GAB Decision 626
February 26, 1985
Virginia Department of Social Services;
Settle, Norval D. (John); Teitz, Alexander G. Ballard, Judith A.
Docket No. 84-148
The Virginia Department of Social Services (State) appealed a
determination by the Office of Human Development Services (Agency) that
the State was ineligible for fiscal year 1983 funds under section 427 of
title IV-B 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, if the
state meets certain requirements for the protection of children in
foster care. /1/
The Agency evaluated states' compliance with section 427 on two levels.
First, the Agency determined whether a state had established policies or
procedures for implementing the requirements of the Act. Second, the
Agency reviewed a sample of case records to determine whether these
policies or procedures were operational. If a state failed to establish
a requirement as a matter of policy, or a state did not comply with the
applicable requirements in a certain percentage of the cases sampled,
the Agency required the return of the section 427 funds. Under criteria
established by the Agency, the State had to comply with the applicable
requirements in 80% of the cases in order to be eligible for fiscal year
1983 funding. (State's appeal file, Exhibit M, pp. 4-5)(2)$%The Agency
initially approved the State's written request for additional funds
based on a written certification by the State that it met the
requirements of section 427. However, following a review conducted in
January 1984 to validate the State's self-certification, the Agency
advised the State that it was ineligible for fiscal year 1983 funds
since it failed to comply with the Act in at least 80% of the cases
sampled. Specifically, the Agency found that periodic reviews and
dispositional hearings, two of the safeguards specified in the Act, were
either not held or not timely in more than 20 percent of the cases.
(State's appeal file, Exhibit Q) For the reasons discussed below, we
sustain the Agency's determination that the State failed to meet the
requirements of section 427 in fiscal year 1983. Applicable Law As one
of the conditions for the receipt of additional child welfare funds,
section 427(a) (2) (B) requires that a state have implemented and be
operating to the satisfaction of the Secretary--
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--
(5) The term "case review system" means a procedure for assuring
that--
(A) each child has a case plan designed to achieve placement in the
least restrictive (most family like) setting available and in close
proximity to the parents' home, consistent with the best interest and
special needs of the child,
(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 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, and(3)$T(C) with respect to each such
child, procedural safeguards will be applied, among other things, to
assure each child in foster care under the supervision of the State of a
dispositional hearing to be held, in a family or juvenile court or
another court (including a tribal court) of competent jurisdiction, or
by an administrative body appointed or approved by the court, no later
than eighteen months after the original placement (and periodically
thereafter during the continuation of foster care), which hearing shall
determine the future status of the child (including, but not limited to,
whether the child should be returned to the parent, should be continued
in foster care for a specified period, should be placed for adoption, or
should (because of the child's special needs or circumstances) be
continued in foster care on a permanent or long-term basis); and
procedural safeguards shall also be applied with respect to parental
rights pertaining to the removal of the child from the home of his
parents, to a change in the child's placement, and to any determination
affecting visitation privileges of parents. Agency's Findings The State
was found eligible for section 427 funding for fiscal year 1981, the
first year for which funding was available. For fiscal year 1982,
although the Agency determined that the State had maintained appropriate
policies and procedures for implementing the section 427 requirements,
the Agency found that the State did not comply with the dispositional
hearing requirement in at least 80% of the cases reviewed. The Board
sustained the Agency's determination that the State was ineligible for
fiscal year 1982 funding on this basis. Virginia Department of Social
Services, Decision No. 596, November 21, 1984. For fiscal year 1983,
the Agency again determined that the State was ineligible for funding on
the ground that the State did not implement the required safeguards in
at least 80% of the cases reviewed. Specifically, the Agency found
unacceptable 22 of the 48 cases reviewed. Fifteen of the 22 were found
to involve periodic review errors: according to the Agency, in six
cases, the reviews were 30-60 days late, in five cases, the reviews were
more than 60 days late, and in four cases, no reviews were held. Six of
the 22 cases(4) were found to have had late dispositional hearings. One
of the 22 cases was found to be lacking a case plan. /2/ (State's appeal
file, Exhibit N, Report of State Eligibility, p. 4)
The State's arguments in support of its position that the determination
of ineligibility was improper are discussed separately below. The Fiscal
Year 1983 Compliance Review Was Authorized. The State argued that the
Agency's own policies precluded the Agency from conducting a compliance
review for fiscal year 1983. A draft Notice of Sampling Procedures
Applicable to Section 427 Reviews, received by the State in March 1984,
/3/ provided as follows:
States are reviewed for Section 427 eligibility in three types of
reviews: Initial Reviews, Subsequent Reviews, and Triennial Reviews.
In an Initial Review conducted for the year in which the State first
certified its eligibility, the State is determined eligible if the case
record survey shows that at least 66% of the State Agency's foster care
case records are judged acceptable.
In a Subsequent Review, conducted for the year immediately following
eligibility established under an Initial Review, the State is determined
eligible if the case record survey shows that 80% or more of the State
Agency's foster care case records are judged acceptable.
