DEPARTMENTAL GRANT APPEALS BOARD
Department of Health and Human Services
SUBJECT: Maryland Department of Human Resources
Docket No. 86-214
Decision No. 846
DATE: March 10, 1987
DECISION
The Maryland Department of Human Resources (MHR, State) appealed
a
disallowance by the Family Support Administration (FSA, Agency)
of
$16,598 related to child support collections reported by MHR for
the
quarters which ended September 30, 1983 and December 31, 1983.
The
$16,598 is the difference between the amount which the State
reimbursed
the federal government ($4,626,968) and the amount to which the
federal
government contended it was entitled as its share of the
collections
($4,643,566).
The facts material to the case are not in dispute. The State and
the
federal government each funded 50 percent of basic grants of aid
to
families with dependent children (AFDC). To this basic AFDC
grant,
Montgomery County added a ten percent supplement, approved by the
State,
to bring the payment up to the State-established standard of
need.
Under federal legislation enacted in 1974, the AFDC recipient
families
had to assign to the State any rights to child support due from
an
absent parent. Any amounts collected by the State from absent
parents,
in excess of certain amounts due the family, were to be shared with
the
federal government as reimbursement for assistance payments. During
the
period in question, the State permitted Montgomery County to retain
ten
percent of what the County had recovered as support payments (after
the
appropriate deductions for the family) and gave the federal
government
half of the remainder. The Agency disagreed with the State's
method of
reimbursement and found that the federal government was entitled to
50
percent of the entire support recoveries retained as reimbursement
for
assistance payments.
Based on our analysis of the record and the parties' arguments, we
affirm
the disallowance.
Background
The AFDC program is jointly funded by the federal and state
governments
and administered by the states to furnish needy dependent
children, and
the parents or relatives with whom they are living, with
financial
assistance, rehabilitation,
and other services "to help maintain and strengthen family life and
to
help such parents or relatives to attain or retain capability for
the
maximum self-support and personal independence consistent with
the
maintenance of continuing parental care and protection. . . ." See
42
U.S.C. 601, et seq. (Title IV-A of the Social Security Act).
Each state is authorized to establish a standard of need which could
be
unique to that state. If the funds available from the state and
federal
governments are not sufficient to meet the state's standard of need,
the
state may supplement the basic grant. See 45 CFR
233.20(a)(3)(vii)(c).
In Maryland, the AFDC State Plan authorized local
supplementation, when
approved, so long as the supplement did not duplicate
any specified item
in the State Standard of Need and the cost was paid
entirely from local
funds. State's Appeal File (Record), p. 31.
Montgomery County
supplemented the basic grant and the supplement was
included in the
check to the AFDC recipient.
The AFDC legislation also includes measures designed to encourage
states
to locate absent parents and to hold them responsible for the
financial
support of their children. Applicants for AFDC are required to
assign
the state their rights to support. 42 U.S.C.
602(a)(26)(A). Under the
Child Support Enforcement Program (Title
IV-D), the federal government
funds a major share of a state's effort to
collect child support. In
Maryland, the federal government's share of
the cost of the collection
effort is 70 percent. After the State pays
any amounts due the family,
the State is authorized to use the excess to
reimburse itself and the
federal government for past assistance
payments. The State is obliged
to reimburse the federal government to
the extent of the latter's
participa- tion in the financing of the assistance
payments. 42 U.S.C.
657(b)(3)(A). In Maryland, the State and the
federal government each
finance 50 percent of the basic AFDC benefit,
exclusive of any
supplement.
A federal audit of the State collection effort for the period October
1,
1977 -- September 30, 1978 (FY 1978) disclosed that the collections
in
Montgomery County were not split 50-50 between the State and the
federal
government. Instead, the County was first reimbursed for the
supplement
which it had added to the federal-State payment. The audit
report for
FY 1978, dated July 3, 1980, recommended that the State
discontinue
reimbursing the County supplement from the 50 percent share due
the
federal government. Record, pp. 19-21. The audit report for
FY 1979,
dated February 3, 1981, made the same disclosure and recommendation,
as
did audit reports for FY 1980 and FY 1981.
By letter dated July 27, 1981, the Executive Director of MHR wrote to
the
federal agency responsible for child support enforcement to request
a formal
opinion of the General Counsel of this Department on the
legality of
reimbursing Montgomery County as the State had done.
