Pennsylvania, Department of Public Welfare v. Sebelius

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 10-4584

_____________

COMMONWEALTH OF PENNSYLVANIA,

DEPARTMENT OF PUBLIC WELFARE,

Appellant

v.

KATHLEEN SEBELIUS, SECRETARY OF HEALTH AND

HUMAN SERVICES

_____________

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. Civil No. 2-09-cv-00808)

District Judge: Honorable William L. Standish

_____________

Argued October 25, 2011

Before: FISHER, VANASKIE and ROTH, Circuit Judges

(Filed: March 15, 2012)

Jason W. Manne, Esq. (Argued)

Office of General Counsel

Department of Public Welfare

301 Fifth Avenue,

Suite 430

Pittsburgh, PA 15222

Counsel for Appellant

Lindsey Powell, Esq. (Argued)

United States Department of Justice

Appellate Section

Room 7240

950 Pennsylvania Avenue, N.W.

Washington, DC 20530-0000

Mark B. Stern, Esq.

United States Department of Justice

Civil Division

Room 7531

950 Pennsylvania Avenue, N.W.

Washington, DC 20530-0000

Counsel for Appellee

_____________

OPINION

_____________

VANASKIE, Circuit Judge.

The Pennsylvania Department of Public Welfare

(“DPW”) appeals a decision of the United States District

Court for the Western District of Pennsylvania that sustained

a directive of the United States Department of Health and

2

Human Services (“HHS”) that DPW must remit to the federal

government more than $5.6 million in overpayments

recovered by DPW under the Aid to Families with Dependent

Children (“AFDC”) program. DPW also appeals the District

Court’s dismissal of a Freedom of Information Act (“FOIA”)

claim for lack of standing. Discerning no error in the District

Court’s rulings, we will affirm its judgment.

I.

A. Statutory and Regulatory Framework

The Aid to Families with Dependent Children

(“AFDC”) program was established by Title IV-A of the

Social Security Act of 1935, 42 U.S.C. §§ 601-617, to assist

states in providing aid to needy children and their families.

The AFDC program provided for federal reimbursement of a

percentage of all qualifying state expenditures, which were

calculated and reported on a quarterly basis. 42 U.S.C. §

603(a)(1994). The AFDC was considered an “open-ended

entitlement program” because there was no cap on the amount

of federal funds a state could receive in a fiscal year, and

states were reimbursed for all qualifying expenditures.

The AFDC program also established a procedure for

recovering and accounting for payments that states made to

recipients who were ineligible to receive them. The program

required states to recover these overpayments, either by

collecting direct cash repayments from the recipients, or

through offsets to a future cash assistance payment. 45

C.F.R. § 233.20(a)(13). Because the AFDC recipients were

needy, states generally recovered overpayments in

installments over a period of time. Once the overpayments

were recovered, states were required to report the amounts

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collected in their quarterly financial reports to HHS, which

was responsible for administering the program. 45 C.F.R. §

201.5(a)(3). Federal payments for future quarters were then

reduced pro rata by the federal share of the amount recovered

by the state in the prior quarter. 42 U.S.C. § 603(b)(2)(1994).

In 1996, Congress passed the Personal Responsibility

and Work Opportunity Reconciliation Act (“PRWORA”),

Pub. L. No. 104-193, 110 Stat. 2105 (1996) (codified at 42

U.S.C. §§ 601 et seq.), which replaced the AFDC program

with the Temporary Assistance for Needy Families (“TANF”)

grant program. TANF was designed to give states greater

flexibility in administering their welfare programs while

reducing total federal welfare spending. States that are

eligible to participate in TANF receive an annual “block

grant” from HHS, and thus, unlike the AFDC program,

TANF imposes a cap on the total federal funds each

participating state is entitled to receive annually.

PRWORA § 116(b)(3) establishes guidelines for the

close-out of state AFDC programs during the transition to

TANF. In relevant part, it provides:

Claims made with respect to State expenditures

under a State plan approved under part A of title

IV of the Social Security Act (as in effect on

September 30, 1995) with respect to assistance

or services provided on or before September 30,

1995, shall be treated as claims with respect to

expenditures during fiscal year 1995 for

purposes of reimbursement even if payment was

made by a State on or after October 1, 1995.

Each State shall complete the filing of all claims

under the State plan (as so in effect) within 2

4

years after the date of the enactment of this Act.

The head of each Federal department shall—

(A) use the single audit procedure to review and

resolve any claims in connection with the close

out of programs under such State plans.

PRWORA, Pub. L. No. 104-193, § 116(b)(3), 110 Stat. 2105

(1996).

The “single audit procedure” to which reference is

made in § 116(b)(3) is established by the Single Audit Act of

1984 (“SAA”), 31 U.S.C. §§ 7501-7507. Under the SAA,

“[e]ach non-Federal entity” that expends at least $300,000 of

Federal awards in a fiscal year “shall have either a single

audit or a program-specific audit made for such fiscal year in

accordance with the requirements of this chapter.” 31 U.S.C.

§ 7502(a)(1)(A).

The Administration for Children and Families

(“ACF”), the division of HHS responsible for administering

the former AFDC and current TANF programs, interpreted §

116 in a series of program instructions (“PI”s) that clarified

ACF policy for the recovery of AFDC overpayments and

provided the states with directions for closing out their AFDC

accounts in accordance with § 116. On March 9, 1999, ACF

issued PI 99-2, which required states to remit to HHS the

federal share of recovered overpayments made to recipients

on or before September 30, 1996, but permitted states to

retain the full amount of recovered overpayments of AFDC or

TANF funds paid to recipients after October 1, 1996, with the

recovered overpayments to be applied towards TANF

program costs. PI 99-2 also provided that states must submit

the federal share of overpayments to the ACF in quarterly

checks. On May 1, 2000, ACF issued PI 99-2 (Revised),

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which permitted states to retain the full amount of recovered

overpayments but stated that “the amounts recovered must be

credited against the current grant in the fiscal year in which

the overpayment was recovered.” (A. 122-23.)

