Montana Department of Family Services, DAB No. 1266 (1991) Department of Health and Human Services DEPARTMENTAL APPEALS BOARD Appellate Division SUBJECT: Montana Department DATE: July 15, 1991 of Family Services Docket No. 91-13 Decision No. 1266 DECISION The Montana Department of Family Services (Montana or State) appealed a determination by the Administration for Children and Families (ACF or Agency) disallowing $191,776 in federal financial participation (FFP) claimed by Montana under Title IV-E (foster care) of the Social Security Act (Act). 1/ The disallowed amount represented costs claimed by Montana for Title IV-E administrative activities during the quarters ending March 31 and June 30, 1990. Montana had an approved cost allocation plan (CAP) for allocating the costs of its social workers' activities among various federal grant programs. 2/ Montana's CAP employed a time study code labeled "Child Protective Service - Investigation" to accumulate the costs of certain social worker activities. Montana said this included Title IV-E preplacement activities, and devised a method (which was not approved) for allocating part of these costs to Title IV-E. ACF disallowed the State's claims on the grounds that investigatory activities are not reimbursable under Title IV-E. The central issue presented by this appeal is whether Montana may claim, as allowable preplacement services, under Title IV-E the costs of activities of its social workers accumulated under the code for "Child Protective Services - Investigation." For the reasons discussed below, we find that Montana's allocation of these costs to Title IV-E is not consistent with its approved CAP, as required, and, therefore, there is no assurance the costs are for allowable preplacement activities. Accordingly, we sustain the disallowance. Statutory Background of the Title IV-E Program The Child Welfare Services program has been a part of the Act since the Act's inception in 1935. In 1968 Congress transferred this program to Title IV-B of the Act. Historically, Title IV-B has provided federal grants to states to establish, extend, and strengthen child welfare services. The services are available to all qualified children, including the handicapped, homeless, neglected, and dependent. The Adoption Assistance and Child Welfare Act of 1980, Pub. L. 96-272, was enacted on June 17, 1980. In addition to amending Title IV-B, this legislation established a new program, the IV-E program, Federal Payments for Foster Care and Adoption Assistance. The foster care component of the Aid to Families with Dependent Children (AFDC) program, which had been an integral part of the AFDC program under Title IV-A of the Act, was transferred to the new Title IV-E, effective October 1, 1982. Title IV-E of the Act (42 U.S.C. 670-676) had as its impetus the belief that the public child welfare system responsible for serving dependent and neglected children had become a holding system for children living away from their parents. Congress intended Title IV-E "to lessen the emphasis on foster care placement and to encourage greater efforts to find permanent homes for children either by making it possible for them to return to their own families or by placing them in adoptive homes." S. REP. No. 336, 96th Cong., 1st Sess. 1 (1979), reprinted in U.S. CODE CONG. & ADMIN. NEWS 1448, 1450. Title IV-E enables each state to provide, in appropriate cases, foster care and adoption assistance for children who otherwise would be eligible for assistance under a state's approved Title IV-A plan (42 U.S.C. 601 et seq.) or, in the case of adoption assistance, would be eligible for benefits under the Supplemental Security Income program of Title XVI of the Act (42 U.S.C. 1381 et seq.). In order to carry out the provisions of Title IV-E, appropriations made available for that program are to be used for making payments to those states which have submitted, and had approved, state plans under Title IV-E. Section 471 of the Act. Congress identified three separate categories of expenditures for which states are entitled to FFP under payment formulas set forth in section 474 of the Act: foster care maintenance payments for children in foster care homes or child care institutions (section 472); adoption assistance payments (section 473); and payments "found necessary by the Secretary for the proper and efficient administration of the State plan . . ." The last category, expenditures for plan administration, is subdivided to cover the cost of training state personnel to administer the IV-E program and all other administrative expenditures. Section 474 (a)(3). This appeal concerns the latter subcategory of IV-E administrative expenditures. The implementing regulation for the funding of these expenditures, 45 C.F.R. 1356.60, provides: (c) Federal matching funds for other State and local administrative expenditures for foster care and adoption assistance under title IV-E. Federal financial participation is available at the rate of fifty percent (50%) for administrative expenditures necessary for the proper and efficient administration of the title IV-E State plan. The State's cost allocation plan shall identify which costs are allocated and claimed under this program. . . . (2) The following are examples of allowable administrative costs necessary for the administration of the foster care program: (i) Referral to services; (ii) Preparation for and participation in judicial determinations; (iii) Placement of the child; (iv) Development of the case plan; (v) Case reviews; (vi) Case management and supervision; (vii) Recruitment and licensing of foster homes and institutions; (viii) Rate setting; and (ix) A proportionate share of related agency overhead. Factual Background Montana stated that it investigates all reports of suspected child abuse and neglect. Montana maintained that the claims at issue here represent only those reports that are substantiated, concern Title IV-E eligible children, and result in foster care placement. In this process the State's social workers conduct investigations, develop a case plan, make service referrals, and prepare for and participate in judicial determinations. In order to