
357 S.E.2d 388 (1987)
D. Elaine SURGEON, Personal Representative for Ophelia A. Knotts
v.
DIVISION OF SOCIAL SERVICES and Division of Medical Assistance, North Carolina Department of Human Resources.
No. 8622SC1326.
Court of Appeals of North Carolina.
July 7, 1987.
*390 Turner, Enochs, Sparrow & Boone, P.A. by Wendell H. Ott and S. Mark Payne, Greensboro, for petitioner-appellant.
Atty. Gen. Lacy H. Thornburg by Asst. Atty. Gen. Catherine C. McLamb, Raleigh, for respondent-appellee.
JOHNSON, Judge.

I
Petitioner argues on appeal that (1) respondent's decision to deny petitioner's medicaid benefits retroactive to 1 March 1984, was affected by error of law, (2) *391 respondent's decision was unsupported by substantial evidence, and (3) respondent's decision was based upon unlawful procedure.
Since this is a contested case instituted prior to 1 January 1986, the effective date of G.S. Chap. 150B, the applicable scope of review of an agency decision is stated in G.S. 150A-51 as follows:
The court may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the agency findings, inferences, conclusions, or decisions are:
(1) In violation of constitutional provisions; or
(2) In excess of statutory authority or jurisdiction of the agency; or
(3) Made upon unlawful procedure; or
(4) Affected by other error of law; or
(5) Unsupported by substantial evidence admissible under G.S. 150A-29(a) or G.S. 150A-30 in view of the entire record as submitted; or
(6) Arbitrary or capricious
We find that pursuant to G.S. 108A-79, petitioner is authorized to seek judicial review of respondent's final agency decision; and we further find that the questions presented by petitioner properly fall within our scope of review.

II
Our first line of inquiry is whether respondent's decision was supported by substantial evidence. After a review of the record we conclude that respondent's decision was supported by substantial evidence.
The standard for judicial review stated in G.S. 150A-51(5) is commonly referred to as the "whole record" test. Thompson v. Wake County Bd. of Education, 292 N.C. 406, 233 S.E.2d 538 (1977). The function of a court applying the whole record test is to determine whether an administrative decision has a rational basis in the evidence. Id. A reviewing court is required to determine if there is substantial evidence in the record to support the administrative tribunal's findings and conclusions. In re Community Savings & Loan Assn. v. North Carolina Savings & Loan Assoc., 43 N.C. App. 493, 259 S.E.2d 373 (1979). Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Lackey v. North Carolina Department of Human Resources, 306 N.C. 231, 293 S.E.2d 171 (1982). When applying the "whole record" test a reviewing court may not replace an administrative tribunal's judgment as between two reasonably conflicting views, even though the court could have reached a different result had the matter been before it de novo. See Thompson, supra.
It is clear that federal law mandates that a state plan for medical assistance benefits must provide benefits retroactive to three months prior to the month in which an individual makes application "if such individual was (or upon application would have been) eligible for such assistance at the time such care and services were furnished." 42 U.S.C. sec. 1396a (a)(34) (emphasis supplied). See also 42 CFR sec. 435.914. It is equally clear that North Carolina's plan has such a provision in 10 NCAC 50B.0204 as follows:
10NCAC 50B.0204 Effective Date of Assistance
(a) Medicaid coverage is effective as follows:
(1) As much as three months prior to the month of application when medical services covered by the program were received and the client was eligible during the month(s) of medical need.
Based upon a provision in a manual promulgated by respondent, the Chief Hearing Officer concluded that petitioner was not eligible for medical assistance benefits, retroactive to three months, as follows:
The regulations at section 2460 cited in the hearing officer's decision address the exclusion of the burial funds. The regulation is very clear in the limitations of the burial exclusion and permits exclusion only as early as the first day of the month in which an individual signs the statement of intent if the total funds are subsequently designated for burial exclusions *392 within 30 days of signing the statement. There is no provision for exclusion in months for which retroactive coverage is requested. Accordingly, the hearing officer's conclusion that the life insurance policies could be excluded from reserve effective June 1, 1984 is correct and based upon existing regulation.
The pertinent section of the eligibility manual referred to by the Chief Hearing Officer is as follows:
4. Only the following resources are allowed for the burial exclusion: irrevocable burial trusts, irrevocable burial contracts, any other irrevocable arrangement established for burial expenses, revocable burial trusts, revocable burial contracts, and life insurance that accrues cash value, if it is designated for burial expenses.

