SUBJECT: Maryland Department of Human Resources

Request for Reconsideration of DAB No. 1886

SUPPLEMENTAL RULING ON
REQUEST FOR ECONSIDERATION

In July 2003, the Maryland Department of Human Resources (Maryland) requested reconsideration of Maryland Dept. of Human Resources, DAB No. 1886 (2003). That decision upheld in full the disallowance of foster care maintenance payments for 37 sample cases that ACF determined were not eligible for funding under title IV-E of the Social Security Act (Act). The Board remanded the case to the Administration for Children and Families (ACF) to consider how to properly calculate the unallowable administrative costs associated with ineligible sample cases.

In its request for reconsideration of that decision, Maryland disputes the Board's conclusion that ACF has general authority to disallow administrative costs associated with ineligible cases that were identified in a primary review. In addition, Maryland disputes the Board's conclusion that a 1993 ACF policy to allow administrative costs incurred on behalf of otherwise eligible children placed in unlicensed foster family homes did not extend to administrative costs associated with children who are ineligible because there was no timely judicial determination of reasonable efforts to finalize a child's permanency plan. See 45 C.F.R. § 1356.21(b)(2). Maryland also argues for the first time that children lacking such a judicial determination are eligible for IV-E because "[l]ateness in obtaining a judicial determination about progress in finalizing a permanency plan is not an eligibility issue; rather it is a State plan compliance issue." Reconsideration request at 4.

The Board's regulations permit the Board to reconsider a decision where a party promptly alleges a clear error of fact or law. 45 C.F.R. § 16.13. We have already denied Maryland's request for reconsideration on the question of ACF's general authority to disallow administrative costs associated with ineligible cases in a decision addressing three other states' appeals in addition to Maryland's reconsideration request. Maryland Dept. of Human Resources et al., DAB No. 1949 (2004). That decision, however, left for resolution in a separate proceeding Maryland's request for reconsideration of the Board's decision with respect to ACF's disallowance of administrative costs associated with sample cases for which there was no judicial determination meeting the requirements of section 1356.21(b)(2). In order to ensure consistency of results, the Board waited to resolve this issue pending our consideration of a similar disallowance in New York State Office of Children and Family Services, DAB No. 1984 (July 1, 2005).

As explained below, we conclude that Maryland has not shown that the Board made a clear error of fact or law in upholding that disallowance. Accordingly, we deny Maryland's request for reconsideration of DAB No. 1886 with respect to the remaining issue raised in that request.

First, we note that federal funding at the administrative cost rate is available only for expenditures the Secretary determines are reasonable and necessary for the proper and efficient administration of the IV-E program. See section 474(a) of the Act; 45 C.F.R. § 1356.60(c). Maryland's continued reliance on ACF's 1993 policy as a determination that the costs at issue here meet this standard is misplaced. Maryland points out that DAB No. 1886 (at page 11) incorrectly described that policy as applying to otherwise eligible children placed in unlicensed foster family homes that were in the process of becoming licensed, instead of otherwise eligible children placed in any unlicensed foster family home. Maryland argues that, in view of the "extent and scope of ACF's policy," administrative costs associated with any children "who met the title IV-E statutory eligibility requirements" should be allowed. Reconsideration request at 5.

It appears that Maryland is correct that ACF's 1993 policy is not restricted to unlicensed foster family homes in the process of becoming licensed; however, the policy still applies only to children in unlicensed foster family homes. See ACYF-CB-PA-01-02, at 8 (ACF Ex. 7 in record for DAB No. 1886). In addition, Maryland does not explain how the fact that the policy applies to children in any unlicensed foster family home would make a difference in this case. In DAB No. 1886, the Board distinguished the children it thought were covered by the policy from the children with respect to whom Maryland argues administrative costs should be allowed on the ground that--

[a]dministrative efforts on behalf of a child in the situation addressed in the policy could result in IV-E maintenance payments properly being made. Once the state agency has failed to make reasonable efforts to finalize a permanency plan for the child and/or to obtain a judicial determination to that effect, however, the administrative efforts alone cannot result in proper IV-E maintenance payments.