On September 1, 2000, ACF issued PI 2000-2, which

rescinded PI 99-2 and PI 99-2 (Revised) and replaced them

with a new overpayment recovery policy. PI 2000-2

reiterated the continuing requirement to remit the federal

share of recovered AFDC overpayments. PI 2000-2 required

the states to remit the federal share of pre-October 1, 1996

overpayments to ACF by check, and provided the states with

instructions for making these repayments going forward. It

also provided that it was only “effective for recoveries made

after 9/30/96,” and that “[r]ecoveries made prior to the date of

this transmittal [i.e., September 1, 2000] will be evaluated on

reasonable interpretation of statutory requirements or any

previous guidance provided by ACF.” (A. 125.)

B. Factual and Procedural Background

In August 2007, the HHS Office of Inspector General

(“OIG”) conducted a nationwide audit to determine whether

states were complying with the requirements to reimburse the

federal share of recovered AFDC overpayments made before

October 1, 1996. According to the OIG report, of the 43

states reviewed, 24 states had complied with the federal

requirements and reimbursed ACF for overpayment

recoveries from July 2002 through June 2006, while 19 states

and the District of Columbia continued to collect

overpayments, but did not reimburse ACF $28.7 million for

the federal share of recoveries. The OIG report

recommended that ACF collect the federal share of the

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overpayments from the states that had not complied with the

reimbursement requirements.

The OIG audit found that the Pennsylvania DPW, the

state agency responsible for administering the former AFDC

and current TANF programs, had recovered $10,598,095 in

AFDC overpayments from October 1, 1996 through June 30,

2006, but had not reimbursed ACF for the federal share of

$5,609,572. Pursuant to this audit, on June 26, 2008, the OIG

sent a letter to DPW requesting remittance of the federal

share of $5,609,572 by check made payable to HHS within 30

days.

DPW appealed this reimbursement request, or

“disallowance,” to the HHS Departmental Appeals Board

(“DAB” or “Board”). DPW did not contest the OIG audit

findings with respect to either the amount of AFDC

overpayments recovered or the calculation of the federal

share. Rather, it challenged HHS’ authority to conduct the

audit. It argued that PRWORA § 116(b) designates the SAA

as providing the exclusive audit procedure for the close-out of

the AFDC program, and thus precludes HHS from requiring

reimbursement based on the results of its own audit. DPW

submitted declarations stating that its federal programs,

including TANF, had been subject to SAA audits since 1996,

and that none of the audits had taken any “exception . . . or

finding . . . relative to DPW’s retention of overpayment

recoveries from the [AFDC] program.” (A. 161.) DPW

argued that HHS was bound by the results of these audits.

DPW also argued that it was entitled to retain the

recovered overpayments under HHS policies. It contended

that PI 2000-2 permitted it to retain the overpayments

collected before September 1, 2000, because “it was not

7

unreasonable for the State to interpret” PRWORA as allowing

it to do so. (A. 69.) It also claimed that it was entitled to

retain the overpayments collected after September 1, 2000,

because even if its retention of overpayments violated ACF

policy in the various PIs, § 116 prohibited ACF from issuing

such guidance documents to the states. DPW also advanced a

separate argument that the DAB could not give stare decisis

effect to its prior decisions addressing AFDC overpayments

in the TANF period because the agency had not properly

indexed those decisions in accordance with the Freedom of

Information Act (“FOIA”) requirements that agencies

maintain published indices of their final decisions. 5 U.S.C. §

552(a)(2).

In a decision issued on April 16, 2009, the DAB

rejected each DPW argument and upheld the HHS

determination requiring DPW to remit the federal share of

$5,609,572 to HHS. The DAB held that the reference to the

SAA in § 116(b) does not preclude HHS from relying on the

accurate results of its own audit of the states’ accounting of

federal grants. It also held that DPW is not entitled to retain

the funds under either federal appropriations law or the

statutory limits on TANF grants. The DAB also rejected the

DPW challenge to its precedent, holding that the website

indexing its decisions satisfies FOIA requirements.

In June 2009, DPW sought judicial review of the DAB

decision in the District Court for the Western District of

Pennsylvania. Count One of its Complaint challenged the

agency’s decision under the Administrative Procedure Act

(“APA”), 5 U.S.C. § 706(2), on two grounds. First, it argued

that the DAB decision upholding the reimbursement directive

“was not in accordance with law,” reasserting its argument

8

that PRWORA designates the SAA procedure as the

exclusive audit procedure. Second, it claimed that the

conclusion that DPW was not entitled to retain the federal

share of the AFDC overpayment recoveries under substantive

law was “arbitrary, capricious and contrary to law.” (A. 20.)

Count two raised a FOIA claim based on HHS’ alleged

failure to maintain an adequate published index of its prior

decisions. While DPW conceded that it was not prejudiced by

this alleged failure in the instant dispute, it sought ongoing

injunctive relief to compel HHS to comply with FOIA

requirements.

In an order entered on October 14, 2010, the District

Court granted summary judgment for HHS on both counts.

On Count One, the Court first held that the DAB reasonably

rejected DPW’s “procedural” argument, concluding that there

was no support for the assertion that PRWORA prohibits

HHS from conducting its own audit. The District Court next

held that the conclusion that DPW was not substantively

entitled to retain the federal share of the recovered

overpayments was not arbitrary, capricious, or contrary to

law. On Count Two, the District Court held that DPW lacked

standing to raise the FOIA claim because it had alleged no

injury from the allegedly inadequate indices. DPW now

appeals the District Court’s decision.

II.

We have jurisdiction over this appeal pursuant to 28

U.S.C. § 1291. We apply de novo review to a district court’s

grant of summary judgment in a case brought under the APA,

“and in turn apply the applicable standard of review to the

underlying agency decision.” Cyberworld Enter. Techs., Inc.

v. Napolitano, 602 F.3d 189, 195-96 (3d Cir. 2010). The

9

underlying agency decision is reviewed under the APA,

which requires courts to set aside an agency decision that is

“arbitrary, capricious, an abuse of discretion, or otherwise not

in accordance with law,” or that was conducted “without

observance of procedure required by law.” 1 5 U.S.C. §§

706(2)(A) & (D); Chao v. Roy’s Const., Inc., 517 F.3d 180,

186 (3d Cir. 2008). With respect to the grant of summary

judgment on the FOIA claim, we review dismissals for lack

of standing under a de novo standard. Common Cause of Pa.

v. Pennsylvania, 558 F.3d 249, 257 (3d Cir. 2009).

