TANF And Child Care Programs
HHS Lacks Adequate Information to Assess Risk and Assist States in Managing Improper Payments Gao ID: GAO-04-723 June 18, 2004Minimizing improper payments is important given the dollar magnitude of the Temporary Assistance for Needy Families (TANF) and Child Care and Development Fund (CCDF) programs--about $34 billion in federal and state funds expended annually. These block grants support millions of low-income families with cash assistance, child care, and other services aimed at reducing their dependence on the government. At the federal level, the Department of Health and Human Services (HHS) oversees TANF and CCDF. Within states, many public and private entities administer these programs and share responsibility for financial integrity. GAO looked at (1) what selected states have done to manage improper payments in TANF and CCDF and (2) what HHS has done to assess risk and assist states in managing improper payments in these programs. To address these questions, GAO judgmentally selected states that varied in geographic location and program size. GAO used a survey to collect consistent information from 11 states and visited 5 states.
The 16 states in GAO's review reported using various strategies and tools to manage improper payments, but their efforts were uneven. Almost all the states in the review reported that they performed some activities to assess whether their programs were at risk of improper payments. These activities, however, did not always cover all payments that could be at risk, focusing, for instance, on cash welfare payments but not on payments for services, which were more than half of all TANF payments in certain states. As a result, the assessments do not provide a comprehensive picture of the level of risk in these state programs, which would be useful to HHS as it takes steps to address requirements under the Improper Payments Act. States also reported using a variety of prevention and detection tools to protect against improper payments, but states reported fewer tools in place for CCDF than for TANF, particularly in the area of data sharing to verify eligibility. Although the states in GAO's review recognized the importance of addressing improper payments, they cited competing demands for staff attention and resource limitations that constrained their efforts. While addressing improper payments does involve costs, comprehensively assessing risks can help focus prevention and detection efforts on areas at greatest risk. HHS reported using information from its monitoring activities, including single audits and state financial expenditure reporting to determine if the TANF and CCDF programs are at risk of improper payments. We found however, that these activities do not capture information about the various strategies and tools that states have in place for managing improper payments, such as those we observed in our review. In the absence of such information, HHS cannot determine if the TANF and CCDF programs are susceptible to significant improper payments, as required under the Improper Payments Act. HHS officials acknowledged that they needed more information to be in a position to carry out their responsibilities under the act and therefore recently initiated several projects to gain a better understanding of state control activities. However, HHS's projects do not provide mechanisms to gather information on a recurring basis. The absence of such mechanisms hinders HHS's ability to adequately assess the risk of improper payments and assist states in managing improper payments in these multibillion dollar programs on an ongoing basis. Given the statutory framework of the TANF program, GAO recognizes that HHS may determine that it needs legislative action to direct states to provide the information it needs to take this approach.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-723, TANF And Child Care Programs: HHS Lacks Adequate Information to Assess Risk and Assist States in Managing Improper Payments
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Report to Congressional Requesters:
June 2004:
TANF AND CHILD CARE PROGRAMS:
HHS Lacks Adequate Information to Assess Risk and Assist States in
Managing Improper Payments:
GAO-04-723:
GAO Highlights:
Highlights of GAO-04-723, a report to the Chairman, Committee on
Finance, U.S Senate, and Chairman, Subcommittee on Human Resources,
Committee on Ways and Means, House of Representatives:
Why GAO Did This Study:
Minimizing improper payments is important given the dollar magnitude of
the Temporary Assistance for Needy Families (TANF) and Child Care and
Development Fund (CCDF) programs”about $34 billion in federal and state
funds expended annually. These block grants support millions of low-
income families with cash assistance, child care, and other services
aimed at reducing their dependence on the government. At the federal
level, the Department of Health and Human Services (HHS) oversees TANF
and CCDF. Within states, many public and private entities administer
these programs and share responsibility for financial integrity. GAO
looked at (1) what selected states have done to manage improper
payments in TANF and CCDF and (2) what HHS has done to assess risk and
assist states in managing improper payments in these programs. To
address these questions, GAO judgmentally selected states that varied
in geographic location and program size. GAO used a survey to collect
consistent information from 11 states and visited 5 states.
What GAO Found:
The 16 states in GAO‘s review reported using various strategies and
tools to manage improper payments, but their efforts were uneven.
Almost all the states in the review reported that they performed some
activities to assess whether their programs were at risk of improper
payments. These activities, however, did not always cover all payments
that could be at risk, focusing, for instance, on cash welfare payments
but not on payments for services, which were more than half of all TANF
payments in certain states. As a result, the assessments do not provide
a comprehensive picture of the level of risk in these state programs,
which would be useful to HHS as it takes steps to address requirements
under the Improper Payments Act. States also reported using a variety
of prevention and detection tools to protect against improper payments,
but states reported fewer tools in place for CCDF than for TANF,
particularly in the area of data sharing to verify eligibility.
Although the states in GAO‘s review recognized the importance of
addressing improper payments, they cited competing demands for staff
attention and resource limitations that constrained their efforts.
While addressing improper payments does involve costs, comprehensively
assessing risks can help focus prevention and detection efforts on
areas at greatest risk.
HHS reported using information from its monitoring activities,
including single audits and state financial expenditure reporting to
determine if the TANF and CCDF programs are at risk of improper
payments. We found however, that these activities do not capture
information about the various strategies and tools that states have in
place for managing improper payments, such as those we observed in our
review. In the absence of such information, HHS cannot determine if the
TANF and CCDF programs are susceptible to significant improper
payments, as required under the Improper Payments Act. HHS officials
acknowledged that they needed more information to be in a position to
carry out their responsibilities under the act and therefore recently
initiated several projects to gain a better understanding of state
control activities. However, HHS‘s projects do not provide mechanisms
to gather information on a recurring basis. The absence of such
mechanisms hinders HHS‘s ability to adequately assess the risk of
improper payments and assist states in managing improper payments in
these multibillion dollar programs on an ongoing basis. Given the
statutory framework of the TANF program, GAO recognizes that HHS may
determine that it needs legislative action to direct states to provide
the information it needs to take this approach.
What GAO Recommends:
GAO recommends that HHS do more to gather information on state
internal control systems and to partner with states to address
improper payments. In response, HHS said that its current plans are
adequate, given the legislative restrictions on its ability to
regulate state TANF programs.
www.gao.gov/cgi-bin/getrpt?GAO-04-723.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Linda Calbom at (202)
512-9508 or calboml@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
States' Efforts To Manage Improper Payments Are Uneven:
HHS Has Limited Information on the Risk of Improper Payments, but Has
Efforts Under Way to Improve Monitoring Activities and Assistance to
States:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Information on Selected States:
Survey of State TANF Directors and Child Care Administrators:
State Site Visits:
Review of Federal Role:
Appendix II: Comparison of Data-Sharing Sources in TANF and CCDF
Programs Among Surveyed States:
Appendix III: Comments from the Administration for Children and
Families:
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Examples of Risk Assessment Activities from States Surveyed
and Visited:
Table 2: Types of TANF Payments Covered by States' Assessment of Risks
as Reported by Surveyed States:
Table 3: Extent to Which Surveyed States Reported Estimating an Amount
of Improper Payments and the Methods Used:
Table 4: Factors That Have Contributed to Improper Payments over the
Past 2 Fiscal Years for the TANF Program as Identified by Surveyed
States:
Table 5: Factors That Have Contributed to Improper Payments over the
Past 2 Fiscal Years for the Child Care Subsidy Program as Identified by
Surveyed States:
Table 6: Strategies Used to Prevent and Detect Improper Payments as
Identified by the Surveyed States:
Table 7: Activities Reported by Surveyed States to Prevent and Detect
Improper Payments:
Table 8: Most Frequently Cited Factors That Make It Difficult to
Address Improper Payments as Reported by Surveyed States:
Table 9: TANF Expenditures by State and as a Percentage of the U.S.
Total, Fiscal Year 2002:
Table 10: Families Receiving TANF Monthly Cash Assistance and
Percentage of Expenditures Spent on Cash Assistance for Fiscal Year
2002 and the Amount of Cash Assistance Benefits in January 2003 (in the
16 States):
Table 11: CCDF Expenditures by State and as a Percentage of the U.S.
Total, from Fiscal Year 2002 Appropriation as Expended Through
September 30, 2002:
Table 12: Number of Providers Receiving CCDF Subsidies for Selected
States and Extent of Use of Providers Operating Legally without
Regulation, Fiscal Year 2001:
Figures:
Figure 1: Expenditures of TANF Funds in Fiscal Years 1997 and 2002 (in
percentages):
Figure 2: Broad Array of Services and Providers Involved in TANF
Payment Processes:
Figure 3: Child Care Payment Process:
Figure 4: ACF's Organizational Structure:
Figure 5: Extent to Which Improper Payments Are a Problem, Based on
Surveyed States' Reported Assessment or Analysis of Risk:
Figure 6: Reported Extent of Assistance from HHS on Improper Payments
from Surveyed States:
Figure 7: Types of Assistance Surveyed States Said They Would Like from
HHS:
Letter June 18, 2004:
The Honorable Charles Grassley:
Chairman:
Committee on Finance:
United States Senate:
The Honorable Wally Herger:
Chairman:
Subcommittee on Human Resources:
Committee on Ways and Means:
House of Representatives:
Both the federal government and states have a strong financial interest
in minimizing improper payments in the Temporary Assistance for Needy
Families (TANF) and Child Care and Development Fund (CCDF) programs.
Through these two block grant programs, states receive a fixed amount
of federal funds each year to design and operate their own programs for
assisting families with children. For fiscal year 2002, federal and
state TANF and CCDF expenditures totaled about $34 billion, most of it
federal funds. States use these funds to design and implement their own
programs--within federal guidelines--to support millions of
predominantly low income families with cash assistance, employment,
child care, and other services aimed at reducing their dependence on
the government and promoting employment. At the federal level, the
Department of Health and Human Services (HHS) oversees states' TANF and
CCDF programs. Within states, numerous public and private sector
entities help administer these programs and share responsibility for
protecting the financial integrity of TANF and CCDF programs.
Improper payments in TANF and CCDF can include those made to
individuals who are not eligible, as well as payments made to providers
for services that are not covered by program rules or services that
were billed and paid for but never actually provided. Improper payments
can also result from inadvertent errors--due in part to clerical errors
or a misunderstanding of program rules--as well as from fraud--an
intentional act to deceive for gain.
Because improper payments in government programs are a long-standing,
widespread, and significant problem, Congress enacted the Improper
Payments Information Act of 2002 (the Improper Payments Act).[Footnote
1] The act requires federal managers to review all agency programs and
activities; identify those that may be susceptible to significant
improper payments; and take actions to mitigate the risks identified,
including actions to estimate the amount of improper payments. Like
other federal agencies, HHS must comply with the Improper Payments Act
for all of its programs including TANF and CCDF.
Assessing the risks of improper payments in TANF and CCDF is
particularly important given changes initiated by the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996
(PRWORA).[Footnote 2] This statute led to states broadening the range
and number of services and service providers involved in program
administration, heightening the importance of understanding what steps
the states and the federal government have taken to address improper
payments in these programs. In light of the financial resources at
stake and the importance of TANF and CCDF programs to millions of
American families, you asked us to determine (1) what selected states
have done to manage improper payments in the TANF and CCDF programs and
(2) what HHS has done to assess risk and assist states in managing
improper payments in these programs.
To guide our work, we used the Standards for Internal Control in the
Federal Government and The Executive Guide on Strategies to Manage
Improper Payments: Learning from Public and Private Sector
Organizations as a basis to obtain information about each state's
internal control structure--control environment, risk assessment
procedures, control activities, information and communications, and
monitoring efforts for the TANF and CCDF programs.[Footnote 3]
To determine what selected states have done to manage improper payments
in these programs, we visited 5 states and surveyed 11 other
states.[Footnote 4] We chose these states on the basis of geographic
location, level of program expenditures, and type of program
administration. These states' TANF and CCDF expenditures totaled almost
60 percent of annual national expenditures for these two
programs.[Footnote 5] In our five site visits, we gathered information
on steps taken to identify and address improper payments, including
interviewing TANF and CCDF program officials, fraud officials, and
state auditors and reviewing audit reports and other relevant studies.
In addition, we observed and spoke with program officials in local TANF
and CCDF offices. We surveyed the other 11 states to obtain similar
information from TANF and CCDF program officials. In addition, we spoke
with representatives of national professional associations to discuss
state program integrity issues and their views on efforts to measure
improper payments.
To determine what HHS has done to assess risk and assist states in
managing improper payments in the TANF and CCDF programs, we identified
and reviewed guidance and policies that described HHS's oversight
activities; observed key oversight activities at an HHS regional
office; reviewed documents, plans, and strategies for identifying
improper payments; and interviewed HHS finance and program officials.
We also reviewed results of audits conducted under Office of Management
and Budget (OMB) Circular No. A-133 and the Single Audit Act.[Footnote
6] For additional details of our scope and methodology, see appendix I.
We provided a draft of this report to HHS and to the American Public
Human Services Association (APHSA), the professional organization of
state welfare officials; HHS's comments are included in an appendix and
technical comments from HHS and APHSA were incorporated as appropriate.
Our work was conducted from April 2003 through May 2004 in accordance
with generally accepted government auditing standards.
Results in Brief:
The states in our review reported having various strategies and tools
in place for managing improper payments although these efforts were
uneven. With the flexibility provided under TANF and CCDF, states
generally retain responsibility for determining the types and extent of
internal controls to put in place, with few federal regulations and
limited guidance in this area. Of the 16 states, almost all reported
that they have performed some activities to assess the extent to which
their programs were at risk of improper payments, including reviewing
samples of cases, conducting fraud investigations, and measuring the
amount of improper payments in their programs. These assessment
activities, however, often did not cover all payments that could be at
risk. For example, some state TANF programs' risk assessments focused
on cash welfare payments but did not cover other TANF payments for
services, even though such payments accounted for more than half of all
TANF payments. As a result, while these assessments provide useful
information, they do not provide a comprehensive picture of the level
of risks in these states' programs, which would be useful to HHS as it
takes steps to address requirements under the Improper Payments Act.
The 16 states also reported using a variety of prevention and detection
tools to protect against improper payments, although states reported
fewer tools in place for CCDF than for TANF, particularly in the area
of data sharing to verify eligibility. While the states we reviewed
recognized the importance of addressing improper payments, they cited
competing demands for attention and resource limitations that
constrained their efforts. Although addressing improper payments does
involve costs, comprehensively assessing risks can help focus
prevention and detection efforts on areas at greatest risk. This in
turn can help to minimize improper payments and maximize resources that
can be directed to families in need of program services. The unevenness
of the risk assessments and other control activities in place may mean
there are missed opportunities for states to better prevent and detect
improper payments.
HHS reported having monitoring activities in place, such as single
audits and state financial expenditure reporting, that they rely on to
determine if the TANF and CCDF programs are at risk of improper
payments. However, we found that these monitoring activities do not
capture information about the various strategies and tools that states
have in place for managing improper payments, such as those we observed
in our review. Under the Improper Payments Act, HHS is required to
determine if the TANF and CCDF programs are susceptible to significant
improper payments and annually report to Congress on its determination.
To do so, HHS needs information on states' internal control systems to
determine the extent to which they are sufficient to protect these
programs from significant improper payments. HHS has attempted to
assess the risk of improper payments in these programs using
information from its monitoring activities, but because this
information is limited, the true risk of improper payments in these
programs has yet to be determined. Recognizing these limitations, HHS
recently initiated several projects to gain a better understanding of
state control activities. HHS has also initiated several projects to
provide additional assistance to states in managing improper payments.
Many states we surveyed reported not having received assistance from
HHS specifically related to managing improper payments and several
reported that they would like assistance in identifying effective
practices in this area. The projects that HHS has initiated should help
develop a baseline of information on the various controls that states
have in place for managing improper payments and thus improve HHS's
ability to determine if the TANF and CCDF programs are susceptible to
significant improper payments. However, HHS's projects do not provide
mechanisms to gather information from states on a recurring basis. The
absence of such mechanisms hinders HHS's ability to adequately assess
the risk of improper payments and assist states in managing improper
payments in these multibillion dollar programs on an ongoing basis.
