Illinois Department of Children and Family Services, DAB No. 1516 (1995)

Department of Health and Human Services

DEPARTMENTAL APPEALS BOARD

Appellate Division

SUBJECT: Illinois Department of Children and Family Services

DATE: May 4, 1995
Docket No. A-93-206
Decision No. 1516

DECISION

The Illinois Department of Children and Family Services (Illinois)
appealed a determination by the Administration for Children and Families
(ACF) that Illinois was ineligible to receive $5,634,432 in federal
incentive funds for fiscal year (FY) 1991 under section 427 of title
IV-B of the Social Security Act (Act). Section 427 provides that a
state may receive additional funds for child welfare services, beyond
the amount available under section 420 of the Act, if the state meets
the specified requirements for protecting children in foster care.

ACF has established a two-stage process for evaluating states'
eligibility for section 427 funds. First, ACF conducts an
administrative procedures review to determine whether a state has
established policies or procedures for implementing the section 427
requirements. Second, ACF reviews a sample of case records to determine
whether these policies or procedures are operational. If a state fails
to establish a requirement as a matter of policy, or does not comply
with the applicable requirements in a certain percentage of the cases as
determined through a case sample, ACF requires the return of the section
427 funds.

Here ACF found, based on the results of a case record survey for FY 1991
conducted in May 1992, that Illinois was well below the 90% compliance
level required for that year. ACF therefore determined to disallow
Illinois' section 427 incentive funding for FY 1991.

Illinois attacked the disallowance on several different grounds.
Illinois argued: (1) ACF violated its own policies in reviewing
Illinois' performance for FY 1991; (2) ACF was precluded by various
moratoria and other congressional actions from either performing the
review or taking this disallowance and pursuing this appeal; (3) the
failed cases generally should not have been found to have failed since
Illinois was unable to determine what actions and documentation were
necessary to meet the requirements; (4) ACF improperly included some
cases in the sample and improperly failed or disqualified successful
cases; and (5) individual cases cited by ACF as having failed the review
should have passed.

For the reasons discussed below, we affirm the disallowance. We
conclude: ACF's review of Illinois' performance for FY 1991 was proper;
congressional moratoria and other actions did not preclude ACF from
reviewing Illinois' FY 1991 program or from pursuing these appeal
proceedings in support of the finding of ineligibility; Illinois had
sufficient notice of the nature of the section 427 requirements,
including the requirement that it be able to document its compliance
with section 427 requirements; the sample here was properly constructed;
and arguments concerning Illinois' compliance in individual cases lack
merit.

It is important to note that what is at stake here is incentive funding
over and above what a state would ordinarily obtain and that there are
important statutory requirements that a state must establish it complied
with in order to be eligible for these funds. Here, the evidence is
overwhelming that Illinois did not meet these statutory requirements for
its foster care children. Although Illinois raised a number of
technical, legal arguments about why ACF could not conduct a 427 review
and find it out of compliance, those arguments are simply not
persuasive. Illinois does not have an absolute right to obtain this
additional incentive funding with no federal oversight or accountability
concerning whether it complied with basic statutory requirements.

Below, we first give the background to this appeal and then discuss each
of the arguments advanced by Illinois. As part of that discussion, we
examine the failed cases from the first 50 cases in the case record
survey to determine if ACF's findings were correct. Based on the review
methodology applied by ACF, Illinois actually reached the failure point
for the case record survey after ACF completed its review of Case No. 12
of the sample, since Illinois had failed eight cases in the first 12
reviewed. Although it is therefore not necessary for the Board to
review more than the first eight failed cases, we have reviewed all
failed cases within the first 50 sample cases to provide an extra degree
of certainty concerning the results of this review and in response to
certain arguments raised by Illinois concerning the review methodology.
Overall, ACF found that Illinois had failed 52 cases out of 107 sample
cases read.

Statutory Provisions

The Adoption Assistance and Child Welfare Act of 1980, Public Law No.
96-272, amended the program of child welfare services under title IV-B
of the Act by adding a new section 427, and also established a new title
IV-E authorizing funding for foster care maintenance and adoption
assistance payments. These amendments were precipitated by studies
which showed that the public child welfare system had become a holding
system for children living away from parents, rather than a system
assisting parents in carrying out their roles and responsibilities and
providing for alternative permanent placement for children who cannot
return to their own homes. Thus, one of the goals of Public Law No.
96-272 was to ensure that children do not remain adrift in the foster
care system. See 48 Fed. Reg. 23,104 (May 23, 1983) (preamble to
regulations implementing section 427). Section 427 provides that states
may obtain additional funding for child welfare services if they have
implemented case plan and case review procedures that periodically
assess the appropriateness of a child's placement in foster care and
reevaluate the services provided to assist the child and the family.
Moreover, a state must comply with all of the requirements of section
427 in order to be eligible for title IV-E funds for children in
voluntary placements. Section 472(d).

As pertinent here, section 427(a)(2)(B) requires as a condition for
receipt of section 427 funds 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) of title IV-E provides that --

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

(C) . . . 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 . . . 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) . . . .

Thus in order to qualify for section 427 incentive funding, a state must
implement a case review system with three components: a case plan for
each child, a periodic review (at least every six months) of the child's
status, and timely dispositional hearings to determine the future status
of the child. 1/

Factual Background

A. Illinois' prior section 427 reviews.

The year involved in the current dispute is not the first year for which
Illinois has undergone a section 427 review. In 1982 ACF conducted its
first review of Illinois' compliance with the section 427 requirements.
This review covered both FYs 1981 and 1982, with ACF finding that
Illinois had complied with the requirements in the requisite percentage
of cases.

In 1986 ACF conducted what it considered to be a triennial review for
Illinois, which covered FY 1984. ACF found that Illinois had failed the
case record survey, thus making Illinois ineligible for section 427
funding for that year. Illinois appealed ACF's decision to this Board,
which sustained ACF's determination in Illinois Dept. of Children and
Family Services, DAB No. 1037 (1989). Illinois appealed the Board's
decision to the United States District Court, which, as we discuss
below, remanded the case to the Board for further proceedings.