III.

Section 603(b)(2) of Title 42 describes the methods for

computing federal payments to the states and provides that

the amount shall be:

1

DPW's challenge to the DAB's interpretation of

PRWORA's transition provision raises the question whether

deference is appropriate under Chevron, U.S.A., Inc. v.

Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). The

District Court concluded that Chevron deference is

inapplicable (see A. 45-53), and although HHS does not raise

this issue, DPW contends that the DAB decision is not

entitled to deference. (DPW Reply at 1-2). Recently, we

held that the DAB's interpretation of statutory provisions that

are part of the Medicaid program is entitled to Chevron

deference. See Pa., Dep’t of Pub. Welfare v. U.S. Dep’t of

Health & Human Services, 647 F.3d 506, 510-11 (3d Cir.

2011). We find it unnecessary to decide whether our recent

decision is applicable in the context presented here, as we

find that the DAB decision withstands plenary review.

10

[R]educed by a sum equivalent to the pro

rata share to which the United States is

equitably entitled, as determined by the

Secretary of Health and Human Services, of

the net amount recovered during any prior

quarter by the State or any political

subdivision thereof with respect to aid to

families with dependent children furnished

under the State plan.

42 U.S.C. § 603(b)(2)(B) (repealed). Although PRWORA

repealed most of the AFDC, § 116(b)(2) preserves certain

powers and responsibilities under the AFDC, including:

[A]dministrative actions and proceedings

commenced before such date [of the AFDC’s

repeal], or authorized before such date to be

commenced, under such provisions.

42 U.S.C. § 116(b)(2)(B). The HHS letter requesting

remittance of the federal share of AFDC overpayments made

through September 30, 1996, is a collection proceeding that

was “authorized . . . to be commenced” before the AFDC was

repealed. Specifically, 45 C.F.R. § 74.72(a) provides:

(a) The closeout of an award does not affect

any of the following: (1) the right of the

HHS awarding agency to disallow costs and

recover funds on the basis of a later audit or

other review. (2) The obligation of the

recipient to return any funds due as a result

of later refunds, corrections, or other

transactions.

11

(Emphasis added). Thus, even after “[t]he closeout of an

award,” this regulation preserves both HHS’ authority “to

disallow costs and recover funds on the basis of a later

audit,” and DPW’s obligation, as a recipient of funds, “to

return any funds due as a result of later refunds.” Id.

The statutory scheme therefore authorizes HHS’

disallowance letter and establishes at the very least its

presumptive entitlement to the requested funds. DPW

challenges this conclusion by advancing various legal

theories why the reimbursement directive was unauthorized,

and why, in any event, DPW is entitled to retain the funds.

For the reasons set forth herein, we reject each of these

arguments.

DPW challenges HHS’ authority to require the

disallowance by claiming that PRWORA’s transition

provision, § 116(b)(3)(A), prohibits it. Section 116(b)(3)(A)

provides:

The head of each Federal department shall—(A)

use the single audit procedure to review and

resolve any claims in connection with the close

out of programs under such State plans.

(Emphasis added). Emphasizing the seemingly mandatory

“shall use” and broad “any claims” language, DPW interprets

this provision to mean that HHS must rely on the results of

audits conducted pursuant to the SAA procedure in resolving

all claims relating to the close-out of the AFDC program—

including federal claims for the federal share of recovered

AFDC overpayments. Accordingly, DPW reasons that this

provision prohibits the HHS reimbursement demand, which

relied on the result of the OIG audit. Moreover, DPW argues

12

that since HHS is bound by the results of the SAA audits,

which took no exception to DPW’s failure to remit the federal

share of its AFDC overpayments between October 1996 and

June 2006, HHS has no authority for its demand.

DPW argues that this interpretation is consistent with

PRWORA’s overall statutory scheme and purpose. As

evidence of this purpose, DPW cites 42 U.S.C. § 617, which

provides:

No officer or employee of the Federal

Government may regulate the conduct of States

under this part or enforce any provision of this

part, except to the extent expressly provided in

this part.

This section narrowly circumscribes the scope of HHS

authority with regard to TANF, and the legislative history of

this provision evinces Congress’ intent in this regard:

Many States are highly critical of the current

welfare system’s lack of flexibility and high

degree of Federal regulation. This provision is

designed to explicitly restrict the ability of

Federal officials to regulate State block grant

programs, except as specifically provided under

the committee proposal.

House Report 104-651, at 1371 (emphasis added). However,

the language of § 617 and the legislative history indicate that

this provision limits HHS authority only with respect to

TANF, and not with respect to the AFDC program.

Accordingly, this provision does not affect our interpretation

of HHS authority to disallow AFDC overpayments.

13

DPW also asserts that § 116(b)(2)(B), discussed supra,

“prohibit[s] HHS from issuing any new policies relative to the

AFDC program that would bind the single auditors.” (DPW

Br. at 16.) DPW reasons that these provisions and the

legislative history reflect Congress’ intent to create a “‘hands

off’ approach to Federal interference” with TANF. (Id.) It

argues that § 116(b)(3)(A) should be construed, consistent

with the overall statutory purpose, as prohibiting HHS from

relying on its own audit procedures in resolving AFDC-

related claims.

DPW’s interpretation of the pertinent statutory

provisions is only plausible when the language of §

116(b)(3)(A)—particularly the “shall use” and “any claims”

terms—is read in isolation from the relevant statutory context

and definitions. We, however, agree with the DAB and

District Court that the meaning of the provision must be

determined in light of the relevant statutory context.

Following this approach, we concur with their interpretation

of § 116(b)(3)(A) as permitting HHS to conduct its own

audits in addition to the single audit procedure employed by

DPW. We reach this interpretation after identifying two

flaws in DPW’s interpretation of the provision.