To address these issues, this report makes recommendations to HHS to
develop mechanisms for gathering more information on state internal
control systems and to partner with states to address improper
payments. Given the statutory framework of the TANF program, we
recognize that HHS may determine it needs legislative action to direct
states to provide the information it needs to implement these
recommendations. In commenting on a draft of our report, HHS provided
clarification and expanded views on several issues. In particular, HHS
commented that its current plan for acquiring additional information
and assessing risk is adequate in the statutory context of the TANF
program. While its efforts to gather information are important, they
must be expanded if they are to provide the detail HHS needs on a
recurring basis to ensure it has the relevant information to assess
risk. HHS also commented that we had not addressed its recent
initiatives with the states. We disagree. Our draft clearly depicts the
initiatives planned and underway as described to us by HHS officials
and in documents we reviewed during our fieldwork. HHS also provided us
with technical comments, which we have incorporated as appropriate.
Background:
The TANF and CCDF programs are two of the nation's key federal programs
for assisting needy families with children and are an important
component of states' social services networks. These two programs each
consist of more than 50 distinct state-level programs--one for each
state, the District of Columbia, four territories, and numerous tribal
entities. Annually, the federal government makes available to each
state a portion of the (1) $16.5 billion TANF block grant that was
established by PRWORA and (2) $4.8 billion from CCDF for child care
subsidies and other related activities. Within HHS, the Administration
for Children and Families (ACF) oversees states' TANF and CCDF
programs.
Changes under PRWORA--TANF:
Congress created TANF in 1996 to replace the decades-old Aid to
Families With Dependent Children (AFDC) program that entitled eligible
needy families to monthly cash assistance payments. PRWORA made
sweeping changes to federal welfare policy, including ending
individuals' entitlement to aid, imposing time limits on the receipt of
aid, and imposing work requirements on most adults receiving aid. This
federal framework gives states the flexibility to design their own
programs; define who will be eligible; establish what benefits and
services will be available; and develop their own strategies for
achieving program goals, including how to help recipients move into the
workforce.
PRWORA provides states substantial authority to use TANF funds in any
way that is reasonably calculated to meet the goals of the program. As
specified by PRWORA, TANF's goals include ending the dependence of
needy families on government benefits by promoting job preparation,
work, and marriage; preventing and reducing the incidence of nonmarital
pregnancies; and encouraging two-parent families. These broad goals
represent a significantly broader scope than AFDC. PRWORA also expanded
the scope of services that could potentially be contracted out, such as
determining eligibility for TANF, which had traditionally been done by
government employees.
In addition to these programmatic changes, PRWORA dramatically changed
the fiscal structure of the program and shifted significant fiscal
responsibility for the program to states.[Footnote 7] Each year, the
federal government makes a fixed amount of TANF funds available to each
state, and a state may reserve some of these funds for use in the
future. This represents a significant departure from past policy, under
which the amount of federal funds received was linked to the size of
each state's welfare caseload. To receive their federal TANF funds,
states must spend a specified amount of their own funds each year,
referred to as state maintenance of effort.
Along with granting states significant flexibility, PRWORA redefined
HHS's role in administration of the nation's welfare system, limiting
its regulatory and enforcement authority and reducing its staff level
for administering TANF. Specifically, the law states: "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."[Footnote 8] The law also
eliminated the quality control system that HHS used to measure payment
accuracy of monthly welfare payments under AFDC. Under that system,
states were required to statistically select a sample of cash
assistance cases and determine the level of erroneous (improper)
payments; if a state's improper payment rate exceeded the targeted
error rate, it faced a financial penalty.
HHS states in the preamble to TANF regulations that PRWORA reflects the
principle that the federal government should focus less attention on
eligibility determinations and place more emphasis on program
results.[Footnote 9] To that end, PRWORA gave HHS new responsibilities
for tracking state performance, including a set of financial penalties
for states that fail to comply with program requirements and a bonus
program for states that perform well in meeting certain program goals.
Several of these penalties reflect new expectations for states to
assist recipients in making the transition to employment. For example,
states face financial penalties if they do not place a minimum
specified percentage of adult TANF recipients in work or work-related
activities each year and if they provide federal TANF funds to families
who have reached the TANF time limits on receipt of aid--60 months over
a lifetime. The bonus program was to reward states for high performance
toward achieving program goals, such as moving welfare recipients into
jobs and reducing out-of-wedlock births.
At the same time, Congress, through PRWORA, emphasized the importance
of sound fiscal management for state TANF programs. One part of the new
penalty system focused on penalties for states that use funds in
violation of PRWORA, as identified through audits conducted under the
Single Audit Act. In addition, the law stated that states are to
include in the TANF plans that they file with HHS a certification that
procedures are in place to combat fraud and abuse, although the law
does not require the states to describe these procedures. Moreover,
states are required to continue participating in the Income and
Eligibility Verification System (IEVS) that provides information from
various sources to help verify eligibility information.
As state TANF programs have evolved since implementation, the nation's
welfare system now looks quite different than it did under AFDC, posing
some challenges for defining and measuring improper payments. As our
previous work has shown,[Footnote 10] welfare agencies now operate more
like job centers, taking steps to move recipients into work and
providing aid to help families avoid welfare. States now spend most
TANF funds on a broad array of services for families rather than on
monthly cash assistance, as shown in figure 1. These services include
employment services, case management services, support services such as
child care and transportation, and pregnancy prevention among others.
In addition, states offer various services to other low-income families
not receiving welfare, including child care and employment and training
services.
Figure 1: Expenditures of TANF Funds in Fiscal Years 1997 and 2002 (in
percentages):
[See PDF for image]
Sources: HHS and Congressional Research Service.
Note: HHS data from TANF Annual Report for fiscal year 2002.
[A] This category includes spending for a variety of services, such as
transportation, pregnancy prevention, and promoting family stability
and child welfare.
[End of figure]
In addition to the broad range of services provided by TANF programs,
more entities receive and administer TANF program funds than before,
posing additional challenges for states in managing improper payments.
In many states, county or local governments receive TANF funds and are
the key TANF administrative agencies, sometimes establishing their own
policies and programs. States may also distribute TANF funds to several
different state agencies to provide services. States and localities
also may contract with a multitude of nonprofit and for-profit
organizations. In our 2002 report on TANF contracting, our survey to
states identified more than 5,000 TANF contracts with nongovernmental
organizations at the state level and at least 1,500 contracts at the
local level.[Footnote 11] We also found that in 2001, about a quarter
of states contracted out 20 percent or more of TANF funds expended for
services in fiscal year 2000, ranging up to 74 percent. Figure 2 shows
the broad range of services for which TANF payments are made and the
entities involved in the TANF payment processes.
Figure 2: Broad Array of Services and Providers Involved in TANF
Payment Processes:
[See PDF for image]
[A] States, and in some cases localities, also contribute funds.
[B] This category includes spending for a variety of services, such as
transportation, pregnancy prevention, and promoting family stability
and child welfare.
[End of figure]
Changes under PRWORA--CCDF:
PRWORA also combined several existing child care programs into one
program designed to provide states with more flexible funding for
subsidizing the child care needs of low-income families who are working
or preparing for work. CCDF provides states funds to subsidize child
care assistance for families with incomes up to 85 percent of state
median income who are working or in education or training. Under CCDF
rules, eligible participants are to be allowed parental choice of child
care providers, including center-based, home-based, or relative care.
In addition, families are required to contribute to the cost of care,
in the form of a copayment, unless states exempt families below the
poverty level from this requirement. CCDF rules also provide some
guidance on establishing reimbursement rates for child care providers
and requires that a specified portion of funds be set aside for
activities designed to enhance child care quality.[Footnote 12]
Within this framework, states establish their own income eligibility
criteria and determine how the program will be administered. Like TANF,
CCDF is administered through multiple agencies, including county and
local governments and nonproft and for-profit organizations. This
decentralized system can create challenges for determining what
constitutes an improper payment. Figure 3 illustrates the steps often
involved in making child care payments.[Footnote 13] In recent years,
federal and state CCDF expenditures have increased more than 100
percent--from $4.0 billion in 1997 to $8.6 billion in 2002, the most
recent year for which data are available.
Figure 3: Child Care Payment Process:
[See PDF for image]
[End of figure]
HHS's Administrative Structure and Oversight:
At the federal level, ACF's Office of Family Assistance (OFA) is
responsible for overseeing TANF, and the Child Care Bureau is
responsible for overseeing CCDF. Staff in the 10 ACF regional offices
and the Office of Financial Services also assist in overseeing aspects
of state TANF and CCDF programs. Figure 4 shows ACF's organizational
structure.
Figure 4: ACF's Organizational Structure:
[See PDF for image]
[End of figure]
OFA is responsible for overseeing TANF and coordinating HHS efforts to
assist states in managing improper payments in the TANF program.
Specifically, the office is responsible for (1) developing and
implementing strategies to assist grantees in implementing and
designing programs to meet TANF purposes; (2) ensuring compliance with
federal laws and regulations; (3) implementing national policy and
developing regulations to implement new laws; (4) developing
regulations to implement data collection requirements; (5) implementing
and maintaining systems for the collection and analysis of data,
including participation rate information, recipient characteristics,
financial and administrative data, state expenditures on families, work
activities of noncustodial parents, transitional services, and data
used in the assessment of state performance; and (6) identifying best
practices and sharing information through conferences, publications,
and other means.
The Child Care Bureau is responsible for overseeing CCDF programs and
coordinating HHS efforts to assist states in managing improper payments
in the CCDF program. The Bureau's responsibilities include (1) tracking
grantee program implementation by collecting and analyzing information
that states are required to report through CCDF plans, financial
expenditure reports, and administrative data reports; (2) providing
technical assistance to grantees concerning CCDF through the Child Care
Technical Assistance Network where the Bureau sponsors national and
regional conferences and meetings and support the development of
Technical Assistance materials and websites; (3) developing program
policy guidance to grantees on the administration of CCDF, including
questions related to what expenditures are allowable under the program;
and (4) supporting research to disseminate findings that document
emerging trends in the child care field.
OFA and the Child Care Bureau share fiscal oversight responsibility
with the 10 regional offices that are responsible for reviewing
financial expenditure reports that states are required to submit as
well as assisting in other program responsibilities. The Office of
Financial Services is the HHS-designated lead unit for coordinating
reporting on the agency's efforts to manage improper payments in the
TANF and CCDF programs.
Improper Payments Act:
In November 2002, Congress passed the Improper Payments Act. The act
requires the head of each agency to annually review all programs and
activities that the agency administers and identify all such programs
and activities that may be susceptible to significant improper
payments. For each program and activity identified, the agency is
required to estimate the annual amount of improper payments and submit
those estimates to Congress before March 31 of the following applicable
year. The act further requires that for any agency program or activity
with estimated improper payments exceeding $10 million and 2.5 percent
of program payments, the head of the agency shall provide a report on
the actions the agency is taking to reduce those payments.[Footnote 14]
The Improper Payments Act also required the Director of OMB to
prescribe guidance to implement its requirements. OMB issued guidance
on May 21, 2003, that provides instructions for estimating improper
payment rates, and requires agencies to set target rates for future
reductions in improper payments, identify the types and causes of
improper payments, and highlight variances from targets or goals
established. Significantly, the May 2003 guidance also required 15
agencies to publicly report improper payment information for 46
programs identified in OMB Circular No. A-11 in the agencies' fiscal
year 2003 Performance and Accountability Reports. According to OMB, the
programs were selected primarily because of their large dollar volumes
($2 billion dollars or more in outlays). The TANF and CCDF programs are
included in the 46 programs.
Internal Control Framework:
In most cases, the cause of improper payments can be traced to a lack
of or breakdown in internal control. Our Standards for Internal Control
in the Federal Government provides a road map for entities to establish
control for all aspects of their operations and a basis against which
entities' control structures can be evaluated. Also, our Executive
Guide on Strategies to Manage Improper Payments: Learning from Public
and Private Sector:
Organizations focuses on the internal control standards as they relate
to reducing improper payments.[Footnote 15]
The five components of internal control--control environment, risk
assessment, control activities, information and communication, and
monitoring--are defined in the Executive Guide in relation to improper
payments as follows:
* Control environment--creating a culture of accountability by
establishing a positive and supportive attitude toward the achievement
of established program outcomes.
* Risk assessment--analyzing program operations to determine where
risks of improper payments exist, what those risks are, and the
potential or actual impact of those risks on program operations.
* Control activities--taking actions to address identified risk areas
and help ensure that management's decisions and plans are carried out
and program objectives are met.
* Information and communication--using and sharing relevant, reliable,
and timely financial and non-financial information in managing
activities related to improper payments.
* Monitoring--tracking improvement initiatives over time, and
identifying additional actions needed to further improve program
efficiency and effectiveness.
Improper payments in the TANF program can occur in all of the TANF
payment types: ongoing monthly cash assistance payments to individuals
or families; one-time payments to individuals or families; and payments
made to a range of for-profits, non-profits, state agencies, and
contractors. HHS has instructed states that they should recover any
overpayments by recouping them from the recipients as a reduction in
future TANF cash payments or by collecting cash repayments. It also
states that the full amount of recovered overpayments made after
October 1, 1996--PRWORA was signed into law in August 1996--is to be
retained by the state and used for TANF program costs.[Footnote 16]
Improper payments in the CCDF program can occur in all payment types:
payments to child care providers or families.
States' Efforts To Manage Improper Payments Are Uneven:
Almost all states we surveyed and visited reported taking some steps to
assess whether their TANF and CCDF programs were at risk for improper
payments or to measure the extent of improper payments. However, these
efforts were uneven--not all states had assessed risks, risk
assessments often did not cover all program payment types, and states'
measures of the amounts of improper payments did not always rely on
rigorous methodologies. While these assessments provide some valuable
information, they do not provide a comprehensive picture of the nature
and extent of improper payments in TANF and CCDF programs among the 16
states. In addition, while the states reported they have various
strategies and tools in place to help prevent and detect improper
payments, these efforts were also uneven. While states understand the
importance of addressing improper payments, they cited several factors
that make it difficult for them to adequately manage improper payments.
The unevenness of internal controls among states may result in missed
opportunities to further address improper payments.
Almost All States Reported Some Risk Assessment Activities:
Almost all the states we surveyed and visited reported performing some
activities to assess whether their TANF and CCDF programs were at risk
of improper payments. We defined a risk assessment as a formal or
informal review and analysis of program operations. The purpose of a
risk assessment is to determine where risks of improper payments exist,
what those risks are, and the potential or actual impact of those risks
on program operations.[Footnote 17] Conducting risk assessments helps
to ensure that public funds are used appropriately and clients receive
the proper benefits. Improper payments, including fraud,[Footnote 18]
may occur in several different ways in the TANF and CCDF programs,
involving clients, providers, and agency personnel. For example, an
inadvertent error may result in an overpayment or underpayment when:
* a client mistakenly fails to report some income,
* a provider accidentally receives payment due to a billing error, or:
* a caseworker incorrectly records some information or makes an error
in calculating a benefit amount.
Improper payments due to fraudulent activity may occur, for example,
when:
* a client files for and receives benefits in two jurisdictions
concurrently,
* a provider claims payment for services not rendered, or:
* an agency employee creates a fictitious case and collects the
benefit.
In addition, a broad range of state entities may be involved in
identifying improper payments and measuring the extent to which they
occur. For overpayments and underpayments, these state entities may
include frontline workers, quality control staff, or management staff.
State entities involved in preventing and detecting fraud may include
the state inspectors general offices, state fraud units, and state
auditors.
The 16 states we surveyed and visited reported a mix of risk assessment
activities. These activities include state studies conducted under the
Single Audit Act and other studies by state auditors, fraud units, and
inspectors general. States also identified other activities, including
reviews of program policies, one-time studies or pilots, and regular
reviews of client cases. States generally reported more activities for
TANF than CCDF programs. More specifically, TANF-related activities
were more likely to include regular quality control reviews than CCDF
activities, as might be expected given the requirements for the
previous AFDC program. Table 1 provides some examples of states' risk
assessment activities.
