Department of Health and Human Services
DEPARTMENTAL APPEALS BOARD
Appellate Division
SUBJECT: Illinois Department
DATE: August 1, 1990
of Public Aid Docket No. 90-20
Audit No. A-05-88-00018
Decision No. 1180
DECISION
The Illinois Department of Public Aid (Illinois or State) appealed a
determination of the Office of Refugee Resettlement (ORR) to disallow
$91,414 which Illinois claimed under the Refugee Resettlement Program.
ORR disallowed the claim based on an audit finding that Illinois had
claimed this amount for cash assistance payments during the period of
October 1, 1985 to September 30, 1987 without substantiating the
continuing eligibility of the recipients of the payments. ORR and
Illinois policies required redeterminations of eligibility every six
months, but did not explicitly state consequences of a failure to
redetermine eligibility.
The federal auditors used a statistical sampling and extrapolation
process to establish the amount of the disallowance. They reviewed 200
randomly selected cases, and focused on fifteen cases which had remained
active for an average of fourteen months without redeterminations of
eligibility before the cases were cancelled. The auditors projected
ineligible costs associated with these fifteen cases of at least
$91,414. Illinois was given the opportunity to present evidence of
eligibility, but ORR was not persuaded by what the State presented.
Illinois challenged ORR's approach of questioning recipient eligibility
where the State had failed to make the six-month redetermination of
eligibility. The State also presented arguments related to specific
aspects of eight of the fifteen cases. 1/
Below, we first discuss general issues related to the six-month
redetermination requirement. Then, we discuss issues which are specific
to eligibility of the cases involved here.
I. The requirement for timely redeterminations
Illinois did not dispute that ORR's guidelines and the State's own
policy called for redeterminations of eligibility at least every six
months, nor that the State had failed specifically to make these
redeterminations. Basically, the dispute concerns the consequences of
the failure. Illinois argued that it was unreasonable for ORR to assume
the ineligibility of a recipient based on the lack of a six-month
redetermination; a disallowance, said Illinois, should only follow from
affirmative evidence of ineligibility. Illinois Brief, pp. 1-3.
The State's position raises two interrelated issues: whether the
redetermination requirement itself was reasonable, and if so, whether a
redetermination failure justified a challenge to eligibility and a
disallowance if the State failed to present evidence adequate to prove
eligibility.
a. The validity of ORR's redetermination requirement
Illinois acknowledged that an ORR guideline issued in 1976, as well as
the State's own written policies, specifically required that eligibility
for refugee assistance be redetermined at least every six months. 2/
Nonetheless, the State argued that neither the underlying law (the
Refugee Act of 1980, Public Law 96-212) nor ORR's regulations (45 C.F.R.
Part 400) authorized the requirement. Illinois took the position that
the State did not treat its own six-month policy as dispositive on the
issue of eligibility. Illinois argued that ORR had violated the
principle in Pennhurst State School v. Halderman, 451 U.S. 1 (1981),
that Congress's imposition of conditions on federal grants must be
stated unambiguously. Illinois Brief, pp. 2-5, and exhibits cited.
We find that ORR's requirement clearly passes muster under Pennhurst.
Pennhurst dealt with whether a state could be compelled to spend its own
funds to implement a sweeping, general policy -- a "bill of rights"
--
promoting habilitation of the disabled, which was part of a law
providing grants to states for programs for disabled persons. A
mentally retarded resident of a state institution cited the policy as a
basis for demanding correction of poor conditions at the institution.
Lower courts found the "bill of rights" created enforceable, substantive
rights which the state had to meet at its own expense, as an implied
condition of having accepted the grant for disabled programs. The
Supreme Court disagreed, holding that while the grant was contractual,
the conditions of the contract had to be stated unambiguously, since
there could be "no knowing acceptance if a State is unaware of the
conditions or is unable to ascertain what is expected of it." 451 U.S.
at 17. The Court then determined that the "bill of rights" was
essentially precatory language, and that there had been no congressional
intent to force states to "fund new, substantive rights." Id., p.
18.
These factors distinguish Pennhurst:
- Here, unlike the situation in Pennhurst, ORR's requirement for a
six-month redetermination was clear, simple, modest, and
unambiguous, and had been in existence for a decade prior to the
period of the disallowance. Indeed, we are not even dealing
with a question of a requirement residing only in federal
guidelines. Illinois itself had implemented the requirement for
a six-month redetermination quite explicitly in its own State
Plan. Illinois Brief, Exhibit D.
- We are not faced with a requirement which the State was expected
to fund on its own, and, in fact, the case concerns only the
federal funds provided for the specific cases involved in the
redetermination controversy.