In Illinois Department of Children and Family Services v. Sullivan,
C.A. No. 89-1730 (D.D.C., September 12, 1990), Illinois challenged the
Board's rejection of its argument that six children whom ACF found did
not receive the protections of the case review system were not in
"foster care" within the meaning of section 427(a)(1)(B) of the Act and
should not have been included in the universe for the case record
survey. Illinois had asserted that the six children were placed in the
homes of relatives ("approved only" homes) and were not in "foster
family homes" within the meaning of the Act. The Board had found that
the "approved only" homes met state licensing standards for foster
family homes and that the six children were therefore in foster care.
Before the district court Illinois also challenged the Board's rejection
of Illinois' contention that the 90 percent compliance standard used by
ACF in the case record survey was arbitrary, capricious, or an abuse of
discretion.

The district court found that the Board erred in finding that the
"approved only" homes met licensing standards. The district court
remanded the case to the Board to address Illinois' contention that the
term "foster care" in section 427 applies only to children in foster
family homes as defined in section 472(c) of the Act. The district
court did not rule on the merits of Illinois' objections to the 90
percent compliance standard on the ground that the Board's decision on
remand might render that issue moot.

In Illinois Dept. of Children and Family Services, DAB No. 1335 (1992),
the Board concluded that ACF erred in finding that Illinois was
ineligible for section 427 funds for FY 1984 based on a case record
survey which included children in "approved only" homes. The Board
directed ACF to conduct a case record survey which did not include any
children in "approved only" homes to determine Illinois' eligibility for
section 427 funds. In DAB No. 1335 the Board also reaffirmed its holding
that the 90 percent compliance standard was proper. As of the date of
this decision, there has been no revised determination from ACF
regarding Illinois' review performance for FY 1984 funds.

In 1992 ACF also conducted a review of Illinois' case records for FY
1985, but the results of that review have not yet been finalized. There
has been no review of Illinois' case records for section 427 compliance
for any year from FY 1986 through FY 1990.

B. The FY 1991 section 427 review at issue.

In order to determine a state's rate of compliance in individual cases,
ACF employs a special type of sampling procedure known as "sequential
sampling." In this type of sampling, although a sample of a fixed size
is drawn, all of the cases in the sample may not be reviewed. Instead,
the number of cases reviewed is determined during the course of the case
record survey based on the results in individual cases. A "decision
table" prescribes how many cases of the number sampled at each point
must have been out of compliance, or "failed," in order to conclude
without further review that a state is ineligible for section 427 funds,
as well as how many cases must have "passed" in order to conclude
without further review that a state is eligible for section 427 funds.
2/

ACF conducted the FY 1991 section 427 review in May 1992 with both
federal and state reviewers. ACF issued a report on its findings on
September 9, 1992. Illinois Ex. 23, "Section 427 Report on State
Eligibility" (Report). ACF found that eight of the first 12 cases were
not in compliance with the section 427 requirements, and based on the
decision table, concluded that Illinois did not meet the 90% compliance
standard. According to ACF, seven of the cases failed the requirement
for dispositional hearings, five failed the requirement for periodic
reviews, and some cases failed both the requirements. The case record
survey continued until 107 cases had been reviewed. Upon completion of
the review in May 1992, ACF determined that 60 of the cases failed to
meet at least one of the section 427 statutory requirements. Illinois
failed the dispositional hearing requirement in 52 of the 107 cases, and
the periodic review requirement in 44 of the 107 cases. During the
course of Board proceedings, Illinois submitted additional documentation
in several cases which was accepted by ACF (none involving the first 12
cases in the sample), with the result that ACF now considers 52 cases to
have failed. ACF Post Argument Br. at 5.

C. Congressional moratoria on the collection of section 427 funds.

After ACF conducted its section 427 review for Illinois for FY 1991,
Congress enacted a moratorium precluding any section 427 funding
sanctions during FY 1994. The moratorium was established by section
13716 of the Omnibus Budget Reconciliation Act (OBRA) of 1993, Public
Law No. 103-66. 3/ Section 13716 is captioned "Moratorium on Collection
of Disallowances," and provides in pertinent part that the Secretary
shall not, before October 1, 1994, "reduce any payment to, withhold any
payment from, or seek any repayment from any State under part B or E of
title IV of the Social Security Act by reason of a determination made in
connection with a review of State compliance with section 427 of such
Act for any Federal fiscal year before fiscal year 1995 . . . ."

In a December 3, 1993 ruling, the Board denied Illinois' request for a
stay of proceedings in this appeal based on the moratorium. Illinois
had argued that the moratorium precluded litigation of this appeal
before the Board because ACF's sole purpose in participating in such
litigation would be to seek repayment of the funds within the meaning of
section 13716. The Board noted that it was indisputable that the
moratorium prohibited ACF from recovering the funds at issue prior to
October 1, 1994 (the beginning of federal FY 1995). The Board held,
however, that the plain language of section 13716 precludes the
Secretary only from collecting disallowed funds. The Board declared
that --

the conduct of proceedings before the Board does not constitute the
collection of disallowed funds. Indeed, it is part of the review
process leading to a determination on whether funds should be
disallowed, a process which is necessary in order for the Secretary
to carry out her fundamental responsibility to monitor a state's
performance under the section 427 program.

At 3. The Board further noted that it had reviewed and issued decisions
in other cases that were subject to the various moratoria on the
collection of section 427 funds. See West Virginia Dept. of Health and
Human resources, DAB No. 1437 (1993), and Connecticut Dept. of Children
and Youth Services, DAB No. 952 (1988), aff'd 788 F. Supp. 573 (D.D.C.
1992), 9 F.3d 981 (D.C. Cir. 1993).

The moratorium imposed by OBRA '93 expired on October 1, 1994, and
Congress did not reinstate the moratorium.

Discussion

On appeal before the Board, Illinois disputed ACF's right to take a
disallowance under the particular circumstances presented by this
appeal. First, Illinois contended that the FY 1991 review was contrary
to stated ACF policy. Illinois also argued that ACF's action violated
the congressional moratoria. In the oral argument held in this appeal
Illinois made a parallel argument that it is currently the intent of
Congress that no actions be taken by ACF to penalize states for failing
to meet the section 427 requirements. Illinois further contended that
cases should not have been failed in the review merely because
documentation was lacking or the dispositional hearing was not held due
to reasons beyond Illinois' control. Illinois also argued that the
sample of cases was improperly constructed and that successful cases,
such as cases where children were adopted or returned to their parents,
should have been considered passed by the reviewers rather than
eliminated from the sample and replaced with other cases from the
oversample. Illinois additionally challenged ACF's findings in regard
to particular cases in the sample.

We will discuss each of these arguments in turn.