Table 1: Examples of Risk Assessment Activities from States Surveyed
and Visited:
State: Colorado;
Description of Actions: CCDF officials conducted a study to determine
the extent to which child care assistance payments were supported by
adequate documentation and records. Of these payments to providers,
officials determined that 14.7 percent were either errors or exceptions
to payment. The study included site visits and data collection
activities in 32 of Colorado's 64 counties. The study recommended,
among other things, that additional auditing controls of provider
records and case files were needed at the local level to ensure that
child care was appropriately provided and that families were eligible
for assistance.
State: Illinois;
Description of Actions: Officials conducted an analysis of program
risk by identifying ways that improper payments occurred in the child
care program and examining current state policies to identify risk
areas that could be addressed. In order to mitigate program risk, the
study recommended several ways to improve its policies, including
developing procedures and forms to establish repayment schedules for
improper payments and providing stronger prevention mechanisms,
including more sharing of data through computers at initial
application.
State: Texas;
Description of Actions: TANF officials established work groups that
assessed the risk of new policy initiatives and considered methods to
better manage these risks. One method of risk management included
developing bulletins that alert program staff to new and revised
policies to better ensure proper implementation and reduce improper
payments.
State: Florida;
Description of Actions: TANF officials reported that quality assurance
staff regularly conduct case reviews to determine where risks exists.
These reviews result in formal reports and require district offices to
prepare corrective action plans to address the findings.
Source: GAO surveys and site visit information.
[End of table]
While states reported performing some risk assessment activities, these
activities did not appear to be uniformly comprehensive in their
coverage of all types of program payments. As shown in table 2, many of
the states we surveyed said they had performed some type of an
assessment or analysis of risk for three primary types of TANF
payments, while others did not cover all of these payment types. Three
states said they had assessed risks for monthly cash payments only.
Data from HHS for fiscal year 2002 showed that in these three states,
the percentage of TANF expenditures for cash assistance ranged from
about 25 percent to more than 50 percent. (See app. I for each state's
percentage of TANF expenditures for cash assistance.) While fewer
states reported assessing risk in payments to service providers, states
typically have procedures in place to monitor these contracting
activities, as we reported in our previous work.[Footnote 19]
Table 2: Types of TANF Payments Covered by States' Assessment of Risks
as Reported by Surveyed States:
Number of states: 6;
Monthly cash assistance payments: Yes;
Payments for other benefits or services: Yes;
Payments to service providers: Yes.
Number of states: 1;
Monthly cash assistance payments: Yes;
Payments for other benefits or services: Yes;
Payments to service providers: No.
Number of states: 3;
Monthly cash assistance payments: Yes;
Payments for other benefits or services: No;
Payments to service providers: No.
Source: GAO.
Notes: Based on surveys of state TANF administrators in 11 states. One
state did not respond to this question.
[End of table]
Most of the states we surveyed and visited reported taking steps to
measure the extent of improper payments in their TANF and CCDF programs
as part of their risk assessment activities, although the extent of
these efforts was mixed. As shown in table 3, the surveyed states
reported relying on a variety of methods to calculate their measures of
improper payments. For the TANF program, four of the surveyed states
(California, Maryland, Michigan, and Pennsylvania) as well as one site
visit state (Texas) reported that they relied on a statistically
representative sample to estimate an amount of improper payments,
although these generally covered TANF monthly cash assistance payments
only. Among the surveyed states, fewer reported estimating an amount of
improper payments for the CCDF program than for the TANF program.
Compared with TANF, CCDF measures of improper payments generally
occurred on a more ad hoc basis, such as a one-time study or pilot
effort that covered one jurisdiction of a state, and were less likely
to result from regular reviews of cases. In one state we visited, child
care officials said they estimated the amount of improper payments for
the largest subsidized child care program but not the other three
programs also supported with CCDF funds.
Table 3: Extent to Which Surveyed States Reported Estimating an Amount
of Improper Payments and the Methods Used:
TANF;
State: California;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: Yes;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: Yes;
Other[A]: No.
TANF;
State: Colorado;
Has estimated the amount of improper payments: No;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
TANF;
State: Florida;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: Yes;
Findings from other state or local auditors: No;
Findings from state or local fraud units: Yes;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
TANF;
State: Idaho;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: Yes;
Findings from other state or local auditors: No;
Findings from state or local fraud units: Yes;
Reviews of service provider or contractor: Yes;
Reviews of sampled cases (not statistically representative of
all payments): Yes;
Statistically representative sample of cash payments: No;
Other[A]: No.
TANF;
State: Kansas;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: Yes.
TANF;
State: Maryland;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): Yes;
Statistically representative sample of cash payments: Yes;
Other[A]: No.
TANF;
State: Michigan;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: Yes;
Findings from other state or local auditors: No;
Findings from state or local fraud units: Yes;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: Yes;
Other[A]: No.
TANF;
State: New Mexico;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: Yes;
Findings from state or local fraud units: Yes;
Reviews of service provider or contractor: Yes;
Reviews of sampled cases (not statistically representative of
all payments): Yes;
Statistically representative sample of cash payments: No;
Other[A]: No.
TANF;
State: New York;
Has estimated the amount of improper payments: No;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
TANF;
State: Ohio;
Has estimated the amount of improper payments: No[B];
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
TANF;
State: Pennsylvania;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: Yes;
Other[A]: No.
CCDF;
State: California;
Has estimated the amount of improper payments: No;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
CCDF;
State: Colorado;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: Yes;
Findings from state or local fraud units: Yes;
Reviews of service provider or contractor: Yes;
Reviews of sampled cases (not statistically representative of
all payments): Yes;
Statistically representative sample of cash payments: No;
Other[A]: Yes.
CCDF;
State: Florida;
Has estimated the amount of improper payments: No[B];
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
CCDF;
State: Idaho;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: Yes;
Findings from other state or local auditors: No;
Findings from state or local fraud units: Yes;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
CCDF;
State: Kansas;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: Yes.
CCDF;
State: Marlyand;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: Yes;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
CCDF;
State: Michigan;
Has estimated the amount of improper payments: No;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
CCDF;
State: New Mexico;
Has estimated the amount of improper payments: Yes[C];
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
CCDF;
State: New York;
Has estimated the amount of improper payments: No;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
CCDF;
State: Ohio;
Has estimated the amount of improper payments: No;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: No;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: No.
CCDF;
State: Pennsylvania;
Has estimated the amount of improper payments: Yes;
Methods Used by States to Estimate Improper Payments:
Findings from State's Single Audits: No;
Findings from other state or local auditors: No;
Findings from state or local fraud units: Yes;
Reviews of service provider or contractor: No;
Reviews of sampled cases (not statistically representative of
all payments): No;
Statistically representative sample of cash payments: No;
Other[A]: Yes.
Source: GAO.
Note: Based on surveys of state TANF and CCDF administrators in 11
states.
[A] Other methods that states identified included annual independent
program audits, self-reviews coordinated by counties, and gathering
information from a state's automated eligibility system. States'
automated systems can help identify improper payments through
programmed edits and checks on data entered and on benefit
calculations, for example.
[B] Although the state reponded that it did not calculate an amount, it
provided some information on the amount of improper payments recovered.
[C] Did not provide information on methods used.
[End of table]
Many of the states we visited and surveyed provided us data on the
amount of improper payments in their TANF and CCDF programs, but these
data do not provide a complete picture of the amount of payments in
these states' programs and cannot be used for comparisons among states.
Too often, states' assessment activities did not measure the amount of
improper payments among all types of TANF payments, and therefore do
not present a complete picture of improper payments. In addition, some
state data included amounts based on overpayments to clients only while
others also included underpayments to clients based on agency errors.
In other cases, the amount included only those payments identified as
fraudulent but not other types of improper payments based on
inadvertent mistakes. As a result, data were not comparable across
states.
However, data on the amount of improper payments, can play an important
role in states' program management, helping them to identify program
areas at risk so they can be addressed and to recover funds when
possible. The following are some examples of these types of activities
from the states we visited.[Footnote 20]
* In Texas, TANF program officials stated that the quality control unit
and the fraud unit estimate the amount of improper payments, which
include client error, agency error, and fraud. The quality control unit
uses a statistically representative sample of cash payments to
calculate improper payments and the fraud unit uses all claims
established in the investigation system to estimate improper payments.
Based on these methods, Texas officials estimated the amount of
improper payments to be $6.3 million for the TANF program during fiscal
year 2002.[Footnote 21] Furthermore, officials estimated that $5.7
million in improper payments were recovered that same year.[Footnote
22]
* In Illinois, child care program officials stated that suspected fraud
cases are sent to the state Bureau of Investigations to be examined. In
2002, the Illinois Office of Inspector General completed 114 CCDF
investigations, which identified $1,172,293 in overpayments. The office
cited several examples of fraudulently received child care benefits,
including the following:
* A client falsified her payroll information to qualify for child care
assistance. The alleged overpayment was $27,203.
* A client falsified payroll information to qualify for child care and
failed to report her true earnings. The child care overpayment totaled
$45,174.
* In Virginia, child care program officials told us that they conducted
a pilot study to assess the extent of fraud in the child care subsidy
program. The pilot focused on 3 of the state's 121 local social service
offices. During the year-long pilot, a total of 28 fraudulent claims
were identified, and based on these findings, officials determined that
the savings that would accrue to the state would justify the costs of
fraud monitoring. Child care officials identified several examples of
fraudulent activity, including the following:
* A client failed to report income from a second job, that she was
living with the child's father, and the father's earnings; the total
household income made them ineligible for assistance. The total
overpayment was $8,944.
* A provider submitted invoices for five siblings for child care
provided during periods when the provider was not providing care and
was not living near the children. The total overpayment was $14,931.
States generally rely on information from risk assessment activities to
identify the extent of program risks and to highlight problem areas.
Officials in the states we surveyed responded that on the basis of
their risk assessments, they did not perceive improper payments to be a
great problem in either the TANF or CCDF programs. However, some CCDF
officials reported improper payments as a moderate problem while none
of the TANF officials did so, as shown in figure 5.
Figure 5: Extent to Which Improper Payments Are a Problem, Based on
Surveyed States' Reported Assessment or Analysis of Risk:
[See PDF for image]
Notes: Based on surveys of state TANF and CCDF administrators in 11
states. One state did not respond to this question for the TANF
program; two states did not respond to this question for the CCDF
program.
[End of figure]
As discussed previously, the nature and extent of states' reported risk
assessments varied greatly, and often did not cover all payment types.
This suggests their overall program risk assessments were based on a
limited perspective. While state officials did not see improper
payments as a great problem, they had identified factors that
contributed to improper payments in their programs, as shown in table
4. TANF respondents most often identified inaccurate information on
income, earnings, and assets and clients not meeting participation
requirements as factors contributing to improper payments. Inaccurate
information on income, earning, and assets can occur, for example, when
clients do not report income from employment or changes in earnings
that they are required to report and that may affect the amount of
their payments or basic eligibility for aid.
Table 4: Factors That Have Contributed to Improper Payments over the
Past 2 Fiscal Years for the TANF Program as Identified by Surveyed
States:
Factors contributing to improper payments: Related to clients;
Factors contributing to improper payments: Related to clients;
Nonreporting/underreporting of income;
Number of states responding: Great extent: 4;
Number of states responding: Moderate extent: 5;
Number of states responding: Don't know: 1.
Factors contributing to improper payments: Related to clients;
Client receiving payment in more than one state;
Number of states responding: Little extent: 6;
Number of states responding: No extent: 3;
Number of states responding: Don't know: 1.
Factors contributing to improper payments: Related to clients;
Incorrect reporting of assets;
Number of states responding: Moderate extent: 2;
Number of states responding: Little extent: 4;
Number of states responding: No extent: 3;
Number of states responding: Don't know: 1.
Factors contributing to improper payments: Related to clients;
Incorrect reporting of household size;
Number of states responding: Moderate extent: 5;
Number of states responding: Little extent: 4;
Number of states responding: Don't know: 1.
Factors contributing to improper payments: Related to clients;
Incorrect citizenship or immigration status[A];
Number of states responding: Little extent: 5;
Number of states responding: No extent: 4;
Number of states responding: Don't know: 1.
Factors contributing to improper payments: Related to clients;
Incorrect information on client's compliance with program
requirements, such as participating in required activity;
Number of states responding: Moderate extent: 3;
Number of states responding: Little extent: 3;
Number of states responding: No extent: 2;
Number of states responding: Don't know: 2.
Factors contributing to improper payments: Related to clients;
Other: 0.
Factors contributing to improper payments: Related to providers;
Overstating performance;
Number of states responding: Little extent: 2;
Number of states responding: No extent: 3;
Number of states responding: Don't know: 3.
Factors contributing to improper payments: Related to providers;
Claiming for services not rendered;
Number of states responding: Little extent: 3;
Number of states responding: No extent: 3;
Number of states responding: Don't know: 2.
Factors contributing to improper payments: Related to providers;
Other;
Number of states responding: Don't know: 2.
Source: GAO.
Notes: Based on surveys of state TANF administrators in 11 states.
Eleven states responded to the survey, but not all answered each
question or item.
[A] To be eligible for aid, individuals must meet certain citizenship
or legal immigrant conditions.
[End of table]
For states' child care programs, the surveyed officials identified
factors associated with both clients and child care providers as
contributing most frequently to improper payments, as shown in table 5.
Officials in the states we visited identified examples of client-and
provider-related problems. For example, Virginia CCDF officials
identified several cases in which clients were no longer working or
looking for work and therefore no longer eligible for a child care
subsidy. Illinois officials cited several cases in which the provider
gave inaccurate information on the amount of child care received. In
one case, the provider billed the state for children she had stopped
caring for, and in another case the provider billed the state for
watching children during hours when the provider was actually working
at another job.
Table 5: Factors That Have Contributed to Improper Payments over the
Past 2 Fiscal Years for the Child Care Subsidy Program as Identified
by Surveyed States:
Factors contributing to improper payments: Related to clients;
Nonreporting/underreporting of income;
Number of states responding: Moderate extent: 5;
Number of states responding: Little extent: 1;
Number of states responding: Don't know: 3.
Factors contributing to improper payments: Related to clients;
Client receiving payment in more than one state;
Number of states responding: Little extent: 1;
Number of states responding: No extent: 3;
Number of states responding: Don't know: 4.
Factors contributing to improper payments: Related to clients;
Incorrect reporting of household size;
Number of states responding: Moderate extent: 2;
Number of states responding: Little extent: 4;
Number of states responding: Don't know: 2.
Factors contributing to improper payments: Related to clients;
Incorrect citizenship or immigration status of child[A];
Number of states responding: No extent: 4;
Number of states responding: Don't know: 3.
Factors contributing to improper payments: Related to clients;
Incorrect information on client's compliance with employment or
education and training requirements;
Number of states responding: Moderate extent: 2;
Number of states responding: Little extent: 2;
Number of states responding: No extent: 1;
Number of states responding: Don't know: 2.
Factors contributing to improper payments: Related to clients;
Claiming subsidy for child care not received;
Number of states responding: Moderate extent: 2;
Number of states responding: Little extent: 4;
Number of states responding: Don't know: 3.
Factors contributing to improper payments: Related to clients;
Other;
Number of states responding: Don't know: 1.
Factors contributing to improper payments: Related to providers;
Receiving subsidies for more children than served;
Number of states responding: Moderate extent: 1;
Number of states responding: Little extent: 6;
Number of states responding: Don't know: 3.
Factors contributing to improper payments: Related to providers;
Receiving subsidies for more hours of care than actually provided;
Number of states responding: Moderate extent: 4;
Number of states responding: Little extent: 3;
Number of states responding: Don't know: 3.
Factors contributing to improper payments: Related to providers;
Receiving subsidies when not meeting any existing licensing
requirements;
Number of states responding: Little extent: 2;
Number of states responding: No extent: 4;
Number of states responding: Don't know: 2.
Factors contributing to improper payments: Related to providers;
Receiving subsidies when no services rendered;
Number of states responding: Moderate extent: 3;
Number of states responding: Little extent: 5;
Number of states responding: Don't know: 2.
