SUBJECT:

Florida Department of Children and Families

DECISION

The Florida Department of Children and Families (Florida) appealed a July 26, 2000 determination by the Administration for Children and Families (ACF) disallowing $1,438,525 in federal financial participation (FFP) claimed by Florida under title IV-E of the Social Security Act (Act). The disallowed FFP represented prior quarter adjustments for expenditures incurred in the period July 1, 1990 through June 30, 1991 (FY 1991),⁽¹⁾ submitted on a May 4, 2000 expenditure report for the period ending March 31, 2000.⁽²⁾ ACF Tab Q.

Florida's claim was submitted well beyond the close of the two-year filing period established by section 1132(a) of the Act and 45 C.F.R. § 95.7. However, Florida contended that its claim was allowable as an "audit exception" to the general filing requirement, and also contended that any delay in filing was due to documented action or inaction by ACF. See section 1132(a) of the Act; 45 C.F.R. § 95.4.

Based on the analysis below, we find that Florida's claim is untimely submitted and that no exception applies.

Statutory and Regulatory Background

TITLE IV-E

Title IV-E of the Act provides, among other things, federal matching funding for state foster care maintenance payments for children in foster care who otherwise would have been eligible for Aid to Families with Dependent Children under title IV-A of the Act.⁽³⁾ Prior to the enactment of title IV-E (in the Adoption Assistance and Child Welfare Act of 1980, Public Law No. 96-272), funding for foster care maintenance payments was available under title IV-A. States were given until October 1, 1982 to begin operating under approved title IV-E plans. The Secretary is authorized to provide FFP for foster care maintenance payments at the rate of the "Federal medical assistance percentage" established under Medicaid. 42 U.S.C. § 674(a). Those payments are the subject of this dispute.

Section 472(a)(1) of the Act provides federal funds for foster care payments on behalf of dependent children removed from the home if the removal is made pursuant to (1) a voluntary placement agreement or (2) a judicial determination that remaining in the home would be contrary to the welfare of the child and that reasonable efforts have been made to eliminate the need for removal. 42 U.S.C. §§ 672(a) and 671(a)(15).

The legislative history of Public Law No. 96-272 demonstrates Congress' concern that children were being removed from their homes unnecessarily and placed in foster care. A Senate committee report described the judicial determination requirement as "an important safeguard against inappropriate [state] agency action." Sen. Rep. No. 336, 96th Cong., 1st Sess. 16 (1979).

Public Law No. 96-272 is implemented by regulations at 45 C.F.R. Part 1356. Those regulations do not elaborate on the statutory judicial determination requirement. ACF, with its subagency the Administration for Children Youth and Families (ACYF), has issued numerous Policy Interpretation Questions (PIQs) and memoranda addressing the issue of when a state court removal order, which fails to specify that the requisite judicial determinations have been made, will still constitute adequate documentation that the requirements of section 472(a) of the Act have been met. See ACF Tabs A-C.⁽⁴⁾

The Livingston Memorandum, an internal ACYF policy memorandum titled "Judicial Determination Requirement and Disallowances in Title IV-E Foster Care" issued to ACF Regional Administrators and ACYF Regional Program Directors, provided some "clarification to staff on the provisions of Section 471(a)(15) of the Act." ACF Tab C at 2. The Livingston Memorandum noted that there was "uncertainty in some States as to whether the wording used in court orders authorizing the removal of a child from his home would be sufficient to meet title IV-E requirements." This uncertainty arose from earlier guidance issued in a 1975 PIQ and a 1984 Policy Announcement. ACF Tab C at 1. The Livingston Memorandum clarified that there must be a specific judicial determination that a child needed to be removed from his or her home in order to be eligible for FFP under title IV-E. The Livingston Memorandum went on to provide that ACF would not take a disallowance for children entering foster care prior to October 1, 1986 for failure to comply with requirements specified in a May 8, 1986 PIQ (AYCF-PIQ-86-02). ACF Tab C at 2.