allocate the activities of its social workers, Montana uses a Random Moment Time Study (RMTS) as provided for in its CAP. 3/ The amounts at issue here were claimed under Question 2, code 50 of the RMTS, "Child Protective Service - Investigation." Nothing in the RMTS procedures distinguishes one type of "investigative" activity from another or distinguishes the nature of the children receiving the services. Montana stated nonetheless that it had ensured that only allowable Title IV-E costs were claimed because it had "stepped down" costs allocated using Question 2, code 50 of its RMTS. 4/ This procedure, Montana claimed, intentionally reduced a significant portion of the total activities with a code 50 designation, in order to ensure that all unsubstantiated or unfounded referrals were excluded and that only costs of services to Title IV-E eligible children were claimed. Discussion First, we note that section 1356.60 requires that costs claimed under Title IV-E must be identified in a CAP as IV-E costs. Montana did not deny that its CAP in effect during the time period at issue did not specifically allocate these costs to Title IV-E. The State attempted to justify its allocation by explaining that its CAP was submitted before the Board issued its decision in Missouri Dept. of Social Services, DAB No. 844 (1987). In that case, the Board examined what activities could be claimed as administrative costs under the IV-E program. The Agency's policy had been that allowable administrative costs could "include the determination of eligibility, preparation for placement, placement and referral costs before the child is placed in foster care, but only for children actually placed in foster care and determined eligible under title IV-E." PA-ACYF-85-01 (Agency Ex. 5) (emphasis in original). The Board found this Agency policy too restrictive in limiting allowable administrative costs to only those children actually placed in foster care. The Board found that under the statute and the regulations states were entitled to FFP for the administrative costs listed at 45 C.F.R. 1356.60(c)(2) regardless of whether the children are eventually placed in foster care. The Board declared: The Agency loses sight of the fact that, in order to ensure that every eligible individual becomes a recipient, the State will have to engage in activities for candidates who will never become recipients. These activities are just as much necessary activities for the program as those provided for children who do become program recipients. Missouri, at 8. In response to the Missouri decision the Agency issued a new policy announcement, ACYF-PA-87-05 (State Item II), which provides: Federal financial participation for administrative costs listed at 45 CFR 1356.60(c) may be claimed regardless of whether the child is actually placed in foster care and becomes a recipient of title IV-E foster care benefits. However, reimbursement is limited to those individuals the State reasonably views as candidates for title IV-E foster care maintenance payments. * * * The administrative costs of referrals to service providers (45 CFR 1356.60(c)(2)(i)) are only for those referrals specifically designed to further the statutory goal of section 471(a)(15) of the Act and are limited to the activities of agency staff in the referral process only. Reimbursement is not available for the costs of services, investigations, or physical/mental examinations or evaluations. Allowable costs of preparation for and participation in judicial determinations (45 CFR 1356.60(c)(2)(ii)) are limited to those costs related to the preparation of reports to the court and participation in court proceedings by State or local title IV-E agency personnel. (Emphasis in original) It is undisputed that the questioned claims here were derived from a RMTS code designated "Investigation." The Agency contended that investigatory activities are not included in the list of examples of Title IV-E reimbursable administrative activities provided in 45 C.F.R. 1356.60(c)(2). 5/ The Agency further argued that ACYF-PA-87-05, issued in response to the Missouri decision, specifically states that IV-E reimbursement is not available for investigations. The Agency maintained that a "first step" investigation process that may eventually lead to the opening of a protective services plan, which may subsequently lead to the development of a foster care case plan, is accordingly not reimbursable under ACYF-PA-87-05. The Agency insisted that these investigative costs should have been claimed by Montana under Title IV-B (child welfare services) or other federal grants available under the Child Abuse and Treatment Act, 42 U.S.C. 5101, et seq. By claiming these costs as Title IV-E administrative activities, the State was, according to the Agency, attempting to circumvent the funding ceiling that applies to the Title IV-B program by shifting the costs to the Title IV-E program which has no funding ceiling. Montana disputed the Agency's contention that the questioned costs were entirely for investigative activities. Montana contended that the stepped down activities reflected in the remaining 21.83% of question 2, Code 50, are IV-E pre-placement activities found allowable in Missouri. Specifically, Montana contended that the activities consisted of allowable activities under 45 C.F.R. 1356.60(c)(2): referrals to services, preparation for and participation in judicial determinations, and development of case plans. Montana conceded that the term "Investigation" used in its CAP as code 50 is a poor label for the range of activities recorded under that code and did not reflect the actual preplacement activities performed by its social workers. Montana's reliance on the Board's Missouri decision is misplaced for several reasons. In Missouri the state was not submitting claims which were inconsistent with its existing CAP, but was contesting the disapproval of a proposed amendment to its CAP. The state was seeking to redefine the codes in its time study mechanism to capture the time its social workers spent on Title IV-E preplacement activities. It was in that context that the Board ruled that such activities are reimbursable as