Factors contributing to improper payments: Related to providers;
Other;
Number of states responding: Moderate extent: 1;
Number of states responding: Don't know: 1.
Source: GAO.
Notes: Based on surveys of state CCDF administrators in 11 states.
Eleven states responded to the survey, but not all answered each
question or item.
[A] To be eligible for aid, individuals must meet certain citizenship
or legal immigrant conditions.
Other: Colorado identified excessive absences of children that the
provider billed for and was paid.
[End of table]
States More Likely to Use Prevention and Detection Tools in TANF Than
in CCDF:
In addition to assessing a program's risk of improper payments, states
reported using other key aspects of an internal control system,
including emphasizing accountability and using tools to prevent and
detect fraud, although the extent of use varied among the states and
was less widespread among CCDF programs. For example, states we
surveyed sometimes used performance goals to instill a culture of
accountability by working toward improvement and achievement of
established program outcomes. Although improper payment estimates were
incomplete (as noted in the previous section), table 6 shows that a
majority of TANF programs and two CCDF programs surveyed had
established goals for reducing improper payments. In addition, some
states were required to generate reports on improper payments to senior
government officials. This was also the case in one of the states we
visited. Texas officials told us they have established statewide
performance goals for reducing the TANF rate of improper payments and
hold regional offices accountable for performance objectives. If
regions fail to meet their objectives, they must draft and implement
performance improvement plans, which are then monitored by state
officials.
Table 6: Strategies Used to Prevent and Detect Improper Payments as
Identified by the Surveyed States:
Has established goals for reducing improper payments and is required
to report on improper payments to other government entities;
Number of states reporting using strategy: TANF: 2;
Number of states reporting using strategy: CCDF: 0.
Has only established goals;
Number of states reporting using strategy: TANF: 6;
Number of states reporting using strategy: CCDF: 2.
Has only a reporting requirement;
Number of states reporting using strategy: TANF: 1;
Number of states reporting using strategy: CCDF: 0.
Neither strategy in place;
Number of states reporting using strategy: TANF: 2;
Number of states reporting using strategy: CCDF: 8.
Source: GAO.
Note: Based on surveys of state TANF and CCDF program administrators in
11 states. One state did not respond to part of this question for the
CCDF program.
[End of table]
Greater emphasis on reducing improper payments in state TANF programs
likely stems from states' experience under the former AFDC program in
which the federal government had more guidance and requirements
specifically related to improper payment levels. In contrast, state
CCDF assistance programs do not share that history and generally do not
have the same formal internal control elements in place as in TANF. For
example, officials in Virginia told us TANF fraud is more under control
than child care fraud because there are more institutional processes in
place to manage improper payments. They noted these processes are
holdovers from the old AFDC program, and pointed out that eligibility
workers are more aware of improper payment activities in TANF because
of the training they received under AFDC. Along these lines, CCDF
officials in Virginia told us they do not have any performance goals or
measures for reducing improper payments, and pointed out that internal
controls aimed at reducing fraud for the CCDF program are relatively
new.[Footnote 23]
In addition to performance goals and reporting requirements, each TANF
and CCDF program reviewed reported performing a variety of activities
to verify the accuracy of information to determine client eligibility
and the proper payment amount, as shown in table 7. For example,
Illinois officials told us they verify among other things: income,
assets, residency, relationship of members in household, age, school
attendance, and child support payments, for all appropriate household
members to determine TANF eligibility. In addition, any caseworker or
member of the public who is suspicious of welfare fraud is encouraged
to complete a one-page on-line form that is submitted to Illinois'
Office of Inspector General. Fraud investigations are then initiated,
if warranted.
Table 7: Activities Reported by Surveyed States to Prevent and Detect
Improper Payments:
Require documentation from client;
Number of states that report listed activity: TANF: 11;
Number of states that report listed activity: CCDF: 11.
Activity: Match automated computer files;
Number of states that report listed activity: TANF: 11;
Number of states that report listed activity: CCDF: 10.
Activity: Initiate a fraud investigation if warranted;
Number of states that report listed activity: TANF: 10;
Number of states that report listed activity: CCDF: 11.
Activity: Conduct telephone, fax, or e-mail contacts;
Number of states that report listed activity: TANF: 10;
Number of states that report listed activity: CCDF: 10.
Activity: Access online databases;
Number of states that report listed activity: TANF: 9;
Number of states that report listed activity: CCDF: 8.
Activity: Conduct program integrity or quality control review;
Number of states that report listed activity: TANF: 7;
Number of states that report listed activity: CCDF: 8.
Activity: Child care only: Confirm licensing status of providers, if
warranted;
Number of states that report listed activity: TANF: NA;
Number of states that report listed activity: CCDF: 11.
Activity: Child care only: Conduct background checks of providers;
Number of states that report listed activity: TANF: NA;
Number of states that report listed activity: CCDF: 10.
Activity: Child care only: Conduct visits to providers;
Number of states that report listed activity: TANF: NA;
Number of states that report listed activity: CCDF: 8.
Source: GAO.
Note: Based on surveys of state TANF and CCDF program administrators in
11 states. NA refers to "not applicable."
[End of table]
As the list of activities in table 7 demonstrates, many CCDF programs
report that they verify the accuracy of payments to providers as well
as clients, although this occurs in a variety of ways given the
flexibility provided to states under CCDF.[Footnote 24] All CCDF
programs surveyed reported that they confirm the licensing status of
regulated child care providers before payments are made and most
conduct background checks for providers. For example, in Texas, CCDF
funds are monitored in a two-tier system. CCDF funds are distributed by
the state to 28 local boards that contract out the CCDF program.
Contract monitors at the state level identify questionable costs from
the boards, while contractors monitor the individual providers'
contracts at the local level.
Some child care providers are not required to be licensed, and some
CCDF officials reported having a more difficult time monitoring
payments to these types of providers.[Footnote 25] These legal provider
arrangements (referred to as unregulated or unlicensed providers) are
generally established by parents and frequently involve care by a
family member. Under CCDF, states are to allow parents to make their
own decisions on the type of child care used, as long as they choose a
legally operating provider. CCDF officials in Virginia told us there
might be more potential for fraud among unregulated providers because
the officials have little knowledge about unregulated providers, and do
not feel they have enough tools in place to monitor the legitimacy of
all unregulated providers.
In addition to activities taken by states to help ensure initial
eligibility, all states surveyed reported requiring additional check-
ins with clients to ensure that their eligibility status has not
changed (often referred to as a redetermination). Most states surveyed
said that they require a redetermination at least once every 12 months
for both programs, although the method of check-in is generally more
flexible for the CCDF program. For example, the majority of TANF
programs require clients to visit the TANF office in order to continue
receiving benefits. Conversely, most CCDF programs allow clients to
check in by phone, fax, e-mail, or mail. This difference may be
explained by state welfare programs' long history of requiring periodic
office visits for families to continue receiving monthly checks. In
contrast, the newer CCDF program can be characterized as an important
support for working families not associated with traditional welfare
and the welfare office. Virginia CCDF officials told us redetermination
methods stem from the philosophy that clients should not have excessive
requirements to meet agency representatives face-to-face. A CCDF
official in Washington echoed this sentiment when she told us benefit
interviews are never meant to interfere with a client's work or
training schedule. These views are consistent with CCDF's objective to
assist parents with child care so that they can enter or remain in the
workforce.
One specific activity all the states reported relying on to help
identify accurate eligibility information was data sharing, although
the extent of use varied. Data sharing, a key control activity, allows
comparison of information from different sources to confirm initial and
continuing client or provider eligibility. All states reported
performing at least one data sharing activity; however, the amount of
data sharing varies greatly between the TANF and CCDF programs. Among
the states we surveyed, while the majority of TANF programs reported
data matching with at least 10 sources, the CCDF programs reported data
matching with significantly fewer sources. For example, while all of
the TANF programs we surveyed reported sharing data with the state
department of labor or employment security to ensure that clients are
correctly reporting their income levels,[Footnote 26] only 3 of 11 CCDF
programs reported doing the same. Appendix II summarizes data matching
results from all surveyed states.
The extent to which states reported using data sharing capabilities in
TANF and CCDF programs varied by program, in part because state TANF
programs are more likely to have automated information systems that can
help them analyze large amounts of data from other sources. Some
possible explanations for this difference may be the greater maturity
of the TANF program and the existence of data sharing requirements for
TANF that do not exist for CCDF.[Footnote 27] Additionally, under
TANF's predecessor (AFDC), the federal government funded a large
portion of state-run automated computer system costs in earlier years.
Recognizing the importance of automated systems in efficiently and
accurately determining eligibility, Congress acted to encourage states
to develop automated systems for the AFDC program by authorizing ACF to
reimburse states for a significant proportion of their total costs to
develop and operate automated eligibility determination systems that
met federal requirements.[Footnote 28] Under PRWORA, states may use
their TANF or CCDF funds for their automated system needs, although
no specific federal requirements exist for these systems.
The level of sophistication of data sharing practices varied in the
states we visited. For example, CCDF officials in Washington have
implemented a complex automated system that allows them to find
duplicate payments. Another automated data sharing resource frequently
used with TANF programs is the Public Assistance Reporting Information
System (PARIS). PARIS helps states voluntarily share information on
public assistance programs to identify individuals or families who may
be receiving benefit payments in more than one state
simultaneously.[Footnote 29] Almost half of the TANF programs surveyed
participate in PARIS. No CCDF programs surveyed participated in PARIS
because the project was designed especially for Medicaid, food stamps,
and TANF. ACF officials said they are considering the possibilities of
PARIS for the CCDF program.
Not all data matching is done with automated systems however. Georgia
CCDF officials told us they had conducted a match with Head Start to
ensure that families are not being paid twice for child care.[Footnote
30] To conduct this match Head Start program officials provided CCDF
administrators with a printed list of enrolled children, and officials
cross-referenced the list to look for duplication. Officials noted that
the process would have been more efficient if it were automated, but
speculated that a lack of funding or on-going partnership may be
reasons the process was not computerized.
While states reported having implemented many prevention and detection
tools to manage improper payments, it is difficult to determine the
relative effectiveness of these efforts. If states routinely performed
comprehensive risk assessments or rigorously measured improper
payments, it would be easier to understand the effect of these efforts.
Without such strategies, success of these initiatives cannot be
quantitatively determined, and the return on investment is unknown.
States Cited Factors That Make It Difficult to Adequately Address
Improper Payments:
While the states visited and surveyed understand the importance of
addressing improper payments, many cited factors that make it difficult
for them to address improper payments. Table 8 highlights the most
frequently cited factors and demonstrates that many concerns were
similar for the TANF and CCDF programs. Factors frequently cited in
both programs include competing demands for staff attention and the
lack of staff working specifically on improper payments. Based on their
survey responses, one reason states often face competing demands is
because they place their greatest focus on key mission goals, such as
moving TANF clients into employment and meeting clients' child care
needs. This is consistent with the transformation in the federal
welfare program from a cash welfare entitlement program to an
employment program. Officials in some of our site visit states noted
that the shift from AFDC to TANF changed the focus of the program. For
example, Washington state officials said the TANF program emphasizes
assisting the recipient with the tools needed to obtain and maintain
employment. Illinois state officials also identified activities other
than payment accuracy as their primary focus in meeting TANF program
goals, such as providing income supports including child care
assistance and transportation. Related to these factors are states'
concerns about insufficient funding, with about half of the states
citing this as a factor for TANF and CCDF. We also heard this concern
from some of the state auditors we spoke with in site visit states; the
auditor general in one state said that his office has not conducted any
reviews of the TANF and CCDF programs outside of the single audit
within the past few years, in part due to resource limitations and the
loss of staff within the department.
Table 8: Most Frequently Cited Factors That Make It Difficult to
Address Improper Payments as Reported by Surveyed States:
Factors that make it difficult to address improper payments:
Insufficient policies, procedures, and regulations in place;
Number of states that cited factor as a problem: TANF: 1;
Number of states that cited factor as a problem: CCDF: 4.
Factors that make it difficult to address improper payments:
Insufficient expertise available;
Number of states that cited factor as a problem: TANF: 4;
Number of states that cited factor as a problem: CCDF: 3.
Factors that make it difficult to address improper payments:
Difficulty obtaining valid or reliable data;
Number of states that cited factor as a problem: TANF: 1;
Number of states that cited factor as a problem: CCDF: 4.
Factors that make it difficult to address improper payments:
Difficulty obtaining data in time to be useful;
Number of states that cited factor as a problem: TANF: 4;
Number of states that cited factor as a problem: CCDF: 4.
Factors that make it difficult to address improper payments:
Automated data systems do not provide needed data;
Number of states that cited factor as a problem: TANF: 2;
Number of states that cited factor as a problem: CCDF: 5.
Factors that make it difficult to address improper payments:
Limited ability to use SSNs for data sharing;
Number of states that cited factor as a problem: TANF: 0;
Number of states that cited factor as a problem: CCDF: 6.
Factors that make it difficult to address improper payments:
Insufficient funding;
Number of states that cited factor as a problem: TANF: 5;
Number of states that cited factor as a problem: CCDF: 7.
Factors that make it difficult to address improper payments:
Limit on proportion of funds that can be spent on administration;
Number of states that cited factor as a problem: TANF: 4;
Number of states that cited factor as a problem: CCDF: 3.
Factors that make it difficult to address improper payments:
Competing demands for eligibility caseworkers' or management's
attention;
Number of states that cited factor as a problem: TANF: 9;
Number of states that cited factor as a problem: CCDF: 7.
Factors that make it difficult to address improper payments:
Insufficient staff working specifically on improper payments;
Number of states that cited factor as a problem: TANF: 8;
Number of states that cited factor as a problem: CCDF: 8.
Factors that make it difficult to address improper payments:
Concerns about "going after" families in need;
Number of states that cited factor as a problem: TANF: 5;
Number of states that cited factor as a problem: CCDF: 4.
Factors that make it difficult to address improper payments:
Costs of pursuing improper payments perceived to outweigh potential
benefits;
Number of states that cited factor as a problem: TANF: 5;
Number of states that cited factor as a problem: CCDF: 7.
Factors that make it difficult to address improper payments:
Reluctance of law enforcement to prosecute;
Number of states that cited factor as a problem: TANF: 6;
Number of states that cited factor as a problem: CCDF: 4.
Source: GAO.
Note: Based on surveys of state TANF and CCDF program administrators in
11 states.
[End of table]
Among CCDF officials, survey respondents were also less likely to have
focused on managing improper payments and more likely to have focused
on other aspects of their program, such as matching clients with
providers. For example, Kansas CCDF officials were concerned that
policies and monitoring activities developed to prevent improper
payments and fraud could become overly burdensome, thereby possibly
limiting the quality of services they provide to the children and
families they serve. Officials also cited a lack of staff dedicated
solely to addressing improper payments as problematic for both the TANF
and CCDF programs. For example, Illinois officials said they have fraud
cases that are not investigated due to small staff ratios per case or
loss of staff. Likewise, Virginia officials stated that there is a lack
of investigator staff to pursue fraud cases.
States' concerns about how best to use limited resources highlight the
importance of risk assessment as a key element of sound internal
control systems. Risk assessment activities allow an organization to
focus often limited resources on the most significant problem areas and
determine where risks exist, what those risks are, and what needs to be
done to address the identified risks. This helps to ensure that public
funds are used appropriately and clients receive the proper benefits,
thereby helping meet the program's mission and goals.
Officials also cited problems that were more prevalent in one program
than the other. In the TANF program, officials expressed more concern
about the reluctance of law enforcement to prosecute low dollar value
cases. For example, TANF officials in Virginia told us about law
enforcement officials' reluctance to prosecute improper payment cases
unless they reach a certain dollar amount. The commonwealth attorney in
each county determines the threshold for prosecuting these cases.
On the other hand, CCDF officials frequently cited their limited
ability to use SSNs for data sharing as a problem. While the Social
Security Act and implementing regulations require SSNs as a condition
of eligibility for the TANF program, no such law exists for the CCDF
program. States may not require SSNs for the CCDF program without
violating the Privacy Act of 1974. States may request that applicants
provide their SSNs but must make clear that supplying the numbers is
not required as a condition of receiving services.[Footnote 31] HHS has
told states they may use alternatives (such as a unique case
identifier) to the SSN to verify non-applicant income and resources
when determining eligibility and benefit levels of applicants.
