Foster Care and Adoption Assistance
Federal Oversight Needed to Safeguard Funds and Ensure Consistent Support for States' Administrative Costs Gao ID: GAO-06-649 June 15, 2006Policymakers have expressed concern over how costs to administer the Foster Care and Adoption Assistance programs are contributing to overall increased federal expenditures for these programs, estimated by the Congressional Budget Office to rise from about $6 billion in fiscal year 2003 to $8 billion in fiscal year 2008. The purpose of these programs is to provide financial support for the proper care of children who need placement outside their homes and find adoptive homes for children with special needs. They are authorized under Title IV-E of the Social Security Act and administered by the Department of Health and Human Services' Administration for Children and Families (ACF). GAO was asked to address (1) how the amounts and types of administrative costs changed from FY 2000 to FY 2004; (2) the reasons for differences in and among states in administrative spending and how these differences affect program services; and (3) whether HHS's oversight of administrative costs provides adequate controls over program spending.
Total federal expenditures to help states pay for the costs of administering their Foster Care and Adoption Assistance programs increased 7 percent between fiscal years 2000 and 2004 from approximately $2.5 to $2.6 billion, when adjusted for inflation. Over a third of states received increased federal assistance, but over 80 percent of the increase was limited to six states, as shown in the figure below. Nearly all of the federal expenditures--89 percent in fiscal year 2004--were for costs related to child placement services. However, inconsistencies in how states tracked and reported data precluded analysis of the types of cost incurred within this category. Our review of spending in 11 states between fiscal years 2000 and 2004 showed that the methods states used to identify eligible children and related staff costs for serving them were two primary reasons for differences in IV-E spending within and among states. One state changed how it identified eligible children and calculated the proportion of eligible children, resulting in higher IV-E costs. Other states varied in their practice of claiming costs for serving children not yet removed from their homes or living in places ineligible for foster care payments. Because states use other funding sources to supplement or supplant IV-E, the effect of IV-E spending on program services is unclear. HHS has not implemented a strategic approach in its monitoring efforts to ensure adequate control over program spending. Oversight staff located in the regional offices are not correlated with the risk of states claiming inappropriate costs. Oversight is also hindered by inadequate guidance, including lack of a current financial review manual. While HHS clarified policies concerning whether certain expenditures are allowable in critical areas, policies were not uniformly applied across regions.
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-06-649, Foster Care and Adoption Assistance: Federal Oversight Needed to Safeguard Funds and Ensure Consistent Support for States' Administrative Costs
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Report to the Chairman, Subcommittee on Human Resources, Committee on
Ways and Means, House of Representatives:
United States Government Accountability Office:
GAO:
June 2006:
Foster Care and Adoption Assistance:
Federal Oversight Needed to Safeguard Funds and Ensure Consistent
Support for States' Administrative Costs:
GAO-06-649:
GAO Highlights:
Highlights of GAO-06-649, a report to the Honorable Wally Herger,
Chairman Subcommittee on Human Resources, Ways and Means Committee,
House of Representatives
Why GAO Did This Study:
Policymakers have expressed concern over how costs to administer the
Foster Care and Adoption Assistance programs are contributing to
overall increased federal expenditures for these programs, estimated by
the Congressional Budget Office to rise from about $6 billion in fiscal
year 2003 to $8 billion in fiscal year 2008. The purpose of these
programs is to provide financial support for the proper care of
children who need placement outside their homes and find adoptive homes
for children with special needs. They are authorized under Title IV-E
of the Social Security Act and administered by the Department of Health
and Human Services‘ Administration for Children and Families (ACF). GAO
was asked to address (1) how the amounts and types of administrative
costs changed from FY 2000 to FY 2004; (2) the reasons for differences
in and among states in administrative spending and how these
differences affect program services; and (3) whether HHS‘s oversight of
administrative costs provides adequate controls over program spending.
What GAO Found:
Total federal expenditures to help states pay for the costs of
administering their Foster Care and Adoption Assistance programs
increased 7 percent between fiscal years 2000 and 2004 from
approximately $2.5 to $2.6 billion, when adjusted for inflation. Over a
third of states received increased federal assistance, but over 80
percent of the increase was limited to six states, as shown in the
figure below. Nearly all of the federal expenditures” 89 percent in
fiscal year 2004”were for costs related to child placement services.
However, inconsistencies in how states tracked and reported data
precluded analysis of the types of cost incurred within this category.
Figure:
[See PDF for Image]
Source: GAO analysis of HHS data.
[End of Figure]
Our review of spending in 11 states between fiscal years 2000 and 2004
showed that the methods states used to identify eligible children and
related staff costs for serving them were two primary reasons for
differences in IV-E spending within and among states. One state changed
how it identified eligible children and calculated the proportion of
eligible children, resulting in higher IV-E costs. Other states varied
in their practice of claiming costs for serving children not yet
removed from their homes or living in places ineligible for foster care
payments. Because states use other funding sources to supplement or
supplant IV-E, the effect of IV-E spending on program services is
unclear.
HHS has not implemented a strategic approach in its monitoring efforts
to ensure adequate control over program spending. Oversight staff
located in the regional offices are not correlated with the risk of
states claiming inappropriate costs. Oversight is also hindered by
inadequate guidance, including lack of a current financial review
manual. While HHS clarified policies concerning whether certain
expenditures are allowable in critical areas, policies were not
uniformly applied across regions.
