Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Montana Department
DATE: July 15, 1991 of
Family Services
Docket No. 91-13
Decision No. 1266
DECISION
The Montana Department of Family Services (Montana or State) appealed
a
determination by the Administration for Children and Families (ACF
or
Agency) disallowing $191,776 in federal financial participation
(FFP)
claimed by Montana under Title IV-E (foster care) of the
Social
Security Act (Act). 1/ The disallowed amount represented costs
claimed
by Montana for Title IV-E administrative activities during the
quarters
ending March 31 and June 30, 1990. Montana had an approved
cost
allocation plan (CAP) for allocating the costs of its social
workers'
activities among various federal grant programs. 2/ Montana's
CAP
employed a time study code labeled "Child Protective Service
-
Investigation" to accumulate the costs of certain social
worker
activities. Montana said this included Title IV-E
preplacement
activities, and devised a method (which was not approved) for
allocating
part of these costs to Title IV-E. ACF disallowed the
State's claims on
the grounds that investigatory activities are not
reimbursable under
Title IV-E.
The central issue presented by this appeal is whether Montana may
claim,
as allowable preplacement services, under Title IV-E the costs
of
activities of its social workers accumulated under the code for
"Child
Protective Services - Investigation." For the reasons discussed
below,
we find that Montana's allocation of these costs to Title IV-E is
not
consistent with its approved CAP, as required, and, therefore, there
is
no assurance the costs are for allowable preplacement
activities.
Accordingly, we sustain the disallowance.
Statutory Background of the Title IV-E Program
The Child Welfare Services program has been a part of the Act since
the
Act's inception in 1935. In 1968 Congress transferred this program
to
Title IV-B of the Act. Historically, Title IV-B has
provided federal
grants to states to establish, extend, and strengthen child
welfare
services. The services are available to all qualified
children,
including the handicapped, homeless, neglected, and dependent.
The Adoption Assistance and Child Welfare Act of 1980, Pub. L. 96-272,
was
enacted on June 17, 1980. In addition to amending Title IV-B,
this
legislation established a new program, the IV-E program,
Federal
Payments for Foster Care and Adoption Assistance. The foster
care
component of the Aid to Families with Dependent Children (AFDC)
program,
which had been an integral part of the AFDC program under Title IV-A
of
the Act, was transferred to the new Title IV-E, effective October
1,
1982.
Title IV-E of the Act (42 U.S.C. 670-676) had as its impetus the
belief
that the public child welfare system responsible for serving
dependent
and neglected children had become a holding system for children
living
away from their parents. Congress intended Title IV-E "to lessen
the
emphasis on foster care placement and to encourage greater efforts
to
find permanent homes for children either by making it possible for
them
to return to their own families or by placing them in adoptive
homes."
S. REP. No. 336, 96th Cong., 1st Sess. 1 (1979), reprinted in U.S.
CODE
CONG. & ADMIN. NEWS 1448, 1450.
Title IV-E enables each state to provide, in appropriate cases,
foster
care and adoption assistance for children who otherwise would
be
eligible for assistance under a state's approved Title IV-A plan
(42
U.S.C. 601 et seq.) or, in the case of adoption assistance, would
be
eligible for benefits under the Supplemental Security Income program
of
Title XVI of the Act (42 U.S.C. 1381 et seq.). In order to carry
out
the provisions of Title IV-E, appropriations made available for
that
program are to be used for making payments to those states which
have
submitted, and had approved, state plans under Title IV-E. Section
471
of the Act. Congress identified three separate categories
of
expenditures for which states are entitled to FFP under payment
formulas
set forth in section 474 of the Act: foster care
maintenance payments
for children in foster care homes or child care
institutions (section
472); adoption assistance payments (section 473); and
payments "found
necessary by the Secretary for the proper and efficient
administration
of the State plan . . ." The last category,
expenditures for plan
administration, is subdivided to cover the cost of
training state
personnel to administer the IV-E program and all other
administrative
expenditures. Section 474 (a)(3).