Regardless of HHS's position on this issue, CCDF officials in Illinois
reported that the inability to require SSNs presents the potential for
fraudulent payments. Similarly, CCDF officials in Florida reported that
they would like SSNs to be required at the federal level, because they
believe the effectiveness of data sharing is limited when parents are
allowed to report them voluntarily. On the other hand, at least one
state we reviewed addressed this issue in its CCDF program by asking
for SSNs, but noting that the provision of them is voluntary. This
state said that clients provided SSNs in all but 2 percent of cases.
In addition to the SSN issue, CCDF officials often cited insufficient
funding as a factor that hinders their efforts to address improper
payments. For example, Washington state CCDF officials said they do not
have enough money to improve improper payment identifications and
recoveries because CCDF rules cap administrative costs at 5 percent of
the grant, and improper payment identification is a very labor-
intensive process. Similarly, Virginia CCDF officials told us the
reason they do not have enough staff dedicated to addressing improper
payments is a result of the funding restrictions imposed by the CCDF's
administrative cap. While some states saw the administrative cap as a
limitation, others did not. Nationwide, the average portion of total
funds spent on administrative costs in the CCDF program is about 3
percent. In addition, states may structure their programs to use state
maintenance of effort funds (required to receive a portion of their
CCDF funds) for these costs because no administrative cap exists on
these state funds.
ACF officials explained that some activities related to identifying and
addressing improper payments may not be considered administrative
activities to be included under the cap. For example, eligibility
determination and redetermination, training of child care staff, and
the establishment and maintenance of computerized child care
information systems are not to be considered administrative activities,
and these activities can play an important role in states' efforts to
combat improper payments. At the same time, CCDF regulations state that
activities such as program monitoring; audit services, including
coordinating the resolution of audit and monitoring findings; and
program evaluation are considered administrative. States' choices about
how they design and structure their internal control activities affect
the extent to which the administrative cap may limit their efforts.
HHS Has Limited Information on the Risk of Improper Payments, but Has
Efforts Under Way to Improve Monitoring Activities and Assistance to
States:
HHS relies on the single audit process and financial expenditure
reporting to monitor state compliance with federal guidelines and
oversee whether states expend federal funds properly. These mechanisms,
however, do not capture information on the various strategies and tools
that states have in place for managing improper payments. In the
absence of such information, HHS cannot adequately determine if the
TANF and CCDF programs are susceptible to significant improper
payments, as required by the Improper Payments Act. HHS officials
acknowledge that they will need information on state activities to
manage improper payments if they are to comply with the Improper
Payments Act. As a result, HHS recently started several projects to
collect information from selected states. HHS also initiated several
projects to encourage state use of certain tools in managing improper
payments, such as data matching capabilities. Several states in our
review reported that they would like additional assistance from HHS in
identifying effective practices for managing improper payments. While
HHS's projects are a good start, they do not provide mechanisms to
gather information on state control activities on a recurring basis.
The absence of such mechanisms could hinder HHS's ability to assess the
extent to which program payments may be at risk and comply with the
Improper Payments Act.
HHS Monitoring Activities Do Not Provide Information That HHS Needs to
Adequately Assess the Risk of Improper Payments:
HHS is required to annually review the TANF and CCDF programs to
determine if they are susceptible to significant improper payments. The
Improper Payments Act also requires agencies to estimate the amount of
improper payments if a program is determined to be susceptible to
significant improper payments. HHS needs information on the various
controls that states have in place to minimize improper payments in
order to adequately assess risk. In preparing its 2004 review of TANF
and CCDF, HHS used findings from single audit reports, the key activity
that HHS relies on to monitor state fiscal activities.
Single audits assess whether states have complied with requirements in
up to 14 managerial or financial areas, including allowable activities,
allowable costs, cash management, eligibility, reporting, period of
availability of funds, procurement and subrecipient
monitoring.[Footnote 32] Audit findings in many of these areas often
identify control weaknesses that can lead to improper payments. Based
on an analysis of single audit findings, particularly findings related
to eligibility and allowable cost, HHS concluded in its January 2004
review that there were no systemic problems or improper payment trends
in the TANF and CCDF programs. HHS also concluded that only a very
small percentage of program costs have been classified as misspent
funds based on the rate of questioned costs included in the Single
Audit reports, which according to HHS, has been less than .1 percent of
program costs in recent years. While single audit findings as well as
the amounts of unallowable or questioned costs that the audits identify
are useful in determining the potential for improper payments in the
TANF and CCDF programs, the audits are not designed to provided a
complete description of the methods and activities that the states use
to minimize improper payments. Questioned costs identified in single
audits are also not intended to provide an estimate of the total amount
of improper payments, and the methods used to derive questioned costs
are not consistent among state auditors. For example, we observed
variation in the methods that auditors used to identify questioned
costs when testing whether TANF payments are accurate according to
states' eligibility and payment criteria. In reviewing the fiscal year
2002 and 2001 single audit reports for the five states we visited, we
noted that some samples were selected statistically so that any
questioned costs could be projected to all TANF payments and others
were not. Also, some auditors determined that payments were improper if
case files were missing or incomplete while others identified improper
payments based on the specific eligibility criteria that clients failed
to meet.
HHS also reported that it considered information from its reviews of
state expenditure reports in determining if TANF and CCDF payments were
susceptible to significant improper payments. Federal guidelines
require states to report on the expenditure of TANF and CCDF funds on a
quarterly basis. HHS reported that its review of these reports helps to
ensure that states are properly expending TANF and CCDF funds. However,
regional office staff said that few resources are devoted to financial
expenditure reviews and that the reviews are limited in identifying
improper payments because expenditures are reported on a summary level
and states are not required to submit detailed financial reports that
they would need to identify improper payments. As a result, these
reviews provide little useful information in assessing the risk of
improper payments.
Also, HHS reported that it gains access to information about state
practices and activities from the TANF and CCDF plans that PRWORA
requires states to submit to HHS, although this information is not used
directly to monitor state fiscal activities. The state plans describe
the practices that states use to meet the key objectives and federal
requirements of the TANF and CCDF programs. Further for TANF plans,
states are required to certify that they have procedures in place to
combat fraud and abuse. However, states are not required to describe
these procedures in their TANF plans. Similarly, CCDF plans do not
require states to describe the procedures that they have in place to
combat fraud and abuse but HHS officials report that they often gain an
understanding of state procedures in reviewing and approving these
plans.
HHS Has Some Efforts Under Way to Improve Monitoring Activities and
Assistance to States:
HHS officials acknowledged that HHS's monitoring activities do not
provide enough information to determine if TANF and CCDF programs are
susceptible to significant improper payments. In our most recent report
on governmentwide improper payments initiatives, we reported that HHS
did not include information on TANF and CCDF improper payments in its
Performance and Accountability Reports for fiscal year 2003, as
required by OMB guidance for implementing the Improper Payments
Act.[Footnote 33] The TANF and CCDF programs are among the 46 programs
that OMB required agencies to report the results of their improper
payment efforts in the Management Discussion and Analysis section of
their accountability reports for fiscal year 2003. Specifically, we
reported that HHS did not report improper payment amounts, initiatives
to prevent and reduce improper payments, or impediments to preventing
or reducing them.
HHS has started several initiatives intended to collect more
information on state efforts to control TANF and CCDF improper
payments. HHS has also started several initiatives to assist states in
managing improper payments and to encourage state use of certain tools
to minimize improper payments, such as data matching capabilities.
These initiatives should help HHS begin to assess the risk of improper
payments and send a strong signal to states that managing improper
payments is an important issue. They should also help states understand
that the information they provide HHS on the strategies and tools that
they have in place to manage improper payments is critical to
determining whether these programs are susceptible to significant
improper payments.
HHS's initiatives to collect more information on state CCDF programs
are under way, and HHS is already starting to compile the results.
CCDF Initiative:
HHS officials developed the CCDF initiative in September 2003. The
overall goals of the initiative are to improve monitoring and
administration regarding improper payments and fraud, provide better
definitions of child care errors and child care fraud, and gather
documented "best practices." HHS officials also expect to identify
other technical assistance materials and any new information reporting
needs for the states. As part of the CCDF initiative, HHS recruited a
state agency official with experience in program integrity to help the
Child Care Bureau oversee the initiative. According to HHS officials,
key actions for completing the initiative include:
* Working with selected states to determine whether there is an
effective and cost efficient approach or methodology for estimating
improper payment amounts in the CCDF program.
* Conducting visits to some of the selected states to observe the
internal control and other activities they have in place to manage
improper payments.
* Coordinating with the HHS Office of the Inspector General to provide
training and technical assistance on improper payments and fraud to
state CCDF officials.
* Coordinating with the United Council on Welfare Fraud and the
American Public Human Services Association to discuss child care fraud
and other issues.
HHS is working with 11 states (Arkansas, Connecticut, Georgia, Indiana,
Maryland, Ohio, Oklahoma, Oregon, South Carolina, Virginia, and
Wisconsin) on the project. According to HHS officials, these 11 states
provide experience in dealing with erroneous payments, knowledge of the
capacity of their automated systems, and strong working relationships
among key state agencies. In addition, both centralized and county-
based organizational structures are represented in the 11 states.
HHS held initial meetings with the 11 states during November 2003, in
Washington, D.C. State officials such as child care administrators,
fraud directors, quality assurance directors, auditors, and
investigators participated in the meetings along with HHS Child Care
Bureau and regional office staff. During the meetings, states discussed
various approaches to controlling errors and fraud. In addition, the
Child Care Bureau has conducted a number of conference calls with
states, including one on PARIS.
Since the November meeting, HHS has completed site visits to two
states, Connecticut and Arkansas, and plans to complete visits to three
other states--Indiana, Ohio, and Oklahoma--by the end of June 2004. HHS
officials told us that they would compile all of the information from
their visits into a report to analyze and identify possible options for
estimating payment errors in the CCDF program and for improving program
integrity. HHS expects to issue its report by September 2004.
TANF Initiatives:
HHS has developed plans to implement three projects aimed at improving
its monitoring activities for TANF and assistance to states. HHS is
actively working with OMB on its implementation plans for the TANF
projects to ensure that they strike the right balance between the
authority that HHS has to oversee TANF, as set forth by PRWORA, and the
requirements of the Improper Payments Act.
The first project involves asking two states to volunteer for an
expanded single audit review of their TANF programs by state auditors.
Auditors are expected to conduct more detailed examinations of certain
state controls, such as those used to determine that payments are in
accordance with eligibility criteria and those controls used to oversee
payments to entities that states contract with to provide TANF
services. While this project only includes two states, HHS hopes to
gain detailed knowledge of the adequacy of controls that states have in
place to identify improper payments in all payment types. HHS said it
plans to evaluate the first-year results of the project, report the
information to OMB, and then decide upon second-year initiatives based
on the initial results. According to HHS, it must still secure funding
for these audits and obtain agreement from state auditors to perform
the additional work. HHS is working with its Office of Inspector
General to identify states to participate in the pilot project.
The second TANF project involves collecting and sharing information on
state activities to address improper payments. HHS is drafting a letter
to states asking them for information on their "best practices" for
addressing improper payments. HHS says the letter will request that
states describe how they define improper payments in the state, the
process used to identify such payments, and what actions are taken to
reduce improper payments. HHS noted that the letter will make clear
that a state's submission is voluntary. HHS also said it is working
with OMB to ensure that the letter is in accordance with the oversight
authority that HHS has under PRWORA and requirements under the
Paperwork Reduction Act of 1995.[Footnote 34] According to HHS, it
plans to establish a repository for the state submissions, which would
be available to all states for viewing on an HHS Web site.
The third project involves encouraging more states to use PARIS. PARIS
is the interstate match program that was initiated to help state public
assistance agencies share information to identify individuals or
families who may be receiving or may have duplicate payments improperly
made on their behalf in more than one state. In 2001, we reported on
the usefulness of PARIS in identifying improper payments in the TANF
program along with other programs for low-income individuals, such as
food stamps and Medicaid.[Footnote 35] Currently only 22 states
participate in PARIS. Other states reported that they do not
participate in PARIS for various reasons, including the lack of data
showing that participating would produce savings for their state.
ACF officials say they have promoted state awareness of PARIS at
conferences and ACF staff currently participate as members of the PARIS
board of directors. In addition, HHS's proposed fiscal year 2005 budget
includes $2 million for PARIS activities. HHS plans to use $500,000 of
the $2 million for contractor support to conduct an evaluation of
participant states' PARIS activities to (1) establish a valid and
reliable method for calculating the costs and benefits of participating
in PARIS and (2) disseminate data on cost and benefits to other
states. HHS also plans to devote a full-time equivalent position to
manage the PARIS project.
In carrying out these projects for TANF and CCDF, HHS expects to also
provide more assistance to states in managing improper payments.
Several states that we surveyed said they would like additional
assistance from HHS in this area. We specifically asked states the
following: To what extent, if any, have you received assistance from
HHS (regional or headquarters) regarding identifying and managing
improper payments in your state's TANF and CCDF programs--assistance
such as responses to state queries, any written guidance, any Web-based
HHS information, conference, presentation, etc.?
Many of the states we surveyed reported that they did not receive
assistance from HHS regarding managing improper payments. As figure 7
shows, states reported that HHS generally provided little to no
assistance for the CCDF program and moderate to some assistance for the
TANF program on this topic.[Footnote 36]
Figure 6: Reported Extent of Assistance from HHS on Improper Payments
from Surveyed States:
[See PDF for image]
Notes: Based on surveys of state TANF and CCDF program administrators
in 11 states. For the CCDF program, one state did not respond to this
question.
[End of figure]
Several states said they would like additional assistance from HHS in
managing improper payments. We also asked states if they would like
assistance from a variety of national organizations, recognizing that
other organizations play an important role in advising states on how to
operate their TANF and CCDF programs. TANF officials most frequently
indicated they would like assistance from the National Council of State
Human Services Administrators (NCSHS) and the United Council on Welfare
Fraud (UCOWF), while the CCDF officials primarily wanted assistance
from the National Child Care Information Center (NCCIC).[Footnote 37]
Regarding assistance from HHS, most states indicated that they would
like additional assistance identifying and disseminating promising
practices for managing improper payments, as figure 8 illustrates.
Additionally, most CCDF programs reported that they would like HHS to
provide guidance on what the federal law requires and allows with
respect to improper payments.
Figure 7: Types of Assistance Surveyed States Said They Would Like from
HHS:
[See PDF for image]
Note: Based on surveys of state TANF and CCDF program administrators in
11 states.
[End of figure]
The projects for TANF and CCDF should help improve HHS monitoring
activities as well as assistance to states. If successfully
implemented, the projects will begin to provide HHS with a baseline of
information on the various controls that states have in place for
managing improper payments and thus improve HHS's ability to determine
if the TANF and CCDF programs are susceptible to significant improper
payments. However, HHS projects do not provide mechanisms to gather
information on state control activities on a recurring basis. The
absence of such mechanisms hinders HHS's ability to adequately assess
the risk of improper payments and assist states in managing improper
payments in these multi-billion dollar programs on an ongoing basis.
Conclusions:
The extent to which the TANF and CCDF programs are vulnerable to
improper payments cannot be determined given the information currently
available nationwide and in the 16 states we reviewed. Given the dollar
magnitude of these programs--about $34 billion in federal and state
funds--and the nature of their activities, we know that potential risks
exist. We also know--based on our review of the 16 states--that states
have some prevention and detection tools in place and at least some
understanding of the extent of program risks, although some unevenness
exists among states and between the TANF and CCDF programs in these
areas.
What is not known, however, is the extent to which states' internal
control systems are sufficient to protect these programs against an
unnecessarily high level of improper payments. While we acknowledge
that states have a great deal of discretion in TANF and CCDF, HHS
continues to have a fiduciary responsibility to ensure that states
properly account for their use of federal funds and maintain adequate
internal controls over the use of funds. In addition, it has
requirements under the Improper Payments Act to assess the significance
of risks for improper payments, which it cannot do with the information
currently available. As a result, HHS needs mechanisms to gather
information on state control activities on a recurring basis.