DAB No. 1886, at 11. Maryland does not argue that the fact that the policy applies to children in any unlicensed foster family home renders this distinction invalid. Efforts for such children that could lead to IV-E eligibility could include either seeking a licensed home in which to place the child or seeking to license (or approve) the unlicensed home where the child has already been placed.

Moreover, ACYF-CB-PA-01-02 states that the rationale for ACF's 1993 policy was that children in unlicensed homes were candidates for foster care. Maryland does not argue that that rationale applies to the children in question here, who lacked a timely judicial determination that reasonable efforts were made to finalize the permanency plan. Those children clearly do not meet ACF's definition of "candidate for foster care" as "a child who is at serious risk of removal from home as evidenced by the state agency either pursuing his/her removal from the home or making reasonable efforts to prevent such removal." ACF Child Welfare Policy Manual, § 8.1D, Question 2; ACYF-CB-PA-01-02 (July 3, 2001). (We note that ACF ultimately decided that this definition does not apply to children in unlicensed homes, but agreed not to change the policy without notice and comment rulemaking.) Nor does Maryland explain how administrative costs incurred during the period of ineligibility are reasonable and necessary for the proper and efficient administration of the IV-E program.

Finally, contrary to Maryland's characterization, children for whom there was no judicial determination meeting the requirements of section 1356.21(b)(2) do not meet the eligibility requirements in title IV-E. As discussed by the Board in DAB No. 1984, the regulatory provision to this effect is a reasonable interpretation of the statutory eligibility requirements.

There is also no merit in Maryland's argument that a state's failure to comply with the requirements for a judicial determination of reasonable efforts to finalize a child's permanency plan raises an issue of state plan compliance rather than IV-E eligibility. ⁽¹⁾ In DAB No. 1984, the Board rejected the same argument, stating in pertinent part that--

the regulation implementing section 475(5)(C) [of the Act] makes the requirements in section 471(a)(15) [of the Act] regarding reasonable efforts part of the criteria for determining a state's substantial conformity with title IV-E State plan requirements. 45 C.F.R. § 1355.34(b)(iii)(G). However, section 472(a)(1) provides separate statutory authority for making a judicial determination of the reasonable efforts described in section 471(a)(15)(C) a condition of eligibility. Nothing in section 475(5)(C) limits this authority.

DAB No. 1984, at 10. Moreover, even if DAB No. 1984 had held otherwise, it is questionable whether a party is alleging an error of law where, as here, a request for reconsideration raises for the first time a legal issue that the party could have raised earlier.

Since Maryland did not show any clear error of fact or law in DAB No. 1886, we deny Maryland's request for reconsideration and reaffirm DAB No. 1886 in full. The parties should thus proceed to resolve issues about how to modify the methodology used to calculate the disallowance of administrative costs, pursuant to the remand in DAB No. 1886. ⁽²⁾

Cecilia Sparks Ford

Donald F. Garrett

Judith A. Ballard
Presiding Board Member

1. Maryland may have intended this argument only as an attack on the Board's conclusion that ACF has general authority to disallow administrative costs associated with ineligible cases that were identified in a primary review (although Maryland did not pursue this argument in the proceedings leading to DAB No. 1949). See reconsideration request at 4-5 (concluding that "the Board's ruling is not justified on the basis of a general principle that administrative costs related to ineligible children are unallowable" and requesting only that the Board overturn the disallowance of administrative costs). We nevertheless address this argument here since it could support Maryland's position that administrative costs associated with children for whom there was no judicial determination meeting the requirements of section 1356.21(b)(2) are allowable.

2. Maryland indicated that it would review ACF's recalculation of the disallowance pursuant to the remand after the Board ruled on its request for reconsideration. Docket Nos. A-03-87, A-03-83, A-04-14, and A-04-133, Transcript of 8/24/04 oral argument at 89-90.