Title of Regulation: 22VAC40-920. Appeals of Financial Recoveries for Local Departments of Social Services (adding 22VAC40-920-10 through 22VAC40-920-40).

Statutory Authority: § 63.1-217 of the Code of Virginia; 2 CFR 200.341.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: January 27, 2017.

Agency Contact: David Morrison, Department of Social Services, 801 East Main Street, Richmond, VA 23219, telephone (804) 726-7266, or email david.morrison@dss.virginia.gov.

Basis: The State Board of Social Services has the authority to promulgate this regulation under § 63.2-217 of the Code of Virginia, which provides that the board shall adopt regulations, not in conflict with Title 63.2 of the Code of Virginia, as may be necessary or desirable to carry out the purpose of such title.

The Code of Federal Regulations states in 2 CFR 200.341 that the department will provide the local department an opportunity to appeal an enforcement action to which the local department is entitled to under any statute or regulation. Currently, there is no statute or regulation under which local departments are entitled to appeal an enforcement action.

Purpose: The Virginia Department of Social Services (DSS) needs to provide local departments the statutory right to appeal an enforcement action. A new regulation will provide clear, understandable requirements for local departments to decide on appealing an enforcement action and will best protect the health, safety, and welfare of the citizens receiving services from the local department.

Substance: The proposed regulation provides local departments the appeals process for any enforcement action taken by DSS. The proposed regulation describes the appeals process specifically for a local department that has an enforcement action taken against it by DSS. Specifically, the proposed regulation (i) defines a notification of a recovery, (ii) provides a timeline of actions for the locality to appeal a recovery, (iii) places the burden of proof on the local department of social services, (iv) provides a timeline for action and approval of the Commissioner of DSS, and (v) establishes the commissioner's decision as final and binding.

Issues: This action poses no disadvantages to the public or the Commonwealth. The proposed regulation will bring Virginia into compliance with federal regulations affording a local department of social services a right to appeal financial recoveries applied by DSS.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Pursuant to the federal regulation 2 CFR 200.341,¹ the State Board of Social Services (Board) proposes to establish rules for local departments of social services (local departments) to appeal State Department of Social Services (SDSS) notifications of recovery.

Result of Analysis. The proposed regulation is beneficial in that it will provide a regulatory framework for local departments of social services that contest a notification of recovery and provides standards for the appeal process. However, the proposal to exclude the Commissioner's decisions from judicial review and the proposed timeframes within which to file an appeal and documentation supporting that appeal may be costly for local departments that receive a notification of recovery.

Estimated Economic Impact. The SDSS conducts administrative reviews of funds sent to local departments for programs such as food stamp assistance and temporary assistance for needy families. When through administrative review the SDSS determines that a payment to a local department was too high, it issues a notification of recovery. Examples of causes of payments being too high include incorrectly claiming certain items or activities as being reimbursable and charging too much for rent.² The SDSS recovers the excess payment by reducing a future payment or payments by the amount of the overpayment. No penalty or interest is charged.³

Pursuant to federal regulation 2 CFR 200.341, the Board is required to provide the local departments an opportunity to appeal an enforcement action (notification of recovery) involving federal awards such as food stamp assistance or temporary assistance for needy families. Currently the SDSS provides local departments the ability to appeal a financial recovery in various guidance manuals, but there are no standard rules.⁴ Furthermore, there is no known Virginia statute or regulation addressing this appeals process. Thus, the Board proposes to establish regulatory rules for appeals of notification of recovery by local departments.

The proposed rules establish that local departments have 15 calendar days from the date of notification of a recovery decision to object to it in writing, and 15 calendar days from the date the local department objected in writing to submit all relevant information, documentation or data supporting the appeal. In addition, the Commissioner has 60 days to issue his/her decision. Failure to comply with the timelines would result in the loss of the right to appeal. The decision of the Commissioner is final, binding, and is not subject to judicial review.⁵

Since 2008 there have been 42 notifications of recovery issued. The magnitude of the 42 assessed overpayments ranged from $15 to $2.9 million; however, most have been under $1,000. Of the 42 cases, only two have been appealed.⁶

The proposed action will establish the regulation for the appeals process and ensure compliance with the federal regulation. The rules will also inform all parties as to their respective appeal rights. Moreover, the proposed regulation will bring consistency to the process. Finally, the rules will have the force of law, which is more enforceable compared to guidance manuals.