This appeal concerns the latter subcategory of IV-E
administrative
expenditures. The implementing regulation for the
funding of these
expenditures, 45 C.F.R. 1356.60, provides:
(c) Federal matching funds for other State and
local
administrative expenditures for foster care and
adoption
assistance under title IV-E. Federal financial
participation is
available at the rate of fifty percent (50%) for
administrative
expenditures necessary for the proper and
efficient
administration of the title IV-E State plan. The
State's cost
allocation plan shall identify which costs are allocated
and
claimed under this program. . . . (2) The following are
examples
of allowable administrative costs necessary for
the
administration of the foster care program: (i) Referral
to
services; (ii) Preparation for and participation
in
judicial determinations; (iii) Placement of the
child;
(iv) Development of the case plan; (v) Case
reviews;
(vi) Case management and supervision; (vii)
Recruitment
and licensing of foster homes and institutions;
(viii)
Rate setting; and (ix) A proportionate share of
related
agency overhead.
Factual Background
Montana stated that it investigates all reports of suspected child
abuse
and neglect. Montana maintained that the claims at issue here
represent
only those reports that are substantiated, concern Title IV-E
eligible
children, and result in foster care placement. In this
process the
State's social workers conduct investigations, develop a case
plan, make
service referrals, and prepare for and participate in
judicial
determinations.
In order to allocate the activities of its social workers, Montana uses
a
Random Moment Time Study (RMTS) as provided for in its CAP. 3/
The
amounts at issue here were claimed under Question 2, code 50 of
the
RMTS, "Child Protective Service - Investigation." Nothing in the
RMTS
procedures distinguishes one type of "investigative" activity
from
another or distinguishes the nature of the children receiving
the
services. Montana stated nonetheless that it had ensured that
only
allowable Title IV-E costs were claimed because it had "stepped
down"
costs allocated using Question 2, code 50 of its RMTS. 4/
This
procedure, Montana claimed, intentionally reduced a significant
portion
of the total activities with a code 50 designation, in order to
ensure
that all unsubstantiated or unfounded referrals were excluded and
that
only costs of services to Title IV-E eligible children were claimed.
Discussion
First, we note that section 1356.60 requires that costs claimed
under
Title IV-E must be identified in a CAP as IV-E costs. Montana did
not
deny that its CAP in effect during the time period at issue did
not
specifically allocate these costs to Title IV-E. The State
attempted to
justify its allocation by explaining that its CAP was submitted
before
the Board issued its decision in Missouri Dept. of Social Services,
DAB
No. 844 (1987).
In that case, the Board examined what activities could be claimed
as
administrative costs under the IV-E program. The Agency's policy
had
been that allowable administrative costs could "include
the
determination of eligibility, preparation for placement, placement
and
referral costs before the child is placed in foster care, but only
for
children actually placed in foster care and determined eligible
under
title IV-E." PA-ACYF-85-01 (Agency Ex. 5) (emphasis in
original). The
Board found this Agency policy too restrictive in
limiting allowable
administrative costs to only those children actually
placed in foster
care. The Board found that under the statute and the
regulations states
were entitled to FFP for the administrative costs listed
at 45 C.F.R.
1356.60(c)(2) regardless of whether the children are eventually
placed
in foster care. The Board declared:
The Agency loses sight of the fact that, in order to ensure
that
every eligible individual becomes a recipient, the State
will
have to engage in activities for candidates who will
never
become recipients. These activities are just as much
necessary
activities for the program as those provided for children who
do
become program recipients.
Missouri, at 8.
In response to the Missouri decision the Agency issued a new
policy
announcement, ACYF-PA-87-05 (State Item II), which provides:
Federal financial participation for administrative costs
listed
at 45 CFR 1356.60(c) may be claimed regardless of whether
the
child is actually placed in foster care and becomes a
recipient
of title IV-E foster care benefits. However,
reimbursement is
limited to those individuals the State reasonably
views as
candidates for title IV-E foster care maintenance
payments.