What GAO Recommends:
GAO recommends a number of actions for HHS to better safeguard federal
resources and ensure consistent federal support for state
administration of foster care and adoption assistance. HHS did not
explicitly agree or disagree with the recommendations.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-649].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Cornelia M. Ashby at
(202)-512-7215 or ashbyc@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
Title IV-E Expenditures for Administrative Costs Have Increased, but
Data Deficiencies Limit Analysis by Type of Cost:
State IV-E Spending Reflects Changes In Staffing, Children Served, and
Cost Claiming Practices, but Impact On Services Is Unclear:
HHS Oversight of Program Spending Has Been Compromised by an Absence of
Strategic Risk-Based Monitoring:
Conclusions:
Recommendations for Executive Action:
Appendix I: IV-E Expenditures for Administrative Costs by State:
Appendix II: Comments from the Department of Health and Human Services:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Eligibility Criteria for the Foster Care and Adoption
Assistance Programs:
Table 2: State Reporting Requirements and Federal Reimbursement Rates
for Allowable Administrative Costs under the Foster Care and Adoption
Assistance Programs:
Table 3: Major Reasons Cited by 8 States for Changes in IV-E
Administrative Costs from Fiscal Years 2000 to 2004:
Table 4: Change in Penetration Rate between Fiscal Years 2000 and 2004:
Table 5: Costs for Foster Care Candidates as an Approximate Percentage
of Total Fiscal Year 2004 IV-E Foster Care Administrative Costs:
Table 6: Ineligible Facilities Used by Certain States to Claim IV-E
Administrative Costs in Fiscal Year 2004:
Table 7: Foster Care Program Services Increased or Implemented Since
Completion of CFSR Reviews for 11 States:
Figures:
Figure 1: HHS Entities Responsible for Oversight of IV-E Expenditures
for Foster Care and Adoption Assistance Administrative Costs:
Figure 2: Change in Total Federal Expenditures for Foster Care and
Adoption Assistance Administrative Costs:
Figure 3: Change in Federal Expenditures for Foster Care and Adoption
Assistance Administrative Costs between Fiscal Years 2000 and 2004 by
State:
Figure 4: Foster Care and Adoption Assistance Administrative Costs by
Category for Fiscal Year 2004:
Figure 5: Changes in IV-E Administrative Expenditures for 11 States, FY
2000-FY 2004 (Dollars in millions):
Figure 6: Percentage of Fiscal Year 2004 Total Foster Care And Adoption
Assistance Administrative Costs for States Located In HHS's 10 Regional
Offices:
Abbreviations:
ACF: Administration for Children and Families:
AFDC: Aid to Families with Dependent Children:
CFSR: Child and Family Services Review:
CMS: Centers for Medicare & Medicaid Services:
DCA: Division of Cost Allocation:
FFP: Federal Financial Participation:
GATES: Grants Application and Tracking and Evaluation System:
HHS: Department of Health and Human Services:
OIG: Office of Inspector General:
SACWIS: Statewide Automated Child Welfare Information System:
SSBG: Social Services Block Grant:
SSI: Supplemental Security Income:
TANF: Temporary Assistance to Needy Families:
TCM: Targeted Case Management:
United States Government Accountability Office:
Washington, DC 20548:
June 15, 2006:
The Honorable Wally Herger:
Chairman:
Subcommittee on Human Resources:
Committee on Ways and Means:
House of Representatives:
Dear Mr. Chairman:
Policymakers have expressed concern over how costs to administer the
Foster Care and Adoption Assistance programs are contributing to
overall increased federal expenditures for these programs, estimated by
the Congressional Budget Office to rise from about $6 billion in fiscal
year 2004 to $8 billion in fiscal year 2008. These programs, authorized
under Title IV-E of the Social Security Act and administered by the
Department of Health and Human Services' Administration for Children
and Families (ACF), help states provide care for eligible children who
have been removed from their homes due to child abuse or neglect, and
provide funds to adoptive parents of eligible special needs children.
Administrative costs for these programs include all expenditures on
behalf of Title IV-E eligible children other than payments to foster
families and adoptive parents, such as case management. The federal
government generally reimburses the states for 50 percent of eligible
administrative costs with no limit. States also use funding from other
federal sources such as Medicaid, which may provide a higher match rate
for administrative costs.[Footnote 1] States must document their use of
program funds in federally approved state plans. At the federal level,
ACF approves IV-E state plans and the Centers for Medicare & Medicaid
(CMS) are responsible for approval of state Medicaid plans. In
addition, some states use block grant funds from programs, such as
Temporary Assistance to Needy Families (TANF), that do not require
states to match funds.[Footnote 2] Because Title IV-E only covers costs
associated with IV-E eligible children, states use other federal
funding sources to help pay for administrative costs related to
children that do not meet the IV-E requirements. IV-E eligibility
criteria include among other requirements, having been removed from the
home pursuant to a judicial determination and being eligible for the
Aid to Families with Dependent Children Program as it was in effect in
1996.
In response to concerns about the growth of costs claimed under Title
IV-E, Congress enacted legislation as part of the Omnibus Budget
Reconciliation Act of 1990[Footnote 3] that was intended to provide
better information on the types of administrative costs states claim
for federal reimbursement. As a result, HHS added separate categories
to its reporting form that require states to distinguish costs related
to placing a child in foster care from other program activities. In
addition to reporting amounts for staff training and development of a
statewide automated child welfare information system (SACWIS), HHS
requires states to break out costs related to child placement and other
activities into five types: (1) case management for children in foster
care, (2) case management for children at risk of being placed into
foster care, (3) eligibility determination, (4) information system
operating costs and (5) other costs, such as licensing of foster homes.
In light of more available information and the continued rise in
administrative costs, you asked us to determine (1) how the amounts and
types of federal expenditures for Foster Care and Adoption Assistance
administrative costs changed between fiscal years 2000 and 2004; (2)
the reasons for differences in and among states in administrative
spending and how these differences affect program services; and (3)
whether HHS's oversight of administrative expenditures provides
adequate controls over program spending.