HHS may determine that it needs legislative action in obtaining
information from states. HHS may also require a shift in resources or
additional resources to implement its efforts. It is essential that HHS
move ahead with and expand its actions to better understand the
internal control systems that states have in place and the extent to
which program payments may be at risk. It can also play an important
role in exploring the usefulness of expanding data sharing systems like
PARIS to state CCDF programs.
In the short term, program funds lost to fraud and abuse or used to
support ineligible families mean other needy families cannot be helped.
In the longer term, it means that federal resources may not be used as
effectively and efficiently as possible to meet important federal
goals. Insufficient attention to addressing improper payments can erode
public confidence in and support for these programs. As HHS moves
forward, attention must be paid to carefully balancing the flexibility
allowed states under law and the need for accountability for federal
funds.
Recommendations for Executive Action:
To better assist states in managing improper payments in the TANF and
CCDF programs and comply with the Improper Payments Act, we recommend
that the Secretary of Health and Human Services direct the Assistant
Secretary of ACF to take the following four actions:
* Develop mechanisms to gather information on a recurring basis from
all states on their internal control systems for measuring and
minimizing improper payments.
* Follow through on efforts to identify practices that states think are
effective in minimizing improper payments and facilitate sharing of
these with other states.
* Where appropriate, partner with states to assess the cost-
effectiveness of selected practices.
* Explore the feasibility of expanding PARIS to include CCDF, in
addition to TANF, including a study of the cost-effectiveness of such a
plan.
In recommending these approaches, we recognize that HHS may determine
that it needs legislative action to direct states to provide the
information. We also recognize that these approaches may require a
shift in resources or additional resources.
Agency Comments and Our Evaluation:
ACF provided written comments on a draft of this report; these comments
appear in appendix III. It also provided technical comments that we
incorporated as appropriate. We also provided a draft of the report to
the American Public Human Services Association, the professional
organization of state welfare officials, which provided technical
comments that we also incorporated as appropriate. In its comments, ACF
said that the report provides HHS with new and useful information. It
also expressed concerns about our recommendation for collecting
information on state internal controls as it relates to the TANF
program and said we did not address its ongoing initiatives.
Regarding CCDF, ACF said it welcomed our examination of improper
payments in CCDF and added that our work complements its ongoing
initiative to examine state efforts to address improper payments. While
it did not specifically state that it agreed with our recommendations
as they pertain to CCDF, it noted that its new efforts to examine child
care improper payments are still in the early stages and it is
committed to considering a wide range of options for possible next
steps. ACF also noted that our findings on states' views about the
level and usefulness of ACF technical assistance related to improper
payments may not reflect its recent and growing level of effort it
provides states in this area. We generally spoke with and surveyed
states between December 2003 and February 2004. As a result, the time
period of our review would not cover ACF's most recent efforts.
Regarding TANF, ACF agreed that new and improved information from
states would enable HHS to better help states address improper
payments. It also stated, however, that it believed that the assessment
of risk called for under the Improper Payments Act must be made within
the statutory framework of the TANF program, which places constraints
on ACF to regulate state TANF programs. Within this statutory
framework, ACF thinks its plan for acquiring additional information and
assessing risk is adequate. It also expressed concern that the draft
report did not adequately portray the regulatory constraints,
particularly in its summary sections. In the draft report, we clearly
stated the regulatory restrictions and noted that HHS may need to
pursue additional legislative authority to collect the information
needed on state internal control systems to assess program risk levels.
We have added more of this information to our summary sections.
We also recognize, and discuss in the draft report, that ACF has plans
to ask states to provide voluntarily more information on their efforts
to address improper payments in order to share that information with
all states. We agree that this is an important effort; we found that
states in our review often reported wanting more assistance from HHS on
identifying promising practices in this area. However, ACF will need to
expand upon this effort or pursue additional strategies to ensure it
has information of sufficient detail to gain an understanding of
states' internal control systems. Its current data collection strategy
is not likely to lead to information of sufficient detail to adequately
assess the risk of improper payments on a recurring basis.
In addition, ACF said the draft did not address the relevant
initiatives it has undertaken or will undertake during fiscal years
2004 and 2005 and it provided information on these initiatives. We
disagree. Our draft discussed all of the initiatives for the CCDF and
TANF programs that ACF noted in its comments. We did, however, enhance
portions of the discussion based on information provided by ACF in its
comment letter.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 30
days from its date. At that time, we will send copies of this report to
the Secretary of Health and Human Services and others who are
interested. In addition, this report will be available at no charge on
GAO's Web site at [Hyperlink, http://www.gao.gov]. We will also make
copies available to others upon request.
If you or your staff have any questions about this report, please
contact Linda M. Calbom on (202) 512-9508 or
[Hyperlink, Calboml@gao.gov] or Cynthia M. Fagnoni on (202) 512-7215
or [Hyperlink, Fagnonic@gao.gov]. Additional GAO contacts and
acknowledgments are provided in appendix IV.
Signed by:
Linda M Calbom:
Director, Financial Management and Assurance:
Signed by:
Cynthia M. Fagnoni:
Managing Director, Education, Workforce, and Income Security:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
We designed our study to provide information on (1) what selected
states have done to manage improper payments in the Temporary
Assistance for Needy Families (TANF) and Child Care and Development
Fund (CCDF) programs, and (2) what the Department of Health and Human
Services (HHS) has done to assess risk and assist states in managing
improper payments in these programs. To obtain information about these
objectives, we developed a data collection instrument for state TANF
directors and a separate one for state CCDF administrators, conducted
in-person interviews with state TANF and CCDF program officials and
state fraud officials, conducted telephone interviews with state
auditors, reviewed information from our prior work, and conducted work
at the federal level. In addition, we interviewed or consulted
officials with professional associations including the American Public
Human Services Association and the United Council on Welfare Fraud. We
provided a draft of this report to APHSA and HHS. HHS's comments are
included in appendix III and technical comments from HHS and APHSA were
incorporated as appropriate.
We conducted our work from April 2003 through May 2004 in accordance
with generally accepted government auditing standards.
Information on Selected States:
To obtain information for this report, we judgmentally selected 16
states that reflect variations in the following characteristics:
geographic location, level of TANF and CCDF program expenditures, and
size of population. As part of our analysis, we sent data collection
instruments to 11 states: California, Colorado, Florida, Idaho, Kansas,
Maryland, Michigan, New Mexico, New York, Ohio, and Pennsylvania. We
also visited 5 other states: Georgia, Illinois, Texas, Virginia, and
Washington. Table 9 provides information on the amount of TANF
expenditures for the 16 states in our review and each state's TANF
expenditure as a percentage of the U.S. total. The table also shows
that together these states represent about 70 percent of total U.S.
TANF expenditures.
Table 9: TANF Expenditures by State and as a Percentage of the U.S.
Total, Fiscal Year 2002:
State: California;
Total TANF expenditures (dollars in millions): $5,477.3;
State's TANF expenditures as a percentage of U.S. total: 21.6%.
State: Colorado;
Total TANF expenditures (dollars in millions): $233.2;
State's TANF expenditures as a percentage of U.S. total: 0.9%.
State: Florida;
Total TANF expenditures (dollars in millions): $992.5;
State's TANF expenditures as a percentage of U.S. total: 3.9%.
State: Georgia;
Total TANF expenditures (dollars in millions): $510.7;
State's TANF expenditures as a percentage of U.S. total: 2.0%.
State: Idaho;
Total TANF expenditures (dollars in millions): $39.3;
State's TANF expenditures as a percentage of U.S. total: 0.2%.
State: Illinois;
Total TANF expenditures (dollars in millions): $971.2;
State's TANF expenditures as a percentage of U.S. total: 3.8%.
State: Kansas;
Total TANF expenditures (dollars in millions): $137.1;
State's TANF expenditures as a percentage of U.S. total: 0.5%.
State: Maryland;
Total TANF expenditures (dollars in millions): $427.7;
State's TANF expenditures as a percentage of U.S. total: 1.7%.
State: Michigan;
Total TANF expenditures (dollars in millions): $1,266.8;
State's TANF expenditures as a percentage of U.S. total: 5.0%.
State: New Mexico;
Total TANF expenditures (dollars in millions): $123.1;
State's TANF expenditures as a percentage of U.S. total: 0.5%.
State: New York;
Total TANF expenditures (dollars in millions): $3,851.5;
State's TANF expenditures as a percentage of U.S. total: 15.2%.
State: Ohio;
Total TANF expenditures (dollars in millions): $901.1;
State's TANF expenditures as a percentage of U.S. total: 3.5%.
State: Pennsylvania;
Total TANF expenditures (dollars in millions): $1,062.9;
State's TANF expenditures as a percentage of U.S. total: 4.2%.
State: Texas;
Total TANF expenditures (dollars in millions): $740.8;
State's TANF expenditures as a percentage of U.S. total: 2.9%.
State: Virginia;
Total TANF expenditures (dollars in millions): $264.4;
State's TANF expenditures as a percentage of U.S. total: 1.0%.
State: Washington;
Total TANF expenditures (dollars in millions): $627.9;
State's TANF expenditures as a percentage of U.S. total: 2.5%.
State: Total for the states;
Total TANF expenditures (dollars in millions): $17,628.1;
State's TANF expenditures as a percentage of U.S. total: 69.40%.
State: Nationwide total;
Total TANF expenditures (dollars in millions): $25,414.3;
State's TANF expenditures as a percentage of U.S. total: 100%.
Source: GAO analysis of HHS data.
Note: Information from HHS's Administration for Children and Families.
Numbers may not add to totals due to rounding.
[End of table]
Table 10 provides information on the number of families and children
served by the TANF program and the percentage of TANF expenditures
attributed to cash assistance payments for the 16 states in our review.
Table 10: Families Receiving TANF Monthly Cash Assistance and
Percentage of Expenditures Spent on Cash Assistance for Fiscal Year
2002 and the Amount of Cash Assistance Benefits in January 2003 (in the
16 States):
State: California;
Average monthly number of TANF families receiving monthly
cash assistance: 462,328;
Maximum monthly TANF benefits for three-person family: $679[A];
Percentage of TANF expenditures on cash assistance: 48.4%.
State: Colorado;
Average monthly number of TANF families receiving monthly
cash assistance: 12,086;
Maximum monthly TANF benefits for three-person family: 356;
Percentage of TANF expenditures on cash assistance: 22.7%.
State: Florida;
Average monthly number of TANF families receiving monthly
cash assistance: 59,013;
Maximum monthly TANF benefits for three-person family: 303;
Percentage of TANF expenditures on cash assistance: 26.7%.
State: Georgia;
Average monthly number of TANF families receiving monthly
cash assistance: 53,678;
Maximum monthly TANF benefits for three-person family: 280;
Percentage of TANF expenditures on cash assistance: 22.4%.
State: Idaho;
Average monthly number of TANF families receiving monthly
cash assistance: 1,369;
Maximum monthly TANF benefits for three-person family: 309;
Percentage of TANF expenditures on cash assistance: 12.9%.
State: Illinois;
Average monthly number of TANF families receiving monthly
cash assistance: 48,091;
Maximum monthly TANF benefits for three-person family: 396;
Percentage of TANF expenditures on cash assistance: 16.0%.
State: Kansas;
Average monthly number of TANF families receiving monthly
cash assistance: 13,958;
Maximum monthly TANF benefits for three-person family: 429;
Percentage of TANF expenditures on cash assistance: 38.4%.
State: Maryland;
Average monthly number of TANF families receiving monthly
cash assistance: 27,132;
Maximum monthly TANF benefits for three-person family: 473;
Percentage of TANF expenditures on cash assistance: 54.4%.
State: Michigan;
Average monthly number of TANF families receiving monthly
cash assistance: 74,338;
Maximum monthly TANF benefits for three-person family: 489[B];
Percentage of TANF expenditures on cash assistance: 26.2%.
State: New Mexico;
Average monthly number of TANF families receiving monthly
cash assistance: 17,015;
Maximum monthly TANF benefits for three-person family: 389;
Percentage of TANF expenditures on cash assistance: 68.3%.
State: New York;
Average monthly number of TANF families receiving monthly
cash assistance: 170,430;
Maximum monthly TANF benefits for three-person family: 577[C];
Percentage of TANF expenditures on cash assistance: 39.1%.
State: Ohio;
Average monthly number of TANF families receiving monthly
cash assistance: 84,031;
Maximum monthly TANF benefits for three-person family: 373;
Percentage of TANF expenditures on cash assistance: 39.3%.
State: Pennsylvania;
Average monthly number of TANF families receiving monthly
cash assistance: 80,624;
Maximum monthly TANF benefits for three-person family: 421;
Percentage of TANF expenditures on cash assistance: 33.2%.
State: Texas;
Average monthly number of TANF families receiving monthly
cash assistance: 129,937;
Maximum monthly TANF benefits for three- person family: 201;
Percentage of TANF expenditures on cash assistance: 28.4%.
State: Virginia;
Average monthly number of TANF families receiving monthly
cash assistance: 30,051;
Maximum monthly TANF benefits for three-person family: 389;
Percentage of TANF expenditures on cash assistance: 41.6%.
State: Washington;
Average monthly number of TANF families receiving monthly
cash assistance: 54,188;
Maximum monthly TANF benefits for three-person family: 546;
Percentage of TANF expenditures on cash assistance: 49.6%.
Nationwide total;
Average monthly number of TANF families receiving monthly
cash assistance: 2,064,373.
Source: HHS and the Congressional Research Service.
Notes: Information for HHS's Administration for Children and Families
and Gene Falk and Meridith Walters, "Cash Welfare Benefit Amounts,"
Welfare Reform Briefing Book (Washington, D.C.: Congressional Research
Service, updated 2003). Numbers may not add to totals due to rounding.
[A] California - (Region 1) benefits.
[B] Washtenaw County benefits.
[C] New York City benefits.
[End of table]
Table 11 provides information on the amount of CCDF expenditures,
average number of children served, and the state CCDF expenditure as a
percentage of the U.S. total for the 16 states in our review. The table
also shows that together these 16 states represent almost 60 percent of
total U.S. CCDF expenditures.
Table 11: CCDF Expenditures by State and as a Percentage of the U.S.
Total, from Fiscal Year 2002 Appropriation as Expended Through
September 30, 2002:
State: California;
Total federal and state expenditures (dollars in millions): $592.9;
State's CCDF expenditures as a percentage of U.S. total: 9.6%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 202.0.
State: Colorado;
Total federal and state expenditures (dollars in millions): $63.1;
State's CCDF expenditures as a percentage of U.S. total: 1.0%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 24.5.
State: Florida;
Total federal and state expenditures (dollars in millions): $287.8;
State's CCDF expenditures as a percentage of U.S. total: 4.7%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 80.5.
State: Georgia;
Total federal and state expenditures (dollars in millions): $167.4;
State's CCDF expenditures as a percentage of U.S. total: 2.7%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 57.8.
State: Idaho;
Total federal and state expenditures (dollars in millions): $31.0;
State's CCDF expenditures as a percentage of U.S. total: 0.5%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 9.7.
State: Illinois;
Total federal and state expenditures (dollars in millions): $332.7;
State's CCDF expenditures as a percentage of U.S. total: 5.4%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 103.0.
State: Kansas;
Total federal and state expenditures (dollars in millions): $73.7;
State's CCDF expenditures as a percentage of U.S. total: 1.2%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 14.9.
State: Maryland;
Total federal and state expenditures (dollars in millions): $143.8;
State's CCDF expenditures as a percentage of U.S. total: 2.3%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 21.2.
State: Michigan;
Total federal and state expenditures (dollars in millions): $122.8;
State's CCDF expenditures as a percentage of U.S. total: 2.0%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 50.1.
State: New Mexico;
Total federal and state expenditures (dollars in millions): $61.8;
State's CCDF expenditures as a percentage of U.S. total: 1.0%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 22.8.