administrative costs under the Title IV-E program, regardless of whether the child for whom the activities are undertaken is found to be Title IV-E eligible, and that accordingly Missouri's amendment to its CAP reflecting these activities should be approved, provided Missouri could properly define those activities in its CAP. The significance of the Missouri decision as it applies to the facts of this appeal is not that the activities for which Montana is seeking Title IV-E reimbursement could be considered identical to the activities performed by Missouri, but that Missouri was seeking to modify its CAP so it could claim the costs of these activities under Title IV-E in the future. The Board did not give blanket authority for claiming Title IV-E reimbursement for these preplacement activities. The Board's decision stands for the proposition that the costs of these activities can be claimed only in the context of an approved CAP. Moreover, the fact that Montana's CAP and associated RMTS were written prior to the Missouri decision does not avail the State here. Montana's stepdown method does not purport to simply identify allowable preplacement activities for candidates for foster care. Rather, the State contended that this method identified activities, such as preparing case plans for Title IV-E eligibles, which the Agency's policy always allowed. Also, the time period encompassed by this disallowance began three years after the Board's issuance of its Missouri decision, yet the State continued to rely on this same RMTS, with its same coding provisions, as approved in its existing CAP. There is no indication in the record before us that during this period Montana ever sought to amend its RMTS or its CAP based on the Missouri decision. 6/ Contrary to what the State argued, the existing CAP did specifically identify some preplacement activities. Montana's existing RMTS included under Question 2 a code 53 specifically addressed to the Title IV-E program, entitled "Child Foster Care." Code 53 sublisted the allowable Title IV-E administrative costs contained in 45 C.F.R. 1356.60(c)(2) (including development of the case plan, referral to services, and preparation for court), as well as the additional topics of "Eligibility Determination" and "Redetermination of Eligibility, Fair Hearings, & Appeals." Montana clearly had the ability to amend this code to encompass preplacement activities for both eligible Title IV-E individuals and candidates, as permitted by Missouri and ACYF-PA-87-05. Instead, Montana merely alleged such costs were accumulated under the nebulous code 50 (although some of the activities would appear to fit more readily under code 53, and it is likely that the social workers identified them to this code). Moreover, the use of the term "investigation" in the State's current CAP, while not determinative, indicates that it is likely that unallowable investigative activities were captured under this code. We question whether the stepdown method employed by the State would eliminate all of the unallowable investigative activities. Montana elected the provisions of its CAP, and it must accept the results of those provisions, until it amends the CAP. Federal regulations require that claims must be submitted in accordance with an approved CAP. See 45 C.F.R. 1356.60; 95.517(a) and Part 201. This is more than merely a technical requirement. The plan ensures consistent treatment of costs, avoids duplicate claiming, and ensures that the methods used are reasonable for the time period they cover. Here the State must follow the approved CAP which failed to specifically allocate the costs in question to the Title IV-E program. Conclusion For the reasons stated above, we affirm the disallowance in the full amount of $191,776. __________________________ Cecilia Sparks Ford __________________________ Norval D. (John) Settle __________________________ Judith A. Ballard Presiding Board Member 1. The disallowance was issued in January 1991 by the Administration for Children, Youth and Families of the Office of Human Development Services (OHDS). OHDS is now part of the Administration for Children and Families. 2. A state participating in the various public assistance programs under the Act, including Title IV-E, is required to make determinations as to the amount of commonly incurred expenditures, such as staff time, that are attributable to each program the state administers. A state is required to submit a plan for cost allocation to the Director, Division of Cost Allocation, in the appropriate regional office. 45 C.F.R. 95.507(a). This cost allocation plan is defined as "a narrative description of the procedures that the State agency will use in identifying, measuring, and allocating all State agency costs incurred in support of all programs administered by the State agency." 45 C.F.R. 95.505. 3. A RMTS is a method of statistical sampling. As explained in Montana's CAP, it provides a basis for dispersion of costs into program categories. The person conducting the time study telephones a worker and asks the worker to identify by code the activity which the worker is currently doing. State Ex. V, Appendix A. 4. Montana explained how the claims were "stepped down" as follows: During the reporting period 77.2% of reported [child abuse and neglect cases] were substantiated. The IV-E client ratio, the ratio of IV-E clients to total clients was 28.28%. Code 50 had 35.4% of the total social worker time allocated to it. Therefore, .354 x .772 x .2828 = .07728 of social worker time was reported as eligible for federal participation at the rate of 50%. Montana Brief, at 5, fn. 2. 5. The Board pointed out in Missouri that the list of examples at 45 C.F.R. 1356.60(c)(2) was not all-inclusive, but for purposes of claiming Title IV-E funds, "states are still limited to activities closely related to the activities listed and are not permitted to develop entirely new categories of activities." At 17. 6. Thus, the timing of the issuance of Missouri did not create a "significant inequity" that might justify retroactive amendment of the State's CAP. 45 C.F.R. 95.515(a). In any event, Montana has not submitted such an amendment to its