To determine how federal expenditures for administrative costs changed
during fiscal years 2000 to 2004, we analyzed state claims for
expenditures provided by ACF.[Footnote 4] These data distinguished
expenditures by type of costs such as child placement services,
training, and development of state automated systems. We determined the
data were sufficiently reliable for this purpose. To determine the
reasons for differences in and among states in administrative spending
and how these differences affect program services, we (1) conducted
site visits to five states--California, Kansas, Pennsylvania, South
Carolina, and Washington; (2) conducted phone interviews with state
officials responsible for program and fiscal operations in six
additional states--Illinois, Maryland, Michigan, New York, Texas, and
Wisconsin; and (3) obtained financial data and perspectives from these
11 states through a structured data collection instrument. These 11
states accounted for about 64 percent of fiscal year 2004 federal
administrative costs and represented diversity in the change in
administrative costs, total spending on foster care and adoption
assistance programs, geographic location, and also provided examples of
state and county operated programs. While we did not fully assess the
reliability of the data the state agencies reported on the instrument,
we reviewed the data to determine that the responses were complete and
reasonable and found the data to be sufficiently reliable for the
purposes of this report. We also analyzed state allocation plans and
financial reports. To assess HHS oversight of administrative
expenditures, we reviewed Title IV of the Social Security Act, related
regulations on allowable expenditures, guidance issued by ACF, and
audit reports from HHS's Office of Inspector General. We also
interviewed officials in HHS's Division of Cost Allocation, Office of
Grants Management, and Centers for Medicare & Medicaid Services, and
Office of the Inspector General, as well as 6 of HHS's 10 regional
offices primarily responsible for oversight of expenditures.
We conducted our work from June 2005 through June 2006 in accordance
with generally accepted government auditing standards.
Results in Brief:
Total federal expenditures to help states pay for the costs of
administering the Foster Care and Adoption Assistance Programs
increased 7 percent from fiscal years 2000 to 2004, from approximately
$2.5 to $2.6 billion[Footnote 5], but analysis of changes in the types
of costs incurred was limited due to inconsistencies in how states
tracked and reported data over time. While over a third of the states
received greater federal reimbursements of administrative costs in
fiscal year 2004 than in fiscal year 2000, six states accounted for
over 80 percent of the increase. California alone was responsible for
approximately 31 percent of the total increase. Nearly all of the
federal expenditures--89 percent in fiscal year 2004--were for costs
related to child placement services such as managing cases as children
progress through the child welfare system and finding appropriate
foster and adoptive homes. We were unable to use the data to analyze
changes at a more detailed level because not all states complied with
the criteria for reporting costs or interpreted the criteria the same.
For example, at least one region did not require states to report costs
as instructed on the reporting form. Some federal and state officials
told us, however, that caseworker costs such as developing and
reviewing case plans accounted for the bulk of the increase during this
time period and were primarily associated with the salaries and
benefits of caseworkers.
Our review of state IV-E spending in 11 states between fiscal years
2000 and 2004 showed that methods states used to identify eligible
children and the related staff costs for serving them were two primary
reasons for differences in federal expenditures within and among
states; but it is unclear how these differences affected services to
children. Washington more than doubled its costs charged to IV-E
between fiscal years 2000 and 2004 by changing the formula used to
calculate the number of eligible children and by changing methods to
determine a child's eligibility. More significant for some states is
the extent that they claim costs for serving children not yet removed
from their homes--known as foster care "candidates." Wisconsin, for
example, reported that about half of its total fiscal year 2004 IV-E
administrative costs were for candidates, while Michigan reported
candidate costs of only 1 percent. States also differed in the extent
that they used other federal programs instead of IV-E for
administrative costs or had increases or decreases in their state
budgets for social services. For example, while most states charged IV-
E for all eligible foster care case management costs, a majority of
South Carolina's case management costs were charged to Medicaid.
Officials in all 11 states reported taking action to improve services,
such as reducing ratios of caseworkers to children by hiring or
reallocating staff, and collaborating with the court system to improve
the legal processes and reduce the time that children spend in foster
care. However, the effect of IV-E expenditures on program services is
unclear because states use various funding sources and a change in IV-
E funding does not necessarily result in a change in the funding of
child welfare services.
HHS's oversight of state claims is insufficient to provide adequate
control over program spending. According to HHS officials, because of
retirements and restructuring efforts, staff do not always have the
qualifications or experience to fulfill oversight responsibilities. HHS
has not redistributed its staff commensurate with the risk of states
claiming inappropriate costs. Consistent oversight is also hindered by
inadequate guidance, including lack of a current financial review
manual. Regional offices have developed their own protocols for
reviewing states' quarterly claims for reimbursement, which has
resulted in inconsistent oversight of state costs. In addition, while
HHS clarified policies on the allowability of certain expenditures--
including costs for candidates and the use of Medicaid funding for
services for children in foster care--policies were not uniformly
applied across regions. For example, two states located in two regions,
charged certain foster care costs to Medicaid instead of Title IV-E,
while HHS officials from a third region required a state to discontinue
this practice. Further, questionable claiming practices have not been
systematically addressed. For example, although two regions and HHS
headquarters officials cited problems with how states are documenting
and allocating costs for candidates, HHS's Division of Cost Allocation
has not systematically reviewed state allocation procedures to address
this problem.
In this report, we are recommending that the Secretary of Health and
Human Services direct the Assistant Secretary for the Administration
for Children and Families to take action to better safeguard federal
resources and ensure consistent federal support for states'
administration of foster care and adoption assistance programs.
In this report, we are recommending that the Secretary of Health and
Human Services direct the Assistant Secretary for the Administration
for Children and Families to take several actions to better safeguard
federal resources and ensure consistent federal support for states'
administration of foster care and adoption assistance programs. In its
written comments on a draft of this report, HHS did not explicitly
agree or disagree with our five recommendations, but stated that it
would implement or consider implementing four of them in whole or in
part. A copy of the written comments from the Department of Health and
Human Services is in appendix II.