TITLE IV-E PAYMENT AND TIMELY CLAIMS PROVISIONS

Based on state reports and other information available to it, ACF estimates a state's FFP entitlement for each calendar quarter. ACF then makes grant payments to the state which may later be increased or decreased if ACF determines that the state was either underpaid or overpaid FFP for a previous quarter. 42 U.S.C. § 674(d)(1)-(3). Determinations about the amount due are based on a quarterly statement of expenditures, which shows actual expenditures and other adjustments. See 45 C.F.R. §§ 201.5; 1355.30(n).

Section 1132 of the Act provides that any claim by a state for expenditures under this title for any calendar quarter are to be filed within two years of the first day following the end of such quarter. The only exceptions to this two-year rule are for "any expenditure involving court-ordered retroactive payments or audit exceptions or adjustments to prior year costs" (section 1132(a) of the Act), or any waiver granted by the Secretary if he determines there was good cause for the failure to file within two years (section 1132(b) of the Act). A failure to file a claim within such time period which is attributable to neglect or administrative inadequacies shall be deemed not to be for good cause. Id.

The implementing regulations define "claim" as "a request for Federal financial participation in the manner and format required by our program regulations, and instructions or directives issued thereunder." 45 C.F.R. § 95.4. An audit exception is "a proposed adjustment by the responsible Federal agency to any expenditure claimed by a State by virtue of an audit." 45 C.F.R. § 95.4. Good cause for the late filing of a claim is "lateness due to circumstances beyond the State's control" examples of which can be acts of God or documented action or inaction by the Federal government. 45 C.F.R. § 95.22. The regulations specify when a waiver must be requested, what a waiver request must include, and where it should be sent. 45 C.F.R. §§ 95.25 - 95.31.

Factual Background

While this case involves a claim for reimbursement for expenditures made in Florida's FY 1991, Florida's argument, and ACF's response, necessitate reviewing events that related to a claim for expenditures made in FY 1990. We find in our analysis that many of these facts do not lead to the conclusions suggested by Florida.

On May 24, 1993, Florida wrote ACF requesting "review toward reimbursement of IV-E/IV-A funds dating from May 8, 1986." ACF Tab E at 1 (unnumbered). Florida generally asserted that, in spite of what it considered its compliance with the requirements of section 472(a)(1) of the Act, it had "been penalized heavily and forced to forego millions of dollars." Id. at 2 (unnumbered). Florida asserted that it had not been aware of PIQ-86-02 until discussions with federal representatives during a 1991 audit (Stage I review) concerning FY 1990 funding. Florida contended that during that Stage I review it had provided "federal technical assistance staff" with relevant portions of the Florida Statute, but was told that its statute did not "qualify," i.e., meet the requirements of the PIQ. Florida alleged that it was not informed of its right to challenge this opinion.⁽⁵⁾ Consequently, at that time, Florida backed out (withdrew) a large number of cases included in its FY 1990 claim for foster care payments which would have been eligible for FFP under the PIQ. Florida alleged that it believed that failure to back out these cases would have caused it to fail the Stage I review of its title IV-E claim and that these cases would have been subject to a disallowance based on extrapolation from a sample of those IV-E cases ("Stage II review").⁽⁶⁾ ACF Tab E; Florida Response to Request for Further Development of the Record (Florida Response) at 2; see also ACF Br. at 9.

Florida's May 24, 1993 letter referenced a memorandum of law from the Florida Attorney General which, it alleged, concluded that the language in the Florida Statutes is consistent with the requirements of the governing PIQs in terms of providing the appropriate judicial language to render costs reimbursable under title IV-E and had been consistent since at least 1978.

By letter dated May 12, 1994, ACF rejected Florida's request for reimbursement for the withdrawn cases. ACF noted that Florida had not specified "exactly what type of claims . . . [it wished] to file," but recognized that "some of the claims involve care rendered pursuant to court orders based on Chapter 39 of the Florida Statutes." Moreover, ACF reasoned that "contrary to the suggestion in . . . [Florida's] letter, claims which were never filed cannot be characterized as audit exceptions pursuant to 45 C.F.R. § 95.19 as that term is defined at 45 C.F.R. § 95.4." ACF concurred with Florida's interpretation that the court orders entered after October 1, 1986 were consistent with the requirements as expressed in the relevant PIQs. Additionally, ACF indicated that Florida's claim did not qualify for a good cause waiver because Florida had not followed the regulatory standards for requesting a waiver. ACF Tab F.