* * *
The administrative costs of referrals to service providers
(45
CFR 1356.60(c)(2)(i)) are only for those referrals
specifically
designed to further the statutory goal of section
471(a)(15) of
the Act and are limited to the activities of agency staff
in the
referral process only. Reimbursement is not available for
the
costs of services, investigations, or
physical/mental
examinations or evaluations.
Allowable costs of preparation for and participation in
judicial
determinations (45 CFR 1356.60(c)(2)(ii)) are limited to
those
costs related to the preparation of reports to the court
and
participation in court proceedings by State or local title
IV-E
agency personnel. (Emphasis in original)
It is undisputed that the questioned claims here were derived from a
RMTS
code designated "Investigation." The Agency contended
that
investigatory activities are not included in the list of examples
of
Title IV-E reimbursable administrative activities provided in 45
C.F.R.
1356.60(c)(2). 5/ The Agency further argued that ACYF-PA-87-05,
issued
in response to the Missouri decision, specifically states that
IV-E
reimbursement is not available for investigations. The
Agency
maintained that a "first step" investigation process that may
eventually
lead to the opening of a protective services plan, which
may
subsequently lead to the development of a foster care case plan,
is
accordingly not reimbursable under ACYF-PA-87-05. The Agency
insisted
that these investigative costs should have been claimed by Montana
under
Title IV-B (child welfare services) or other federal grants
available
under the Child Abuse and Treatment Act, 42 U.S.C. 5101, et
seq. By
claiming these costs as Title IV-E administrative activities,
the State
was, according to the Agency, attempting to circumvent the
funding
ceiling that applies to the Title IV-B program by shifting the costs
to
the Title IV-E program which has no funding ceiling.
Montana disputed the Agency's contention that the questioned costs
were
entirely for investigative activities. Montana contended that
the
stepped down activities reflected in the remaining 21.83% of question
2,
Code 50, are IV-E pre-placement activities found allowable in
Missouri.
Specifically, Montana contended that the activities consisted
of
allowable activities under 45 C.F.R. 1356.60(c)(2): referrals
to
services, preparation for and participation in judicial
determinations,
and development of case plans. Montana conceded that
the term
"Investigation" used in its CAP as code 50 is a poor label for the
range
of activities recorded under that code and did not reflect the
actual
preplacement activities performed by its social workers.
Montana's reliance on the Board's Missouri decision is misplaced
for
several reasons. In Missouri the state was not submitting claims
which
were inconsistent with its existing CAP, but was contesting
the
disapproval of a proposed amendment to its CAP. The state was
seeking
to redefine the codes in its time study mechanism to capture the
time
its social workers spent on Title IV-E preplacement activities. It
was
in that context that the Board ruled that such activities
are
reimbursable as administrative costs under the Title IV-E
program,
regardless of whether the child for whom the activities are
undertaken
is found to be Title IV-E eligible, and that accordingly
Missouri's
amendment to its CAP reflecting these activities should be
approved,
provided Missouri could properly define those activities in its
CAP.
The significance of the Missouri decision as it applies to the facts
of
this appeal is not that the activities for which Montana is
seeking
Title IV-E reimbursement could be considered identical to the
activities
performed by Missouri, but that Missouri was seeking to modify its
CAP
so it could claim the costs of these activities under Title IV-E in
the
future. The Board did not give blanket authority for claiming
Title
IV-E reimbursement for these preplacement activities. The
Board's
decision stands for the proposition that the costs of these
activities
can be claimed only in the context of an approved CAP.
Moreover, the fact that Montana's CAP and associated RMTS were
written
prior to the Missouri decision does not avail the State here.
Montana's
stepdown method does not purport to simply identify
allowable
preplacement activities for candidates for foster care.
Rather, the
State contended that this method identified activities, such
as
preparing case plans for Title IV-E eligibles, which the Agency's
policy
always allowed. Also, the time period encompassed by this
disallowance
began three years after the Board's issuance of its Missouri
decision,
yet the State continued to rely on this same RMTS, with its same
coding
provisions, as approved in its existing CAP. There is no
indication in
the record before us that during this period Montana ever
sought to
amend its RMTS or its CAP based on the Missouri decision. 6/
Contrary to what the State argued, the existing CAP did
specifically
identify some preplacement activities. Montana's existing
RMTS included
under Question 2 a code 53 specifically addressed to the Title
IV-E
program, entitled "Child Foster Care." Code 53 sublisted the
allowable
Title IV-E administrative costs contained in 45 C.F.R.