Background:
Title IV-E of the Social Security Act authorizes funds to states to
help cover the costs of operating their Foster Care and Adoption
Assistance programs. These programs primarily provide financial support
for the care of eligible children who have been removed from their home
due to abuse or neglect, as well as to families who adopt eligible
children with special needs from the foster care system. Table 1
illustrates the eligibility criteria for the Foster Care and Adoption
Assistance Programs.
Table 1: Eligibility Criteria for the Foster Care and Adoption
Assistance Programs:
Foster Care Program: A judicial determination has been made that
conditions in the home from which the child was removed were contrary
to the child's welfare and reasonable efforts were made to prevent
removal;
A judicial determination has been made that the state has documentation
that it made reasonable efforts to finalize a permanency plan;
A judicial determination has been made that the state has
responsibility for placement and care of the child;
But for the removal from the home, the child would have qualified for
the Aid to Families with Dependent Children (AFDC) program as it was in
effect on July 16, 1996; and;
The state has verification of provider safety requirements;
If removal is the result of a voluntary placement agreement, a state
must obtain a judicial determination that continued placement is in the
child's best interest;
Adoption Assistance Program: Children must have a special need that is
defined as the state determining that a child should not or could not
be returned to the home of his or her parents, and certain factors,
such as age; membership in a sibling unit or minority group; or
emotional, mental, or physical conditions that would make finding an
appropriate adoptive home difficult; Special needs children must also
meet at least one criterion from the following list:
(a) the child is a dependent child who would have been eligible for
AFDC, as it existed in 1996;
(b) the child is eligible for Supplemental Security Income (SSI);
(c) the child is a child of a minor parent who is in foster care
already and receiving foster care maintenance payments under Title IV-
E; or;
(d) the child received adoption assistance previously, but the adoption
dissolved or the adoptive parents died.
Source: Title IV-E of the Social Security Act.
[End of table]
Although most foster care funds support children who have been placed
outside of the home due to abuse or neglect, they may also be used to
support placing a child in a child care institution, such as a juvenile
justice facility not operated primarily for detention, pursuant to
voluntary agreements or decisions made by the courts that stipulate
removal from the home is in the best interests of the child. Title IV-
E also authorizes financial support to states to help defray the costs
of administering the programs. Administrative costs cover expenses
states incur to identify eligible children, refer them for services,
and plan for permanent placement, including administrative costs to
facilitate the adoption of special needs children, the training of
staff, and the development and operation of a statewide automated child
welfare information system that helps states manage their child welfare
cases as well as report child abuse and neglect, foster care, and
adoption information to the federal government.
Program Funding and Costs:
Title IV-E provides an open-ended entitlement for administrative costs
on behalf of children who meet certain federal eligibility criteria.
The federal government shares the cost of administration 50-50 with
states.[Footnote 6] Total federal expenditures, including
administrative costs, for the Title IV-E Foster Care and Adoption
Assistance programs were $6 billion in fiscal year 2004 and estimated
to rise to $8 billion in fiscal year 2008, according to the
Congressional Budget Office. Of the $6 billion, $2.9 billion was for
the cost of administering these programs with approximately 90 percent
going towards administering the Foster Care Program.
Title IV-E is one of many funding sources states use to provide child
welfare services. Title IV-B of the Social Security Act authorizes
funds to states for a broad range of services, including child
protection, family preservation, other support services, and adoption
services. The Child Abuse Prevention and Treatment Act authorize grants
and research funds designed to improve child protective services, offer
services aimed at preventing abuse and neglect, and increase the
knowledge about ways to prevent child maltreatment. Additionally,
states may use federal funds from other programs with a focus much
broader than child welfare, such as Title XX's Social Services Block
Grant (SSBG), Medicaid, and TANF to provide some support for child
welfare services.
States report their administrative costs to ACF in three main
categories: child placement services and other administrative
activities,[Footnote 7] training, and development of statewide
automated child welfare information systems (SACWIS development). The
Omnibus Budget Reconciliation Act of 1990[Footnote 8] required that
certain foster care costs be further categorized to provide better
information about reimbursement for administrative costs. HHS's current
reporting form requires states to distinguish among five types of costs
related to child placement as shown in table 2. Because this
requirement does not apply to the Adoption Assistance program, adoption
assistance administrative costs are only reported in two categories,
child placement services and training.[Footnote 9]
Table 2: State Reporting Requirements and Federal Reimbursement Rates
for Allowable Administrative Costs under the Foster Care and Adoption
Assistance Programs:
General reporting requirements:
* Child Placement Services;
* Case management for children in foster care;
* Case management for children at risk of placement into foster
care[A];
* Eligibility determination;
* Statewide Automated Child Welfare Information Systems (SACWIS)
operation;
* Other administration;
Federal reimbursement rate: 50%;
Title IV-E allowable activities:
* Development, review, or revision of case plans or the supervision or
management of cases, including preparation for and participation in
judicial proceedings, as well as referral to services for children
placed in foster care;
* Development, review, or revision of case plans or the supervision or
management of cases, including preparation for and participation in
judicial proceedings, as well as referral to services for children
still living at home;
* Verification and documentation of eligibility;
* Operation of statewide automated child welfare information systems;
* Other costs not mentioned above that are related to running the
program such as setting the rates paid to foster care institutions,
recruitment and licensing of homes, and issuing payments to families.
General reporting requirements: SACWIS development costs;
Federal reimbursement rate: 50%;
Title IV-E allowable activities: Establishing states' automated child
welfare information systems[B].
General reporting requirements: State and local training;
Federal reimbursement rate: 75%;
Title IV-E allowable activities: Training of personnel employed by
state or county agencies administering the program and training current
and prospective foster parents.
General reporting requirements: Adoption Assistance Program;
Federal reimbursement rate: [Empty];
Title IV-E allowable activities: [Empty].