On June 13, 1994, Florida wrote to the ACF Regional Office in Atlanta (Region) to request a good cause waiver of the two-year filing limitation for its claim for expenditures made in FY 1990. Florida based its request on not receiving the Livingston Memorandum until early March 1994. ACF Tab G. Citing 45 C.F.R. § 95.22, Florida further alleged circumstances beyond its control including "documented action or inaction of the Federal government." ACF Tab G. Florida reiterated that it had submitted a substantially reduced title IV-E adjustment for the period October 1, 1989 through September 30, 1990 as a result of not receiving the Livingston Memorandum until March 1994, and thus it requested a waiver to the two-year limit so that it could go back and revise the decreasing adjustment and claim any other FFP to which it may have been entitled. Id.

After the parties exchanged additional correspondence, ACF, on September 8, 1997, granted the requested good cause waiver for the FY 1990 claim. ACF indicated that Florida was entitled to $5,654,477 in FFP based on its previously submitted claim of $9,299,109. ACF Tab L. ACF determined the extent to which the withdrawn cases were allowable based on a review of a random sample of "200 payment units for the fiscal year ending in 1990." ACF Br. at 10-11.

On December 7, 1998, Florida contacted ACF to request "support for a Title IV-E retroactive claim for federal fiscal years 1990/91 and 1991/92" which its staff was preparing. ACF Tab O. Florida indicated that --

This claim is a continuation of the authorization for a prior year claim (1989/90) granted by the . . . central office in 1994. As you may know, a 1991 federal audit of the program found that the regional office had not supplied Florida with adequate information on key issues of Title IV-E eligibility.

Further, in March 1997 another federal audit that re-examined foster care found that 56 percent of our cases that had previously been identified as non-eligible were actually eligible for Title IV-E funding.

During conference calls on September 12, 1996 and October 9, 1996 . . . the then HHS financial operations specialist . . ., [a] statistician in the HHS central office, and our department staff . . . discussed the rationale for claiming reimbursement for FYs 1990/91 and 1991/92. . . [T]he federal staff agreed that the percentage of Title IV-E cases found to be eligible by the 1997 audit should be applied to the children who continued to be claimed as non-eligible in those years.

ACF Tab O.

In its February 3, 1999 response, ACF set out the applicable time limits for filing claims and stated that "[e]xceptions to this general rule will be considered in accordance with the guidelines at 45 CFR 95.19 through 95.34." ACF directed that, along with its claim, Florida should clarify if the children for whom Florida was proposing to claim retroactive FFP were the same children that were part of the 1989/1990 time period audited in 1997. ACF noted that there were 200 payment units reviewed in that audit. Additionally, assuming they were the same children from the 1989/1990 time period, Florida was directed to clarify if the proposed retroactive payments were for the time periods the children were in care after the 1989/1990 period. ACF Tab P.

On May 4, 2000, Florida submitted a claim for FFP ($807,107 ultimately corrected by ACF to $1,438,525) for the period July 1, 1990 through June 30, 1991. ACF Br. at 12; ACF Tab Q. ACF disallowed this claim because the -

documentation submitted with the claim did not contain the required request for waiver of the time limit for filing claims as outlined in 45 CFR 95.19 through 95.34, nor did it address the other issues raised in the February 3, 1999 letter.

ACF Tab Q.

The Parties' Arguments

Florida asserted that the ACF review of Florida's resubmitted FY 1990 claim was an audit. Florida further argued that the redetermination of eligibility for the identified population for FY 1990, and the resulting additional title IV-E reimbursement to Florida, constituted an "audit exception" as defined at 45 C.F.R. § 95.4. Consequently, Florida reasoned, not only the FY 1990 claim, but also potential claims for subsequent years that had not ever been filed, should be allowed per the audit exception. However, referencing language associated with a good cause waiver for late filing, Florida also argued that any alleged late filing which might be attributed to it was due to documented action or inaction of the federal government and in no way its fault. Florida Br. at 4-8.