State: New York[B];
Total federal and state expenditures (dollars in millions): $277.7;
State's CCDF expenditures as a percentage of U.S. total: 4.5%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 180.8.
State: Ohio;
Total federal and state expenditures (dollars in millions): $438.9;
State's CCDF expenditures as a percentage of U.S. total: 7.1%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 84.0.
State: Pennsylvania;
Total federal and state expenditures (dollars in millions): $224.2;
State's CCDF expenditures as a percentage of U.S. total: 3.6%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 65.1.
State: Texas;
Total federal and state expenditures (dollars in millions): $371.6;
State's CCDF expenditures as a percentage of U.S. total: 6.0%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 105.5.
State: Virginia;
Total federal and state expenditures (dollars in millions): $50.8;
State's CCDF expenditures as a percentage of U.S. total: 0.8%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 15.9.
State: Washington;
Total federal and state expenditures (dollars in millions): $282.5;
State's CCDF expenditures as a percentage of U.S. total: 4.6%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 51.2.
State: Total for the states;
Total federal and state expenditures (dollars in millions): $3,522.7;
State's CCDF expenditures as a percentage of U.S. total: 57.0%;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 1,089.0.
State: Nationwide total;
Total federal and state expenditures (dollars in millions): $6,159.7;
State's CCDF expenditures as a percentage of U.S. total: --;
Average monthly number of children receiving CCDF subsidies in
fiscal year 2001[A]: (in thousands): 1,813.8.
Source: HHS's Administration for Children and Families.
Note: These data represent states' expenditures from their fiscal year
2002 CCDF appropriations only and do not reflect expenditures made
from previous years' appropriations. As a result, these data do not
represent total expenditures for fiscal year 2002. The total amount of
CCDF expenditures by state is not yet available for fiscal year 2002.
Numbers may not add to totals due to rounding.
[A] Represents most recent data available.
[B] Data reported in New York for fiscal year 2002 are incomplete.
[End of table]
Table 12 provides information on the number of providers operating in
the selected states we reviewed and the percentage of those providers
operating without regulation.
Table 12: Number of Providers Receiving CCDF Subsidies for Selected
States and Extent of Use of Providers Operating Legally without
Regulation, Fiscal Year 2001:
State: California;
Total number of child care providers receiving subsidies: 91,982;
Percentage of children served who were in child care settings operating
without regulation: 27%.
State: Colorado;
Total number of child care providers receiving subsidies: 10,914;
Percentage of children served who were in child care settings operating
without regulation: 22%.
State: Florida;
Total number of child care providers receiving subsidies: 13,958;
Percentage of children served who were in child care settings operating
without regulation: 10%.
State: Georgia;
Total number of child care providers receiving subsidies: 13,566;
Percentage of children served who were in child care settings operating
without regulation: 7%.
State: Idaho;
Total number of child care providers receiving subsidies: 5,191;
Percentage of children served who were in child care settings operating
without regulation: 45%.
State: Illinois;
Total number of child care providers receiving subsidies: 98,659;
Percentage of children served who were in child care settings operating
without regulation: 53%.
State: Kansas;
Total number of child care providers receiving subsidies: 5,306;
Percentage of children served who were in child care settings operating
without regulation: 16%.
State: Maryland;
Total number of child care providers receiving subsidies: 12,694;
Percentage of children served who were in child care settings operating
without regulation: 25%.
State: Michigan;
Total number of child care providers receiving subsidies: 87,757;
Percentage of children served who were in child care settings operating
without regulation: 66%.
State: New Mexico;
Total number of child care providers receiving subsidies: 9,499;
Percentage of children served who were in child care settings operating
without regulation: 51%.
State: New York;
Total number of child care providers receiving subsidies: 53,553;
Percentage of children served who were in child care settings operating
without regulation: 49%.
State: Ohio;
Total number of child care providers receiving subsidies: 18,415;
Percentage of children served who were in child care settings operating
without regulation: 0%.
State: Pennsylvania;
Total number of child care providers receiving subsidies: 30,866;
Percentage of children served who were in child care settings operating
without regulation: 37%.
State: Texas;
Total number of child care providers receiving subsidies: 29,904;
Percentage of children served who were in child care settings operating
without regulation: 18%.
State: Virginia;
Total number of child care providers receiving subsidies: 0[A];
Percentage of children served who were in child care settings operating
without regulation: 13%.
State: Washington;
Total number of child care providers receiving subsidies: 38,451;
Percentage of children served who were in child care settings operating
without regulation: 32%.
Source: HHS's Administration for Children and Families.
Note: These data are the most recent available.
[A] Virginia did not report the number of providers by setting type.
[End of table]
Some limitations exist in any methodology that gathers information
about programs undergoing change, such as those included in this
review. Although we did not collect information on the entire
population of states and therefore cannot generalize our findings
beyond the 16 states in our review, we have used the information for
descriptive/illustrative purposes.
Survey of State TANF Directors and Child Care Administrators:
To obtain information on what selected states have done to manage
improper payments in the TANF and CCDF programs, we surveyed states
using a data collection instrument (DCI) for each program in 11 states.
These DCIs were identical in many respects to allow comparisons between
the two programs; the instruments differed to the extent necessary to
capture different conditions and factors in each program. We pretested
the instruments in two states with the key TANF and CCDF officials
responsible for program administration and program integrity. In
addition, we showed the instruments to and received input from
Administration for Children and Families (ACF) officials at HHS.
Separate data collection instruments were mailed to TANF directors and
Child Care administrators in December 2003, and follow-up phone calls
were made to state TANF and CCDF officials whose DCIs were not received
by January 9, 2004. We addressed DCIs to each state TANF director and
child care administrator and requested he or she to consult with other
state officials who were most familiar with efforts taken to manage and
identify improper payments to complete the DCI. We received responses
from all 11 of the state TANF directors and 11 child care
administrators, although each state did not respond to all questions.
We did not independently verify the information obtained through the
DCI, other than for specific dollar amounts for which we asked states
to provide documentation. Data from the DCIs were double-keyed to
ensure data entry accuracy and were independently verified. In
addition, the information was analyzed using approved GAO statistical
software (SAS). The DCIs included questions on an assessment of risk to
decide the nature and extent of improper payments in the TANF and CCDF
programs; other actions taken to prevent, identify, and reduce improper
payments, including fraudulent payments in the TANF and CCDF programs;
and assistance and guidance from HHS and other sources.
The practical difficulties of conducting any survey may introduce
errors, commonly referred to as nonsampling errors. For example,
difficulties in how a particular question is interpreted, in the
sources of information that are available to respondents, or in how the
data are entered into a database or were analyzed can introduce
unwanted variability into the survey results. We took steps in the
development of the survey instrument, the data collection, and the data
analysis to minimize these nonsampling errors. For example, a survey
specialist designed the survey instrument in collaboration with GAO
staff with subject matter expertise. Then, as stated earlier, it was
pretested to ensure that the questions were relevant, clearly stated,
and easy to comprehend. When the data were analyzed, a second,
independent analyst checked all computer programs.
State Site Visits:
To obtain information about each assignment objective and, in
particular, an understanding of the steps states have taken to identify
and address improper payments, we interviewed state officials in
Georgia, Virginia, Illinois, Texas, and Washington. We met with state
TANF, CCDF, and fraud officials in these states. The interviews were
administered using an interview guide that included questions similar
to those on the DCIs. To obtain additional perspectives on TANF and
CCDF mechanisms to manage improper payments, we conducted observations
at local offices in the following locations: Springfield, Illinois;
Austin, Texas; and Tumwater, Washington. In addition, we interviewed
state auditors in the 5 states we visited and we analyzed state single
audit reports conducted under Office of Management and Budget's (OMB)
Circular A-133 for 15 of the 16 states in our review.[Footnote 38] We
also reviewed documents provided by states that described their
programs and internal control systems and that corroborated any data
officials provided on the amounts of improper payments.
Review of Federal Role:
To identify steps HHS has taken to assess risk and assist states in
managing improper payments in the TANF and CCDF programs, we identified
and reviewed policies and procedures that described HHS's oversight
activities; observed key oversight activities at an HHS regional
office; reviewed documents, plans, and strategies for identifying
improper payments; and interviewed ACF finance and program officials.
We also reviewed results of audits done under OMB's Circular No. A-133
and the Single Audit Act.
[End of section]
Appendix II: Comparison of Data-Sharing Sources in TANF and CCDF
Programs Among Surveyed States:
Data source: Income Eligibility Verification System;
Number of states that report sharing with listed data source: TANF: 11;
Number of states that report sharing with listed data source: CCDF: 1.
Data source: Other human services programs in agency/state;
Number of states that report sharing with listed data source: TANF: 9;
Number of states that report sharing with listed data source: CCDF: 5.
Data source: State department of labor or employment security;
Number of states that report sharing with listed data source: TANF: 11;
Number of states that report sharing with listed data source: CCDF: 3.
Data source: State directory of new hires;
Number of states that report sharing with listed data source: TANF: 8;
Number of states that report sharing with listed data source: CCDF: 0.
Data source: State department of motor vehicles;
Number of states that report sharing with listed data source: TANF: 10;
Number of states that report sharing with listed data source: CCDF: 1.
Data source: Public Assistance Reporting Information System;
Number of states that report sharing with listed data source: TANF: 5;
Number of states that report sharing with listed data source: CCDF: 0.
Data source: Lottery agencies;
Number of states that report sharing with listed data source: TANF: 6;
Number of states that report sharing with listed data source: CCDF: 0.
Data source: Prisons and criminal justice agencies at state level;
Number of states that report sharing with listed data source: TANF: 8;
Number of states that report sharing with listed data source: CCDF: 2.
Data source: National Criminal Information Center;
Number of states that report sharing with listed data source: TANF: 4;
Number of states that report sharing with listed data source: CCDF: 1.
Data source: Local jails;
Number of states that report sharing with listed data source: TANF: 5;
Number of states that report sharing with listed data source: CCDF: 1.
Data source: Credit bureaus;
Number of states that report sharing with listed data source: TANF: 4;
Number of states that report sharing with listed data source: CCDF: 1.
Data source: Financial institutions;
Number of states that report sharing with listed data source: TANF: 5;
Number of states that report sharing with listed data source: CCDF: 1.
Data source: State tax intercepts;
Number of states that report sharing with listed data source: TANF: 7;
Number of states that report sharing with listed data source: CCDF: 1.
Data source: Immigration and Naturalization Service;
Number of states that report sharing with listed data source: TANF: 8;
Number of states that report sharing with listed data source: CCDF: 2.
Data source: K-12 school system;
Number of states that report sharing with listed data source: TANF: 6;
Number of states that report sharing with listed data source: CCDF: 3.
Data source: Community colleges;
Number of states that report sharing with listed data source: TANF: 3;
Number of states that report sharing with listed data source: CCDF: 3.
Data source: Other providers of services, education, and training;
Number of states that report sharing with listed data source: TANF: 4;
Number of states that report sharing with listed data source: CCDF: 4.
Data source: Child support;
Number of states that report sharing with listed data source: TANF: 9;
Number of states that report sharing with listed data source: CCDF: 8.
Data source: Social Security Administration (SSA) form W-2 (wage
statements);
Number of states that report sharing with listed data source: TANF: 6;
Number of states that report sharing with listed data source: CCDF: 5.
Data source: SSA Social Security number verification;
Number of states that report sharing with listed data source: TANF: 11;
Number of states that report sharing with listed data source: CCDF: 2.
Data source: SSA Supplemental Security Income data;
Number of states that report sharing with listed data source: TANF: 11;
Number of states that report sharing with listed data source: CCDF: 6.
Data source: SSA death information;
Number of states that report sharing with listed data source: TANF: 7;
Number of states that report sharing with listed data source: CCDF: 2.
Data source: State data (from other states) on length of TANF receipt;
Number of states that report sharing with listed data source: TANF: 8.
Data source: State data (from other states) on potential concurrent
TANF receipt;
Number of states that report sharing with listed data source: TANF: 9.
Data source: State child care licensing data;
Number of states that report sharing with listed data source: CCDF: 9.
Data source: Head Start agencies;
Number of states that report sharing with listed data source: CCDF: 2.
Source: GAO.
Note: Based on surveys of state TANF and CCDF administrators in 11
states.
[End of table]
[End of section]
Appendix III: Comments from the Administration for Children and
Families:
DEPARTMENT OF HEALTH AND HUMAN SERVICES:
JUN 10 2004:
ADMINISTRATION FOR CHILDREN AND FAMILIES:
Office of the Assistant Secretary,
Suite 600 370 L'Enfant Promenade, S.W.
Washington, D.C. 20447:
Ms. Linda Calbom:
Director, Financial Management and Assurance:
U.S. General Accounting Office
441 G Street, N.W.
Washington, D.C. 20548:
Dear Ms. Calbom:
Thank you for the opportunity to review the U.S. General Accounting
Office's draft report, "TANF and Child Care Programs: HHS Lacks
Adequate Information to Assess Risk and Assist States in Managing
Improper Payments," (GAO-04-723).
Should you have any questions regarding our comments, please contact
Joan Ohl, Acting Director, Office of Family Assistance, at (202) 205-
8347 or Moniquin Huggins, Director of Program Operations, Child Care
Bureau, at (202) 690-8490.
Sincerely,
Signed by:
Wade F. Horn, Ph.D.,
Assistant Secretary for Children and Families:
Enclosure:
COMMENTS OF THE ADMINISTRATION FOR CHILDREN AND FAMILIES:
ON THE GENERAL ACCOUNTING OFFICE'S DRAFT REPORT ENTITLED, "TANF AND
CHILD CARE PROGRAMS: HHS LACKS ADEQUATE INFORMATION TO ASSESS RISK AND
ASSIST STATES IN MANAGING IMPROPER PAYMENTS," (GAO-04-723)
General Comments:
The Administration for Children and Families (ACF) appreciates the
opportunity to comment on the General Accounting Office's (GAO) draft
report on what states and the Department of Health and Human Services
(HHS) are doing to assess and manage improper payments in the Temporary
Assistance for Needy Families (TANF) and the Child Care Development
Fund (CCDF) programs. It is important to recognize that these are two
separate programs with different authorizing statutes, purposes, rules,
and eligibility criteria. Based on surveys in 11 states, with site
visits in five states and discussions with HHS staff, the report
provides information on activities to address requirements under the
Improper Payments Act. The report also provides the Department with new
and useful information.
GAO Recommendations:
To better assist states in managing improper payments in the TANF and
CCDF programs and comply with the Improper Payments Act, we recommend
that the Secretary of Health and Human Services direct the Assistant
Secretary of ACF to take the following four actions:
* Develop mechanisms to gather information on a recurring basis from
all states on their internal control systems for measuring and
minimizing improper payments.
* Follow through on efforts to identify practices that states think are
effective in minimizing improper payments and facilitate sharing of
these with other states.
* Where appropriate, partner with states to assess the cost-
effectiveness of elected practices.
* Explore the feasibility of expanding the Public Assistance Reporting
Information System (PARIS) to include CCDF, in addition to TANF,
including a study of the cost-effectiveness of such a plan.
In recommending these approaches, we recognize that HHS may determine
that it needs legislative action to direct states to provide the
information. We also recognize that these approaches may require a
shift in resources or additional resources.
ACF Comments:
ACF is providing comments from the Administration on Children, Youth
and Families' Child Care Bureau for the CCDF program and the Office of
Family Assistance for the TANF program.
Child Care Bureau:
The Child Care Bureau (CCB) welcomes GAO's examination of improper
payments in the child care subsidy program. GAO's work complements
HHS's ongoing initiative to examine state efforts related to tracking,
preventing, and detecting improper payments. As the GAO report points
out, controlling erroneous payments is critical since every dollar
diverted from its intended purpose is a dollar that cannot be used to
provide child care services to eligible children and families. At the
same time, ACF recognizes the need to help states address erroneous
payments in a manner that is cost-effective and that allows effective
service delivery to meet program objectives.
Some of the GAO findings, such as those assessing technical assistance
provided by HHS, may not completely reflect the recent and growing
level of effort that ACF provides in this area. Our new efforts to
examine child care erroneous payments are still in the early stages and
CCB is committed to considering a wide range of options for possible
next steps. CCB is pleased with states' willingness and commitment to
partner with us to ensure that the Federal and state child care
resources are invested wisely.
