AFDC payments but were erroneously paid as Home
Relief. The State found that 67.2% of the months for which FFP was
sought in a 40-case sample covered periods after the cases were
identified as AFDC-eligible. (State's brief dated July 15, 1984, p. 7)
The Agency agreed that if there was a timely authorization of payment as
AFDC which was incorrectly paid as Home Relief, FFP would be available,
and agreed to examine relevant documentation on remand. (20) (Agency's
brief dated August 26, 1983, pp. 39-41) Accordingly, the Agency is
directed to review documentation to be made available by the State
promptly upon receipt of this decision to determine the extent to which
FFP is allowable. At the request of the parties, the Board may assign a
mediator to the case pursuant to 45 CFR 16.18(a) to assist in resolving
issues such as the method to be employed to review the cases (i.e.,
sample or 100% review) and what constitutes the proper format for an
authorization.The State is not precluded in any event from appealing as
a new disallowance the Agency's determination that any of the costs
subject to the remand are unallowable on the ground that the
authorization requirement was not satisfied.
As indicated above, we do not reach the question of the precise
format that an authorization pursuant to HB-IV-5214 must take. Although
there is some testimony in the record on this point, the parties did not
identify it as a question presented for decision and it was not briefed.
We have held, however, that an authorization, although it need not
include the designation "AFDC," must be supported by a determination
in
the case record that the individual to whom payment was made met or
could have been presumed to meet all applicable requirements for AFDC.
Such a determination exists if the case record shows that documentation
or information provided by the individual was reviewed or validated and
regarded as establishing AFDC eligibility or presumptive eligibility.
The State argued that it was entitled to FFP in payments made from
the time an individual actually became eligible for AFDC even if that
preceded the time that documentation or information showing AFDC
eligibility was provided to the State, since the requirements of 45 CFR
234.120 were satisfied. That section provides that FFP is available
under title IV-A beginning with the month in which all eligibility
conditions are met and in which an application has been received by the
state title IV-A agency. The State contended that the application upon
which the original grant of Home Relief was based constituted an
application for purposes of this section since the State had a unified
application for public assistance which did not require the applicant to
identify the type of assistance applied for and which remained in the
recipient's file until such time as all public assistance to the
individual was terminated. (Transcript of May 11, 1984 Hearing, pp.
5-6) The Agency asserted, however, that a new application was required
when an individual's status changed to make him or her eligible (21) for
AFDC, thus mooting the application for public assistance on the basis of
which Home Relief was granted. In support of this position, the Agency
relied on 45 CFR 206.10(a)(6)(i)(A), which, as noted previously,
requires that assistance begin no later than 30 days after the receipt
of an application. (Transcript of May 11, 1984 Hearing, p. 19)
We are not persuaded that section 206.10 requires that a new formal
application be filed in order for an individual already in receipt of
Home Relief to be eligible for AFDC payments. However, we find that, in
order to give any meaning to section 206.10, the submission of
information regarding a change in status which would make a Home Relief
recipient eligible for AFDC must be deemed an application. Unless
notification of a change in status is treated in this fashion, there
would be no way to measure the 30 days following receipt of an
application within which AFDC payments must begin. Thus, we reject the
State's argument that FFP was available under title IV-A on the basis of
an application for public assistance filed before the individual even
met the eligibility requirements for AFDC, much less provided
information about or documentation of such eligibility. /12/
Once a recipient of Home Relief applies for AFDC, however the prior
authorization of award should be read together with a determination
regarding the deprivation factor to constitute an authorization of award
as AFDC. An initial authorization as Home Relief that reflects all
other aspects of eligibility for assistance is sufficient as an
authorization of AFDC payments once the determination (22) is made
concerning the deprivation factor. Such an authorization supports the
payment of FFP and is fully satisfactory documentation of an orderly
process for determining eligibility and awarding assistance. The AFDC
authorization is effective to cover the same time periods for which the
State could have made AFDC payments had the individual not been a
current recipient of Home Relief payments at the time the individual
applied for AFDC. The State may thus claim FFP in payments actually
made before the determination regarding the deprivation factor was made
to the extent the payments would be in accord with the regulations and
State plan requirements concerning the time periods for which assistance
can be paid once AFDC payments have been authorized. Pursuant to 45 CFR
CFR 234.120, the earliest point in time that FFP under title IV-A would
be available is the beginning of month the individual actually applied
for AFDC, i.e. provided information about or evidence showing
eligibility or presumptive eligibility for AFDC. /13/
(23) Issues Not Presented
During pre-hearing procedures in the instant case, both parties
agreed that whether the claims were timely filed or whether the claims
were adequately documented were not issues presented by the appeal.
(Agency's letter dated January 30, 1984; State's letter dated January
31, 1984) The parties differed with respect to whether the Agency could
raise these issues as a bar to payment subsequent to the issuance of
this decision. (Id.) That question would properly be considered by the
Board only in the context of an appeal from a disallowance based on
untimely filing or inadequate documentation of any costs determined upon
remand to have been claimed in compliance with HB-IV-5214.
