Maryland Department of Human Resources, DAB No. 1225 (1991)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

SUBJECT: Maryland Department of Human Resources
Docket No. 90-126
Decision No. 1225

DATE: February 7, 1991

DECISION


The Maryland Department of Human Resources (Maryland, State) appealed
the determination of the Administration for Children, Youth and Families
(ACYF) disallowing federal financial participation (FFP) in the amount
of $522,760 claimed under title IV-E of the Social Security Act (Act).
The disallowance was based on ACYF's review of foster care maintenance
payments made by the State during fiscal year 1984.  ACYF found that 98
of a sample of 249 payments were not eligible for funding under title
IV-E.  Projecting the results of this review to the universe from which
the sample was drawn, ACYF determined that payments totalling $522,760
FFP were inappropriately claimed for fiscal year 1984.  ACYF
subsequently withdrew the disallowance with respect to four sample
cases, and stated that it would take appropriate steps to recalculate
the disallowance.  ACYF brief dated 11/30/90, pp. 13-14.

On appeal to this Board, Maryland disputed ACYF's findings of
ineligibility with respect to 19 of the sample cases (in addition to the
four with respect to which ACYF withdrew the disallowance).  Maryland
also took the position that ACYF should not have extrapolated the
results of the case review, and that the disallowance should be reversed
except with respect to individually identified payments in the remaining
sample cases.

For the reasons discussed below, we conclude that ACYF properly
extrapolated the results of the case review.   Moreover, we conclude
that, in 18 of the 19 individual cases disputed by Maryland, the
payments were not made to title IV-E eligibles.  Specifically, we
conclude that ACYF correctly found two cases ineligible on the ground
that the state title IV-E agency was not responsible for the child's
placement and care as required by section 472(a)(2) of the Act. 1/  We
further conclude that ACYF correctly found 16 cases ineligible on the
ground that the child did not have a social security number as required
by sections 472(a)(4) and 402(a)(25) of the Act.  However, we agree with
Maryland that FFP should not have been disallowed based on the remaining
disputed case, which was reclassified by the State prior to the review
as a State-funded rather than a title IV-E case.  Thus, ACYF should
reduce the disallowance by the amount attributable to this case. 2/

Below, we first describe the statutory framework of the foster care
program.  We proceed to discuss the extrapolation issue and then the
grounds on which the individual cases were found ineligible.


Statutory Framework

The first federal foster care grant program was enacted in 1961 to
supplement the already existing Aid to Families with Dependent Children
(AFDC) program.  Congress added to title IV-A of the Act a provision
making FFP available for payments on behalf of children for whose
placement and care the State agency was responsible and who would have
been eligible for AFDC had they remained in their own homes, but who had
been removed from home as a result of a judicial determination and
placed in foster care.  This provision was modified by Congress in 1976
to broaden eligibility to include children whose placement had been
judicially confirmed within six months of removal from the original
home.

The Adoption Assistance and Child Welfare Act of 1980, Pub. L. No.
96-272, transferred the title IV-A foster care program to a new title
IV-E of the Act.  The criteria for eligibility for foster care payments
remained essentially the same.  States were permitted to shift their
foster care programs from IV-A to IV-E beginning October 1, 1980, and
were required to have made the transition by October 1, 1982.

One of the requirements for title IV-E eligibility at issue here is the
requirement in section 472(a)(2) that the --

 . . .  child's placement and care are the responsibility of (A)
 the State agency administering the State plan approved under
 section 471, or (B) any other public agency with whom the State
 agency administering or supervising the administration of the
 State plan approved under section 471 has made an agreement
 which is still in effect . . .

Also at issue here is whether the requirement for title IV-A eligibility
in section 402(a)(25) applied to title IV-E.  During the time period in
question here, section 402(a)(25) required that a state's title IV-A
plan provide --

 that, as a condition of eligibility under the plan, each
 applicant for or recipient of aid shall furnish to the State
 agency his social security account number . . . .

A reference to section 402 generally appears in section 472(a)(4) of
title IV-E, which requires that, in order to be eligible for title IV-E
foster care maintenance payments, the child must have --

    (A) received aid under the State plan approved under 402 . .
 . , or (B)(i) would have received such aid . . . .


