Montana Department of Social and Rehabilitation Services, DAB No. 581
(1984)

GAB Decision 581

October 24, 1984 Montana Department of Social and Rehabilitation
Services;  Docket No.  83-286 Ford, Cecilia;  Garrett, Donald Ballard,
Judith


   The Montana Department of Social and Rehabilitation Services
(Montana, State) appealed a disallowance of $35,841 federal financial
participation in the cost of maintenance assistance payments made during
fiscal year 1978 (October 1, 1977 through September 30, 1978) and
claimed by the State under Title IV-A of the Social Security Act.  /1/
Title IV-A authorized federal assistance for foster care (FC) as part of
the program of Aid to Families with Dependent Children (AFDC).  /2/



   The Office of Human Development Services (OHDS, Agency) estimated
that $35,841 on appeal by extrapolating from a sample of AFDC-FC cases.
The Agency sampled 164 payments in a universe of 382 taken from 10
counties.  It found payments for 24 children to be unallowable.

   The State argued that the Agency's use of extrapolation to estimate
the disallowance was inconsistent with Agency policy, citing California
Department of Social Services, Decision No. 319, June 30, 1982 and its
Reconsideration, December 31, 1982.  The Agency contended that its
policy did permit extrapolation, citing Action Transmittal (AT) 82-33,
issued December 13, 1982, by the Social Security Administration, and
Policy Announcement 83-03, issued by OHDS May 4, 1983, adopting the
policy in AT 82-33.  In the alternative, the Agency argued that the
policy set forth in AT-82-33 should be applied retroactively.

   (2) We find that Agency policy applicable to the time period when the
State made the assistance payments was to disallow only for individually
identified errors.  Accordingly, we reverse the disallowance to the
extent based on extrapolation from a sample.  We uphold the disallowance
for the 24 sample cases.

   The reasons for our decision are the same as those set forth in
Louisiana Department of Health and Human Resources, Decision No. 580,
October 22, 1984.  Montana's appeal was argued jointly with Louisiana
and cases from several other states and the District of Columbia at a
conference on July 11, 1984.  As summarized at page 2 of the Louisiana
decision, we hold:

   (1) that as a culmination of historical developments, including a
failed rulemaking on error tolerance and a court decision, the Agency,
perhaps in part inadvertently, ended up with a policy stance which
assured states that only individually identified errors would be held
against them;

   (2) that for the periods in question here, a contrary policy was
never clearly articulated;  and

   (3) that the states have made a persuasive showing that the
retroactive imposition of a changed policy would be unfair, primarily
because the states had no opportunity to decide whether to shift
resources to reduce on error rate which the Agency had, in effect,
agreed to tolerate.

   In the July 11 conference, the Agency was asked whether the errors in
the cases addressed there were distinguishable from California. The
Agency did not argue that they were distinguishable, but, rather,
indicated that the definition of "case error" for the AFDC program was
broad enough to cover all of the errors in question.  Tr., 44-47. Thus,
we see no reason for a different outcome here than in Louisiana.

(3) Conclusion

   Accordingly, for the reasons stated above and explained in Louisiana,
we uphold the disallowance in part and reverse in part.  /1/ The State
        originally indicated it was appealing $69,356. In its brief and
in a subsequent telephone conference, the State affirmed that it was
appealing only $35,841.  The State also did not dispute the Agency's
individual case findings.         /2/ The Child Welfare and Adoption
Assistance Act of 1980, Public Law 96-272, established a new Foster Care
Program under Title IV-E of the Act.

MARCH 19, 1985