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

3
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),

5
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

6
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.

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(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

14
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.

18
 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