Extrapolation from Sample

To review Maryland's title IV-E foster care program, ACYF used a
stratified random sampling methodology to select a total of 249 cases in
which payments were made in fiscal year 1984 in four jurisdictions in
the State.  ACYF found that 98 of the cases involved payments not
eligible for funding as title IV-E foster care maintenance payments.
These cases represented claims for FFP totalling $10,875.50.  ACYF then
projected, or extrapolated, the results of the sample to the universe
from which the sample was selected and determined that at least $522,760
FFP claimed for fiscal year 1984 represented unallowable payments.  See
letter from Horn to Colvin dated 5/2/90, p. 1, and enclosure, pp. 2-3.

There is no dispute regarding the validity of the sampling methodology
used by ACYF.  However, Maryland took the position that, as a matter of
law, ACYF was not permitted to disallow claims for FFP in title IV-E
maintenance payments based on extrapolation from a sample.  Citing
Louisiana Dept. of Health and Human Resources, DAB No. 580 (1984),
Maryland argued that "[t]he Board has consistently rejected the Agency's
attempts to impose disallowances based on extrapolation in the AFDC-FC
[title IV-A foster care] program and the same holding should apply to
the IV-E program" given its similarity to the IV-A program.  Maryland
brief dated 10/22/90, p. 7.  Maryland also argued that, while ACYF
issued a policy announcement (PA 84-2, dated March 7, 1984) five months
after the beginning of the fiscal year in question here which
specifically permitted disallowances in the title IV-E program based on
extrapolation from a sample, the standards for retroactive application
of this policy were not met.

ACYF responded that the Board "has always countenanced the Department's
general policy of using sampling to arrive at disallowances."  ACYF
brief dated 11/30/90, p. 2.  ACYF argued that the Board had found
extrapolation an impermissible basis for a title IV-A foster care
disallowance solely on the basis that the federal agency had a contrary
policy during the relevant period.  ACYF argued further that the use of
extrapolation here was consistent with a later policy announcement for
title IV-A issued on May 4, 1983 (PA 83-02), which stated that ACYF
would use extrapolation as a basis for disallowances.  ACYF also argued
that, even had the earlier, contrary policy remained in effect, ACYF was
not bound by the rules governing the prior program in administering the
new title IV-E foster care program.

We conclude that ACYF was justified in basing the disallowance here on
extrapolation from a sample.  It is well-established in Board and court
precedent that sound statistical sampling methodology can generally be
used to determine the amount of costs properly charged to HHS programs.
See, e.g., New York State Dept. of Social Services, DAB No. 1079 (1989),
p. 5.  As ACYF correctly pointed out, the Board's holding that
extrapolation was impermissible as a basis for taking disallowances in
the title IV-A foster care program was predicated on its finding that
the federal agency had adopted a contrary policy during the time period
in question.  It is clear from the Louisiana decision on which Maryland
relied that, under other circumstances, the Board's position is that --

 [there is] . . . nothing wrong with the Department's general
 policy of using extrapolations from statistical samples to
 produce disallowances.

Louisiana, supra, p. 2.  The Board also stated elsewhere in that
decision:

 We again affirm our position that extrapolation from a
 statistical sample may be reliable evidence of the amount of
 unallowable costs in a universe of claims, even though a grantee
 had no prior notice that it would be used.  University of
 California--General Purpose Equipment Decision No. 118,
 September 29, 1980.

Id., p. 6.  Thus, the Board's reversal in Louisiana of the disallowance
of extrapolated amounts was clearly based on an exception to this
principle.  See also Michigan Dept. of Social Services, DAB No. 589
(1984) (Board held that extrapolation was impermissible based on the
same rationale on which Louisiana was based).