I. ACF's conduct of a section 427 review for FY 1991 was proper.

Illinois contended that ACF failed to follow its stated policy with
respect to the timing of section 427 triennial reviews and the conduct
of reviews while litigation is pending relating to a prior year's
review. Illinois argued that ACF's policy, as enunciated in the Section
427 Review Handbook issued in August 1988, is that it conducts triennial
reviews every third year. Illinois Ex. 1, at 2. Illinois reasoned that
if ACF had adhered to this policy, it would have reviewed Illinois for
FYs 1987 and 1990, since ACF had conducted a triennial review for FY
1984. However, ACF conducted no such reviews. Illinois also argued
that ACF had another policy of not conducting a section 427 review when
litigation was still pending in regard to the results of a prior year's
review. Illinois Ex. 13. Illinois asserted that during FY 1991,
Illinois and ACF were engaged in litigation over the FY 1984 review.
This litigation was not resolved, according to Illinois, until the Board
issued DAB No. 1335 on June 1, 1992, which was after the review for FY
1991 had been conducted. Illinois argued that it was unfair for ACF to
proceed with the FY 1991 review at a time when Illinois did not have a
resolution of the definition of "foster care" or of the appropriate
compliance standard.

While not disputing ACF's right to change its policy, Illinois argued
that ACF should not be permitted to discard established policies in
order to conduct a case record survey for Illinois in FY 1991 (outside
the alleged triennial review cycle and during the pendency of
litigation), without a reasoned explanation for doing so.

Contrary to Illinois' arguments, we find no evidence of any ACF policy
that would have prohibited the section 427 review at issue. The Section
427 Review Handbook, cited by Illinois for the proposition that a
triennial review is conducted only every third year, states:

If a State meets the Initial Review requirements, a Subsequent
Review is conducted for the following fiscal year. States that
meet the requirements of the Subsequent Review will be reviewed for
the third fiscal year following the fiscal year for which the
Subsequent Review was conducted. This is known as the Triennial
Review. If a State does not meet the established standards for any
review for the year under review, the review is conducted each
succeeding year (unless the State withdraws) until eligibility is
established.

Illinois Ex. 1, at 2 (emphasis added).

The Handbook thus contemplates that a triennial review occurs for the
third year only if a state can establish that it has successfully met
the program requirements in the initial and subsequent reviews. 4/
Illinois was found to have met these requirements in the initial review,
FY 1981, and the subsequent review, FY 1982. For the review of FY 1984,
however, Illinois was found not to have met the requirements. As
discussed above, although there have been two Board decisions and a
district court decision over the FY 1984 review, the results of that
review have not yet been finalized. It has not therefore been
established that Illinois met the requirements for the review for FY
1984. Under the provisions of the Handbook, ACF could have conducted a
review every fiscal year until Illinois established its eligibility.
The fact that ACF decided, for whatever reason, not to conduct annual
reviews in particular intervening years should not be a bar to ACF's
decision to conduct a review for FY 1991. Moreover, the Handbook does
not in any way imply that if ACF chooses to delay a review for a year or
more it may only perform a review according to an earlier triennial
review schedule. Rather, the state presumably would be subject to a
review for any succeeding year after the year that should otherwise have
been the scheduled review year. Thus, we can find no basis in the
Handbook or in the statute or regulations for Illinois' argument that
the review of FY 1991 was contrary to ACF's stated policy on triennial
reviews. 5/

As its source for its allegation that ACF policy precluded ACF from
conducting a review while litigation was pending over a previous year's
review, Illinois referred to a January 9, 1992 letter from the ACF
Regional Administrator to the Director of the Illinois Department of
Children and Family Services. This letter states, in part:

Illinois' most recent review covered . . . FY 1984, and subsequent
reviews were held in abeyance during the intervening years due to
our agency's past practice to not review a State which had appealed
the Section 427 decision to the Departmental Appeals Board, and
later, due to a statutory prohibition barring reviews while
litigation was pending. This statutory prohibition was not
extended in [OBRA '90], thereby allowing resumption of the periodic
reviews.

Illinois Ex. 13, at 1.

According to Illinois, this wording in the letter is evidence of an ACF
policy that no further section 427 reviews will be conducted while a
prior year's review is being litigated. Illinois concluded that ACF
violated this policy when it conducted a review for FY 1991 when the
review for FY 1984 was still being contested.

ACF responded that it had never issued any written policy precluding
reviews while litigation was pending. ACF argued that it had legitimate
reasons to conduct a review for FY 1991 under its statutory and
regulatory mandate and exercised that discretion appropriately. ACF
referred to Connecticut, supra, which involved a section 427 review
conducted by ACF for the years 1986-1991 despite continued litigation
over the review for FY 1985. ACF asserted that nothing in that decision
suggested that ACF did not have the authority to use its discretion in
administering the section 427 program to conduct further reviews even
while litigation over a prior review continued.

While the letter quoted above referred to a past "practice" by ACF to
forego reviews in limited circumstances, ACF never issued any regulation
or program policy transmittal that required it to forego reviews. Under
these circumstances, we see no basis for concluding that ACF could not
relinquish its practice as the letter implied it already had. No formal
process would be required for ACF to do so since the practice had never
been adopted as a binding policy to begin with. Moreover, even if ACF
had concluded that the moratorium in OBRA '90 was a basis for foregoing
reviews, that moratorium subsequently expired and no longer had any
bearing on ACF's discretion to conduct section 427 reviews. Thus, we
conclude that no past practice on ACF's part in any way limited its
discretion to conduct the FY 1991 program review at issue here.

Moreover, the conduct here of Illinois's FY 1991 review, even while a
prior year's review was still being litigated, has a sound program
basis. To prohibit ACF from conducting a review for an indefinite
period of time while a previous year's review is in litigation would
allow a state to receive potentially millions of dollars in section 427
funds without any accountability for the funds. A delay under these
circumstances might reasonably be viewed as conflicting with the
Secretary's responsibility under section 427 to monitor the performance
of states under this program. There would be no way to determine if a
state's foster care program was the type of "holding system" for foster
children that Public Law No. 96-272 sought to end. In the case of
Illinois, the section 427 review for FY 1984 still has not been
resolved. Under Illinois' theory, all the succeeding years would be
unreviewable because of the lack of a resolution for the FY 1984 review.

We also note that it appears that the review for FY 1991 was undertaken
only with Illinois' explicit consent. The letter quoted above
continues, "We are pleased that [Illinois] has agreed to allow us to
conduct three (3) triennial Section 427 reviews [for FYs 1985, 1991, and
a year to be determined] in Chicago during FY 1992." Id. The letter
specifically details that one of the reviews agreed to will be for FY
1991. Id.