5. Funds specifically set aside for burial expense may be excluded from countable reserve if the money is designated for burial expenses as follows:
a. For applications,
(1) The funds must be separately identifiable at time of application;
(2) The funds cannot be commingled with other funds or assets which are not set aside for burial;
(3) The funds must be clearly designated as set aside for burial expenses. (This includes life insurance policies.) If the funds are not so designated at time of application, the funds can be excluded if the individual states in writing that he/she intends to use the funds for his/her burial and agrees to submit within 30 days of signing the statement evidence that the total funds have been designated as set aside for burial as one of the allowable resources.
(4) The funds subject to the $1500 limit, may be excluded as of the first day of the month in which the individual signed the statement if the total funds are designated as set aside for burial within 30 days of signing the statement....
DHR Medical Assistance Eligibility Manual, Part I, MA-2460VA. (emphasis supplied).
Testimony and exhibits in the Record on Appeal establish that the cash value of petitioner's life insurance policies was not "designated" at the time of application as the eligibility manual requires. Moreover, during the three month period that petitioner seeks medical assistance benefits for there was no designation of burial expenses or written statement of intent to designate the cash value of the life insurance policies as burial expenses. There is substantial evidence that petitioner would have signed a written statement of intent and designated the cash value of the policies at the time of her application on 14 June 1984. However, as the Chief Hearing Officer concluded in the final decision, the manual only allows the burial expenses to be excluded as of the first day of the month which the applicant signs the written statement of intent. Therefore, after an exhaustive review of the whole record, we conclude that the Chief Hearing Officer's decision, based upon the eligibility manual, that petitioner was not eligible for medical assistance benefits retroactive to March of 1984, was supported by substantial evidence. Having established that but for the eligibility requirements of the manual petitioner would have been entitled to retroactive medical assistance benefits pursuant to 42 U.S.C. sec. 1396a(a)(34), 42 C.F.R. sec. 435.914(a)(2), and 10 NCAC 50B.0204(a)(1), we next address petitioner's first and third arguments.

III
The ultimate issue raised by petitioner's first and third arguments is whether MA-2460 V.A. 5(4) of respondent's eligibility manual deprives petitioner of three months of retroactive medical assistance benefits to which she was entitled pursuant to 42 U.S.C. sec. 1396a (a)(34) and 10 NCAC 50B.0204(a)(1). If so respondent's decision was based upon unlawful procedure because it promulgated a "rule," within the meaning of G.S. 150A-10, that was not promulgated pursuant to the North Carolina Administrative Procedure Act, G.S. 150A-9. We hold that MA-2460 V.A. 5(4) is a rule within the meaning of G.S. 150A-10 *393 which conflicts with applicable state and federal regulation; we further hold that respondent's promulgation of MA-2460 V.A. 5(4) does not meet the minimum procedural requirements of Article 2 of the North Carolina Administrative Procedure Act.
Initially, we dispose of respondent's contention, stated in its brief, as follows:
The Superior Court was without jurisdiction to consider the construction and validity of the administrative rules, because appellant has failed to exhaust her administrative remedies in respect of such construction and validity of administrative rules. The General Assembly has provided and appellant must follow the procedures prescribed in G.S. 150B-17(sic) before the superior court may consider the issue of the applicability of the validity of administrative rules.
(Citations omitted.)
G.S. 150A-17 states the following:
On request of a person aggrieved an agency shall issue a declaratory ruling as to the validity of a rule or as to the applicability to a given state of facts of a statute administered by the agency or of a rule or order of the agency, except when the agency for good cause finds issuance of a ruling undesirable. The agency shall prescribe in its rules the circumstances in which rulings shall or shall not be issued. A declaratory ruling is binding on the agency and the person requesting it unless it is altered or set aside by the court. An agency may not retroactively change a declaratory ruling but nothing in this section prevents an agency from prospectively changing a declaratory ruling. A declaratory ruling is subject to judicial review in the same manner as an agency final decision or order in a contested case. Failure of the agency to issue a declaratory ruling on the merits within 60 days of the request for such ruling shall constitute denial of the request as well as a denial of the merits of the request and shall be subject to judicial review.
G.S. 150A-17.