- The requirement for a six-month eligibility check is a mechanism
for policing eligibility of claimed amounts for federal sharing,
and as such may reasonably be deemed an administrative or
financial management condition, not a new, substantive program
obligation. As we have noted before, this is quite different
from the situation in Pennhurst. Los Angeles County
Superintendent of Schools, DAB No. 461 (1983), pp. 12-14.
- The 1976 Program Instruction, which informed states of what
requirements would apply to refugee assistance programs, was
developed after state agencies and other interested parties had
been given actual notice and an opportunity to comment on the
draft requirements. Moreover, the State clearly understood that
the redetermination requirement continued to apply even after
the 1980 amendments.
- The six-month redetermination requirement is modest and
reasonable, and directly related to the purposes of the program.
The refugee program pays states additional reimbursement for
costs under the Medicaid and Aid to Families with
Dependent Children programs for eligible refugees (as well as
some medical and cash assistance for refugees not eligible under
those programs). It is clear that Congress intended funding to
be conditioned upon refugees actively seeking employment, and
that funds were intended for the relatively narrow purpose of
bridging the gap between entry and independence quickly; for
example, it is an express aim of the program to place refugees
in jobs "as soon as possible." 8 U.S.C. 1522(a)(1)(A)(i); see
also section 1522(a)(6)(A)(i), and implementing regulations, 45
C.F.R. 400.1, 400.5(b) (1985 and 1986). 3/ While the regulations
do not specify the six- month redetermination, the regulations
do specify that federal financial participation is available
only in certain costs to eligible refugees, clearly implying the
need for a periodic eligibility assessment such as the one
described in ORR's long-standing supplementary guidelines. See,
e.g., 45 C.F.R. 400.8 (1985). Congress conditioned assistance
on a recipient's registration for employment services,
participation in job and language training, and acceptance of
appropriate employment. 8 U.S.C. 1522(e)(2)(A). Again, we
note that Illinois itself recognized the common sense of the
redetermination mechanism in its own State Plan, which contains
considerable detail on how to redetermine eligibility "at least
every six months." Illinois Exhibit D, second page.
Therefore, the redetermination requirement itself is clearly a
reasonable policy, of which the State had adequate notice. Now, we turn
to the issues related to the consequences of a violation of the
requirement.
b. The effect of a redetermination failure
Although the redetermination requirement itself is clearly reasonable,
the State's position raises additional Pennhurst-type concerns about the
clarity and reasonableness of the consequence of a redetermination
failure.
The State presented affidavits from two State officials to the effect
that their interpretation of the State Plan provision was that a failure
to perform redetermination on an individual does not, per se, result in
ineligibi- lity of the individual, and that eligibility can be otherwise
determined. Illinois Brief, Exhibit D, last two pages; Illinois Reply
Brief, Exhibit A.
However, the State's affidavits largely are beside the point.
In effect, the State casts ORR in the role of valuing form (the
six-month redetermination) over substance (actual eligibility), implying
that ORR has imposed a harsh and unauthorized requirement which the
State could not reasonably have anticipated. This is an inaccurate
representation of what occurred. Whether ORR can sanction a failure to
redetermine eligibility per se is not the issue here. The record shows
that ORR did no more than use a finding of a redetermination failure as
a triggering mechanism, i.e., as a reason to challenge the State to
produce evidence of eligibility. ORR's decision leading to this appeal
states:
. . . we have determined that the primary issue to be resolved is
whether any of the 15 cases were eligible to receive refugee cash
assistance when the redeterminations were due to be performed and
precisely how, and what, was documented. The State's response
referred generically to other sources of information for detecting
changes in case eligibility, but provided no specific data . . .
Because the State has failed to produce documentation to establish
that these cases were eligible to receive refugee cash assistance .
. . the cited amount of $91,414 is disallowed.
Disallowance Letter dated December 26, 1989, p. 2.
ORR treated a redetermination failure not as a conclusive presumption of
ineligibility, but as a challenge to the State to show evidence of
continued eligibility. In fact, ORR said that had it followed a policy
of disallowing for lack of a redetermination per se, it would have
disallowed funds for 22 more sample cases, in which it found no timely
redeterminations had been made. ORR Brief, pp. 8-9. The affidavits of
the State's witnesses, to the effect that redetermination failure does
not per se render a recipient ineligible and that eligibility may be
shown by other means, in principle do not conflict with ORR's position
here. ORR's position is reasonable. To begin with, it is axiomatic that
the federal funds appropriated for the refugee assistance program are
available only for expenditure for eligible individuals. ORR has
considerable discretion to establish accountability mechanisms and to
challenge questionable expenditures.