General reporting requirements: Child placement services;
Federal reimbursement rate: 50%;
Title IV-E allowable activities: All costs related to running the
program such as conducting adoptive home studies, recruiting adoptive
homes, placement of a child into a home, and the negotiation and review
of adoption agreements.
General reporting requirements: State and local training;
Federal reimbursement rate: 75%;
Title IV-E allowable activities: Training of personnel employed by
state or county agencies administering the program and training current
and prospective adoptive parents.
Source: ACF Form IV-E-1 and HHS regulations.
[A] On ACF Form IV-E-1, these costs are entitled "Pre-Placement." In
order for a child to be considered at risk of placement, or a
"candidate" for foster care as they are commonly referred to, states
must have one of the following documentation: (1) case plan that
identifies foster care as the goal absent preventative services, (2)
eligibility form used to document the child's eligibility for Title IV-
E, or (3) evidence of court proceedings related to the child's removal
from the home.
[B] To qualify for federal funding for SACWIS, states must prepare and
submit an advance planning document (APD) to the Children's Bureau, in
which they describe the state's plan for managing the design,
development, and operation of a SACWIS that meets federal requirements
and state needs in an efficient, comprehensive, and cost-effective
manner.
[End of table]
States report quarterly the costs of administering their Foster Care
and Adoption Assistance programs to ACF in accordance with cost
allocation plans they developed and ACF approved. These cost allocation
plans describe how the state will identify, measure, and allocate
administrative costs across federal programs such as Title IV-E,
Medicaid, and TANF that may serve overlapping populations with
overlapping state resources. States use a variety of methods to
allocate costs among programs such as (1) the direct charge of costs to
a specific program based on the number of full-time employees, or (2)
use of a time study to identify how workers involved in multiple
programs are spending their time. Most states employ a random moment
time study, a statistical tool for estimating the amount of time
employees spend performing specific activities, such as case
management. By collecting a relatively few representative moments of
employee time, an agency is able to estimate the total distribution of
employee time statewide. This information is used to document and
support claims for federal matching funds by program.
In addition, states generate an eligibility statistic--often referred
to as a penetration rate--that represents the proportion of IV-E
eligible children (numerator) relative to all children served by the
state foster care or adoption assistance programs (denominator). States
then apply this rate to all IV-E allowable costs to determine how much
of these costs are eligible for federal reimbursement.[Footnote 10]
The following is a simplified illustration of a state's claiming
process:
A state randomly surveys caseworkers throughout the quarter and find
that they spend 40% of their time conducting case management work for
children placed in foster care. The caseworker costs--salary, benefits,
and a portion of overhead--is $200,000 for the quarter. Then 40 percent
of the $200,000, or $80,000, might be chargeable as IV-E case
management costs. However, the caseworkers are assisting both IV-E
eligible and non-eligible children; only the costs for assisting the
eligible children can be claimed. To calculate the portion of the
$80,000 that can be charged to IV-E, the state multiples $80,000 by the
eligibility statistic. If the eligibility statistic is 70% (70% of the
children served are IV-E eligible) then the case management cost that
can be charged to Title IV-E for that quarter are $80,000 times
.7=$56,000. The state subsequently receives 50 percent of that amount,
or $28,000, in reimbursement for those case management costs.
In addition to claiming costs for IV-E eligible children who have been
placed in foster care, states are permitted to also claim costs for IV-
E eligible children who are at serious risk of removal from the home.
States can demonstrate children are candidates for foster care by
either seeking to remove the child from the home or determining that
absent effective preventive services, the child would be placed in
foster care. In order to claim costs for foster care candidates, states
can either determine whether or not the candidates are actually IV-E
eligible or use a cost allocation approach based on both determination
of foster care candidacy and potential IV-E eligibility. Because states
interpreted policy regarding candidates differently, HHS issued formal
guidance in 2001 designed to clarify at what point a child is
considered a candidate, who has the authority to make such a
determination, and the types of costs allowed. In addition, the
guidance stipulated that states were no longer able to claim
administrative costs for children in unlicensed facilities under the
guise they were candidates for foster care.[Footnote 11]
The Deficit Reduction Act:
The Deficit Reduction Act[Footnote 12] incorporated many of the
provisions outlined in ACF guidance. The act specified the
administrative costs that can be claimed for children who meet all
eligibility criteria except placement in a licensed foster care
setting.[Footnote 13] It also clarified the specific case management
services permitted for Medicaid reimbursement including:
* assessment of an eligible individual to determine service needs by
taking a client history, identifying an individual's needs, and
gathering information to form a complete assessment;
* development of a specific care plan based on the information
collected through an assessment that specifies the goals and action to
address the medical, social, educational, and other services needed by
the individual;
* referral and related activities to help an individual obtain needed
services; and:
* monitoring and follow-up activities, including activities and
contacts to ensure the care plan is effectively implemented and
adequately addresses the individual's needs.
The act asserts that Medicaid can be charged when "there are no other
third parties liable to pay for such services," including a medical,
social, educational or other program that provides reimbursement. It
also specifies that targeted case management services for children in
foster care would not cover activities including but not limited to the
completion of required foster care documentation, assessing adoption
placement, and recruiting potential foster care parents.
Organization Structure and Oversight Activities:
ACF is responsible for the administration and oversight of Title IV-E
funding to states. HHS headquarters staff develop policies and
procedures for states to obtain and use federal funds, while staff--
financial operations specialists--in HHS's 10 regional offices perform
frontline activities to oversee financial internal control processes.
One key oversight activity includes verifying the accuracy and
appropriateness of the costs states claim for federal reimbursement on
their quarterly expenditure reports. Depending on resources, regional
offices may conduct on-site reviews related to expenditure claims.
Regional offices are also responsible for resolving any findings from
the Office of Management and Budget Circular A-133 audit which requires
non-federal entities that spend more than $500,000 of federal funds
each year to obtain an audit of its financial statements that includes
verification of compliance with federal rules.