A. “Any Claims”

First, we conclude that § 116(b)(3)(A)’s directive—to

use the SAA procedure to resolve “any claims” connected

with the close-out of AFDC programs—does not apply to

federal claims for the federal share of recovered AFDC

overpayments. DPW’s contrary interpretation depends on

reading the words “any claims” in isolation from the relevant

context. As the District Court observed, the phrase “any

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claims” must be considered in the context of the entirety of §

116(b)(3), which provides:

CLOSING OUT ACCOUNT FOR THOSE

PROGRAMS TERMINATED OR

SUBSTANTIALLY MODIFIED BY THIS

TITLE. — In closing out accounts, Federal and

State officials may use scientifically acceptable

statistical sampling techniques. Claims made

with respect to State expenditures under a State

plan approved under part A of title IV of the

Social Security Act (as in effect on September

30, 1995) with respect to assistance or services

provided on or before September 30, 1995, shall

be treated as claims with respect to expenditures

during fiscal year 1995 for purposes of

reimbursement even if payment was made by a

State on or after October 1, 1995. Each State

shall complete the filing of all claims under the

State plan (as so in effect) within 2 years after

the date of the enactment of this Act.

(Emphasis added). The following subpart, § 116(b)(3)(A),

then provides that “[t]he head of each Federal department

shall—(A) use the single audit procedure to review and

resolve any claims in connection with the close out of

programs under such State plans.” Thus, the words “any

claims in connection with the close out of programs” appear

in the context of a provision that discusses “claims”

exclusively in terms of state claims: claims that states must

file for state expenditures made under state plans. Moreover,

the subsequent subpart of § 116(b)(3) reinforces the exclusive

focus of this provision on “state” claims:

15

The head of each Federal department shall— . .

. (B) reimburse States for any payments made

for assistance or services provided during a

prior fiscal year from funds for fiscal year 1995,

rather than from funds authorized by this title.

§ 116(b)(3)(B). Thus, the surrounding statutory text indicates

that this provision is concerned with claims that the states

make for reimbursement from the federal government for

their expenditures under the AFDC program.

That the phrase “any claims” in § 116(b)(3)(A) refers

to claims asserted by a state is made especially clear in the

sentence immediately preceding § 116(b)(3)(A). This

sentence establishes the filing deadline for state claims, i.e.,

two years after the enactment of the legislation. ACF

explained this requirement in PI 97-4, which “provide[d]

guidance to States for the closeout of the AFDC” and detailed

some of the procedures for transitioning to TANF in

accordance with § 116. (A. 211.) Explaining the meaning of

this sentence, PI 97-4 noted: “all expenditures that a State

claims pursuant to these instructions” must, among other

requirements, “meet the two year limit for filing claims for

expenditures, in accordance with Section 1132 of the Social

Security Act and 45 CFR Part 95, Subpart A.” (A. 211

(emphasis added).)

Section 1132 of the Social Security Act provides for a

two-year period for filing “any claim by a State for payment

with respect to an expenditure made during any calendar

quarter by the State—(1) in carrying out a State plan . . . .” 42

U.S.C. § 1320b-2(a) (emphasis added). Additionally, 45

C.F.R. § 95.4 defines “claim” as follows: “In this subpart— . .

. Claim means a request for Federal financial participation in

16

the manner and format required by our program regulations,

and instructions and directives issued thereunder.” 45 C.F.R.

§ 95.4 (emphasis added).

Section 116(b)(3) is focused exclusively on state

claims for federal reimbursement. None of the surrounding

statutory language contemplates federal claims for states to

repay the federal share of recovered AFDC overpayments.

Furthermore, the two-year filing period plainly could not

contemplate HHS claims for state-recovered AFDC

overpayments given the fact that recoupment of

overpayments from welfare beneficiaries occurs over a course

of many years.

DPW contends that “[w]hen Congress wants to refer to

State claims, it customarily uses the modifier ‘state’ in close

conjunction with the word ‘claim,’” and points out that this

modifier “state” “appears throughout § 116(b)(3), except in

the clause at § 116(b)(3)(A).” (DPW Br. at 17.) It concludes:

“Had Congress wanted to tie back the words ‘any claims’ to

the earlier references to state claims, it would have said ‘HHS

shall use the single audit procedure to review and solve such

claims.’” (Id.) This argument invokes an expressio unius

type of logic: that the inclusion of “state” in the preceding

discussion of claims is purposeful, and therefore, so too is the

omission of this qualifier in the ensuing subpart.

Even assuming arguendo that Congress “customarily”

refers to state claims by including “state” in close conjunction

with “claim”—a sweeping hypothesis about statutory writing

for which DPW offers no evidence—it does not follow that

Congress would include that modifier where it is evident from

the context that it refers to state claims. In any event, we do

not agree that “any claims” is unconnected to the word “state”

17

in § 116(b)(3)(A). In fact, this provision makes such a link,

as it says: “any claims in connection with the close out of

programs under such State plans.” § 116(b)(3)(A). This

language tracks the preceding sentence, which makes clear

the type of claims that are “in connection with the close out”:

“all claims under the State plan” that states must file within a

two-year deadline. § 116(b)(3). Indeed, the reference to

“such State plans” indicates that § 116(b)(3)(A) clearly refers

back to this preceding sentence, which was concerned only

with “state” claims.

DPW also challenges this interpretation by invoking

the Supreme Court’s statement that “the words ‘any claim’

are sweeping words in common usage.” (DPW Br. at 17,

quoting United States v. Yellow Cab, 340 U.S. 543 (1951).)

DPW’s argument, however, is untethered from the context of

the Yellow Cab Court’s statement. In Yellow Cab, the Court

was considering whether the United States could be sued for

contribution by a joint tortfeasor under the Federal Tort

Claims Act when it remarked: “The words ‘any claim against

the United States . . . on account of personal injury’ are broad

words in common usage. They are not words of art.” 340

U.S. at 548. Thus, the Court was considering the meaning of

the words “any claim” in a statute concerning tort claims

against the United States. By contrast, in the current case we

consider the meaning “any claims” in the context of a

provision that has narrowed the discussion to a particular

category of state claims. The statement in Yellow Cab does

not require us to disregard this context and interpret it as

referring to the broad category of “any” claim that could be

brought “in connection with the close out of” AFDC

programs.

