Illinois Department of Public Aid, DAB No. 1180 (1990) 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