Administrative Expenditures and Federal Matching Rates of Selected Support Programs
Gao ID: GAO-05-839R June 30, 2005The federal government spends billions of dollars annually for programs that help low-income families and other individuals. A significant portion of these funds cover administrative costs rather than direct benefits and services. To provide information on how these administrative costs compare across programs and the federal government's role in funding these programs' administrative costs, we examined (1) total funding and the amounts and types of administrative expenditures for selected programs and (2) the federal matching rates for these administrative expenditures.
Total expenditures, including administrative and all other expenditures, for the seven programs in our review ranged from $2.9 billion for Adoption Assistance to $295 billion for Medicaid, including both federal and state expenditures. Total expenditures generally include the costs of direct benefits, such as the costs of food stamps and medical services, as well as all other costs of administering the programs and providing benefits. For each of the programs in our review, both the federal and state governments provide program funding. The federal share of total program expenditures ranged from 53 percent for Foster Care to 91 percent for the Food Stamp Program. The specific types of expenditures that are considered administrative differ considerably across the programs. For example, administrative costs for Foster Care include case planning, recruitment and licensing of foster care homes, and eligibility determination activities, as well as other activities. In contrast, administrative costs for CCDF do not include the costs of providing direct services, such as determining eligibility and placing children in child care. Both federal and state funds are used for administrative expenditures. The federal share of administrative expenditures ranged from 49 percent for the Food Stamp Program to 70 percent for SCHIP. The sharing of administrative costs between the federal and state governments is based largely on federal matching rates, in accordance with federal laws and regulations. The federal matching rate is 50 percent for most administrative expenditures for Medicaid, the Food Stamp Program, Foster Care, and Adoption Assistance, although higher federal matching rates may apply to certain expenses. For CSE, the federal matching rate is 66 percent for most administrative expenditures. For a portion of CCDF administrative expenditures, the federal matching rate varies by state and ranges from 50 percent to 77 percent. For SCHIP, the federal matching rate also varies by state and ranges from 65 percent to about 84 percent. In addition, administrative expenditures in SCHIP and CCDF are capped at 10 percent and 5 percent, respectively, of total expenditures.
GAO-05-839R, Administrative Expenditures and Federal Matching Rates of Selected Support Programs
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June 30, 2005:
The Honorable Wally Herger:
Chairman:
Subcommittee on Human Resources:
Committee on Ways and Means:
House of Representatives:
Subject: Administrative Expenditures and Federal Matching Rates of
Selected Support Programs:
Dear Mr. Chairman:
The federal government spends billions of dollars annually for programs
that help low-income families and other individuals. A significant
portion of these funds cover administrative costs rather than direct
benefits and services. To provide information on how these
administrative costs compare across programs and the federal
government's role in funding these programs' administrative costs, we
examined (1) total funding and the amounts and types of administrative
expenditures for selected programs and (2) the federal matching rates
for these administrative expenditures.
Our review included seven programs: Medicaid, State Children's Health
Insurance Programs (SCHIP), Food Stamp Program, Foster Care, Adoption
Assistance, Child Support Enforcement (CSE), and Child Care and
Development Fund (CCDF).[Footnote 1] The Food Stamp Program is
administered by the U.S. Department of Agriculture (USDA), and the
remaining programs are administered by the U.S. Department of Health
and Human Services (HHS). To determine the amounts and types of
administrative expenditures for these programs as well as the federal
role in funding their administrative costs, we examined information
publicly available from legislation, governmentwide publications, and
the relevant federal agencies. We determined that this information is
sufficiently reliable for the purpose of this correspondence. We
conducted our work during May and June 2005 in accordance with
generally accepted government auditing standards.
Total expenditures, including administrative and all other
expenditures, for the seven programs in our review ranged from $2.9
billion for Adoption Assistance to $295 billion for Medicaid, including
both federal and state expenditures, as shown in table 1. Total
expenditures generally include the costs of direct benefits, such as
the costs of food stamps and medical services, as well as all other
costs of administering the programs and providing benefits. For each of
the programs in our review, both the federal and state governments
provide program funding. The federal share of total program
expenditures ranged from 53 percent for Foster Care to 91 percent for
the Food Stamp Program.