Finally, we conclude that Illinois did not establish that it was in any
way prejudiced by ACF's resumption of reviews before all issues
pertaining to the FY 1984 review were finally resolved. Illinois could
raise here any issue that it believed remained unresolved from the
earlier review.

We therefore conclude that it was entirely proper for ACF to conduct the
section 427 review for FY 1991.

II. ACF's section 427 review for FY 1991 was not prohibited by the
moratorium contained in OBRA '90, nor is the Board's review of ACF's
determination of ineligibility prohibited by the moratorium contained in
OBRA '93.

Illinois argued that ACF should not have conducted a section 427 review
for FY 1991 because that year was unreviewable as a matter of law.
Illinois contended that the moratorium contained in OBRA '90 was in
effect during all of FY 1991. Section 5072 of OBRA '90 amended section
10406 of OBRA '89 so that the language pertinent to this appeal read:

The Secretary of Health and Human Services shall not, before
October 1, 1991, reduce any payment to, withhold any payment from,
or seek any repayment from, any State under part B or E of title IV
of the Social Security Act, by reason of a determination made in
connection with any triennial review of state compliance with the
foster care protections of section 427 of such Act for any Federal
fiscal year preceding fiscal year 1992.

Illinois maintained that this language makes FY 1991 unreviewable for
purposes of determining a state's eligibility for section 427 funds for
that year.

Illinois' position concerning the effect of the moratorium contained in
OBRA '90 is contrary to the plain language of the moratorium. The
moratorium did not make FY 1991 permanently unreviewable nor did it ever
preclude ACF from performing a review of Illinois' FY 1991 performance
under section 427. Rather, the moratorium merely precluded the
Secretary from taking certain adverse payment actions before October 1,
1991. The moratorium expired as of October 1, 1991 and does not now bar
any adverse payment actions. Moreover, the various arguments made by
Illinois concerning the legislative purpose behind this moratorium (and
subsequent ones) are highly speculative and fail to address the effect
of the plain language of the moratoria statutes themselves. The
moratoria simply cannot be viewed as having any greater effect than the
express statutory language would indicate.

Closely related to its argument concerning the OBRA '91 moratorium,
Illinois argued that the language of the moratorium in OBRA '93
prohibited ACF from participating in appeal proceedings in furtherance
of its disallowance of section 427 funds to Illinois. Section 13716 of
OBRA '93 repeats the language of the moratorium in OBRA '90, with the
only changes being the dates ("October 1, 1994" for "October 1, 1991"
and "fiscal year 1995" for "fiscal year 1992").

This issue was addressed by the Board in its December 3, 1993 Ruling on
Illinois' Motion for Stay. As discussed above, the Board denied
Illinois' request for a stay of proceedings in this appeal. In that
Ruling, which we incorporate by reference here, the Board found that the
plain language of the moratorium prohibited ACF only from collecting
disallowed section 427 funds, not from conducting a review of a state's
compliance with the section 427 requirements.

Illinois has not provided any new arguments in the briefing that
followed the Ruling that persuade us that the Board's reasoning in the
Ruling was incorrect. Moreover, since the Board issued its ruling, the
moratorium in OBRA '93, like the moratorium in OBRA '91, has expired,
and the Department is no longer precluded from taking adverse payment
actions based on the provisions of the moratorium.

III. Recent congressional actions do not prohibit the disallowance at
issue.

Illinois pointed to the passage of the Social Security Act Amendments of
1994, Public Law No. 103-432, as confirmation of congressional intent,
first evidenced by the various moratoria, that states not be punished
for any alleged failure to meet the section 427 requirements.

The 1994 amendments contain the following provisions affecting the IV-B
program: section 427 is repealed, effective with fiscal years beginning
after April 1, 1996; a IV-B state plan must provide assurances that the
state is operating a case review system for each child receiving foster
care; and the Secretary is to promulgate regulations by July 1, 1995, to
be effective April 1, 1996, for the review of a state's IV-B program to
determine whether the program is in substantial conformity with state
plan requirements, the implementing regulations, and the approved state
plan.

According to Illinois, the 1994 amendments and recent testimony before
Congress in an oversight hearing on the section 427 program (Illinois
Exs. 28 - 30) are evidence of congressional support for Illinois'
position that section 427 reviews are inconsistent with the purpose of
the Adoption Assistance and Child Welfare Act and are unfair to the
states. Illinois argued that the fact that Congress directed the
Secretary to promulgate regulations for the IV-B review system
specifying the requirements subject to review and the criteria to be
used to measure conformity with such requirements corroborates Illinois'
position that, in the absence of promulgated regulations, it was
impossible for states during the time period at issue to determine what
actions and supporting documentation ACF considered necessary for
periodic reviews and dispositional hearings under the section 427 review
process.

Illinois' argument that the Board should take notice of Congress'
concerns with the section 427 review process (as expressed in
legislative histories of provisions relating to the process) would
require the Board to ignore the actual terms of the existing law. As
discussed previously, there are no moratoria now in effect that would
preclude the repayment of section 427 funds required as a result of a
review of a state's compliance with the section 427 requirements.
Moreover, the Social Security Act Amendments of 1994 that eliminate
section 427 do not take effect until April 1, 1996.

The Board is bound by all applicable laws and regulations. 45 C.F.R. 
16.14. Thus, the Board is required to apply section 427 as it was in
effect during FY 1991 (and as it remains in effect at the present time)
to the facts of this case.

Despite whatever reasons caused Congress to amend the section 427 review
process, Congress did not elect, when it clearly had the opportunity to
do so, to impose a temporary or a permanent moratorium on the repayment
of funds arising from a finding of non-compliance with the section 427
requirements for any fiscal year prior to the effective date of the
amendments. Similarly, Congress did not include in the 1994 amendments
any language prohibiting ACF from monitoring or enforcing the current
section 427 requirements. The fact that Congress chose to make
significant changes affecting foster care incentive funding to be
effective at some future date does not relieve states of the obligations
of the existing law. We therefore conclude that neither the 1994
amendments to the Social Security Act nor the recent testimony in
oversight hearings cited by Illinois bar ACF from requiring repayment of
section 427 incentive funds claimed by Illinois for the 1991 fiscal
year.