Effect of Decision on Docket Nos. 82-227 and 83-102
The State's appeal in Docket No. 83-80, to which this decision
pertains, was jointly considered with two other appeals by the State,
Docket No. 82-227 and Docket No. 83-102. Docket No. 82-227 involves a
disallowance of AFDC payments totalling $35,089,637 and related
administrative costs totalling $4,471,760 claimed on the State's revised
quarterly expenditure report for the quarter ended December 1980. The
amount in dispute is now $33,707,545 since the State agreed that the
portion of the claim relating to administrative costs was properly
disallowed and did not supply documentation sufficient to support all
the payments claimed. (State's brief dated July 15, 1983, p. 2) The
Agency disallowed the costs on the ground that they duplicated a portion
of the amount claimed on the State's quarterly expenditure report for
the quarter ended September 1980. (Letter from DiSturco to Webb, dated
October 18, 1982) The claims included on the latter quarterly
expenditure report are among those in dispute in Docket No. 83-80, which
is the subject of the instant decision. During pre-hearing procedures,
it was agreed that the parties would not fully brief the duplicate
claims issue in Docket No. 82-227 and that Docket No. 82-227 would be
the subject of a (24) separate decision, to be issued at a later date.
(Transcript of February 14, 1984 hearing, p. 6) If the claims in Docket
No. 82-227 duplicated the costs in question here they are unallowable
simply on the basis that they involve duplicate costs, regardless of the
holding in the instant case. (See New York State Department of Social
Services, Decision No. 439, June 17, 1983) In light of the decision in
this case, it is not clear whether there are any issues remaining for
resolution assuming that the claims are not duplicate claims.
Accordingly, the State should file a statement within 30 days of its
receipt of this Decision No. 585 identifying any such issues or
indicating its view that the record for decision in Docket No. 82-227 is
complete.
Docket No. 83-102 involves a disallowance of $5,399,387 claimed under
title XIX of the Act for Medicaid services rendered to Home Relief
recipients living in AFDC households. The Board determined that since
the issue of whether prior or simultaneous authorization of AFDC
payments is lrequired was a threshold issue with respect to the title
XIX claims, the record developed in Docket No. 83-80 would be considered
as part of the record in Docket No. 83-102 as well. (Board's letter
dated June 8, 1983 re Docket No. 83-102) In view of the Board's
conclusion in the instant case that HB-IV-5214 was binding on the State,
it appears that briefing on the principal issue presented in Docket No.
83-102 may be unnecessary. Accordingly, the State should within 30 days
of its receipt of this Decision No. 585 file a statement identifying any
issues remaining for resolution or indicating its view that the record
for decision in Docket No. 83-102 is complete.
Conclusion
For the reasons set forth above, we conclude that the State was bound
by the requirement in HB-IV-5214 with respect to the costs claimed. The
case is, however, remanded to the Agency to consider whether the State
complied with this requirement in some cases and thus to determine the
amount of the allowable claims. /1/ The notice of disallowance
indicates that all of the claims, with the exception of
$1,755,500, were for payments made from July 1973 through December 1981.
The time period of expenditure for the $1,755,500 is shown as "unknown."
(Letter from DiSturco to Perales dated March 22, 1983, p. 1) However,
documentation submitted by the State to support part of the $1,755,500
claim covers payments made as early as March 1971. (State's Exhibit 19)
/2/ We note that the Agency agreed to a remand to consider the State's
contention that some of the payments included in its claims would comply
even with the Agency's application of HB-IV-5214. (Agency's brief dated
August 26, 1983, pp. 39-41) This decision, however, broadens the
Agency's interpretation of that provision. /3/ According to the
Agency, HB-IV-5214 was originally promulgated on September 26, 1947. It
was preceded in 1941 by a provision with similar effect in the Social
Security Board's Guide to Public Assistance Administration. (Agency's
brief dated August 26, 1983, pp. 15-17) /4/ That the Agency must
stand before the Board in 1984 and represent as uncompleted the process
of transferring program policy from the Handbook to regulation or other
policy issuance is poor tribute to the bureaucratic decision-making
process. Nevertheless, we do not regard this delay as a significant
factor in deciding whether the HB-IV-5214 continued in effect during the
time period at issue here. /5/ The failure of SS-AT-75-4(APA) to
name the Handbook as a "current issuance" of the Department does not
imply that the Handbook was revoked, as the State argued. (State's
post-hearing brief dated June 28, 1984, p. 4) The fact that new or
revised policies are transmitted in a particular format does not prove
that existing policies which have not been revised do not remain valid
in their original format. /6/ A requirement like HB-IV-5214 was
also part of the State's title IV-A plan from 1967 until October 1,
1976. According to the State, until the latter date, when a standard
plan printed by the federal government ("federal pre-print") was adopted
by the State as its title IV-A plan, the State's title IV-A plan
consisted of regulations, administrative directives, and State bulletins
issued by the State. (Transcript of February 14, 1984 hearing, pp.