Florida alleged the existence of a causal linkage between the 1997 determination and the claim now at issue. Florida maintained that the circumstances leading to the granting of the waiver for FY 1990 carried over to subsequent years. Florida provided an affidavit from a State employee attesting that the children for whom Florida was now claiming FFP were the same as reviewed in the 1997 audit. Florida Reply Br. at 2-3; Florida Tabs 1 and 7; see also Florida Response at 5. Florida argued that since the 1997 review of the cases submitted under the good cause waiver for 1990 found that 56% of those cases were actually eligible for FFP, this same percentage should be applied to prior and subsequent year claims. Further, Florida alleged that, in subsequent conference calls, federal representatives agreed that the percentage (56%) of cases found eligible in the 1997 audit "should be applied to Florida's prior and subsequent year claims involving those children."⁽⁷⁾ Florida asserted that "from 1989/90 at least through 1992" it submitted title IV-E reimbursement claims substantially below the amount to which it was entitled because the Region had not supplied it with adequate information on key issues of title IV-E reimbursement. Florida Br. at 6-7.

While conceding that the "claim at issue has been disallowed" based on untimeliness, Florida argued that it "would have been impossible" for it to timely submit any claims for ensuing years "because documented action or inaction of the Federal government prevented timely inclusion," and that inclusion could not be determined until after the 1997 "audit." Id. at 7.

Distinguishing the Board's decision in New York State Dept. of Social Services, DAB No. 521 (1984), Florida asserted that the facts of this case demonstrated that this was not a situation where it had simply not gotten its data together in time to file a claim within the statutory requirements. Rather, Florida argued, it would be patently unfair to preclude its claim merely based on the passage of time. Florida Br. at 7.

ACF argued that the audit exception did not apply to this case because the action taken with regard to the 1990 claim was based on a good cause waiver, that the prerequisites for an audit exception were simply not present here, and that no good cause waiver had ever been requested for the claims at issue in this case. ACF emphasized that the audit exception is to be construed narrowly, and that Florida had basically chosen "another avenue for attempting to present its claims belatedly." ACF Br. at 15.

ACF accused Florida of attempting to "bootstrap an audit exception for [fiscal year] 1991 . . . to a review of a sample of previously withdrawn payment units for [fiscal year] 1990." Id. at 14. ACF generally disputed Florida's accounts as to what its personnel told Florida personnel concerning the applicability of ACF's analysis of the claims submitted pursuant to the good cause waiver to other years.

1. The audit exception to the timely claims requirement does not apply to the claim in issue.

In light of the implementing regulation, this Board has always construed the audit exception as narrowly drawn. See New York State Dept. of Social Services, DAB No. 982 (1988). The regulatory definition of the audit exception as "a proposed adjustment by the responsible Federal agency to any expenditure claimed by a State by virtue of an audit," 45 C.F.R. § 95.4, establishes two basic prerequisites for the exception. These prerequisites are not even facially met here. Additionally, we find that there is no basis for extending the findings of the review for the FY 1990 claim (which was not, in any event, clearly an "audit") to claims that have never been properly or timely filed with ACF.

In referring to the "audit exception" the statute uses a term of art generally employed by auditors to refer to an audit finding that takes exception with what the audited party has done and may propose an adjustment to costs based on what the auditors found. Section 1132(a) of the Act precludes applying the time limit to deny payment of claims "involving an audit exception." Contrary to what would be the logical result of Florida's position here, Congress clearly did not mean to imply that any time there is an audit, but no audit exception, states may ignore the timely claim provisions.

As we have earlier stated, "[t]he regulatory definition of audit exception has two primary elements: the adjustment of a claimed expenditure must result from an audit and the adjustment must be proposed by the responsible Federal agency." New York State Dept. of Social Services, DAB No. 1382 at 5 (1993). These criteria were not met here.

First, no adjustment to the expenditures claimed in this case resulted from an audit. Rather, the cases initially withdrawn from the 1990 claim, and which were ultimately partially allowed under the good cause exception to the two-year filing rule, were reviewed by ACF, and a significant percentage (44%) of these cases were disallowed. The claim for the year in question in this appeal, FY 1991, was never submitted to or reviewed by ACF, let alone subject to an audit. It would be a significant stretch for us to find that a claim never submitted should be bootstrapped into falling under the audit exception when at best the claim may have involved some of the same children as were included in the prior year's claim. By the terms of the regulation, any adjustment must be made after an audit. Here, no claimed expenditures for the year in question were subject to any audit, even under the most liberal definition of that term.