After establishing eligibility under a Subsequent Review, no review
will be conducted until three years later and, if eligibility is
conducted, every three years thereafter. For this Triennial Review,
the(5) State is determined eligible if the case record survey shows that
at least 90% or more of the State Agency's foster care case records are
judged acceptable.
If a State does not meet the established standard during any one of
these reviews, the review will be conducted each succeeding year until
eligibility is established or reestablished at the same level at which
the State previously failed to meet the required standards.
(State's appeal file, Exhibit M, pp. 4-5) The State argued that if,
pursuant to its appeal then pending before this Board, it was determined
to be eligible for fiscal year 1982 funds, then under the terms of the
Agency's own policy, the State was entitled to be found eligible for
fiscal year 1983 funding without any review of its compliance with
section 427. (State's brief dated October 9, 1984, p. 7) The State
also argued that, regardless of the outcome of its appeal regarding
fiscal year 1982 funding, the Agency was not authorized to conduct the
fiscal year 1983 review because no final decision with respect to fiscal
year 1982 funding had been made when the fiscal year 1983 review was
conducted. (State's reply brief dated November 29, 1984, p. 4) The
fiscal year 1983 review was conducted in January 1984 (State's appeal
file, Exhibit M), while the Agency's letter notifying the State of its
determination of ineligibility for fiscal year 1982 funding was dated
March 6, 1984 (State's appeal file, Exhibit J). As noted previously, the
Board in Decision No. 596, dated November 21, 1984, sustained the
Agency's determination that the State was ineligible for fiscal year
1982 funding. Since reviews in two consecutive years did not establish
the State's eligibility for funding, the State was not entitled under
the Agency's policy to be deemed eligible for the next two years absent
any review. The fact that no final determination of ineligibility for
fiscal year 1982 was made before the fiscal year 1983 review was
conducted does not provide a basis for concluding that the latter was
unauthorized. We see nothing in the Agency's policy that would bar the
Agency from conducting a review for a third consecutive year prior to
the time a final determination is made that the State was ineligible for
second-year funding. The policy merely indicates that if eligibility
has been established under a Subsequent Review, no review will be
conducted until(6) three years later. In the case before us, the
State's eligibility for fiscal year 1982 funding had not been
established at the time scheduled for the fiscal year 1983 review. /4/
Therefore, the Agency did not violate its policy by proceeding with the
fiscal year 1983 review. Moreover, the Agency stated that the State
would retain the funds for fiscal years 1982 and 1983 until the Board
ruled on the State's eligibility in each year, and asserted that the
State had therefore "not been penalized in any way by ACYF's action in
conducting the FY 1983 review." (Agency's brief dated November 9, 1984,
p. 7) The State did not allege any prejudice resulting from the Agency's
proceeding with the fiscal year 1983 review. According, we find that the
fiscal year 1983 review was authorized.
The Dispositional Hearing Requirement Was Not Met. As noted previously,
the Agency found that the State failed to comply with the dispositional
hearing requirement in six of the 22 cases judged unacceptable. The
State asserted that it had in fact complied with the dispositional
hearing requirement in all six cases. /5/ In support of its(7) position,
the State icorporaed by reference the entire record in its appeal of the
finding of ineligibility for fiscal year 1982 then pending before the
Board. (State's reply brief dated November 29, 1984, pp. 2-3) The State
argued in that appeal that the Agency had not considered certain
provisions of State law which provided for dispositional hearings and
had incorrectly required an in-person hearing when a paper review was
sufficient. The Board determined that, even if appropriate
dispositional hearings could have been held pursuant to the additional
provisions of State law relied on by the State, the State had not shown
that such hearings were actually held in any of the disputed cases. The
Board also held that the mere filing of a petition for review could not
constitute a dispositional hearing under section 475(5) (c) and that,
even if a paper review by a court might be sufficient in some
circumstances, the State had not shown that such a review actually
occurred in any of the disputed cases. Decision No. 596, pp. 6-13.
Here, the State was specifically provided an opportunity to submit
evidence that its legal arguments bore a relationship to the facts of
the cases in dispute. Although the State first said that it could
identify one case which would be in compliance if the Board determined
that an in-person hearing was not required, the State ultimately
admitted that this was not one of the original 22 cases found
unacceptable as part of the Agency's official review of cases, but was
one of the cases the Agency subsequently reviewed informally. (State's
letter dated February 11, 1985) Accordingly, we find that six cases were
properly judged unacceptable on the basis that the dispositional hearing
requirement was not met. Periodic Reviews for Children in Pre-adoptive
Placements. In a letter responding to the Agency's preliminary
determination of ineligibility, the State asserted that, in the fiscal
year 1983 review, cases involving children in adoptive placements were
improperly considered out of(8) compliance when periodic reviews were
not conducted in such cases. According to the State, the Agency had
previously considered such cases in compliance on the ground that
"permanency for these children had been obtained. . . ." (State's
appeal file, Exhibit P, p. 2) In the Agency's letter advising the State
of the determination of ineligibility for fiscal year 1983, however, the
Agency responded that children in pre-adoptive homes prior to adoption
finalization were not exempt from periodic reviews, and stated that the
Regional Office would be in contact with the State "to clarify this
situation." (State's appeal file, Exhibit Q, p. 3) Since the State did
not indicate which of the 22 unacceptable cases in dispute here involved
children in adoptive placements, the Board asked the State if it could
identify any such cases. The State acknowledged that none of the cases
found unacceptable here were children in pre-adoptive placements.