No such exception exists on the facts of this case.  As ACYF noted, PA
83-02 (issued after the period in question in Louisiana) specifically
stated that it was ACYF's policy to use extrapolation in taking
disallowances under title IV-A.  Thus, assuming that the title IV-E
foster care program was governed by the rules applicable to title IV-A,
the use of extrapolation here was proper.  If, on the other hand, the
title IV-E program operated independently of any rules previously
applicable under title IV-A, extrapolation was also proper since there
was no contrary policy established specifically for the title IV-E
program.  It is irrelevant that ACYF did not issue a policy specifically
providing for the use of extrapolation in title IV-E until after the
beginning of the period in question here: as the Board pointed out in
Louisiana, no prior notice is required to use an audit technique which
produces reliable evidence of the amount of unallowable costs.   See
also Tennessee Dept. of Health and Environment, DAB No. 898 (1987), pp.
6-7.


State Agency's Responsibility for Child's Placement and Care

ACYF found two cases, Sample No. 648 and Sample No. 662, ineligible for
foster care maintenance payments on the ground that the State title IV-E
agency was not responsible for the child's placement and care, as
required by section 472(a)(2) of the Act.  There is no dispute that in
each case, the child's commitment to the State agency had been
terminated or rescinded by the court and custody and guardianship
granted to private individuals.  Maryland asserted, however, that the
State agency nevertheless retained responsibility for the child's
placement and care within the meaning of the statute.  In support of its
position, Maryland cited State regulations providing that "continuing
foster care" is "guardianship of the person granted to the foster parent
and agency involvement limited to financial support."  COMAR
07.02.11.01D(6).   Maryland also asserted that both ACYF and the Board
had interpreted language in section 427 of title IV-B of the Act which
was similar to that in question here to apply to situations where the
foster parents had guardianship of the child. 3/  In addition, Maryland
argued that the State agency's responsibility to provide services in
support of the child's placement satisfied the statute since there was
no specific requirement that the child be committed to the State agency.
Finally, Maryland argued that, if ACYF's interpretation were adopted and
reimbursement was not available for payments in such cases, a state
would have less incentive to move a child into this type of placement
even though it is considered an acceptable permanent placement under the
statute.

ACYF responded that, by virtue of the court order in each case, the
court had responsibility for the child's placement and the foster
parents responsibility for the child's care, so that the statutory test
was not met.  ACYF also contended that the requirements of section 427
did not apply to the children in question here, so that its
interpretation of that provision was consistent with its interpretation
here.  In addition, ACYF argued that, even if the placements in question
constituted foster care within the meaning of State law, this did not
mean that the federal statutory requirements for title IV-E payments
were met. 4/


We find that, in the two cases at issue, the State agency did not have
responsibility for the child's placement and care within the meaning of
section 472(a)(2).  In a prior decision, the Board concluded that the
similarly worded predecessor of this section required that the State
agency have "the ability to control where a child is placed, and to
alter the plan of care without further petitioning of the court to do
so."  Washington Dept. of Social and Health Services, DAB No. 280
(1982), p. 8.  (The Board held in Washington that this requirement was
not met where a court order directed that a private non-profit
organization be responsible for placement and care of the child.)
Maryland did not dispute that, in the cases in question here, only a
court could change the child's placement.  As in Washington, the
argument that the State agency could have sought a court order to remove
the child from the placement in question is simply not persuasive, since
the State could take the same action for a child living with his
parents, in which case title IV-E payments would of course not be
available.

Moreover, even if the State agency was responsible for providing
services to support the child's placement, this did not constitute
responsibility for the child's care.  Indeed, the regulation cited by
Maryland indicates that the State agency's official involvement in
guardianship cases was "limited to financial support," which is clearly
not tantamount to responsibility for the child's placement and care.
Maryland's interpretation would render this restriction so broad as to
be meaningless:  surely if Congress had intended to make title IV-E
funds available for any case in which the State agency took an interest,
it would not have required specifically that the State agency have
responsibility for the child's placement and care.

Furthermore, we need not reach the question whether, as the State
argued, the unavailability of title IV-E funds might discourage states
from making the type of placement in question here.  Given the fact that
federal funds are limited, it would not be unreasonable for Congress to
have made them available only where the State agency had a greater role
than it had here.

We find no support, moreover, for Maryland's contention that similar
language in section 427 of the Act has been interpreted differently.
Maryland claimed that Maryland Dept. of Human Resources, DAB No. 1053
(1989), indicated that children in permanent placements, including
children placed with legal guardians, were generally subject to section
427 requirements, which apply to children in foster care "under the
responsibility of the State."  However, as pertinent here, that case
decided only the narrow question whether certain children, none of whom
was placed with a guardian, were in permanent placements and thus exempt
from the periodic review requirement (as reasonably interpreted by
Maryland in the absence of the implementing regulations issued in May
1983).  Thus, the question raised here did not arise in that case.