Secondly, the regulation explicitly requires that the audit exception adjustment be proposed by "the responsible Federal agency." Here, ACF has, from the outset of this dispute, vigorously contested allowing Florida's disputed costs as an audit exception. Simply stated, without action by ACF, there can be no audit exception. While we have in the past recognized that an adjustment "has been proposed or accepted by the responsible federal agency if there was a direct cause and effect relationship between the audit and the adjusted claim," New York, DAB No. 1382 at 7, we find that no such relationship exists here. Specifically, Florida cannot demonstrate a direct cause and effect relationship between the review of the withdrawn claims from FY 1990 and the claims now before us. See Oklahoma Dept. of Public Services, DAB No. 809 at 7-8 (1986). Florida knew that it needed to submit claims for its FY 1991 payments for children who met the Livingston Memorandum criteria before the 1997 review of claims withdrawn in FY 1990 was conducted, not as a result of the review.

Even assuming that the 1997 review of the FY 1990 claim was an audit, there is still no relationship between the timing of the ACF review of the FY 1990 claim for which Florida was granted a good cause waiver, and the submission of a claim for a later year, so as to invoke the audit exemption.⁽⁸⁾

As interpreted in the program regulations, the statutory preclusion of applying the two-year limit to an "audit exception" is narrowly drawn. This interpretation is consistent with congressional intent, as envisioned in the waiver provision, and with the purpose underlying the timely claims provision. In New York, DAB No. 521, we stated that the purpose of the two-year limitation on filing --

was not on its face to save federal money by depriving the states of FFP in valid claims for expenditures. The purpose was to prevent the states from coming in many years after expenditures were made and claiming FFP, or transferring claims for FFP from one program to another, without any time limit. Such delayed claiming made it difficult for the Department of Health and Human Services to plan its budget; claims for millions of dollars for expenditures in years long gone by could turn up at any time.

The exceptions to the time limitations were intended to cover only extreme situations. They were not intended to cover a routine situation where a state simply did not get around to getting its data together in time to file a claim within the statutory requirements. The exceptions are to take care of those cases where it would be patently unfair to a state to outlaw its claims merely because of the passage of time.

New York, DAB No. 521 at 8.

Thus, in determining whether the audit exception or any other exception to the statutory two-year period applies, we continue our long-standing approach of construing any exception to the rule narrowly. Here, we find that neither of the two requisite regulatory elements for an audit exception is met.

Florida has not supported a good cause waiver to the timely claims requirements.

Although the focus of Florida's argument was on the audit exception, Florida also repeatedly insisted that documented action or inaction by ACF prohibited timely filing of the FY 1991 claims. As noted above, 45 C.F.R. § 95.22 provides that good cause for late filing is premised on the existence of circumstances beyond a state's control, such as documented action or inaction by the Federal government. Thus, Florida's assertion that documented action or inaction by ACF prohibited timely filing could be construed as an indirect request for a good cause waiver by ACF for the FY 1991 claim for title IV-E expenditures. As ACF argued, however, Florida "has neither requested a waiver or furnished supporting proof." ACF Response to Request for Further Development of the Record at 4.

The regulation at 45 C.F.R. § 95.25 directs a state to request a waiver in writing as soon as the state recognizes that it will be unable to submit a claim within the appropriate time limit. A waiver request must include a specific explanation, justification or documentation regarding why the claim is late. The request must establish that the late filing is for good cause, as defined in 45 C.F.R. § 95.22, not simple neglect or administrative inadequacy. Moreover, if the claim has not been filed, the state must indicate when it will be. 45 C.F.R. § 95.28.