(Summary of Conference Call dated June 30, 1984) Accordingly, there is
no basis in the record to determine that some of the disputed cases
should have been found acceptable on the ground that the children were
exempt from periodic reviews. Ninety-Day Grace Period for Periodic
Reviews and Dispositional Hearings Was Not Mandatory. Another argument
advanced by the State in its response to the Agency's preliminary
finding of ineligibility, but not specifically pursued on appeal, was
that the Agency arbitrarily failed to allow a 90-day grace period for
periodic reviews and dispositional hearings otherwise due every six
months and within 18 months of the original placement, respectively.
The State alleged that the Agency had allowed such a grace period prior
to the fiscal year 1983 review. (State's appeal file, Exhibit P, p. 1)
The Agency acknowledged that it had previously allowed a grace period,
the purpose of which was to avoid penalizing a state in determining
eligibility for second-year funding for cases in which periodic reviews
or dispositional hearings were not held the first year. If the State
held a periodic review or dispositional hearing in such a case within 90
days of the beginning of the second year, then the Agency would find
that the applicable requirement was met despite the fact that the case
was technically out of compliance. However, the Agency asserted that
the grace period was not required by the Act and was intended by the
Agency to apply only during the initial years of the program's
operation. (State's appeal file, Exhibit Q, pp. 1-2)(9) This Board has
indicated in a prior decision that the 90-day grace period was not
required under a literal reading of section 427. Arkansas Department of
Human Services, Decision No. 553, July 16, 1984, p. 6. In view of the
purpose of the grace period as explained by the Agency, it does not
appear that the Agency acted arbitrarily in refusing to apply the grace
period in determining eligibility for third-year funding. In any event,
it is not clear that the grace period would have applied even if
extended to cover determinations of eligibility for third-year funding.
The State did not allege that any of the cases found unacceptable in the
fiscal year 1983 review due to lack of a timely periodic review or
dispositional hearing had also been found unacceptable on that basis in
the prior year's review, nor did the State provide any information
regarding the dates on which the periodic reviews or dispositional
hearings were eventually held. Accordingly, we cannot conclude that any
of the 22 cases in dispute here would have been acceptable if a 90-day
grace period had been applied. Conclusion For the foregoing reasons, we
find that the State failed to hold timely periodic reviews or
dispositional hearings in 80% of the cases sampled. Accordingly, we
sustain the Agency's determination that the State was ineligible for
$2,019,608 which was subject to the requirements of sectin 427 in isal
year 1983. /1/ The additional funds are a proportional share of the
amount appropriated for title IV-B which exceeds $141,000,000,
in this case, $380,160. The amount in dispute in this case also
includes $1,599,428 of title IV-E funds transferred to title IV-B and
$40,020 of title IV-E funds awarded for placements made pursuant to
voluntary placement agreements. (Agency's appeal file, Attachment 2, p.
4) The title IV-E funds are subject to the requirements of section 427
under section 474( c) of title IV-E. /2/ The lack of a case plan
was not mentioned in the Agency's formal determination of ineligibility.
However, the State was clearly aware of this finding (State's appeal
file, Exhibit P, p. 1) and did not argue that it was not properly
considered as a basis for the finding of ineligibility. /3/ This
Notice was intended for publication in the Federal Register. The record
does not indicate whether it was so published. In any event, the Agency
did not deny that the Notice represented an accurate statement of its
policy. /4/ The State, in November 1983, received a copy of the
Agency's report on the fiscal year 1982 review and a letter from the
Acting Commissioner of the Administration for Children, Youth and
Families notifying the State of the possibility of a negative
determination and giving the State an opportunity to submit additional
information. (State's appeal file, Exhibits G and H) It is arguable that
the Agency was justified in proceeding with the fiscal year 1983 review
on the basis of its preliminary finding of ineligibility for fiscal year
1982 funding. /5/ The State asserted that "(s)hould such cases
be found to be in compliance, then the statistical basis for ACYF's
conclusion that the State was not in compliance based upon a minimum
number of acceptable records is void." (State's reply brief dated
November 29, 1984, p. 2) It appears that, under the statistical sampling
method used by the Agency, the Agency would have been required to review
more than 48 cases for the sample to have been valid if only 16 of the
first 48 cases reviewed were unacceptable. The agency used a sequential
sampling, where "the size of the sample is left undetermined and the
procedure is to review one case record at a time with the review
continuing until the cumulative evidence is sufficiently strong for the
State to be considered eligible or not eligible." (State's appeal file,
Exhibit M, p. 6) The record indicates that 22 of 48 was "the minimum
number of unacceptable cases necessary to make the decision that the
State is not in compliance." (State's appeal file, Exhibit N, p. 5)
JUNE 06, 1985