IV. Illinois has the burden to provide adequate documentation that it
met the section 427 requirements.

Illinois argued that the number of failed cases found by the review is
misleading. (ACF originally found that 60 out of 107 cases failed.
After Illinois had the opportunity to submit additional documentation
during Board proceedings, ACF still found 52 out of 107 cases failed.)
Illinois attributed the failure of many cases to meet the periodic
review and dispositional hearing requirements to a lack of
documentation. Illinois referred to the Report, which in discussing the
44 cases that were originally found not to have met the periodic review
requirement, stated:

Many of the cases did not have acceptable documentation of periodic
reviews. It was difficult to tell if reviews actually were late,
did not occur, or whether information was just missing from the
files.

Report at 10. Similarly, in regard to the 52 cases which were
originally found to have failed the dispositional hearing requirement,
Illinois referred to the Report's finding that "[m]issing or incomplete
case record material" affected the dispositional hearing requirements.
Id. at 9.

While acknowledging that it was not possible to say precisely how many
cases failed due to some defect of documentation, as opposed to an
actual failure to hold a review or hearing on time, Illinois contended
that the Report contained enough information to suggest that lack of
documentation might have been the primary cause of Illinois' failing the
section 427 review. Illinois estimated that up to 42 of the
dispositional hearing failures and up to 31 of the periodic review
failures were due to a lack of documentation rather than an actual
failure to hold a hearing or review on time.

Illinois argued that these concerns over documentation highlight a
"troubling" aspect of the section 427 review process, namely the lack of
any rules specifying what documentation a state must produce to
establish the adequacy and timeliness of periodic reviews and
dispositional hearings. Illinois declared that ACF has not provided the
states with any detailed guidelines as to what constitutes acceptable
documentation and pointed out that ACF's 1988 Handbook refers only to
"critical" documentation without defining the term. Illinois argued
that this lack of guidance over what is acceptable documentation may
result in the Secretary's statutory determination of whether a state is
operating its case review system in an acceptable manner depending more
on the state's record-keeping capabilities than on whether periodic
reviews and dispositional hearings are actually being held and whether
children are being protected from foster care drift. Illinois contended
that the lack of established rules governing section 427 reviews means
that the reviews are essentially arbitrary in terms of documenting the
periodic review and dispositional requirements; individual case
reviewers may fail cases for different reasons, leaving open the
possibility of inconsistency among the reviewers on a particular team or
inconsistency among reviews conducted from state to state.

Illinois declared that, in the absence of more specific rules, the
section 427 review should take into account a broader range of
documentation as establishing the conduct of periodic reviews and
dispositional hearings. Illinois requested that, since it is unclear
what standards were applied in its FY 1991 review, the review be
remanded to ACF to be conducted using the full range of evidence of such
reviews and hearings.

Illinois' arguments are completely unpersuasive. For purposes of
establishing a state's compliance with the section 427 requirements,
there is no basis for distinguishing between cases where it is
acknowledged that no timely dispositional hearings were held and cases
where it is claimed that hearings were held but there is no way of
documenting the existence of those hearings. Indeed, the production and
retention of basic documentation evidencing the holding of dispositional
hearings and periodic reviews is not merely a technical requirement but
is critical for the success of the state's section 427 program. The
value of the hearings and reviews for the children in foster care may be
largely negated if a state has no record of what actually transpired or
even that the hearings or reviews ever took place.

Moreover, Illinois cannot here reasonably claim that it was unaware that
it would have to provide documentation that dispositional hearings were
held and periodic reviews were conducted, particularly in view of the
fact that it had already been subject to several previous reviews of
compliance with the section 427 requirements, including the review for
FY 1984. The Board has long and consistently held that a state must be
able to document its eligibility for the federal grant funding it
receives. See, e.g., Missouri Dept. of Social Services, DAB No. 395
(1983); Connecticut, supra. This is particularly true in the case of an
incentive program such as that authorized by section 427. The whole
purpose of the program is for the federal funding to serve as an
incentive for the state to provide additional safeguards for children in
foster care. If a state cannot demonstrate that it provided the
safeguards, it simply is not entitled to the incentive funding. In this
case, Illinois is seeking over $5 million in federal incentive funds
without proof that it did the things the funds were supposed to
encourage.

As we discuss in detail below, Illinois has clearly not met its burden
here to document for individual cases considered in the case record
survey that it complied with the requirements of the section 427 program
for FY 1991. We consider below the documentation provided by Illinois
concerning every failed case out of the first 50 cases of the 107 sample
cases read. Four of the 22 failed cases were not contested. For 14 of
18 contested cases, Illinois provided no documentation whatsoever that
it met either the dispositional hearing or the periodic review
requirement (or both). Illinois cannot reasonably argue that, in the
absence of any documentation, it complied with the statutory and
regulatory requirements in these cases or that it was treated by ACF in
an arbitrary fashion. For the remaining four cases where documentation
was provided, we carefully consider each document submitted and conclude
below that there is simply no reasonable basis for finding that any of
these cases should have passed.

Illinois' position that ACF has been somehow remiss by not specifying
the documentation needed to show that periodic reviews were conducted
and dispositional hearings were held is completely undercut by ACF's
assertion that it is willing to accept any type of documentation that
clearly shows that a particular requirement has been met. For example,
ACF stated that it would accept the following documents to show that a
dispositional hearing had been held: transcripts of court proceedings,
court docket sheets, judicial orders, bench notes, or any other type of
judicial documents that indicate that parents or guardians were present
or notified and that the future placement of a child was considered at a
hearing. ACF Br. at 10-11. ACF has not demanded that each child's file
must contain a certain type of document showing that there was a review
and a hearing. Rather, ACF agreed to accept a wide range of
documentation. 6/ We do not consider the production of such
documentation to be an unreasonable burden upon Illinois or one which is
not evident from the statute.

Additionally, we find that there is nothing "vague" about what section
427 requires. The Board has previously held that "the basic statutory
requirements for [the section 427] protections are clear on their face."
West Virginia, supra, at 5. Furthermore, if Illinois found the section
427 requirements too vague to implement and document, then it presumably
would not have elected to participate in the section 427 program or
later certified that it met those requirements. Id. at 7.

Nor do we find that Illinois was prejudiced by alleged inconsistent
treatment compared with other states. On the contrary, as ACF argued,
Illinois was unique in the nation for retaining section 427 funds for
many years without any oversight. Oral Argument Transcript (Tr.) at 76.

We therefore decline Illinois' request to remand the cases to ACF for
further review. We find that Illinois was required to retain and make
available for ACF's review documentation that periodic reviews and
dispositional hearings were held and that ACF properly failed cases in
which such documentation was lacking.