Record, p. 15. The
Agency sent the State's letter to the Acting Deputy
Director with the request
that it be forwarded to the General Counsel.
Record, p. 14. On January 16,
1984, the Agency's Regional Representative
wrote about federal policy on the
issue, declaring that the Social
Security Act and implementing program
regulations did not provide for
reimbursement to Montgomery County for the
supplement it provided to
AFDC recipients. Record, p. 12.
1/ The Agency added, nonetheless,
that if the County has a right to
reimburse- ment of the County
supplement under State law, excess support
payments (after the State and
federal share have been reimbursed) may be used
to reimburse a local
supplement rather than being paid to the family.
Record, p. 13. On
July 3, 1984, the State instructed Montgomery County
to discontinue
retaining AFDC child support collections to offset the
county
supplement. Record, p. 6.
On appeal before the Board, the State argued that the disal-
lowance
should be reversed because under the circumstances of this case
it
amounted to an unfair retroactive penalty. The circumstances alleged
by
the State were: (1) that the retention of child support collections
by
Montgomery County was based on a reasonable interpretation of the
Social
Security Act and implementing regulations; and (2) that the
State
attempted in good faith and in a timely manner to obtain
clarification
of the federal policy.
The Agency contended that the State was adequately informed of the
federal
policy by the comments in the audit reports for Fiscal Years
1978, 1979,
1980, and 1981. The Agency argued that the State was not
entitled to a
legal opinion concerning a challenged Agency policy and
that the risk of
delay while the Agency considered the State's request
for a policy change
rested with the State. The Agency also argued that
its position
limiting the governmental share of child support collections to the
State
and federal governments was fully supported by the Social Security
Act and
implementing regulations.
Analysis
Title IV-D and implementing regulations require the State to reimburse
the
federal government to the extent of its participation in the
financing of
"assistance payments." Although the term "assistance
payments" is not defined
by statute, we find that it means, as the
Agency argued, the basic AFDC
payment funded by the State and the
federal governments. This conclusion is
fully supported by the statute
as a whole, the legislative history and by
Department regulations. The
reference to "assistance payments" in Title
IV-D must be read in context
with references elsewhere in the same Title to
assistance under IV-A and
to the assignment of support rights for IV-A
applicants. Furthermore,
the legislative history of the IV-D program suggests
that a primary
purpose of the program is to reduce escalating AFDC costs by
recouping
federal monies expended for AFDC payments. S.Rep. No. 1356,
93rd Cong.,
2d Sess., reprinted in 1974 U.S. Code Cong. & Ad. News 8133,
8145-8149.
Thus, when the statute requires the State to reimburse the
federal
government for participating in the financing of "assistance
payments,"
it reasonably refers to the basic AFDC payment. Indeed, the
legislative
history notes that the governmental share is to be distributed
"as
between Federal and State Governments according to the
proportional
matching shares which each has under the AFDC formula."
Id. at 8158.
2/ Moreover, in discussing how recovered support monies
should be
distributed, neither the statute nor the regulations gives
any
indication that local governments can receive reimbursement
for
supplements which are entirely funded by them. The provision cited
by
the State for the proposition that the supplement may be viewed as
part
of the AFDC payment simply does not support that view. The
regulation
at 45 CFR 233.20(a)(3)(vii)(c) merely provides that the assistance
paid
under the IV-A plan need not be reduced if a supplement is
provided. In
response to the State's argument that both the basic
payment and the
supplement were paid in one check to the family, the Agency
noted that
other amounts which were not part
of the assistance payment were also included in the check, such as
the
first part of child support payments collected by the State and paid
to
the family without any decrease in the amount paid as IV-A
assistance.
42 U.S.C. 657(a)(1).
Finally, contrary to what the State contended (Record, p. 17), the
term
"State" as used in the statute and regulations does not embrace
local
county governments. State is defined to mean "the several States,
the
District of Columbia, the Commonwealth of Puerto Rico, the
Virgin
Islands, and Guam." See, e.g., 45 CFR 201.1(g) and 301.1(f).
Thus, the Agency's position is soundly based on the statute and
the
regulations. It also furthers valid program purposes by
maximizing
reimbursement to the federal government for what it has paid out
in
participation in AFDC payments.