ACF also monitors state compliance with federal child welfare laws and
performance through (1) Title IV-E Eligibility Reviews and (2) Child
and Family Services Reviews (CFSR). The Title IV-E Reviews ensure that
states are properly determining the eligibility of children for federal
foster care support and making correct claims for reimbursement.
Passage of the Adoption and Safe Families Act helped spur the creation
of the CFSR by emphasizing the outcomes of safety, permanency, and well-
being for children. Based on a review of statewide data, interviews
with community stakeholders and some families receiving services, and a
review of a sample of 50 child welfare cases, HHS determines whether a
state achieved substantial conformity with: (1) outcomes related to
safety, permanency, and well-being, such as keeping children protected
from abuse and neglect and achieving permanent, stable living
situations for children; and (2) key systemic factors, such as having
an adequate case review system and an adequate array of services.
States are required to develop program improvement plans to address
identified shortcomings. Since fiscal year 2000, all 50 states have
undergone at least one IV-E Eligibility Review, and some have had a
second. ACF completed its first round of on-site reviews for the CFSR
in all 50 states, District of Columbia, and Puerto Rico in March of
2004.
Other HHS agencies have responsibility for reviewing the financial
management of state programs and ensuring claims for expenditure are
allowable and allocable in accordance with federal regulations and
guidelines. HHS's Division of Cost Allocation (DCA) is responsible for
reviewing states' public assistance cost allocation plans, resolving
audits that involve cost allocation issues, and providing technical
assistance and guidance to federal departments and agencies. DCA and
ACF work together to review state cost allocation methods to ensure the
cost distribution to the federal government is appropriate and
accurate, in accordance with Office of Management and Budget
guidelines. HHS's Office of Inspector General (OIG), Office of Audit
Services, provides all auditing services for HHS. OIG audits examine
the performance of HHS programs and/or its grantees and contractors in
carrying out their respective responsibilities and are intended to
provide independent assessments of HHS programs and operations in order
to reduce waste, abuse, and mismanagement and to promote economy and
efficiency throughout HHS. Figure 1 illustrates the entities
responsible for oversight of expenditures for foster care and adoption
assistance administrative costs.
Figure 1: HHS Entities Responsible for Oversight of IV-E Expenditures
for Foster Care and Adoption Assistance Administrative Costs:
[See PDF for image]
Source: GAO analysis of HHS information
[End of figure]
Title IV-E Expenditures for Administrative Costs Have Increased, but
Data Deficiencies Limit Analysis by Type of Cost:
Federal expenditures to states for administering the Foster Care and
Adoption Assistance programs increased between fiscal years 2000 to
2004, but data limitations prevent a determination of how the types of
federal expenditures changed. While federal expenditures increased in a
little over a third of the states during this period, changes in a few
states drove the nationwide increase and federal expenditures declined
in fiscal year 2004. States reported incurring almost all foster care
costs in one category: child placement services. Nationwide changes in
the five types of costs within this category could not be analyzed,
however, because states did not always adhere to the federal reporting
criteria or interpreted the criteria differently. Despite the data
deficiencies, some state and federal officials said that staff costs
related to case management were primarily responsible for the increase
in overall administrative expenditures.
Federal expenditures have increased 7 percent from fiscal years 2000 to
2004 primarily due to changes in a few states:
Federal expenditures to all states for administering the Foster Care
and Adoption Assistance programs increased by $173 million (7 percent)
from fiscal years 2000 to 2004, after adjusting for inflation.[Footnote
14] However, a steady increase in expenditures over the first 3 years
was followed by a decrease in the final year as shown in figure
2.[Footnote 15]
Figure 2: Change in Total Federal Expenditures for Foster Care and
Adoption Assistance Administrative Costs:
[See PDF for image]
Source: GAO analysis of HHS data.
Note: Figure based on data adjusted for inflation in fiscal year 2000
dollars.
[End of figure]
The $173 million overall increase in federal expenditures resulted from
increases totaling $318 million in 21 states, including the District of
Columbia, offset by decreases totaling $145 million in the remaining
states. Among the 21 states with increased federal expenditures, 6
states accounted for the majority of the increase, over 80 percent, as
shown in figure 3. California alone was responsible for 31 percent of
the total increase in federal expenditures. Among the 30 states
reporting a decrease in administrative costs, the change was
distributed more evenly, with 13 states accounting for 81 percent of
the decrease. (See app;I for detailed information on the amount of
administrative costs by state for fiscal years 2000 and 2004.)
Figure 3: Change in Federal Expenditures for Foster Care and Adoption
Assistance Administrative Costs between Fiscal Years 2000 and 2004 by
State:
[See PDF for image]
Source: GAO analysis of HHS data.
[End of figure]
Among the three broad reporting categories of administrative costs for
the Foster Care and Adoption Assistance programs, costs for child
placement services accounted for nearly all of the federal
expenditures--89 percent in fiscal year 2004, followed by costs for
staff training and development of child welfare data systems, as shown
in figure 4.
Figure 4: Foster Care and Adoption Assistance Administrative Costs by
Category for Fiscal Year 2004:
[See PDF for image]
Source: GAO analysis of HHS data.
Note: Figure based on data adjusted for inflation in fiscal year 2000
dollars.
[End of figure]
Child placement costs drove the increase in overall administrative
expenditures between fiscal years 2000 and 2004, for a total increase
of $173 million, while costs related to the development of SACWIS
increased by $10 million and staff training costs decreased by a
similar amount.[Footnote 16]
Inconsistencies in state reported data limit analysis of how types of
costs have changed, but according to officials case management services
accounted for the majority of increased expenditures:
States have not consistently reported foster care costs by type within
one of the three broad categories of administrative costs--the child
placement services category--precluding a detailed analysis of how
these types of costs have changed over time.