Table 1: Total Federal and State Expenditures for Selected Programs,
Fiscal Year 2004:
[See PDF for image]
Source: GAO analysis of HHS and USDA data.
[A] Includes local expenditures, where applicable.
[B] Federal and state expenditures are reduced by child support
collections that are used to reimburse the Temporary Assistance for
Needy Families (TANF) and Foster Care programs and by fees collected
for certain services. The federal total also includes administrative
costs, payments to states that meet established performance measures,
and costs for certain grants.
[End of table]
Administrative expenditures for these programs are listed in table 2.
The specific types of expenditures that are considered administrative
differ considerably across the programs. For example, administrative
costs for Foster Care include case planning, recruitment and licensing
of foster care homes, and eligibility determination activities, as well
as other activities. In contrast, administrative costs for CCDF do not
include the costs of providing direct services, such as determining
eligibility and placing children in child care. Both federal and state
funds are used for administrative expenditures. The federal share of
administrative expenditures ranged from 49 percent for the Food Stamp
Program to 70 percent for SCHIP.
Table 2: Federal and State Administrative Expenditures for Selected
Programs, Fiscal Year 2004:
[See PDF for image]
Source: GAO analysis of HHS and USDA data.
[A] CSE administrative expenditures exceed total expenditures because
total expenditures are reduced by child support collections distributed
to TANF and Foster Care programs and fees collected for certain
services.
NA = data not available.
[End of table]
The sharing of administrative costs between the federal and state
governments is based largely on federal matching rates, in accordance
with federal laws and regulations.[Footnote 2] Table 3 provides
information on the federal matching rates and other rules governing
federal expenditures for administrative costs for each program. The
federal matching rate is 50 percent for most administrative
expenditures for Medicaid, the Food Stamp Program, Foster Care, and
Adoption Assistance, although higher federal matching rates may apply
to certain expenses. For CSE, the federal matching rate is 66 percent
for most administrative expenditures. For a portion of CCDF
administrative expenditures, the federal matching rate varies by state
and ranges from 50 percent to 77 percent. For SCHIP, the federal
matching rate also varies by state and ranges from 65 percent to about
84 percent. In addition, administrative expenditures in SCHIP and CCDF
are capped at 10 percent and 5 percent, respectively, of total
expenditures.[Footnote 3]
Table 3: Federal Matching Rates and Other Rules Governing Federal
Expenditures of State Administrative Costs:
[See PDF for image]
Source: GAO analysis of HHS and USDA data.
[A] The 50 percent federal share of state and local administrative
expenses is reduced by $197 million a year to account for costs covered
by grants for TANF, resulting in an actual federal share paid under the
Food Stamp Program that is slightly below 50 percent.
[B] Federal matching rates for CCDF are determined using the Federal
Medical Assistance Percentages. States' federal matching rates are
inversely related to their average per capita income levels. Federal
matching rate applies only to one component of CCDF funding, which is
available to states that achieve required levels of state spending.
[C] Federal matching rates for SCHIP are determined using the Enhanced
Federal Medical Assistance Percentages. States' federal matching rates
are inversely related to their average per capita income levels.
[End of table]
We shared a draft of this document with knowledgeable officials from
each program for their technical review. We discussed the draft with
Child Care and Development Fund and Food Stamp Program officials and
incorporated their comments where appropriate.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this letter until 30 days
after its date. At that time, we will send copies of this letter to the
Secretaries of HHS and USDA, appropriate congressional committees, and
other interested parties. We will also make copies available to others
upon request and on GAO's Web site at http://www.gao.gov.
If you have any questions about this letter, please contact me at (415)
904-2272. You may also reach me by e-mail at bellisd@gao.gov. Gale
Harris served as assistant director on this engagement. Heather Hahn
was the analyst-in-charge. Cindy Ayers, Rebecca Christie, Susan
Higgins, and Carolyn Taylor provided key information.