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When viewed in their fixed position within the

relevant context, we think the words “any claims” are

reasonably read as referring to the narrower category of state

claims for federal reimbursement of state expenditures,

submitted within the two-year filing period. We therefore

conclude that the single audit directive in § 116(b)(3)(A) does

not apply to federal claims for state reimbursement of the

federal share of recovered AFDC overpayments.

B. “Shall Use”

Second, even if “any claims” does include federal

claims for state reimbursement of the federal share of

recovered AFDC overpayments, we nevertheless find that §

116(b)(3)(A) did not require ACF to rely on the results of

SAA audits in order to require reimbursement. DPW’s

argument that the provision prohibits ACF from conducting

its own audit is predicated on its interpretation of the “shall . .

. use the single audit procedure” language as imposing a

mandatory requirement on ACF to rely on the results of the

single audit procedure. However, a close examination of the

statutory context, including the SAA, supports the conclusion

that “using” its procedure does not require exclusive reliance

on it.

“[T]he single audit procedure” refers to the method for

conducting audits under the SAA, which provides that

method as part of a scheme for reducing the burden on federal

funding recipients of complying with various audit

requirements. As the SAA states: “An audit conducted in

accordance with this chapter shall be in lieu of any financial

audit of Federal awards which a non-Federal entity is required

to undergo under any other Federal law or regulation.” 31

U.S.C. § 7503(a). However, the SAA also expressly

19

preserves the authority of federal agencies to conduct their

own audits:

Notwithstanding subsection (a), a Federal

agency may conduct or arrange for additional

audits which are necessary to carry out its

responsibilities under Federal law or regulation.

The provisions of this chapter do not authorize

any non-Federal entity (or subrecipient thereof)

to constrain, in any manner, such agency from

carrying out or arranging for such additional

audits, except that the Federal agency shall plan

such audits to not be duplicative of other audits

of Federal awards.

31 U.S.C. § 7503(b). Therefore, while the SAA prohibits

ACF from requiring DPW to conduct more than one audit of

its Title IV-A program in any fiscal year, it does not restrict

ACF from conducting its own audit when “necessary to carry

out its responsibilities under Federal law or regulation.” Id.

Because the HHS audit was necessary to enable HHS to

complete its responsibility to monitor state expenditures

under the AFDC program, the HHS audit was not precluded

by the SSA.

DPW resists this interpretation, reasoning that the

requirement to use the SAA procedure implicitly precludes

HHS from using an “exception to that procedure.” (DPW Br.

at 18.) We disagree. The SAA preserves a federal agency’s

authority to carry out additional audits as necessary, and there

is no indication in § 116(b)(3)(A) that Congress intended to

depart from this feature of the SAA. We do not believe that

Congress would attempt to convey this purpose by referring

to the SAA, which expressly preserves agency authority to

20

conduct audits. Rather, if Congress intended to designate

only one part of the SAA and exclude application of the rest

of the Act, we believe it would have manifested this intent

more clearly. When considered in light of the SAA, the most

reasonable interpretation of § 116(b)(3) is that it restricts

HHS from imposing additional audit requirements on states in

the process of closing out their AFDC programs, but does not

preclude HHS from conducting its own audits. We therefore

conclude that § 116(b)(3)(A) does not prohibit HHS from

relying on the results of its own audit in order to require DPW

to remit the federal share of recovered AFDC overpayments.

C. DPW’s Remaining Arguments

DPW next argues that even if HHS is not bound by the

results of the single audit, Pennsylvania is nonetheless

entitled to retain the federal share of recovered AFDC

overpayments under substantive law. DPW advances several

disjointed arguments to defend its entitlement to the funds.

For the sake of clarity, we will address each of the arguments

according to the asserted legal basis of the claim.

1. “Equitable Entitlement” under 42 U.S.C.

§ 603(b) and PRWORA § 116(b)(2)(B)

DPW argues that “whether or not HHS is entitled” to

recover the federal share of Pennsylvania’s recovered AFDC

overpayments “depends upon whether [HHS] is ‘equitably

entitled’” to the funds under § 603(b) of the old AFDC

statute. (DPW Br. at 20-21.) This provision stated, in

relevant part, that the HHS Secretary shall compute the

amount to be paid to each state, which amount shall be:

21

[R]educed by a sum equivalent to the pro rata

share to which the United States is equitably

entitled, as determined by the Secretary of

[HHS], of the net amount recovered during any

prior quarter by the State or any political

subdivision thereof with respect to aid to

families with dependent children furnished

under the State plan.

42 U.S.C. § 603(b)(2)(B) (repealed) (emphasis added). DPW

argues that PRWORA § 116(b)(2)(B) stripped the HHS

Secretary of the authority to make this determination under

the repealed AFDC, because this administrative action was

not “commenced . . . or authorized . . . to be commenced”

prior to the effective date of PRWORA on July 1, 1997.

(DPW Br. at 20, quoting PRWORA § 116(b)(2)(B).) In this

ostensible vacuum of authority, argues DPW, “it was up to

the State (or the single auditors . . .) to decide whether HHS

was equitably entitled to a refund.” (Id. at 21.) Since

“[n]either of these parties made such a determination,” DPW

neatly concludes that it is entitled to retain the funds. (Id.)

First, we agree with the view taken by the District

Court, which rejected DPW’s contention that § 603(b)

required the HHS Secretary to make an “explicit finding of

equitable entitlement.” (A. 31.) Second, we reject DPW’s

claim that § 116(b)(2) stripped HHS of its authority to seek

reimbursement. To the contrary, as discussed supra, §

116(b)(2)(B) preserves HHS’ authority to disallow the federal

share of recovered AFDC overpayments because it was a

collection proceeding that was authorized under 45 C.F.R. §

74.72(a) to be commenced prior to PRWORA’s effective

date. Even if it were not the case that PRWORA preserves

22

HHS’ authority in this regard, we are not persuaded by

DPW’s claim that the equitable entitlement determination

would fall by default to DPW or the single auditors. DPW

offers no explanation for this conclusion, and we discern no

plausible basis for it.