The State argued that it would be a disincentive for a local government
to
provide supplementation of the AFDC payment if it could not
retain
reimbursement of that supplementation from support collections
under
IV-D since the IV-D program had essentially preempted the support
field.
The Agency decision would, however, permit the County to retain
as
reimbursement for local supplements amounts which would otherwise
be
paid to the family as excess over reimbursement for the AFDC
assistance
payments, so long as this was permitted under State law. The
key point
made by the Agency was that the federal/State shares had to
be
reimbursed first. While the Agency did not articulate a reason for
this
(other than the interpretation of the term "assistance payments"),
we
think that it makes sense. Since the County pays a supplement on top
of
the basic AFDC amount, in cases where the support payment
is
insufficient to meet the State Standard of Need, the County would
be
paying a supplement even if the support payment had been made on
time.
In such cases, permitting the County to take 10 percent off the top
of
any support collection would result in a windfall to the County
simply
because the support payment was not made on time but had to be
collected
after the fact. Moreover, since the IV-D program receives
substantial
federal funding, it is not unreasonable of the federal government
to
expect to be paid first.
The Agency's delay in responding to the State
We also disagree with the State that the disallowance should be
reversed
because of the delay of the Agency in sending a response to the
State.
The State cannot escape liability for its actions because it chose
to
delay changing a practice which had been questioned in audit and
in
subsequent discussions with the Agency. While the Agency agreed to
take
a second look at the
policy in 1981, the State was given no assurance at that time that
its
position would be adopted. Moreover, this is not a situation where
the
State's reliance on its own interpretation caused it to
incur
expenditures it would not otherwise have incurred or caused it to
make
changes in how it operated its program. The sole issue raised
was
whether support recoveries could be retained by the County or should
be
paid over to the federal government.
Finally, contrary to what the State argued, this is not a situation
where
the State's position is one of two reasonable alternatives. 3/
As
indicated above, the Agency's position is soundly based on the
statute and
regulations. The State's position lacks support in the
statute and
conflicts with perhaps the primary purpose behind the
recovery
provision. Thus, the Agency is clearly not precluded from
taking the
disallowance for the period prior to its letter of January
16, 1984.
Calculation of the disallowance
In a footnote in its brief, the State challenged the Agency's
calculation
of the disallowance amount on the basis that the Agency did
not do an
audit. The Agency responded that no audit was required
because the
Agency simply compared two amounts: the federal share of
"actual child
support collections in AFDC cases recorded on State
ledgers" and the federal
share reported on the State's expenditure
reports. Agency Brief, p.
10. The record does not clearly indicate
what the Agency meant by
"collections in AFDC cases." We presume that
the Agency correctly used
only those amounts which the State should have
retained as reimburse- ment
for federal/State assistance payments in
accordance with the IV-D regulations
and our discussion above. Although
the State alleged in a letter to the
Agency that the County had retained
amounts including the local supplements
(some of which otherwise might
have been paid to the families, rather than
being distributed to the
State and the federal government), the State did not
repeat this
allegation in Board proceedings nor reply to the Agency's
explanation of
the calculations. Thus, we affirm the disallowance here
in the amount
determined by the Agency from State records.
CONCLUSION
For the reasons stated above, we affirm the disallowance.
________________________________
Judith
A. Ballard
________________________________
Norval
D. (John) Settle
_________________________________ Donald F. Garrett Presiding
Board
Member
1. The State again requested a formal opinion of
the General
Counsel. Record, Tab 6. By letter dated March 14,
1984, the Regional
Representative told the State that there was no mechanism
for the
General Counsel to furnish legal opinions directly to states, but
that
the position taken in the January 16 letter was consistent with
the
advice of the General Counsel. Record, p. 9.
2. Once the basic AFDC benefit payments have been
fully recouped,
the regulations provide that the remaining recovered support
monies may
be provided to the family. Although the parties did not
articulate how
it worked, presumably the County might be able to recoup its
supplement
payments directly from the family, out of these excess
payments.
3. The State's reliance on Maryland Department of
Human Resources,
Decision No. 706, November 21, 1985, is misplaced, because
in that case
the federal agency specifically agreed in advance to be bound by
a
state's reasonable interpretation. Id. at 4,