Sincerely yours,
Signed by:
David D. Bellis:
Director, Education, Workforce, and Income Security Issues:
Enclosure:
Enclosure I:
PROGRAM DESCRIPTIONS:
Adoption Assistance:
The purpose of the Adoption Assistance program, authorized under title
IV-E of the Social Security Act, is to assist states in finding
adoptive homes for eligible children with special needs. This program
provides funds to states to assist in providing adoptive families with
ongoing financial and medical assistance for adopted children with
special needs as well as funds to support staff training and
administrative costs.
Child Care and Development Fund:
The Child Care and Development Fund (CCDF), authorized by the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996, Pub. L.
No. 104-193, assists low-income families, families receiving temporary
public assistance, and those transitioning from public assistance in
obtaining child care so that they can work or attend training or
education. With this block grant, states develop and pay for child care
programs. Within certain federal guidelines, states have discretion in
deciding how these funds will support child care, who will be eligible,
and what payment mechanism will be used.
Child Support Enforcement:
The Child Support Enforcement (CSE) program is a joint federal and
state partnership established in 1975 under title IV-D of the Social
Security Act to ensure that parents provide support to their children.
State CSE programs are responsible for carrying out the basic
activities for locating absent noncustodial parents, establishing
paternity and support orders, and collecting and distributing child
support payments. Although the states administer the child support
enforcement program, the federal government plays a major role, which
includes funding most of the program, establishing policies and
guidance, and overseeing and monitoring state CSE programs' compliance
with federal requirements.
Food Stamp Program:
The Food Stamp Program, established in 1964 and administered at the
federal level by the U.S. Department of Agriculture's (USDA) Food and
Nutrition Service (FNS), is designed to provide basic nutrition to low-
income individuals and families in the United States by supplementing
their income with benefits to purchase food. FNS pays the full cost of
food stamp benefits and shares the states' administrative costs. FNS is
responsible for promulgating program regulations and ensuring that
state officials administer the program in compliance with program
rules. The states administer the program by determining whether
households meet the program's income and asset requirement, calculating
monthly benefits for qualified households, and issuing benefits to
participants on an electronic benefits transfer card.
Foster Care:
The purpose of the Foster Care program, authorized under title IV-E of
the Social Security Act, is to help states provide proper care for
eligible children who need placement outside their homes--in a foster
family home or an institution. This program provides funds to states to
assist with the costs of foster care maintenance for eligible children,
administrative costs to manage the program, and training for program
staff and foster parents.
Medicaid:
Medicaid (title XIX of the Social Security Act) is an entitlement
program that pays for medical assistance for certain individuals and
families with low incomes and few resources. This program became law in
1965 and is jointly funded by the federal and state governments
(including the District of Columbia and U.S. territories) to assist
states in providing medical assistance to people who meet certain
eligibility criteria. Medicaid is the largest source of funding for
medical and health-related service for people with limited income.
Within broad federal guidelines, each state (1) establishes its own
eligibility standards; (2) determines the type, amount, duration, and
scope of services; (3) sets the rate of payment for services; and (4)
administers its own program.
State Children's Health Insurance Program (SCHIP):
SCHIP programs are established and administered by a state, jointly
funded with the federal government, to provide child health assistance
to uninsured, low-income children through a separate child health
program, a Medicaid expansion program, or a combination program. Title
XXI of the Social Security Act, enacted by the Balanced Budget Act of
1997, authorizes federal grants to states for provision of child health
assistance to uninsured, low-income children. Within broad federal
rules, each state decides eligible groups, types and ranges of
services, payment levels for benefit coverage, and administrative and
operating procedures.
(130490):
FOOTNOTES
[1] See enclosure I for descriptions of these programs. We agreed with
your staff on this set of programs that provide assistance to low-
income families and other individuals. Each of these programs is
jointly funded by federal and state governments, employs federal
matching rates, and has annual federal outlays of over $1.5 billion.
[2] The federal matching rate and the actual share of expenditures that
the federal government pays, in practice, differ slightly, because of
the detailed rules governing the sharing of expenses and application of
the federal matching rate.
[3] The 10 percent cap applies to expenditures for administration,
outreach, health initiatives, and certain other child health
assistance.