2. Unambiguous Statutory Repayment

Conditions

DPW next argues that it is not required to reimburse

HHS because the repayment obligation was not stated

unambiguously in the AFDC, and is therefore invalid. 2 For

this proposition it cites Pennhurst State School & Hosp. v.

Halderman, 451 U.S. 1 (1981), and its progeny, which upheld

Congress’ power to attach conditions to federal grants to

states so long as the conditions are stated unambiguously.

451 U.S. at 17. To determine whether a statute satisfies this

clarity requirement, courts “ask whether . . . a state official

would clearly understand . . . the obligations” of the law, and

“whether the [statute] furnishes clear notice regarding the

2

While DPW acknowledges that it “did not argue for

the grant-law standard for review below,” it insists that “a

party cannot waive the proper standard for review in the

Court of Appeals” and accordingly this Court “has an

obligation to apply the correct legal standard.” (DPW Reply

at 3, n. 2, citing In re Cmty. Bank of N. Va., 622 F.3d 275,

290 (3d Cir. 2010) (“[W]hether an incorrect legal standard

has been used . . . is an issue of law to be reviewed de

novo.”)). DPW’s argument appears to be substantive, rather

than a standard for review of a claim. We need not resolve

that issue, however, because DPW’s argument lacks merit.

23

liability at issue in [the] case.” Arlington Cent. School Dist.

Bd. of Educ. v. Murphy, 548 U.S. 291, 296 (2006).

DPW asserts that “the question before the Court thus

reduces to whether the old AFDC statute, as modified by the

transition provision of PRWORA, unambiguously requires

Pennsylvania to make repayment of the Federal portion of the

AFDC overpayment collections.” (DPW Reply at 2-3.)

DPW contends that “[t]here is no unambiguous repayment

condition in the statute,” and effectively reasserts its

arguments about 42 U.S.C § 603(b) and PRWORA §

116(b)(2). (Id. at 3.) It claims that 42 U.S.C. § 603(b)(2),

which required the states’ funds to be reduced by the “pro rata

share to which the United States is equitably entitled, as

determined by the [HHS] Secretary,” does not impose a

mandatory repayment obligation, but rather calls for a

“discretionary determination.” (Id.) DPW then argues that §

116(b)(2) revoked the Secretary’s authority to determine

whether HHS was “equitably entitled” to repayment, and that

the authority to make this decision was transferred to the

single auditors, who “made no such determination here.”

(Id.)

DPW’s argument relies on misunderstandings of both

the Pennhurst clear notice requirement and § 603(b)(2). The

rationale underlying the Pennhurst requirement is that,

because a conditional grant is akin to a contract, recipients of

federal funds should accept the attached conditions

“voluntarily and knowingly.” 451 U.S. at 17. “States cannot

knowingly accept conditions of which they are ‘unaware’ or

which they are ‘unable to ascertain.’” Arlington, 548 U.S. at

296 (quoting Pennhurst, 451 U.S. at 17). Yet, DPW does not

demonstrate that it was unaware or unable to ascertain that §

24

603(b)(2) created a repayment obligation. DPW’s only

argument in this regard—that the repayment obligation

depended on the Secretary’s “discretionary determination that

HHS was ‘equitably entitled’ to return of the money”—is

unavailing. (DPW Reply at 3.) Section 603(b)(2)(B)

provides clear notice to states that the federal payments they

receive will be “reduced by a sum,” i.e., the share to which

the federal government is “equitably entitled.” The fact that

the Secretary is responsible for determining the amount of

this federal share in no way renders the condition ambiguous.

Even assuming that this determination is “discretionary,” this

does not run afoul of Pennhurst, which merely requires that

states have clear notice of conditions on accepting federal

funds, and imposes no requirement that such conditions be

unconditional.

3. HHS Program Instructions

DPW also argues that the program instructions HHS

issued during the TANF period authorized DPW to retain the

disallowed funds. DPW cites PI 2006-03, which ACF issued

on June 20, 2006, and which stated that a state’s retention of

recoveries made prior to the date of that transmittal would be

evaluated “on reasonable interpretation of statutory

requirements.” (A. 133.) DPW argues that because its

interpretation of the statute “is reasonable, so it is entitle [sic]

to retain the AFDC overpayment collections.” (DPW Br. at

23.) In this regard it asserts, without citation to any authority,

that “[t]o demonstrate reasonableness the Court need only ask

itself if the arguments for state retention of the money would

be sustained if HHS advanced them,” and unsurprisingly

concludes that in its case, “[i]t should be clear that they

would.” (Id.) DPW then reasons that “[s]ince HHS is bound

25

by its own guidance saying that it would accept any

reasonable interpretation of PWORA . . . Pennsylvania is

entitled to retain the funds.” (Id., citation omitted.)

The District Court rejected DPW’s argument that it

“reasonably interpreted PI 99-2 (Revised) to permit retention

of the AFDC overpayments” recovered before September 1,

2000. (A. 23.) The District Court correctly held that PI 99-2

(Revised) required states to credit the federal share of

recovered AFDC overpayments “against the TANF grant in

the fiscal year in which the overpayments were recovered.”

Because DPW “supplemented its TANF grants” with the

funds, rather than crediting them, it did not reasonably rely on

that program instruction. (A. 24.)

4. Federal Appropriations Law under 31

U.S.C. § 1301(a)

DPW also argues that the District Court erred in

upholding the DAB’s decision that the State had no right to

retain the federal share of the AFDC overpayment recoveries

under Federal appropriations law. Section 1301(a) provides

that Federal “[a]ppropriations shall be applied only to the

objects for which the appropriations were made except as

otherwise provided by law.” 31 U.S.C. § 1301(a). Before the

DAB and District Court, DPW acknowledged that its use of

the recovered AFDC overpayments made before September

30, 1996 to supplement its TANF grant was a violation of

general appropriation law, but argued that an exception to this

general law applied. The DAB and District Court both

rejected this argument because the exception was

inapplicable, and DPW failed to identify any other statutory

provision which supersedes §1301(a) to permit its use of

AFDC funds for the TANF program.