Office of Family Assistance:
While new and improved information would enable the Department to
better help states address improper payments, we believe the assessment
of risk under the Improper Payments Act must be made within the
statutory framework of each program. Within the statutory context of
the TANF program, we think the Department's plan for acquiring
additional information and assessing risk is adequate. Also, we do not
think that the Highlights or Results in Brief sections of the report
adequately portray the statutory dilemma and constraints that reduce
the Department's ability to "gather information on state internal
controls" as recommended by GAO.
In enacting the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996, Congress explicitly specified that the
purpose was to increase the flexibility of states in implementing a
program focused on work and self-sufficiency. The systematic program of
quality control reviews, determination of erroneous or improper
payments and focus on payment accuracy that had existed under the Aid
to Families with Dependent Children program for a quarter of a century
was eliminated with the creation of the TANF program. To ensure that
states retained this flexibility, the statute limited the authority
and oversight of the Federal Government. Federal staffing; was reduced
by 75 percent and data collection was limited to that required by law;
no improper payments information is included in the data required.
Section 417 of the Social Security Act (the Act) specifies that: "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" (Part A of the Act).
Since the Improper Payments Act is not included in Part A of the Social
Security Act, HHS cannot regulate how and what states do to address
improper payments or collect additional information under the statute.
GAO's report does not adequately portray the full significance of this
statutory framework and the Department's challenge to gather
information and partner with states to address improper payments.
The report does not address the initiatives that ACF has undertaken or
will undertake during FYs 2004 and 2005 for the TANF program in support
of the President's Management Agenda and the Improper Payments
Information Act of 2002. The activities include: (1) solicitation of
information on improper payment "best practices" in the states; (2)
expansion of A-133 audits of TANF programs in several states; and, (3)
enhancement of the Public Assistance Reporting Information System
(PARIS). These activities are all intended to assist ACF and the states
in their efforts to identify and reduce improper TANF payments without
the need for a legislative change to the program.
A. Solicitation of State "Best Practices":
1. HHS/ACF will draft a letter to states soliciting their "best
practices" for ensuring payments are proper and identifying and
reducing improper payments under their TANF program. The letter will
request that states describe how they define improper payments in their
state; the process used in their state to identify such payments; and
what actions are taken in the state to reduce or eliminate improper
payments. The letter will be clear that submission is voluntary. We
intend to establish a repository for the state submissions, which would
be available to all states for viewing on an HHS/ACF website. This
repository will also assist the states in evaluating and/or creating/
enhancing their TANF program integrity system(s) so that improper
payments in the TANF program can be reduced.
B. Expanded A-133 Audits of TANF Program:
HHS/ACF proposes to conduct an improper payments "demonstration"
project with selected states in order to determine the possible extent
of improper payments in the TANF program. This would entail the states
to undergo a more in-depth review of TANF expenditures in the A-133
audit process. Two states would be asked to volunteer to participate in
the first year. First-year results would be evaluated by HFIS/ACF and
reported to OMB. Second-year initiatives will be decided based on year-
one results.
C. PARIS:
The Public Assistance Reporting Information System (PARIS) is a
voluntary project for those states willing to share public assistance
data among participating states to maintain program integrity and
detect and deter improper payments. The PARIS project has been
operational and matches have been performed every quarter since August
1999. Using the Social Security Number as the key, the match process
compares payouts made by states on various benefit programs (such as
TANF, Medicaid and Food Stamps) against various data bases. Each
quarter participating states voluntarily choose to match against any or
all three of the available sources of data: the Veterans Administration
(VA) database; the Department of Defense (the Federal) database
including civil service/military salary/retirement payments (active or
retired); and the public assistance data from states participating in
any particular quarter (the Interstate Match). This latter match
determines if a client is collecting benefits in more than one state.
The Defense Manpower Data Center (DMDC) searches the data for matches
and forwards any hits to the appropriate state, where staff can verify
the data and decide whether to reduce or cut off benefits. Federal
operational costs for the match processes are borne by DMDC (e.g., free
to participating states). Currently, 22 states have signed agreements
and are eligible to participate in PARIS data matches.
At every opportunity, ACF has actively sought out state representatives
to join PARIS. ACF continues to participate in many conferences to
advance state awareness of the huge potential savings of state human
services dollars with a minimal investment in time and funds and, until
FY 2003, ACF has sponsored annual PARIS Conferences at no cost to the
Federal government (except minimal Federal travel expenses). Currently,
ACF staff participate as members of the PARIS Board of Directors.
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Kimberly Brooks, (202) 512-9038, brooksk@gao.gov Gale Harris, (202)
512-7235, harrisg@gao.gov:
Staff Acknowledgments:
Elspeth Grindstaff, Amanda Mackison, Kathryn Peterson, Cynthia
Teddleton, and Kris Trueblood made major contributions to this report.
Jerry Sandau provided technical assistance in analyzing data.
[End of section]
Related GAO Products:
Financial Management: Fiscal Year 2003 Performance and Accountability
Reports Provide Limited Information on Governmentwide Improper
Payments.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-631T]
Washington, D.C.: April 15, 2004.
Financial Management: Effective Implementation of the Improper
Payments Information Act of 2002 Is Key to Reducing the Government's
Improper Payments.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-991T]
Washington, D.C: July 14, 2003.
Single Audit: Single Audit Act Effectiveness Issues.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-877T]
Washington, D.C.: June 26, 2002.
Welfare Reform: Federal Oversight of State and Local Contracting Can
Be Strengthened.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02- 661]
Washington, D.C.: June 11, 2002.
Welfare Reform: States Provide TANF-Funded Work Support Services to
Many Low-Income Families Who Do Not Receive Cash Assistance.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-02-615T]
Washington, D.C.: April 10, 2002.
Single Audit: Survey of CFO Act Agencies.
[Hyperlink, http:// www.gao.gov/cgi-bin/getrpt?GAO-02-376]
Washington, D.C.: March 15, 2002.
Human Services Integration: Results of a GAO Cosponsored Conference on
Modernizing Information Systems.
[Hyperlink, http://www.gao.gov/cgi- bin/getrpt?GAO-02-121]
Washington, D.C.: January 31, 2002.
Means-Tested Programs: Determining Financial Eligibility Is Cumbersome
and Can Be Simplified.
[Hyperlink, http://www.gao.gov/cgi-bin/ getrpt?GAO-02-58]
Washington, D.C.: November 2, 2001.
Strategies to Manage Improper Payments: Learning From Public and
Private Sector Organizations.
[Hyperlink, http://www.gao.gov/cgi- bin/getrpt?GAO-02-69G]
Washington, D.C.: October 2001.
Public Assistance: PARIS Project Can Help States Reduce Improper
Benefit Payments.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO- 01-935]
Washington, D.C.: September 6, 2001.
Welfare Reform: Challenges in Maintaining a Federal-State Fiscal
Partnership.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01- 828]
Washington, D.C.: August 10, 2001.
Medicaid: State Efforts to Control Improper Payments Vary.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-01-662]
Washington, D.C.: June 7, 2001.
The Challenge of Data Sharing: Results of a GAO-Sponsored Symposium on
Benefit and Loan Programs.
[Hyperlink, http://www.gao.gov/cgi-bin/ getrpt?GAO-01-67]
Washington, D.C.: October 20, 2000.
Benefit and Loan Programs: Improved Data Sharing Could Enhance Program
Integrity.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/HEHS- 00-119]
Washington, D.C.: September 13, 2000.
Standards for Internal Control in the Federal Government.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO/AIMD-00-21.3.1]
Washington, D.C.: November 1999.
(190085):
FOOTNOTES
[1] Pub. L. No. 107-300, 116 Stat. 2350 (Nov. 26, 2002).
[2] Pub. L. No. 104-193, 110 Stat. 2105 (Aug. 21, 1996).
[3] Internal controls are an integral component of an organization's
management that provides reasonable assurance that the organization
achieves its objectives of (1) effective and efficient operations, (2)
reliable financial reporting, and (3) compliance with laws and
regulations. For more information on internal controls see U.S. General
Accounting Office, Strategies to Manage Improper Payments, GAO-02-69G
(Washington, D.C.: October 2001), and Standards for Internal Control in
the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November
1999).
[4] We visited Georgia, Illinois, Texas, Virginia, and Washington and
sent surveys to California, Colorado, Florida, Idaho, Kansas, Maryland,
Michigan, New Mexico, New York, Ohio, and Pennsylvania.
[5] The 16 states represented 69 percent of TANF expenditures and about
57 percent of CCDF expenditures nationwide for fiscal year 2002, the
most recent year for which data were available. Due to state reporting
time frames and time required for HHS's review of state-reported data,
fiscal year 2003 data are not yet available.
[6] 31 U.S.C. §§ 7501-7507. Under the act and implementing guidance,
independent auditors audit federal awards to state and local
governments and nonprofit organizations to assess compliance with
federal financial requirements, including those for TANF and CCDF.
Organizations are required to have single audits if they expend at
least $300,000 in federal funds for fiscal years before December 31,
2003 and $500,000 for years after.
[7] See U.S. General Accounting Office, Welfare Reform: Challenges in
Maintaining a Federal-State Fiscal Partnership, GAO-01-838
(Washington, D.C.: Aug. 24, 2001).
[8] 42 U.S.C. § 617. For more information on HHS's changed
responsibilities under PRWORA, see U.S. General Accounting Office,
Welfare Reform: HHS' Progress in Implementing Its Responsibilities,
GAO/HEHS-98-44 (Washington, D.C.: Feb. 2, 1998).
[9] 64 Fed. Reg. 17720, 17722 (Apr. 12, 1999).
[10] For more information on GAO's work on welfare agencies, see U.S.
General Accounting Office, Welfare Reform: Improving State Automated
Systems Requires Coordinated Federal Effort, GAO/HEHS-00-48
(Washington D.C.: Apr. 27, 2000).
[11] The survey instrument used in this report did not cover all
counties in the states examined; therefore, the total number of TANF-
funded contracts may be understated. For more information on TANF
contracting, see U.S. General Accounting Office, Welfare Reform:
Federal Oversight of State and Local Contracting Can Be Strengthened,
GAO-02-661 (Washington, D.C.: June 11, 2002).
[12] For Regulations on CCDF, see 45 C.F.R. Pt. 98 (2004).
[13] Under CCDF regulations, state or local CCDF agencies may provide
payments directly to child care providers or to parents. Payments to
parents may be in the form of a child care certificate (a check or
other disbursement) that may only be used as payment or deposit for
child care services.
[14] OMB guidance for implementing the act added the additional 2.5
percent requirement. See OMB Memorandum M-03-13. Improper Payments
Information Act of 2002, Pub. L. No. 107-300 (May 21, 2003).
[15] Internal controls are an integral component of an organization's
management that provides reasonable assurance that the organization
achieves its objectives of (1) effective and efficient operations, (2)
reliable financial reporting, and (3) compliance with laws and
regulations. For more information on internal controls, see GAO-02-69G
and GAO/AIMD-00-21.3.1.
[16] ACF Program Instruction for TANF, Transmittal No. TANF-ACF-PI-
2000-2.
[17] Risk assessments may include assessing program policies and
procedures to identify those most at risk of resulting in improper
payments; assessing the likelihood that improper payments are
occurring; and calculating the amount of any improper payments made,
for example, through a Quality Control system or program.
[18] For the purposes of this report, we defined a fraudulent payment,
considered a subset of improper payments, as a payment made based on a
participating household, recipient, provider, or employee
intentionally providing incorrect or insufficient information on which
eligibility and benefit determinations were made. (A full accounting of
an amount of improper payments would include those identified as
fraudulently obtained.)
[19] See U.S. General Accounting Office, Welfare Reform: Federal
Oversight of State and Local Contracting Can Be Strengthened, GAO-02-
661 (Washington, D.C.: June 11, 2002).
[20] We did not independently verify the data provided by states.
[21] As reported to HHS for fiscal year 2002, Texas had TANF
expenditures of about $741 million, with about 28 percent of these
expenditures for cash assistance.
[22] The amount of improper payments recovered in fiscal year 2002 may
include some overpayments made in previous years.
[23] Although state programs that administer CCDF and TANF funds may go
by different names, we refer to them as CCDF and TANF programs in this
report.
[24] This flexibility allows states to choose how to structure their
program, and payment controls vary based on the structure developed.
Regardless of the program structure, state administrators are
responsible for general oversight of providers, including safety
standards and appropriate licensing.
[25] The licensing and regulating of child care providers is determined
at the state level rather than the federal level. Under CCDF, any care
subsidized must meet the health and safety requirements in place in
each state.
[26] State administrators may check with the state department of labor
or employment security to ensure a client has correctly reported the
income level on his or her eligibility documentation and is
consequently receiving the proper benefit amount.
[27] The Social Security Act requires state TANF programs to match with
IEVS (see 42 U.S.C. §1320b-7). Using IEVS, states routinely match TANF
applicant-and recipient-supplied information against several data
sources including (1) Internal Revenue Service data on interest,
dividends, and other types of unearned income; (2) Social Security
Administration data (Retirement, Survivors, and Disability Insurance
benefits, Supplemental Security Insurance Benefits (SSI), and annual
earnings); and (3) state quarterly wage reports and unemployment
insurance benefits. All TANF survey respondents said they perform this
match.
[28] For more information on state automated systems under welfare
reform, see GAO/HEHS-00-48.
[29] PARIS was initially an informal project begun by an ACF staff
person, joined voluntarily by some states, and relying on computer
services provided at no cost by Defense Manpower Data Center.
Participating states sign a uniform agreement that governs the
interstate exchange of data. Recipient lists for all participating
states are matched with one another quarterly at a central location,
using individuals' SSNs. Each state subsequently receives a list of
individuals who may be receiving duplicate TANF, Medicaid, and food
stamp benefits in other states. For additional information on the PARIS
project, see the PARIS Internet site at www.acf.hhs.gov/paris and the
U.S. General Accounting Office, Public Assistance: PARIS Project Can
Help States Reduce Improper Benefit Payments, GAO-01-935 (Washington,
D.C.: Sept. 6, 2001).
[30] For example, a child may be in Head Start 4 hours a day, and
receiving 8 hours of child care (for a total of 12 hours of care). If
the parent only works 8 hours a day, the family is receiving 4 hours of
benefits to which it is not entitled. Data matching helps ensure the
proper amount of care is being provided.
[31] See section 7 of the Privacy Act of 1974, 5 U.S.C. § 552a note.
[32] A previous GAO study on TANF contracting reported that single
audits identified numerous findings on subrecipient monitoring,
including inadequate fiscal and program monitoring of local workforce
boards and the lack of state procedures to monitor activities of TANF
subrecipients. Subrecipients for TANF are for-profit, nonprofit, and
nongovernmental entities that states and localities contract with to
provide services. See GAO-02-661.
[33] U.S. General Accounting Office, Financial Management: Fiscal 2003
Performance and Accountability Reports Provide Limited Information on
Governmentwide Improper Payments, GAO-04-631T (Washington, D.C.: Apr.
15, 2004).
[34] Pub. L. No. 104-13, 109 Stat. 163 (May 22, 1995).
[35] GAO-01-935.
[36] HHS reported that it provides guidance and technical assistance to
the states on matters that affect the appropriateness of TANF
expenditures such as income requirements for TANF eligibility.
[37] NCSHS represents state and local government, as well as
territorial, public human service professionals and is associated with
APHSA. UCOWF is an organization of investigators, administrators,
prosecutors, eligibility workers, and claims writers from local, state,
and federal agencies from the United States and Canada who fight fraud,
waste, and abuse in social service programs. NCCIC, a project of HHS's
Child Care Bureau, is a national clearinghouse and technical assistance
center that links parents, providers, policymakers, researchers, and
the public to early care and education information.
[38] According to a Michigan audit division administrator, audits of
the Michigan TANF and CCDF programs for 2001 and 2002 have not been
completed. Michigan performs a separate single audit for each
department rather than a state-wide single audit.
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