There is also no evidence that ACYF's interpretation of section 427 was
inconsistent with ACYF's position here.  While Maryland noted that ACYF
instructed it to include in the foster care universe to be reviewed
under section 427 "[f]oster children living with guardian foster parents
. . . ," (Maryland appeal file, Tab T, p. 147, (letter from David J.
Lett, Region III Coordinator for Child Welfare Programs, dated
2/27/84)), this letter also stated that "[c]hildren who have been
returned to the custody of their parent(s), relative(s), or other
guardian(s) (Aftercare) should not be included in the universe from
which the sample is drawn since they are no longer in foster care."  Id.
This letter does not advance the State's case since it is not clear in
which category of children the children in question here would fall.

Moreover, it appears that Maryland itself did not interpret section 427
to apply to children placed with a guardian.  Documentation submitted by
the State for Sample No. 648 indicates that annual reconsiderations of
the child's care would be held.  Maryland Ex. T, p. 144.  That Maryland
did not plan to provide this child with the periodic reviews which
section 427 requires be held at least every six months undermines its
argument that the State agency was responsible for the placement and
care of such children. 5/


Children Without Social Security Numbers

ACYF found 16 cases ineligible for foster care maintenance payments on
the ground that there was no evidence that the child had a social
security number or had applied for one before the period covered by the
payments.  ACYF took the position that the requirement in section
402(a)(25) of the Act for a social security number was also a
requirement for title IV-E eligibility by virtue of section 472(a)(4),
which provides that a state shall make foster care maintenance payments
only with respect to a child who was either receiving or eligible to
receive title IV-A funds.  The states were advised of this
interpretation in guidelines issued by ACYF on May 19, 1983 (ACYF PIQ
83-2) which stated that "[i]n order to be eligible under title IV-E, the
requirements of . . . section 402(a)(25) must be met."  Maryland appeal
file, Ex. W.

Maryland took the position, however, that subsequent legislation showed
that Congress never intended to require social security numbers as a
condition of title IV-E eligibility.  Maryland pointed to legislation
effective April 1, 1985 which amended the Act to require social security
numbers as a condition of eligibility only for certain named programs
including title IV-A but not title IV-E.  Section 1137(a)(1) and (b).
Based on this legislation, ACYF changed its policy effective April 1,
1985 to provide that the Act does not require a social security number
in order for an otherwise eligible child to be eligible for the title
IV-E program.  ACYF-PA-86-01, dated 2/25/86, at Maryland Ex. X.
Maryland argued that the subsequent legislation showed that ACYF's
earlier interpretation did not reflect congressional intent and that
therefore the legislation should have been applied retroactively.
Maryland also argued that application of the requirement for a social
security number would serve no useful purpose because there was no
indication that any of the children in question here had earnings which
would have been identified by using their social security numbers.

We conclude that ACYF reasonably interpreted the Act prior to its
amendment as requiring social security numbers as a condition of title
IV-E eligibility, and that there was no basis for retroactive
application of the subsequent legislation.  There is no dispute that,
during the relevant period, the Act required social security numbers as
a condition of eligibility for title IV-A.  Similarly, there is no
dispute that the Act made title IV-A eligibility a condition of
eligibility for title IV-E.  Thus, as a matter of simple logic, it can
be concluded that a social security number was required in order for an
individual to be eligible for title IV-E.  In our view, this requirement
is just as clear as if the Act had stated it directly.  Accordingly,
retroactive application of the subsequent legislation was not justified
on the ground that it clarified an ambiguity or filled a gap in the
statute.  Moreover, we disagree with Maryland's position that
retroactive application of the subsequent legislation was justified on
the ground that no purpose was served by application of the requirement
for social security numbers.  Even if there was no need for this
requirement in the case of any of the children in question here, the
requirement was reasonable since Maryland did not deny that the
requirement might serve some purpose in the case of other children.  See
New York State Dept. of Social Services, DAB No. 1012 (1989), p. 8.