V. Illinois is responsible for ensuring that dispositional hearings are
held within the time limits prescribed by section 427.

Illinois noted that 52 of the 107 cases sampled originally failed the
dispositional hearing requirement. Illinois contended that the FY 1991
review was flawed because the reviewers failed to take into account the
distinction between whether a failure to hold a dispositional hearing on
time was a lapse on the part of Illinois or on the part of the court.
Illinois contended that while section 427 requires "the State" to meet
the section 427 requirements in order to be eligible for section 427
funds, ACF in its implementing regulations created an exception to that
general rule in regard to dispositional hearings. Illinois cited 45
C.F.R.  1357.25(d):

In meeting the requirements of section 427(a)(2)(B) of the Act for
dispositional hearings the State agency must meet the requirements
of section 475(5) of the Act and 45 CFR 1356.21(e).

(Emphasis added by Illinois). 7/ Illinois interpreted this regulation
as imposing the responsibility for meeting the dispositional hearing
requirement on a state's title IV-B/IV-E agency and not the state as a
whole. Illinois therefore argued that the state agency may meet the
dispositional hearing requirement of the Act by having an adequate
system in place for requiring dispositional hearings, even if the
state's courts which must conduct the hearings are not actually holding
those hearings within the prescribed time period.

Illinois maintained that it schedules timely dispositional hearings by
generating and filing a supplemental petition to the court for review.
After the petition is set for hearing, the clerk of the court mails
notices of the hearing to the interested parties. Illinois Br. at 29.
Illinois contended that it has no further control over when the hearing
is actually held; continuances may be granted either for the court's or
the parties' convenience to dates making the hearings late under the
section 427 requirements. Illinois maintained that it is not in a
position to dictate to the courts when hearings are to be held and that
it thus should not be penalized by its inability to direct the courts to
act within the section 427 time parameters. Illinois insisted that it
therefore met the responsibilities of a "State agency" set forth in 45
C.F.R.  1357.25(d) for dispositional hearings. Illinois requested that
the case record review be remanded to ACF to be conducted again in
accordance with the regulatory distinction between a state and a state
agency.

The Board has previously considered the question of whether a court's
failure to set a dispositional hearing when requested by a state agency
excuses the state from compliance with the section 427 requirements. In
Arkansas Dept. of Human Services, DAB No. 553 (1984), the Board held:

It is implicit in Section 427 that states must provide the
resources necessary to implement the required safeguards and insure
that courts understand their role in implementing these safeguards.
To recognize a court's lack of resources or diligence as an excuse
for non- compliance would defeat the purpose of the statute.

At 8. The Board relied on the same rationale in Illinois Dept. of
Children and Family Services, DAB No. 1037 (1989), where it rejected as
an excuse for a failure to meet the dispositional hearing requirement a
court's crowded calendar.

Illinois' attempts to draw a distinction between the requirements
imposed upon a "State" by the Act and those imposed upon a "State
agency" by 45 C.F.R.  1357.25(d) are not persuasive. Illinois did not
point to anything which indicates that the use of the term "State
agency" in the regulation was intended to relieve Illinois of
responsibility for failure to meet the dispositional hearing
requirement.

Furthermore, any such purported distinction overlooks the basic fact
that the section 427 program is an incentive program. States do not
have to participate in the program, but if they do, they must adhere to
the program's requirements, including the criteria for timely
dispositional hearings. As noted previously, if a state found the
criteria too difficult to implement, it could elect not to participate
in the program. Illinois, however, chose to participate and seek the
funds offered by the program. Accordingly, Illinois is required to
ensure that the dispositional hearings are held within the time frames
mandated by section 427. Illinois, like all other states, was required
to work cooperatively with its court system to ensure that dispositional
hearings were held within the section 427 time frames.

Finally, of the 22 failed cases out of the 50 cases in the sample
considered by the Board below, Illinois failed to establish that any
cases could reasonably be considered to have passed based on its
argument that the delay should be viewed as being outside the
responsibility of the state agency administering the section 427
program. Nor did Illinois demonstrate that any of the cases came within
the scope of the continuance policy recognized by the Board in Idaho
Dept. of Health and Welfare, DAB No. 1011 (1989). The Board there
found that a periodic review or a dispositional hearing could be timely
if it is scheduled for a date which is timely, begins, but then is
continued until a later date, even if that later date is outside the
section 427 time parameters. Idaho at 7-8. In the final section of
this decision, we discuss those cases where Illinois argued that a
dispositional hearing was timely based on a court's continuance and find
that its evidence was unpersuasive in each instance.

VI. The sample of cases properly included cases that were substitutions
for cases that had been declared ineligible for the review.

Illinois argued that numerous cases were declared ineligible for review
by the reviewers, and these cases were then dropped from the sample and
replaced with substituted cases from the oversample. 8/ Illinois
alleged that these "ineligible" cases were comprised of cases where
children were returned to their parents or adopted or had reached the
age of majority prior to or during the period under review. According
to Illinois, there were 15 cases of this type or 14% of the review
sample. Illinois contended that these cases should not have been in the
sample in the first place and that replacing them with other cases had
two adverse consequences for Illinois: 1) the inclusion of ineligible
cases in the original sample had the effect of displacing eligible ones
from the sample and may therefore have affected the validity of the
sample and the outcome of the review; and 2) because the sample cases
were not read in their original order Illinois reached the failure point
after Case No. 12 had been read rather than after Case No. 30.

Alternatively, Illinois argued that such cases as adoption and return to
parents, rather than being declared ineligible by the reviewers and
dropped from the sample, should be considered successes of the foster
care program and should therefore be passed in the review. Illinois
pointed to two such adoption cases, Nos. 56 and 74, which were
disqualified from the sample and replaced by two substitute cases that
were then failed.

Illinois' arguments concerning the substitution of cases are
unpersuasive. The purpose of a section 427 review is to determine
whether a state provided the requisite section 427 protections in each
foster care case. Cases that involve children no longer in the foster
care system -- whether through adoption, return to parents, or reaching
the age of majority -- should reasonably not be included in a survey
designed for the purpose of determining how a state is treating children
in the foster care system. Moreover, once a case is eliminated from the
sample on these grounds it is reasonable that it be replaced in order to
preserve the integrity of the sample. Although in this particular
review, ACF's policy of substitution may have caused Illinois to reach
the failure point sooner than it would have otherwise, the same policy
in another review might have just the opposite result. The substituted
cases from the oversample presumably have no greater chance of failing
than would the very next case in the original sample. We question
whether Illinois would have challenged the use of substituted cases here
on appeal if more of the oversample cases had passed rather than failed.
9/

In any event, Illinois conceded that even without the effect of the
substitution policy, it would still have reached the failure point at
Case No. 30. Thus, there is no question that ACF's policy of
substitution did not cause Illinois to fail the case record survey when
it otherwise would have passed. Illinois would still have reached the
failure point at a relatively early stage in the survey of the original
sample of 107.