1356.60(c)(2)
(including development of the case plan, referral to services,
and
preparation for court), as well as the additional topics of
"Eligibility
Determination" and "Redetermination of Eligibility, Fair
Hearings, &
Appeals." Montana clearly had the ability to amend this
code to
encompass preplacement activities for both eligible Title
IV-E
individuals and candidates, as permitted by Missouri and
ACYF-PA-87-05.
Instead, Montana merely alleged such costs were accumulated
under the
nebulous code 50 (although some of the activities would appear to
fit
more readily under code 53, and it is likely that the social
workers
identified them to this code). Moreover, the use of the
term
"investigation" in the State's current CAP, while not
determinative,
indicates that it is likely that unallowable investigative
activities
were captured under this code. We question whether the
stepdown method
employed by the State would eliminate all of the
unallowable
investigative activities.
Montana elected the provisions of its CAP, and it must accept the
results
of those provisions, until it amends the CAP. Federal
regulations
require that claims must be submitted in accordance with an
approved
CAP. See 45 C.F.R. 1356.60; 95.517(a) and Part 201. This is
more
than merely a technical requirement. The plan ensures
consistent
treatment of costs, avoids duplicate claiming, and ensures that
the
methods used are reasonable for the time period they cover. Here
the
State must follow the approved CAP which failed to specifically
allocate
the costs in question to the Title IV-E program.
Conclusion
For the reasons stated above, we affirm the disallowance in the
full
amount of $191,776.
__________________________
Cecilia
Sparks
Ford
__________________________
Norval
D. (John)
Settle
__________________________
Judith A. Ballard Presiding Board Member
1. The disallowance was issued in January 1991 by the
Administration
for Children, Youth and Families of the Office of Human
Development
Services (OHDS). OHDS is now part of the Administration for
Children
and Families.
2. A state participating in the various public assistance
programs
under the Act, including Title IV-E, is required to make
determinations
as to the amount of commonly incurred expenditures, such as
staff time,
that are attributable to each program the state
administers. A state is
required to submit a plan for cost allocation
to the Director, Division
of Cost Allocation, in the appropriate regional
office. 45 C.F.R.
95.507(a). This cost allocation plan is defined
as "a narrative
description of the procedures that the State agency will use
in
identifying, measuring, and allocating all State agency costs
incurred
in support of all programs administered by the State agency."
45 C.F.R.
95.505.
3. A RMTS is a method of statistical sampling. As explained
in
Montana's CAP, it provides a basis for dispersion of costs into
program
categories. The person conducting the time study telephones a
worker
and asks the worker to identify by code the activity which the worker
is
currently doing. State Ex. V, Appendix A.
4. Montana explained how the claims were "stepped down" as follows:
During the reporting period 77.2% of reported [child abuse
and
neglect cases] were substantiated. The IV-E client ratio,
the
ratio of IV-E clients to total clients was 28.28%. Code 50
had
35.4% of the total social worker time allocated to
it.
Therefore, .354 x .772 x .2828 = .07728 of social worker
time
was reported as eligible for federal participation at the
rate
of 50%.
Montana Brief, at 5, fn. 2.
5. The Board pointed out in Missouri that the list of examples at
45
C.F.R. 1356.60(c)(2) was not all-inclusive, but for purposes of
claiming
Title IV-E funds, "states are still limited to activities
closely
related to the activities listed and are not permitted to
develop
entirely new categories of activities." At 17.
6. Thus, the timing of the issuance of Missouri did not create
a
"significant inequity" that might justify retroactive amendment of
the
State's CAP. 45 C.F.R. 95.515(a). In any event, Montana
has not
submitted such an amendment to its