88-89) A requirement similar to HB-IV-5214 was published in State
Bulletin No. 36, dated April 17, 1967. (Agency Exhibit II) As part of
the State's title IV-A plan, this requirement was binding on the State.
(Social Security Act, section 403(a)(1)) Thus, a requirement for prior
or simultaneous authorization was until October 1, 1976 binding on the
State by virtue of its own title IV-A plan as well as HB-IV-5214. The
fact that the "federal pre-print" effective October 1, 1976 did not
specifically refer to a requirement for prior or simultaneous
authorization does not prove that the Agency no longer regarded
HB-IV-5214 as a current program requirement, however. The pre-print
incorporated by reference "other official issuances" of the Department,
and thus was not intended to alter any policies which would otherwise
have been applicable. /7/ It is obvious, however, that FFP is not
available where the case record or other information shows that the
determination that the AFDC eligibility requirements were met was in
fact erroneous or where other requirements for payment of FFP were not
met. /8/ Later in "Remand to Determine Compliance with
HB-IV-5214," we discuss other issues likely to arise during the remand
to review the State's claims. /9/ As indicated previously, however, the
Agency agreed that the State complied with HB-IV-5214 in cases
where Home Relief payments were erroneously made to individuals who had
been classified as AFDC-eligible. Such cases are of course within the
scope of the remand. /10/ Hearing Exhibit H-31 is an internal
Agency memorandum prepared by a regional official in 1981 after
reviewing some case files where the State is claiming retroactive FFP.
While it is only to be expected that the Agency would give close
scrutiny to a large retroactive claim such as this, we do not regard as
significant the absence in this memorandum of any specific reference to
the requirement of HB-IV-5214. There is no indication that this
memorandum was intended to be a dispositive statement of the Agency's
position on whether FFP could properly be claimed. To accord too much
significance to one internal memorandum would tend to deny Agency
employees the opportunity to fully and freely analyze pending claims.
/11/ At the outset of the formal hearing in this case, the State
requested that the Board direct the Agency to provide all documents
pertaining to the "California claim." The Board declined to do so
since
it was unclear whether any of the documents would be relevant. (However,
the Board itself had initially asked the parties about the relevance of
the "California claim".) Instead, the Board indicated that it might
be
appropriate for the State to requeset these documents pursuant to the
Freedom of Information Act (5 U.S.C. 552). (Transcript of February 15,
1984 Hearing, pp. 131-132) The State subsequently made requests for
documents concerning the "California claim" and the Agency responded
six
months later releasing 513 pages and withholding 160 pages. (Letter from
Roberts to Kinney dated August 6, 1984) During the intervening months,
the Agency submitted for the record in the instant case only selected
documents pertaining to the "California claim," although it is clear
from the record that the Agency in preparing its case relied on
additional documents. (Transcript of May 11, 1984 hearing, pp. 69-70)
We think that, viewed in this context, the Agency's conduct provides
support for an adverse inference to the effect that the Agency did not
consider HB-IV-5214 as a bar to payment of the retroactive claim
submitted by California. We make no formal finding in this regard,
however, in light of the above discussion. /12/ The soundness of
this result is shown by the fact that an individual making an initial
application for public assistance would not be entitled to AFDC for
periods prior to the month of application even if he or she in fact met
all eligibility requirements during an earlier month. We see no basis
for distinguishing between a new applicant for public assistance and an
individual already in receipt of Home Relief who later submits evidence
of eligibility for AFDC. The distinction made by the State-- that the
State has not expended any money for the new applicant (Transcript of
May 11, 1984 hearing, p. 10)--seems to us spurious since the State would
of course have to make payments in order to claim FFP. /13/ This result
is necessary in order to avoid substantial unfairness to the
State by virtue of the fact that its State funded Home Relief program
substantially mirrors the AFDC program. The State operated a unified
public assistance program using the same forms and process regardless of
whether assistance was awarded as Home Relief or as AFDC. State social
services districts administer both programs and "are required to use the
Federal program first if the applicant is eligible for it by virtue of
the deprivation factors being met and need." (State's brief dated June
28, 1984, p. 19) The State pointed out that the standard of need and
budget process are the same for both programs (with one exception
concerning an income disregard which we do not consider significant).
"Uniform records are made, the same workers are used, and the same
systems for check issuance are also used." (State brief dated June 28,
1984, p. 20) Cash assistance is available under Home Relief to needy
individuals and families not meeting the deprivation factors necessary
for AFDC eligibility, while AFDC payments are available to needy
families meeting the deprivation factors. (See, State brief dated June
28, 1984, pp. 17-22) This result is also somewhat analogous both to the
availability under 45 CFR 206.10(a)(6)( i)(A) of FFP payments covering
periods prior to the initial authorization (See the discussion on p. 13
of the Comptroller General's decision) and to the availability of FFP in
payments made under an authorization as PG-AFDC only once there has been
a subsequent authorization based on actual eligibility for AFDC.
MARCH 19, 1985