26

In defense of its retention of AFDC funds for its

TANF program, DPW first contends that § 1301(a) “governs

how Federal agencies spend money, not what recipients of

Federal funds do with money after it is paid.” (DPW Br. at

21.) In support of this claim, DPW offers only “the fact that

[sic] title of the United States Code subchapter in which this

provision is located is entitled ‘The Budget Process,’” and

reasons that a contrary conclusion would “make an

appropriations act violation out of every use of Federal funds

by an ultimate recipient contrary to the intended purpose.”

(Id.)

DPW’s interpretation of federal appropriations law—

in support of which it cites no substantive authority—is

contrary to the commonly understood principle that public

funds “may be used only for the purpose for which they were

appropriated.” (HHS Br. at 16, citing Principles of Federal

Appropriations Law, 2d ed., U.S. General Accounting Office,

July 1991, OGC-91-5, at 4-2.) Moreover, as HHS observes,

because DPW “‘d[id] not dispute [in District Court] that its

use of the’” AFDC funds for TANF program costs “‘violated

general Federal appropriations law,’” it has waived its

opportunity to raise a contrary argument now. (Id. at 17,

quoting A. 21.)

DPW next contends that if federal appropriations law

applies, it complied with it by applying AFDC funds to the

TANF program, which benefited the same “objects” of the

AFDC appropriation: “needy families with children.” (DPW

Br. at 22.) However, as we just explained, DPW waived this

argument when it failed to dispute that its use of AFDC funds

for the TANF program violated federal appropriations law.

In any event, the merits of this argument are unavailing,

27

because despite sharing similar purposes, AFDC and TANF

are distinct statutes with separate appropriations, and DPW

cites no statutory provision which purports to authorize the

use of AFDC funds to supplement the TANF program.

Finally, DPW argues that § 1301 “does not apply

where ‘otherwise provided by law,’” and maintains that the

repealed AFDC statute “allows States to retain the

overpayment collections unless there is a determination that

HHS is ‘equitably entitled’ to a refund.” (DPW Br. at 22.)

We conclude that DPW has also waived this argument, which

it did not raise before the agency. See United States v. L.A.

Tucker Truck Lines, 344 U.S. 33, 37-38 (1952); Dir., Office

of Workers’ Comp. Programs v. N. Am. Coal Corp., 626 F.2d

1137, 1143-44 (3d Cir 1980).

5. TANF Spending Cap under 42 U.S.C. §

603(a)(1)

As part of the tradeoff of state flexibility for reduced

federal welfare spending, 42 U.S.C. § 603(a)(1) provides for a

dollar limit, or “cap,” on the federal TANF funds that a state

can receive in a fiscal year. Before the DAB and District

Court, DPW argued that it was entitled to retain the AFDC

funds recovered before September 1, 2000 because DPW’s

retention of the federal share of recovered AFDC

overpayments did not exceed the TANF cap on federal funds.

In this regard, DPW claimed that the annual State Family

Assistance Grant (“SFAG”) does not set the cap on funds a

state may receive under TANF, because states may be eligible

for a bonus, supplemental grant, or contingency funds. The

District Court and DAB properly rejected “this possibility

[as] meaningless,” reasoning that, while a state’s annual

TANF funds may be increased beyond the SFAG by a bonus,

28

supplemental grant, or contingency funds, these amounts are

determined by “a statutory formula under Title IV,” and thus

the statute still imposes a dollar cap on a state’s annual

federal TANF grant. (A. 25.) They concluded that DPW

“may not . . . exceed[] [this cap] by using AFDC

overpayment recoveries to supplement those funds.” (A. 25.)

We agree with this interpretation of the TANF dollar cap, and

since DPW offers no persuasive argument to defeat this

interpretation, we conclude that the District Court did not err.

IV.

A. Lack of Standing to Pursue a FOIA Claim

Turning to its FOIA claim, DPW argues that the

District Court erred in granting summary judgment against it

on the grounds that it lacked standing. The gist of DPW’s

claim is that FOIA requires agencies to publish “current

indexes providing identifying information for the public as to

any matter issued, adopted, or promulgated after July 4, 1967,

and required by this paragraph to be made available or

published.” 5 U.S.C. § 552(a)(2). DPW asserts that the DAB

fails to satisfy its duties under this requirement because it

provides only a listing of decisions and a key word search

engine on the agency’s website.

HHS challenged DPW’s standing to raise this issue

before the District Court, and DPW responded with a Rule

56(f) motion and declaration. The declaration asserted that

the lack of an index prevented it from effectively representing

itself before the DAB, because its counsel could not

conclusively determine whether it had found all relevant

precedent on the search engine. The declaration also claimed

that the search engine’s key-word search function was

29

inadequate because the DAB decisions do not use uniform

wording. DPW offered an example of a principle that could

not be searched by word, but could be categorized by topic.

The District Court did not consider the merits of this

claim, and instead dismissed it for lack of standing due to its

failure to allege an adequate injury, explaining:

PA DPW has failed to cite a single instance in

which the alleged inadequacy of the DAB’s

“index” of its final decision under FOIA has

resulted in its failure to find a prior DAB

decision which would have been advantageous

to PA DPW in an appeal before the DAB. As a

result, this case is simply not the proper case to

challenge generally the sufficiency of the

DAB’s “index” of its final decisions.

(A. 35-36.)

To establish standing to sue, a plaintiff has the burden

of establishing an “injury in fact”: a harm that is both

concrete and particularized, either actual or imminent, and not

conjectural or hypothetical. Lujan v. Defenders of Wildlife,

504 U.S. 555, 560-61 (1992). In Cervase v. Office of the Fed.

Register, 580 F.2d 1166 (3d Cir. 1978), a lawyer sought to

compel the Office of the Federal Register to compile an index

of the Code of Federal Regulations. He argued that the Table

of Contents to the Code made it “almost impossible for [him]

to know which federal regulations appl[ied] to [him.]” Id. at

1167. We held that the lawyer had standing under FOIA

because “[t]he Federal Register Act was intended to confer

upon the general public rights of access to agency rulings,”

and this was clearly intended to benefit a “practicing attorney,

30

who by virtue of his profession must advise others about their

legal rights.” Id. at 1172. Therefore, we found that the

lawyer’s “inability to retrieve information from the Federal

Register” was an injury-in-fact. Id.

