Welfare

In response to a congressional request, GAO analyzed the President's Private Sector Survey on Cost Control's (Grace Commission) recommendations and the administration's fiscal years 1986, 1987, and 1988 budget requests concerning federal costs to administer the Aid to Families with Dependent Children (AFDC), Medicaid, and Food Stamp programs, focusing on: (1) growth in administrative costs; (2) existing state processes whereby administrative costs are separately accounted for and allocated among the three programs; (3) higher-than-normal federal cost-sharing rates for certain administrative activities; and (4) effects of federal program changes and uncontrollable economic conditions on administrative costs.

GAO found that: (1) each of the four proposals would control federal cost growth; (2) only the Grace Commission's proposal and the administration's 1986 budget proposal would eliminate the need to allocate costs among the three programs; (3) each proposal would eliminate federal cost-sharing and shift greater financial responsibility to the states; and (4) all of the proposals would provide an open-ended reimbursement, in which the federal government shared in administrative cost increases that resulted from mandatory federal program changes and case-load increases due to unfavorable economic conditions.