Additionally, Illinois' argument that cases where children are adopted
or returned to their parents should be considered successes and
therefore passed in a section 427 review is not persuasive. While
adoption or the return of the child to the family indisputably achieves
the goal of removing the child from the foster care program, the fact
that a child may ultimately be adopted does not relieve a state of its
responsibilities of meeting the section 427 requirements in the interim.
ACF apparently failed only those cases where Illinois had failed to
comply with program requirements during the review period prior to the
adoption or return to parents. ACF properly disqualified those cases
where the adoption or return prevented the possibility of compliance
during the period under review.

Finally, Illinois has not argued that the manner in which ACF used cases
from the oversample in this review was unexpected. A letter from
Illinois to ACF prior to the review reveals Illinois' understanding that
the mere removal of the ineligible or invalid cases without replacing
them with other cases would result in an "inadequate number of valid
sample cases"; the need for an oversample of cases was recognized, as
was the need for additional time to prepare these cases for review.
Illinois Ex. 18. Illinois failed to object to the use of cases from an
oversample prior to or during the performance of the review when such
objections could be more easily and readily addressed by ACF.

VII. Our review of the first 50 cases in the sample shows conclusively
that Illinois failed to meet the 90% compliance standard.

As discussed above, Illinois failed the sequential sample at Case No.
12, at which point eight cases had failed one or more of the section 427
requirements. Under the sequential sampling methodology used in section
427 reviews, no further examination of additional cases was needed to
determine that Illinois had failed to meet the required 90% compliance
standard. However, in order to eliminate any possible remaining doubt
about Illinois' compliance, we have looked at the first 50 cases in the
sample. Under the decision table, the failure point at the 50th case is
13 failures. We find that at the 50th case in the survey, Illinois had
failed 22 cases, exceeding the failure point by nine and proving very
convincingly that Illinois failed to meet the 90% compliance standard.

The findings of ineligibility largely result from Illinois' failure to
document compliance with the section 427 requirements such as the
dispositional hearing and periodic review requirements. As we
previously discussed, Illinois has the burden to document its compliance
with each of the requirements. As noted above, ACF found that of the
first 50 cases in the sample, Illinois failed 22. Of these 22 failed
cases, four were not contested and 14 were cases in which Illinois
submitted no documentation of compliance with either the dispositional
hearing or the periodic review requirements (case numbers are noted in
parentheses) 10/:

-- Illinois did not contest its compliance with either of the
requirements in three of the first 50 cases (14, 17, 48); --
Illinois did not contest its compliance with the dispositional
hearing requirement in one case (43); -- Illinois did not
present any documentation in support of a dispositional hearing
in eight cases (1/164, 4, 11, 12, 24/167, 33, 36, 38, 50); --
Illinois alleged that it had evidence of a dispositional
hearing in three cases, but did not submit any such evidence
(3/165, 9, 30); -- Illinois did not present any documentation in
support of a periodic review in one case (40); and --
Illinois alleged that it had evidence of a periodic review
in one case, but did not submit any such evidence (2).

In the absence of any documentation in 14 cases that either the
dispositional hearing or the periodic review requirement had been met,
we must affirm ACF's findings that these cases failed. The
dispositional hearing and the periodic review requirements are critical
section 427 requirements, and as we stated previously, Illinois has the
burden to document compliance with each requirement. Illinois clearly
has not met that burden in the absence of any documentation in support
of a requirement. Furthermore, although Illinois seemed to argue that a
case should pass if it could document compliance with only one of these
two requirements, the statute and regulations clearly require compliance
with each requirement.

We discuss in detail below the four remaining cases of the 22 failed
cases (8, 28, 35, 45) where some documentation of compliance with these
requirements was provided. In each one of these cases the issue is
whether Illinois provided a dispositional hearing within 18 months of
the last dispositional hearing or the child's placement in foster care.

Case No. 8: ACF found that the due date for a dispositional hearing was
December 30, 1990, but that a hearing was never held.

Illinois submitted a court information sheet of the Illinois Department
of Children and Family Services specifying the "date of hearing" as
January 11, 1991 and indicating that a hearing to consider adoption or
private guardianship had been scheduled for March 8, 1991 for "calendar
70." Illinois Ex. 27. Illinois also submitted a court docket sheet
which it argued demonstrated that the hearing held on January 11, 1991
was continued for a new administrative case review by order of the
court. Illinois June 16, 1994 Submission. Illinois thus contended that
the court took some action on January 11, 1991 because the court made an
entry on the docket sheet. However, Illinois admitted that it was not
possible to ascertain who was present at the proceeding or what the
judge decided or on what basis he decided anything. Illinois claimed in
any event that a hearing was scheduled two months in the future. Tr. at
55-56. Illinois contended that it was thereby fulfilling its obligation
to ensure that the child was not lost in the foster care system.

The court information sheet and the court docket sheet submitted here in
no way establish that a section 427 dispositional hearing was held on
January 11, 1991, since neither substantiates what type of proceeding
was held on that date. Moreover, Illinois submitted no further
documents to establish that any form of hearing was ever held on March
8, 1991. Therefore, even if it were possible to consider a March 8,
1991 proceeding to have been timely based on a January 11, 1991
continuance, we simply have no documentation that a March 8, 1991
hearing was ever held. In fact, the court docket sheet submitted by
Illinois indicates that the proceeding for March 8, 1991 was further
continued to May 1991 and there is no clear disposition indicated for
any May 1991 proceeding.

We therefore sustain ACF's finding that this case failed.

Case No. 28: ACF found that the child had been placed in foster care on
August 27, 1986, but that Illinois failed to establish through any court
record that a dispositional hearing was ever subsequently held.

Although Illinois initially conceded that no timely dispositional
hearing had been held, it later submitted court docket sheets that,
according to Illinois, demonstrated that the child was placed on the
Guardianship calendar on November 7, 1989 and that a dispositional
hearing was held on May 23, 1991. Illinois June 16, 1994 Submission.
Illinois contended that the dispositional hearing was timely (within 18
months of the last dispositional hearing) apparently on the premise that
the action taken on November 7, 1989 also qualified as a dispositional
hearing.