In Pa. Dep’t of Pub. Welfare v. United States Dep’t of

Health & Human Services, No. 99-175, 2001 U.S. Dist.

LEXIS 3492 (W.D. Pa. Feb 7, 2001) (hereinafter,

“Pennsylvania”), then-District Court Judge D. Brooks Smith

held that DPW was injured by the DAB’s failure to index

certain policy statements. 2001 U.S. Dist. LEXIS 3492, at

*63-64. The Court observed that “[w]ithout current or

complete indices . . . the [state] is unable to determine

precisely what rules and regulations govern its conduct and is

without sufficient information to structure its AFDC, EA, and

TANF programs in the future.” Id. As a result, the state was

injured because it was “deprived of information” that

Congress intended it to have. Id.

However, the harms that DPW alleges in the case at

bar are not equivalent to the injuries-in-fact in these cases. In

its Rule 56(f) declaration, DPW described the various ways in

which it was injured by the DAB’s allegedly inadequate

index. It explained that “the lack of an index has hampered

[DPW counsel’s] effective representation of DPW before the

DAB.” (A. 237.) It elaborated that the key word searchable

website was inadequate, because DPW’s counsel

[O]ften want[s] to find DAB cases setting forth

the principle that a State’s interpretation of an

ambiguous statute, regulation, or state plan is

entitled to prevail over a Federal interpretation

if the State has not been given notice of the

Federal interpretation. Those cases are difficult

31

to locate by key word because the DAB does

not use uniform wording in discussing the issue.

(A. 238.) Thus, DPW generally asserts that the lack of an

index causes it difficulty, and the specific harm it claims as a

result is that its counsel “can never be certain that [it has]

located all important DAB decisions on a topic because

sometimes the topic is not susceptible to a key-word search.”

(A. 237-38.) DPW insists that these allegations are “more

than an ‘unsupported assertion’ that the lack of an index

hampered legal research.” (DPW Reply at 7.)

We disagree. There is a meaningful distinction

between the “difficulties” that DPW identifies and the harms

that were sufficient to qualify as injuries in Cervase and

Pennsylvania. Although DPW claims the lack of an index

“hampered [DPW counsel’s] effective representation of DPW

before the DAB,” it offers only a general description of the

challenges of searching, explaining that some “cases are

difficult to locate by key word,” and that it “can never be

certain” that it has found everything. (A. 237-38.) Yet, such

vague and indefinite allegations are inadequate to establish

injury-in-fact, and DPW does not cure this deficiency by

identifying any concrete information or cases that it was

unable to find, or any other description of how this inability

actually hampered its representation before the DAB.

While the key word search function may be

inconvenient and create some uncertainty in the research

process, there is no indication that DPW suffered any

disadvantage due to the lack of an index. In fact, DPW was

able to locate all of the DAB precedents relevant to its

proceeding, and although it asserts that its counsel has

“practiced before the DAB for nearly thirty years” and

32

“handled dozens of cases in the DAB,” it does not offer a

single example of when it was unable to locate relevant

decisions in other cases. Since the lack of an index has not

made it “almost impossible” for DPW to find relevant DAB

precedent, we conclude that the District Court did not err in

concluding that DPW lacks standing.

B. Rule 56(f) Decision 3

There remains one final claim that DPW asserts to

defend its standing. DPW argues that at the Rule 56(d) stage,

“it was not necessary for [it] to identify a particular case

where it was prejudiced by the lack of an index before the

DAB. The declaration only needed to specify what particular

information was sought and how it would preclude summary

judgment.” (DPW Br. at 27.) It argues that the District Court

“should have allowed [it] to take depositions or other

discovery to obtain evidence to show injury.” (DPW Reply at

8.) It also asserts that Rule 56(d) “motions are usually

3

DPW styled its June 16, 2010 motion to the District

Court as a “Rule 56(f) Motion,” (A. 235-39), and the District

Court evaluated it under the standards applied to Rule 56(f)

motions. (A. 43-45.) As part of a general restyling of the

Federal Rules of Civil Procedure in December 2007, the

language of Rule 56(f) was amended and incorporated into

Rule 56(d). See Fed. R. Civ. P. 56(d). These amendments

were “intended to be stylistic only,” and Rule 56(d) “carries

forward without substantial change the provisions of former

subdivision (f).” (Advisory Committee Notes, Fed. R. Civ. P.

56(d)). Therefore, although DPW’s briefs and much of the

caselaw refer to the language of Rule 56(f), these changes do

not alter our substantive legal analysis.

33

granted as a matter of course.” (Id., citing Doe v. Abington

Friends School, 480 F.3d 252, 257 (3d Cir. 2006).)

When a party opposing summary judgment “believes

that s/he needs additional time for discovery, [Rule 56(d)]

specifies the procedure to be followed.” Dowling v. City of

Phila., 855 F.2d 136, 139 (3d Cir. 1988). Specifically, Rule

56(d) states:

If a nonmovant shows by affidavit or

declaration that, for specified reasons, it cannot

present facts essential to justify its opposition,

the court may: — . . . (2) allow time to obtain

affidavits or declarations or to take discovery.

Fed. R. Civ. P. 56(d). We have interpreted this provision to

require “a party seeking further discovery in response to a

summary judgment motion [to] submit an affidavit

specifying, for example, what particular information is

sought; how, if uncovered, it would preclude summary

judgment; and why it has not previously been obtained.”

Dowling, 855 F.2d at 139-40. DPW, however, submitted no

such affidavit. Thus, the District Court properly dismissed

the FOIA claim for lack of standing.

V.

For the foregoing reasons, we will affirm the District

Court’s judgment.

34