The question becomes whether ORR has reasonably translated the State's
general burden of accountability, in the context of the refugee program,
into a specific burden to demonstrate evidence of eligibility on a six-
month basis when challenged to do so. We conclude that the answer is
"yes," based on the nature of the program.
The refugee program is unusual in that eligibility is a peculiarly
transient aspect: as noted, the program was specifically designed to
expedite refugees through and out of an assisted status to economic
independence. It is particularly reasonable to anticipate changes in
eligibility over relatively short periods. Although the refugee program
is related to the AFDC program, the latter does not have nearly the same
degree of transiency. Also, the refugee program, as even the State
acknowledged, has its own eligibility requirements related to achieving
independence, such as involvement in education, training and job
searches. Illinois Reply Brief, p. 7. Thus, ORR fairly rejected the
State's idea that eligibility should be presumed on a long-term basis
until affirmatively disproved despite a lack of evidence arising from
failure to perform the required six-month redetermination. ORR is well
within reason to demand evidence of continued eligibility in the
circumstances here.
Furthermore, the requirement for redetermination would be virtually
meaningless under the State's approach. We note again that the State
mandated six-month redeterminations as part of its own State Plan, and
that the Plan contains considerable detail on what the redeterminations
must encompass. The State Plan is an important document, mandated by
statute and ORR regulations, subject to review by the Governor and ORR,
and designed to provide the management framework and basic conditions
for administering the refugee program. 8 U.S.C. 1522(a)(6); 45 C.F.R.
400.4 (1985). Among other things, the Plan must "promote employment and
economic self-sufficiency as quickly as possible." 45 C.F.R. 400.5(b)
(1985). Federal funding is available only for payments made "under the
plan," and the state is required to maintain records as are necessary
for federal monitoring of the program. 45 C.F.R. 400.8; 400.10 (1985).
The State argued that its provision on redetermination was "a type of
directive" and not a condition of funding. State's Reply Brief, p. 4.
Whatever the meaning of such a distinction, even assuming its validity,
it does not change our conclusion that a failure to meet the "directive"
provides a reasonable basis to challenge the State to display its
evidence of eligibility. The State did not argue that payments to
ineligible recipients are allowable costs for federal sharing, and ORR
need not (and in fact, may not lawfully) pay for unallowable costs. It
is unreasonable to acknowledge the explicit requirement related to
accounting for eligibility, be it a "directive" or otherwise, but
argue
that it is merely precatory.
Furthermore, there is evidence in the record (a July, 1985 letter from
the ORR Regional Director to a State refugee program official) which
specifically noted that "[f]ailure to comply with State Plan
requirements can result in suspension of grants, including cash and
medical assistance and social services grants administered by the
State." ORR Brief, Exhibit 2. The State argued that this advice was
"generic" and insufficient as notice of a threat of loss of funds
for
failure to comply specifically with the redetermination requirement, but
this argument is not persuasive in the context discussed above. 4/
On the basis of the foregoing analysis, we conclude that ORR reasonably
can challenge Illinois to display evidence of eligibility in cases where
Illinois had failed to specifically redetermine eligibility in
accordance with ORR's Program Instruction and Illinois's State Plan, and
that in principle, a disallowance of costs is fair when eligibility has
not been adequately shown.
We now turn to issues related to the adequacy of evidence of eligibility
of the fifteen recipients. II. The State's evidence of eligibility in
the cases here
Based on our review of the record, we conclude that, except possibly in
one case (which we remand to ORR for further review), the State's
evidence was inadequate to show eligibility.
a. Food Stamp data
Illinois argued that information related to eligibility for Food Stamps
should be an acceptable alternative to six-month refugee
redeterminations, as it "revealed substantially the same information."
Illinois Brief, p. 6. For six cases of the fifteen cases in dispute,
Illinois presented what it said was such data. Illinois Brief, pp. 6-8;
Illinois Reply Brief, pp. 8-12; Illinois Exhibits E-K. The exhibits are
all copies of State forms. With one exception discussed under b. below,
there are five kinds of Illinois forms included: an application for
Food Stamp benefits, a form for noting changes in benefits, a "premail
action request," an AFDC redetermination form, and a Food Stamp
recertification form. Varying combinations of the documents are among
the exhibits for the six cases. For each of the six cases, Illinois
said that these forms showed family size, no assets, and no income other
than from public assistance. None of the forms deal directly with
eligibility for refugee assistance, nor do any of the forms mention
determination or redetermination of eligibility for such assistance.