ACF provides instruction to states on how to report costs. States are
to report foster care child placement services costs by five different
types:
* Costs to determine a child's eligibility for coverage under the Title
IV-E Foster Care program.
* Case management costs for a child in foster care.
* Case management costs for a child at risk of placement into foster
care.
* Costs to operate the Statewide Automated Child Welfare Information
System.
* Other administrative costs not falling in the other categories.
There are three primary reasons for variation among states in reporting
child placement services by these types.
* Not all states complied with the reporting instructions for costs
associated with foster care child placement services. Some states
reported their costs by just one or two types. For example,
Pennsylvania did not begin reporting costs among the five types until
fiscal year 2004 after being directed to do so by its cognizant ACF
regional office in March of 2003. Pennsylvania had reported nearly all
costs before that time as "other administration." Therefore, the
substantial increase in case management costs reported by Pennsylvania
may have been primarily due to compliance with the reporting
requirements in fiscal year 2004 rather than actual changes in costs
incurred. Over the last several years at least two regions have
required states to report their child placement services costs by the
five types.
* States interpreted the reporting instructions differently. Kansas,
Texas, and New York use private contractors for a large portion of case
management activities. Kansas and Texas reported these costs as "other
administration," whereas New York reported them as "case management."
States also vary in how they reported overhead and other costs not
directly related to assisting a specific child. For example, Illinois
reported costs for negotiating and setting the rates they pay foster
care institutions as case management costs, while other states reported
this cost as "other administration."
* States differed in how they claimed costs between the Foster Care and
Adoption Assistance programs. For example, Kansas charged
administrative costs such as case management for children who are
eligible for adoption, the recruitment and study of adoptive homes, and
licensing of adoptive homes to the Foster Care program while
Washington, charged these activities to the Adoption Assistance
program.
Despite the data limitations, state officials reported that costs
related to the salaries and benefits of staff performing foster care
case management activities accounted for the majority of foster care
administrative costs ranging from 50 to 96 percent of total program
costs. In addition, some state and federal officials we interviewed
indicated that costs for case management activities drove the increase
in overall administrative costs between fiscal years 2000 and 2004.
State IV-E Spending Reflects Changes in Staffing, Children Served, and
Cost Claiming Practices, but Impact on Services Is Unclear:
Our review of 11 states between fiscal years 2000 and 2004 showed that
state Foster Care and Adoption Assistance spending within and among
states reflected differences in methods used to identify eligible
children and related staff costs, but these changes could not be linked
to children's services. Among states with increased spending, four
states hired more caseworkers, increased their salaries, and/or changed
how caseworker time is allocated among foster care and other programs.
In states with decreased spending, there were declines in the number of
children for whom states could claim costs and state budget cuts.
States differed in the extent that they included case management costs
for children who are in facilities that are ineligible for foster care
maintenance payments, or the extent that they used other funding
sources to pay for administrative costs that could be charged to IV-E.
All 11 states reported expanding or implementing initiatives to improve
services to children; however, the effects of IV-E funding cannot be
separated from those of other funding sources or initiatives.
State IV-E claims changed due to rising staff costs and changes in
eligible children and state budgets; states differ in cost claiming
practices and use of alternative funding:
Among the 11 states we reviewed, 6 increased their IV-E administrative
cost claims for the Foster Care and Adoption Assistance Programs
between fiscal years 2000 and 2004, with increases ranging from 3
percent in Wisconsin to 142 percent in Washington; another 5 states had
decreased costs ranging from 2 percent in Illinois to 24 percent in
South Carolina, as shown in figure 5.
Figure 5: Changes in IV-E Administrative Expenditures for 11 States, FY
2000-2004 (Dollars in millions):
[See PDF for image]
Source: GAO analysis of HHS data.
Note: Figure based on data adjusted for inflation in fiscal year 2000
dollars.
[End of figure]
States provided various reasons for the increase or decrease in total
administrative costs. For those eight states that had greater than a 5
percent change in costs, reasons cited most frequently as contributing
to these changes included the amount of costs claimed for candidates,
changes in staff allocation methods, and changes in the proportion of
IV-E eligible children, as shown in table 3.
Table 3: Major Reasons Cited by 8 States for Changes in IV-E
Administrative Costs from Fiscal Years 2000 to 2004:
States with overall increased costs: California;
Revised allocation of staff costs: [Empty];
Change in proportion of IV-E eligible children: [Empty];
Costs claimed for children identified as candidates with overall
increased costs: Increased;
State spending: Increased;
Use of other federal funding source with overall increased costs:
[Empty].
States with overall increased costs: Pennsylvania;
Revised allocation of staff costs with overall increased costs:
[Empty];
Change in proportion of IV-E eligible children with overall increased
costs: [Empty];
Costs claimed for children identified as candidates with overall
increased costs: Increased;
State spending: [Empty];
Use of other federal funding source with overall increased costs:
[Empty].
States with overall increased costs: New York;
Revised allocation of staff costs with overall increased costs:
Increased;
Change in proportion of IV-E eligible children with overall increased
costs: Decreased;
Costs claimed for children identified as candidates with overall
increased costs: Increased; State spending: Increased;
Use of other federal funding source with overall increased costs:
[Empty].
States with overall increased costs: Washington;
Revised allocation of staff costs with overall increased costs:
Increased;
Change in proportion of IV-E eligible children with overall increased
costs: Increased;
Costs claimed for children identified as candidates with overall
increased costs: [Empty];
State spending: [Empty];
Use of other federal funding source with overall increased costs:
Decreased.
States with overall increased costs: Texas;
Revised allocation of staff costs with overall increased costs:
[Empty];
Change in proportion of IV-E eligible children with overall increased
costs: Increased;
Costs claimed for children identified as candidates with overall
increased costs: Increased;
State spending: [Empty];
Use of other federal funding source with overall increased costs:
[Empty].