We find that Illinois failed to establish that a dispositional hearing
had been held on either November 7, 1989 or May 23, 1991. The mere
reference on the docket sheets to the child's placement on the
Guardianship calendar on November 7, 1989 does not qualify as
substantiation of a prior dispositional hearing. Moreover, the
court docket sheets submitted in support of the May 23, 1991 proceedings
do not demonstrate that any resolution of placement status was
accomplished during those proceedings.

We therefore sustain ACF's finding that this case failed.

Case No. 35: ACF found that the due date for a dispositional hearing
was March 7, 1990, but that a hearing was not held until March 27, 1991.

Illinois argued a dispositional hearing had been held on July 9, 1990,
which meant that no dispositional hearing was due during FY 1991.
Illinois declared that state re- reviewers found that this case passed
(even though ACF reviewers continued to find that it had not) and that
court records indicated the courts were actively reviewing this case.
Illinois stated that numerous court orders were entered during the
period 1989 through 1991 and a court docket sheet indicated that on
March 27, 1991 the child was permanently placed with the paternal
grandmother, eliminating the requirement for further dispositional
hearings.

We conclude that none of the documentation submitted by Illinois
establishes that a dispositional hearing was held on July 9, 1990. In
particular, Illinois failed to demonstrate how the cryptic references on
the court docket sheet, which apparently seem to be addressing periodic
reviews, substantiate that a dispositional hearing considering the
future status of the child was held on that date.

Moreover, the March 27, 1991 proceedings would not be a timely
dispositional hearing for purposes of this review if Illinois could not
establish that a dispositional hearing had been held on July 9, 1990.

We therefore sustain ACF's finding that this case failed.

Case No. 45: ACF found that the last verified dispositional hearing had
been held on October 12, 1988, and that the next dispositional hearing
would therefore have been due on October 1, 1990, but that a hearing was
not held until June 8, 1991.

Illinois supplied court information sheets which, according to Illinois,
indicate that hearings were held on December 8, 1989, May 3, 1991, and
August 23, 1991. Illinois also submitted a court docket sheet from the
Clerk of the Circuit Court of Cook County. This court docket sheet
contains the notation "B/A 1/18/90 1:30 C- 7BP2" for December 8, 1989.
ACF interpreted this entry as transferring the child to the guardianship
calendar 70 on January 18, 1990.

We find no support in the documents before us that a section 427
dispositional hearing was actually held in this case by the October 1,
1990 due date. The court information sheets and the court docket sheet
submitted by Illinois fail to establish that a dispositional hearing
which considered the future status of the child and with the necessary
procedural safeguards was actually held on December 8, 1989. While the
court information sheet and court docket sheet contain notations to a
date of next hearing as "January 18, 1990," those references alone do
not establish that a dispositional hearing was actually held on that
date either.

We therefore sustain ACF's finding that this case failed.

Conclusion

For the reasons discussed above, we sustain the disallowance of
$5,634,432 in section 427 incentive funds.

__________________________ Cecilia Sparks
Ford

__________________________ M. Terry Johnson

__________________________ Donald F. Garrett
Presiding Board Member

1. Additionally, each case plan must be reviewed for 18 other
remaining section 427 protections. Illinois Exhibit (Ex.) 1, Section
427 Review Handbook, at 1. In order for a case to pass a triennial
review, the type of review at issue here, 15 of the 18 protections must
be verified. Id. at 2. None of the sample cases in the instant review
failed solely on this basis, however. Because neither party addressed
any arguments to these protections, we do not consider them further in
this decision.

2. The Board has upheld ACF's sequential sampling procedures in
prior decisions. See Connecticut Dept. of Children and Youth Services,
DAB No. 952 (1988), aff'd 788 F. Supp. 573 (D.D.C.1992), 9 F.3d 981
(D.C. Cir. 1993). Aside from objecting to ACF's practice of
substituting cases from the oversample for those identified as
ineligible, Illinois did not here challenge the sequential sampling
procedure used by ACF in the FY 1991 section 427 review.


3. This moratorium was the latest of a series of moratoria
concerning section 427 funding dating from FY 1990. See section 10406
of Pub. L. No. 101-239 (OBRA '89) for FY 1990; section 5072 of Pub. L.
No. 101-508 (OBRA '90) for FY 1991; and section 215 of Pub. L. No.
102-170 (Health and Human Services Appropriations Act of 1992) for FY
1992. All of the moratorium provisions contained essentially the same
language preventing the Secretary from reducing any payment to,
withholding any payment from or seeking any repayment from a state under
the section 427 program.

4. The Handbook does not address circumstances where ACF learns
during an intervening year about serious deficiencies in a state's
foster care program. We question whether ACF could comply with its
statutory and regulatory mandate under these circumstances by delaying
its review until a triennial year. The section 427 program nowhere
contemplates that states should be able to let their performance lapse
during intervening years between ACF reviews.


5. Nor can we find any support in the statute, regulations or
Handbook for the position that Illinois was entitled to advance notice
prior to the start of FY 1991 that ACF intended to conduct a review for
that year. On the contrary, Illinois was on notice by the very nature of
this incentive payment program and the statutory provisions establishing
it, that Illinois had to comply with program requirements for every year
of participation.

6. Here, for example, ACF reversed its initial findings that Case
Nos. 60 and 63 failed the dispositional hearing requirement when
Illinois produced Dispositional Orders signed by a judge. For the
periodic review requirement, ACF accepted Form 351, "Administrative Case
Review and Case Activity and Progress Log" or Form 1420, a computer
printout signed by a third party uninvolved in the case, which included
information on the permanency goal, time frame for achievement,
evaluation for progress, and the parties present at the review.

7. ACF defines "state agency" as "the State agency administering or
supervising the administration of the title IV-E and title IV-B State
plans." 45 C.F.R.  1355.20(a).

8. Substituted cases are represented in the sample as a number with
a slash followed by another number, e.g., 1/164. This means that Case
No. 1 was found ineligible for review, and Case No. 164 was substituted
for it in the sample.

9. Not all of the oversample cases were in fact failures; some of
them passed.

10. Many of the cases may have failed both requirements. We focus
here on the requirement for which documentation was altogether lacking,
since such failing in our view was conclusive. Several of the contested
cases in addition failed the case plan and "18 remaining protections"