On its face, the State's argument is that a Food Stamp income/asset
assessment ought to be good enough for determining continued refugee
eligibility. Although the State did not articulate it this way, in the
most generous possible light the argument might be that ORR should draw
a two-part inference from the evidence of a recipient's lack of assets
and income at a given point in time: first, that the recipient probably
also was penniless for some time later or earlier; and second, that the
recipient therefore probably continued in search of a job and eligible
for the refugee assistance for which he/she was once eligible.
However one interprets the State's position, we conclude that ORR was
not unreasonable in rejecting the State's approach as providing a thin
and overly speculative basis for eligibility in light of the nature of
the refugee program and the State's own standards for determining
eligibility. As ORR noted, and the State did not dispute, the Refugee
Act conditioned assistance upon a recipient's registration for
employment services, participation in job and language training, and
acceptance of offered employment; failure to do so means the recipient
loses assistance. 8 U.S.C. 1522(e). A state plan is required to
promote employment and economic self-sufficiency as quickly as possible,
describing how a state will ensure that language training and employment
services are implemented. 8 U.S.C. 1522(a)(6); 45 C.F.R. 400.4, 400.5.
Illinois's State Plan provides considerable detail on what
redetermination must encompass. Illinois Exhibit D. This includes
verifying income and assets -- to which the Food Stamp forms may be
relevant -- but that is only a threshold consideration. Much of the
State Plan provisions are concerned with verifying the refugee's effort
and cooperation in obtaining employment and job skills. Such
cooperation, with the local agency sponsoring the refugee, is
specifically described as an eligibility factor in the State Plan. The
plan calls for determining whether the refugee has refused to apply for
an appropriate job within the last 30 days, or refused a job offer
within the last 30 days, or quit a job, or (if working less than 100
hours a month) refused English language or job skill training. The
State Plan specifies that the redetermination process is complete only
when several steps (verification of eligibility factors, documentation)
are finished.
The Food Stamp evidence supplied by the State does not tell anything
about any of these employment-related factors. The best the State can
do is provide speculative reconstructions of what might have been the
case when the redeterminations were due. Illinois Reply Brief, pp.
8-12. It is clear, therefore, that ORR has not been unreasonable in
rejecting the State's evidence as inadequate to meet program
requirements and the specifics of the State Plan. 5/
b. Eligibility based on refugee program forms
For one of the six recipients (the first one the parties' briefs discuss
-- we do not use names to protect privacy), Illinois submitted what
appears to be new information with its Reply Brief (Exhibit B). The
evidence consisted of three copies of a State form used for referring a
refugee to a refugee job placement agency. Two copies showed that the
recipient was referred in July and September, 1985, and a third showed
that he was placed in a job in October, 1986, and that his assistance
was cancelled in November, 1986 (the State's brief erroneously said
November, 1990). He had been initially found eligible in July, 1985,
and ORR accepted that he had been redetermined eligible in January, 1986
(ORR Brief, p. 13). ORR focused on the failure to redetermine in July,
1986, and disallowed costs of benefits paid from August, 1986 until the
November, 1986 cancellation.
For the following reasons, we think this information warrants ORR's
further review:
(1) Although ORR apparently based its finding on the fact that the
recipient's October 1986 application for general assistance had
been denied on the basis that "assets too high (auto)" (ORR Exhibit
4), our record does not clearly show that these assets were
obtained before the recipient obtained employment.
(2) Unlike the other five recipients, for this recipient Illinois
submitted evidence which directly related to determinations in, and
some ongoing oversight related to, the refugee assistance program.
The referral form notes that it was to be kept "until the client is
placed in a job or refuses a job."
(3) ORR was willing to accept eligibility for the period of July, 1985,
through July, 1986 based on "some indication" of a redetermination
in January, 1986 (ORR Brief, p. 13). ORR did not rely on the
absence of redeterminations per se.
(4) It reasonably appears that the recipient was involved with the
refugee job placement agency in October, 1986, and that he did thus
obtain employment.
(5) Thus, unlike the other cases, here we have some affirmative
evidence of continuity as an active participant directly in
services of the refugee program, during time periods before and
after the date when the missing redetermination should have been
done, and within a relatively short period surrounding it.
We note that this evidence apparently was not reviewed by ORR, since it
was submitted with the State's Reply Brief. While we do not condone a
State waiting so long to submit evidence, we nonetheless consider it
appropriate for ORR to have the opportunity to react to it. Thus, we
remand this part of the case to ORR for its further review of whether
this recipient was eligible during the period in question. ORR may want
to request further information from the job placement agency for this
recipient, or from the State regarding when the assets were acquired.
c. Alleged miscalculation of redetermination dates
In its main brief, Illinois argued that in two cases ORR miscalculated
the lateness of the redeterminations. Illinois Brief, p. 8. ORR
responded with an explanation that the federal auditors' findings
actually agreed with what the State said in its argument, so that there
was no dispute and the calculation was as the State would have it; thus,
the disallowance amount did not change. ORR Brief, p. 16. Illinois
provided no response to this position in its Reply Brief, and nothing on
the face of ORR's presentation appears to be rebutted. Therefore, we
reject Illinois's argument on this issue.