The stated intent of the proposed regulation is to provide a regulatory framework in which a local department is afforded an opportunity to appeal an enforcement action involving federal awards. Some of the proposed rules may be costly for local departments that receive a notification of recovery. For example, the proposed regulation will exclude the Commissioner's decisions from judicial review. This proposed requirement is not necessary for compliance with federal regulation 2 CFR 200.341. This particular change prevents local departments from challenging decisions in court. Similarly, the right to appeal will be lost if a local department fails to note its objection within 15 calendar days or fails to make its case with information, documents, and data within 15 calendar days after the notice of appeal. In some cases, a large dollar amount may be at issue, and the issue may be complicated requiring research. In such cases, the proposed deadlines may not be sufficient to give the local departments enough time to act on recovery decisions, especially during the holiday season. Extending the time lines somewhat would not introduce significant costs for the SDSS, but may enable local departments with staff busy on other matters sufficient time to determine whether they should appeal, and to prepare documents for appeal if necessary.

Businesses and Entities Affected. The proposed appeal process applies to 120 local departments of social services.

Localities Particularly Affected. The proposed changes apply statewide.

Projected Impact on Employment. No impact on employment is expected.

Effects on the Use and Value of Private Property. No impact on the use and value of private property is expected.

Real Estate Development Costs. No impact on real estate development costs is expected.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The proposed regulation does not apply to small businesses.

Alternative Method that Minimizes Adverse Impact. No adverse impact on small businesses is expected.

Adverse Impacts:

Businesses. The proposed regulation does not apply to non-small businesses.

Localities. The proposed regulation may adversely affect local departments of social services and localities as discussed above.

Other Entities. The proposed regulation does not apply to other entities.

____________________________________________

¹ See http://www.ecfr.gov/cgi-bin/text-idx?SID=30737db065c6bf2b497
c1aaaee3cd9a3&mc=true&node=pt2.1.200&rgn=div5#se2.1.200_1341

²Source: State Department of Social Services

³Ibid

⁴ See the Brief Summary section of the Agency Background Document: http://townhall.virginia.gov/l/GetFile.cfm?File=C:\TownHall\docroot\73\4369\7486\AgencyStatement_DSS_7486_v3.pdf

⁵ The proposed process does not provide an opportunity for the local departments to ask the Commissioner to reconsider the decision.

⁶ Source: State Department of Social Services

Agency's Response to Economic Impact Analysis: The Department of Social Services reviewed the economic impact analysis prepared by the Department of Planning and Budget and has no comments.

Summary:

The proposed regulation establishes procedures for local departments of social services to appeal a financial recovery levied by the Virginia Department of Social Services.

CHAPTER 920
APPEALS OF FINANCIAL RECOVERIES FOR LOCAL DEPARTMENTS OF SOCIAL SERVICES

22VAC40-920-10. Definitions.

The following words and terms when used in this chapter shall have the following meanings unless the context clearly indicates otherwise:

"Commissioner" means the commissioner of the department, his designee, or his authorized representative.

"Department" means the Virginia Department of Social Services.

"Local department" means the local department of social services of any county or city in the Commonwealth.

"Notification of a recovery" means any report, letter, email, or other type of communication describing the noncompliance action or recovery.

22VAC40-920-20. Objections to notifications of recovery.

A local department that wants to appeal a notification of recovery shall:

1. Within 15 calendar days of issuance of a notification of a recovery, provide written notice to the commissioner of its objection to the recovery; and

2. Within 15 calendar days of filing its notice of objection with the commissioner, submit all relevant additional information, documentation, or other pertinent data to the commissioner supporting its appeal of the recovery, termination action, or the disallowed costs.

22VAC40-920-30. Dismissal; burden of proof.

A. If the local department fails to appeal the recovery within the timeframe specified in 22VAC40-920-20, the right to appeal is lost.

B. The local department has the burden of proof to provide additional information that would reduce or remove the recovery.

C. If the local department fails to timely file a notice of appeal or fails to timely provide additional information for appealing the recovery, the requirements of the recovery shall become effective 30 calendar days from the date of issuance of the notification of a recovery.

22VAC40-920-40. Final decision by the commissioner.

A. The commissioner shall provide an opportunity for a hearing, reasonable notice of which shall be given in writing to the local department. All hearings and meetings related to appeals shall be held in the Richmond, Virginia, area.

1. The local department is entitled to be represented by counsel at all hearings and meetings related to appeals.

2. The local department will forfeit its right to further its appeal if it fails to show for the hearing, unless the commissioner approves the local department's request to reschedule the hearing.

B. The commissioner shall issue a final decision within 60 days following the date the local department filed its objection with the commissioner. The final decision shall be based on the commissioner's review of the recovery details in addition to the evidence, information, and documentation provided by the local department pertaining to the recovery being appealed. The final decision shall be made in accordance with all applicable laws, regulations, and policies.

C. The final decision of the commissioner is (i) final, (ii) binding, and (iii) not subject to judicial review.

D. The local department shall implement the decision within 30 days of the date of the final decision.