Payment for Case Reclassified by State as Ineligible

ACYF found Sample No. 746 ineligible for title IV-E foster care
maintenance payments on several grounds, including lack of a social
security number.  ACYF Ex. 3, p. 13.  Maryland contended, however, that
even if one or more of ACYF's findings were correct, no disallowance was
warranted with respect to this child because the State itself had
reclassified the child as ineligible prior to the federal review and had
returned title IV-E funds claimed for the child to the federal
government.  Thus, in Maryland's view, the child should not have been
included in the sample.  ACYF did not dispute that a child for whom no
title IV-E funds were claimed should not be included in the sample.
However, ACYF asserted that this case should not be removed from the
sample because Maryland had reclassified the child as ineligible for
title IV-E only after ACYF identified the case as one which would be
included in the sample.  The rationale for ACYF's position was that
"[i]f a state could have erroneous cases removed from the sample simply
by agreeing with the agency that it had erred and returning the funds,
it could easily have all the cases in which it erred removed from the
sample."  ACYF brief dated 11/30/91, p. 14.

While we do not disagree with the rationale stated by ACYF, we conclude
that, contrary to ACYF's assertion, Maryland found the child ineligible
for title IV-E before the sample was taken.  The record includes a
letter from the State to the federal agency confirming that "[t]he
sample selection will take place in Prince George's and Mongtomery
Counties on 3-6-85. . . ."  Maryland Ex. E, letter from Farrow to Myers
dated 2/27/85.  The case in question was selected from Prince George's
County.  ACYF Ex. 3, p. 13 of enclosure.  ACYF did not deny that the
sample selection in fact took place as scheduled.  The record clearly
establishes, moreover, that Maryland reclassified the child as
ineligible for title IV-E prior to March 6, 1985, with a determination
by the local department of social services on February 4, 1985 that the
payments made for the child in question were charged incorrectly to
title IV-E funds (Maryland Ex. V, p. 1) and a journal voucher entry
dated March 5, 1985 reflecting a debit to state funds in the amount of
the payments made for the child.  Id., p. 2.

Since ACYF's position that the child should have been included in the
sample was based solely on its mistaken belief that Maryland
reclassified the child as ineligible for title IV-E after the review was
conducted, we conclude that the child should be removed from the sample,
as argued by the State.

.Conclusion

For the reasons discussed above, except with respect to Sample No. 746,
we uphold the disallowance as reduced by ACYF pursuant to its decision
to withdraw the disallowance pertaining to four cases.

 


       ___________________________ Judith A.
       Ballard

 


       ___________________________ Norval D. (John)
       Settle

 


       ___________________________ Donald F.
       Garrett Presiding Board Member.1.
       Although there were additional grounds for
       ACYF's finding of ineligibility in each of
       these cases, we need not consider them.  In
       any event, it appears that ACYF no longer
       relies on these additional grounds since it
       did not mention them in its brief.

2.     It appears that ACYF's policy was simply to drop a case which was
found not to belong in the sample rather than to substitute another case
since that is how ACYF treated two of the four cases with respect to
which it withdrew the disallowance.

3.     Section 427 provides that a state may receive additional funds
for child welfare services, beyond the amount otherwise available under
title IV-B of the Act, if the state meets certain requirements for
protecting children in foster care "under the responsibility of the
State."

4.     ACYF noted in any event that the Maryland Code provided that the
foster care program covered children -- who are abused, abandoned,
 neglected, or dependent, if a juvenile court:

  (i) has determined that continued residence in the
  child's home is contrary to the child's welfare; and
  (ii) has committed the child to the custody or
  guardianship of a local department.

Md. Family Law Code Ann. section 5-525(a)(2) (1984) (emphasis added).
Under this provision, the children in question here would not be
considered in the State's foster care program.

5.  In any event, it is arguable that the section 427 protections do not
apply to children living with guardians since one of the objectives of
the periodic review is "to project a likely date by which the child may
be returned home or placed for adoption or legal guardianship. . . ."
Section 475(5)(b).  If legal guardianship is a placement goal under the
statute, there might be no need to review the child's status once the
child was in this