III. Other eligibility information
Illinois also argued that there were collateral "safeguards" which
"help
to ensure" eligibility, including a wage verification system to
"identify clients who do not report wage earnings," birth/death record
crossmatches, school record crossmatches "to ensure that the household
is still in the area," a precancellation routine for notifying
caseworkers 16 months into the assistance period of a recipient, and
review of undeliverable mail and returned benefits to find "cases that
may have left the area." Illinois Brief, p. 9; Illinois Exhibits L and
M. On their face, these "safeguards" only address income and other
aspects of eligibility not directly related to the requirements for
employment efforts and simply are not, alone or collectively, reasonable
alternatives to six-month redeterminations or other affirmative evidence
of individual eligibility under the criteria of the refugee program and
the State Plan. In its Reply Brief (pp. 4- 5), Illinois added reference
to general cooperation with refugee social service providers, citing as
an example quarterly reports to the State from a service provider
consortium based on monthly reports kept on clients by service
providers. While this data at least appears more relevant to
eligibility redetermination than some of the information described
above, it still is not helpful here, for no specific data from any of
the "safeguards" was offered in support of eligibility of any of the
particular recipients involved (other than, perhaps, the one recipient
whose case we remanded to ORR). Thus, we conclude that the "safeguards"
provide no substantial support for the State's position in this case.
Conclusion
Based on our review of the record, and the analysis above, we uphold the
disallowance in part and withhold determination in part, pending ORR's
review of evidence in one case as discussed above. ORR should review
this case in light of the State's presentation and our analysis, and
advise the State of whether it will accept the State's evidence (or if
not, why not). The State may return to the Board, on this one case
only, within 30 days after receiving ORR's decision, if the State
disagrees with it.
_____________________________ Norval D. (John)
Settle
_____________________________ Alexander G.
Teitz
_____________________________ Judith A.
Ballard Presiding Board Member
1. In its January 24, 1990 Notice of Appeal, Illinois stated that it
"questions" the statistical methodology used to establish the amount
of
the disallowance. Illinois presented no evidence or argument on this
issue, however, so we do not consider this matter further.
2. ORR's Program Instruction (Action Transmittal) SRS-AT-76-160,
October 22, 1976, Paragraph IX, requires recertification "at least as
frequently as for AFDC [Aid to Families with Dependent Children]
recipients." Illinois Exhibit C, p. 7. It is undisputed that this was
six months. See, e.g., 45 C.F.R. 206.10(a)(9) (1985) (AFDC regulation
applicable during the disallowance period). Illinois tracked the
Program Instruction in an attachment to its State Plan, specifying the
six months redetermination requirement and related details. Illinois
Exhibit D. Although the provision was in this attachment, and although
the State did challenge the effect of the provision, the State did not
challenge ORR's characterization of the provision as having been
incorporated into the State Plan. ORR Brief, p. 4, n. 4; Illinois Reply
Brief, p. 4. The ORR Program Instruction was promulgated under an
earlier refugee program, prior to passage of the Refugee Act of 1980,
but it is undisputed that the Program Instruction remained in effect
(ORR Brief, p. 4) and that the State Plan provision was in effect during
the disallowance period (the version in the record bears dates on
different pages of 2/10/86 and 7/l/89).
3. Regulations applicable to refugee grants were modified during the
period covered by this disallowance. While there is more detail in the
1986 revisions, nothing in the changes affects this disallowance.
4. ORR also noted that a September, 1986, internal State audit warned
that a lack of redeterminations posed potential for disallowances. ORR
Brief, p. 11; ORR Exhibit 3. While we agree with Illinois that this is
not dispositive, the state auditors' view suggests that it is
disingenuous for the State to argue that it could not have anticipated a
disallowance for redetermination failures.
5. Illinois noted in its Reply Brief (p. 7) that this Board previously
found food stamp application forms acceptable in a dispute over refugee
assistance in another case. California Department of Social Services,
DAB No. 868 (1987). However, as that case was presented to us, the
focus was on questions of changed income eligibility, of which Food
Stamp forms are some evidence. See, e.g., DAB No. 868, p. 13. Here,
unlike in California, the focus has not been on threshold income
eligibility, but on other eligibility requirements particular to the
refugee