Everything in the Record on Appeal, including a request by petitioner for an interpretive ruling by respondent, indicates that the validity of MA 2460 V.A. 5(4) has been questioned and ruled upon. Petitioner argued throughout the administrative hearings on this matter that she was entitled to three months retroactive medical assistance benefits. After receiving a tentative decision, but before entry of a final order, the following was requested by petitioner in a letter to the Chief Hearing Officer:
The tentative decision in effect remands the application to the Davidson County Department of Social Services for processing the applicant's June 14, 1984 application. However, conclusion of Law No. 3, on page 3 of the decision, implies that the cash value of life insurance policies owned by the applicant and her husband would be excluded from reserve as of June 1, 1984. For the reasons set forth by our brief dated June 26, 1985 (see issue No. 3, pages 6-8), we contend that the cash value of the insurance policies should be excluded retroactive to March 1, 1984.
If the tentative decision is affirmed, it appears likely that the applicant's application will be approved as of June 1, 1984. At that point, a second appeal hearing would be necessary to address the burial exclusion-retroactive coverage issue. It would seem more efficient to address that issue directly at this point, in the context of the current contested case, to a definitive resolution of that issue without the necessity of a second round of administrative appeals.
(Emphasis supplied.)
Petitioner's letter goes on to state that federal law dictates that she is entitled to retroactive medical assistance.
We find it anamolous that respondent would contend that the issue was not before the superior court when respondent stipulated that the following issue was to be decided in superior court:
(a) Whether or not the hearing officer's decision comports with all applicable state and federal statutes, regulations *394 and constitutional provisions and is supported by substantial evidence of record.
Since the hearing officer's decision was based upon MA-2460 V.A. 5 it was implicit that the superior court would have to determine if the decision and MA 2460 V.A. 5(4) comported with 42 U.S.C. Sec. 1396a (a)(34), 42 CFR sec. 435.914(a)(2), and 10 NCAC 50B.0204(a)(1). Moreover, G.S. 150A-51(3) has been construed to allow judicial review of procedures employed by an agency discharging its statutorily authorized acts. State of North Carolina Ex Rel. Commissioner of Insurance v. North Carolina Rate Bureau, 300 N.C. 381, 408, 269 S.E.2d 547, 566 (1980). Therefore, it was within the superior court's jurisdiction to enter its judgment stating that "the Hearing Officer's decision comports with all applicable state and federal statutes, regulations and constitutional provisions; is supported by substantial evidence of record and has a rational basis in the record." We now focus our inquiry on the validity of MA-2460 V.A. 5.
G.S. 108A-79(1) states: "in the event of conflict between federal law or regulations and state law or regulations, the federal law or regulations shall control." As stated, hereinabove, North Carolina's plan, through 10 NCAC 50B.0204(a)(1), seeks to comply with 42 U.S.C. sec. 1396a (a)(34). The mandate in 42 U.S.C. sec. 1396a (a)(34) is emphasized in 42 C.F.R. sec. 435.914(a)(2), which states that an individual is entitled to retroactive coverage if an individual "would have been eligible for Medicaid at the time he received the services if he had applied...." Legislatory history of 42 U.S.C. sec. 1396a (a)(34) indicates that it was enacted for "persons who are eligible for medicaid but do not apply for assistance until after they have received care, either because they did not know about the medicaid eligibility requirements, or because the sudden nature of their illness prevented their applying." H.R.Rep. No. 92-231, 92d Cong., 2d Sess., reprinted in [1972] U.S. Code Cong. & Ad. News 4989, 5099.
There are no federal regulations with respect to the burial exclusion allowed by North Carolina in 10 NCAC 50B.0403(o)(4). We do not find a conflict between our state plan and federal regulations because of the exclusion. Moreover, it is permissible for respondent to promulgate interpretive rules as contained in the manual to define what is a sufficient designation of the cash value of an insurance policy for burial expenses. G.S. 150A-10(6). However, we do find a conflict between MA-2460 V.A. 5(4) and 42 U.S.C. sec. 1396a (a)(34) to the extent that it limits the retroactive coverage petitioner is entitled to pursuant to 42 U.S.C. sec. 1396a (a)(34). Since MA-2460 V.A. 5(4) is contrary to federal law, we cannot allow it to stand. G.S. 108A-79(1). Furthermore, respondent's decision was based upon unlawful procedure since the decision was based upon a rule which was in conflict with state and federal regulations and was not adopted in substantial compliance with the procedures outlined in G.S. 150A-12.
The facts found by respondent establish that but for MA-2460 V.A. 5(4) petitioner is entitled to medical assistance benefits retroactive to March 1984. Respondent erred as a matter of law in denying petitioner retroactive coverage. The trial court erred in adjudging that respondent's decision comports with all applicable state and federal statutes. Accordingly, we reverse the trial court's judgment and respondent's final order.
Reversed.
ARNOLD and PARKER, JJ., concur.