Florida never complied with the regulations governing the seeking of a good cause waiver. Moreover, during the course of ACF's correspondence with Florida regarding the FY 1991 claims, ACF asked Florida whether it was submitting a good cause waiver, and if so, to comply with the appropriate regulatory provisions. ACF Tabs F, J, and P. Florida insisted throughout that the audit exception was the basis for its request. Other than arguing in the course of the appeal that it was "impossible" for it to timely file the instant claims because of "documented action or inaction" of ACF, Florida fell far short of formally requesting any good cause waiver. Florida Br. at 1 and 7.

The record shows that Florida's post-FY 1990 claims process stalled in a lengthy, unexplained holding pattern. Florida presented no valid excuse for waiting until 2000 to pursue its claims for FY 1991.

Florida premised its request for a waiver for FY 1990 on the fact that it had not received the Livingston Memorandum until March 1994. ACF Tab G. We see no causal connection, however, between the absence of the Livingston Memorandum and Florida's failure to file a claim for post-FY 1990 title IV-E expenditures until May 4, 2000. Florida had filed a request for a waiver for FY 1990 in 1994 and presented no reasons here why it could not have asserted its claims for FYs 1991 and 1992 at the same time. It is the very nature of disputes concerning the allowability of foster care maintenance payments for one year that they may lead to disputes for prior or subsequent years. Notwithstanding the 1993 opinion from its Attorney General that Florida's foster care statute had complied with federal standards since 1978, Florida failed to take immediate steps to pursue its claims for FY 1991. In fact, in May 1993, Florida was sufficiently aware of the potential allowability of this category of claims that it had requested the opportunity to submit similar claims dating as least as far back as 1986. ACF Tab E. However, a review of correspondence between the parties shows nothing more than some ongoing attempts by Florida to get its information together, even well after questions regarding the compatibility of its statute and the federal standards were resolved. Florida's failure to get its information together promptly may reasonably be considered an administrative inadequacy. This is precisely the type of situation the timely claims provisions seek to avoid.

Conclusion

Based on the preceding analysis, we sustain the disallowance of $1,438,525 in its entirety.

Judith A. Ballard

Donald F. Garrett

Marc R. Hillson
Presiding Board Member

1. Florida's fiscal year extends from July 1 through June 30. Thus, the claim at issue is for Florida FY 1991.

2. Florida initially claimed $807,107 in FFP. In the disallowance determination, ACF indicated that Florida had miscalculated the amount of its FFP claim. ACF noted that the correct amount was $1,438,525.

3. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Public Law No. 104-193, repealed the title IV-A program and amended title IV-E so that it refers to certain provisions of former title IV-A as they were in effect on June 1, 1995.

4. ACF Tab A is ACYF-PIQ-86-02. ACF Tab B is ACYF-PIQ-82-3. ACF Tab C is an August 11, 1986 memorandum from the Commissioner, ACYF, known generally as the Livingston Memorandum.

5. It is unclear what Florida meant by "its right to challenge" the opinion. There is no dispute that Florida's statute complied with title IV-E requirements, and no record of any "challenge" to any ACF determination on this subject. Moreover, had Florida filed a claim that was subsequently disallowed, that matter could have been brought before us for review under 45 C.F.R. Part 16, in effect since 1981.

6. Other than referencing advice from "federal technical assistance staff" (see ACF Tab E) Florida never explained the circumstances surrounding the confusion over the FY 1990 claim, including the basis for its decision to withdraw claims. In any event, as discussed later, ACF reviewed the situation and granted Florida's request to resubmit the withdrawn claims.

7. ACF submitted a declaration from one of the ACF officials involved in those conference calls. That participant denied the substance of Florida's position on this issue and noted that neither ACF official was authorized to bind ACF in the manner alleged by Florida. ACF Tab U. Subsequently, Florida backed off its original position on this issue. Florida Reply Br. at 3-4. Given Florida's withdrawal, we need not consider this issue further.

8. Even assuming that Florida was told by ACF employees that the review might establish what percentage of expenditures for the reviewed children would be accepted as properly documented and that this percentage would apply to expenditures for those children in later years, this information could not reasonably be relied on by Florida as an indication that it could wait for the review before submitting its claim. Documentation of expenditures is a different issue from timely filing. As we have previously held, the mere existence of an audit is not sufficient to except a claim from the timely filing requirements. See New York, DAB No. 982 (1988).