States with overall decreased costs: South Carolina;
Revised allocation of staff costs with overall increased costs:
Increased;
Change in proportion of IV-E eligible children with overall increased
costs: [Empty];
Costs claimed for children identified as candidates with overall
increased costs: Increased;
State spending: Decreased;
Use of other federal funding source with overall increased costs:
[Empty].
States with overall decreased costs: Kansas;
Revised allocation of staff costs with overall increased costs:
[Empty];
Change in proportion of IV-E eligible children with overall increased
costs: [Empty];
Costs claimed for children identified as candidates with overall
increased costs: Increased;
State spending: Decreased;
Use of other federal funding source with overall increased costs:
[Empty].
States with overall decreased costs: Michigan;
Revised allocation of staff costs with overall increased costs:
[Empty];
Change in proportion of IV-E eligible children with overall increased
costs: Decreased;
Costs claimed for children identified as candidates with overall
increased costs: Decreased;
State spending: [Empty];
Use of other federal funding source with overall increased costs:
Increased.
Source: State officials.
[End of table]
Changes in Allocation, State Share of Spending, and Staffing:
A common reason cited for increased administrative costs were changes
states made to the methodology used for measuring and allocating
caseworker time, which resulted in identifying more costs eligible for
IV-E reimbursement. Two states--New York and Washington--reported
making various changes in their time studies that significantly
increased the amount of IV-E expenditures claimed from fiscal years
2000 to 2004. For example, Washington reported that in fiscal years
2003 and 2004, time studies were developed and implemented for
contractors providing specialized IV-E allowable case management
services, which enabled the state to claim federal funding for these
activities. New York officials also reported that an update of their
time studies for private, nonprofit agencies serving children in New
York City lead to better identification of costs eligible for IV-E
reimbursement and increased its amount of administrative costs.
California officials highlighted efforts to ensure that staff were
adequately trained resulting in an increase of its training costs by
more than a third over this time period. California requires that all
new and existing county program staff be trained to a standard
statewide curriculum.
State budget changes between fiscal years 2000 and 2004 were reported
to also affect IV-E claims in several of the states we reviewed. For
example, New York highlighted increases in state funding to pay for
staff and programs to improve services, that in turn increase federal
expenditures. However, two states--Kansas and South Carolina--reported
significant decreases in IV-E expenditures as a result of cuts in state
budgets and spending. South Carolina, for example, reported that the
severe budget crisis between fiscal years 1998 and 2003 resulted in a
more than 40 percent decrease in state funding from approximately $140
million to $80 million for the Department of Social Services, and an
associated reduction in IV-E expenditures.[Footnote 17],[Footnote 18]
Michigan also reported decreased state spending for foster care, but
attributed the change to fewer children in the overall foster care
system.
Changes in the Proportion of IV-E Eligible Children:
Most states reported a change in the proportion of IV-E eligible
children--penetration rate--between fiscal years 2000 and 2004 that
contributed to changes in IV-E administrative costs. Washington
substantially increased its rate by excluding children from the
calculation that the federal government does not require be included,
such as children in the custody of a Native American tribe or whose
eligibility had not yet been determined. On the other hand, South
Carolina's rate decreased by more than half in part due to problems
with its SACWIS, according to officials. The remaining states reported
a change of 10 percentage points or less, as shown in table 4.
Table 4: Change in Penetration Rate between Fiscal Years 2000 and 2004:
State: Washington;
Penetration rate in 2000: 37%;
Penetration rate in 2004: 68%;
Percentage point change in penetration rate between 2000 and 2004: 31%;
Reason cited for change greater than 5%: Clarified which children could
be used in calculating the rate; Revised and automated the IV-E
eligibility guide and initiated focused training and audits for IV-E
eligibility staff; Worked with state attorney general office to
standardize state court order language.
State: Texas;
Penetration rate in 2000: 60%;
Penetration rate in 2004: 67%;
Percentage point change in penetration rate between 2000 and 2004: 7%;
Reason cited for change greater than 5%: Focused training on
documenting certain eligibility criteria; Developed policy guidance for
the eligibility staff; Upgraded the SACWIS system with an enhanced IV-E
eligibility function.
State: Michigan[A];
Penetration rate in 2000: 56%;
Penetration rate in 2004: 61%;
Percentage point change in penetration rate between 2000 and 2004: 5%;
Reason cited for change greater than 5%: Not applicable (N/A).
State: Illinois[A];
Penetration rate in 2000: 74%;
Penetration rate in 2004: 73.5%;
Percentage point change in penetration rate between 2000 and 2004:
(0.5)%;
Reason cited for change greater than 5%: N/A.
State: Maryland[A];
Penetration rate in 2000: 70%;
Penetration rate in 2004: 66%;
Percentage point change in penetration rate between 2000 and 2004:
(4)%;
Reason cited for change greater than 5%: N/A.
State: Kansas[A];
Penetration rate in 2000: 58%;
Penetration rate in 2004: 54%;
Percentage point change in penetration rate between 2000 and 2004:
(4)%;
Reason cited for change greater than 5%: N/A.
State: California[A,B];
Penetration rate in 2000: 80%;
Penetration rate in 2004: 75%;
Percentage point change in penetration rate between 2000 and 2004:
(5)%;
Reason cited for change greater than 5%: N/A.
State: Wisconsin;
Penetration rate in 2000: 79%;
Penetration rate in 2004: 71%;
Percentage point change in penetration rate between 2000 and 2004:
(8%);
Reason cited for change greater than 5%: Fewer eligible children due to
1996 income standards; State enforcement of stricter eligibility issued
in 2000.[C].
State: New York[D];
Penetration rate in 2000: 63%;
Penetration rate in 2004: 53%;
Percentage point change in penetration rate between 2000 and 2004:
(10)%;
Reason cited for change greater than 5%: Fewer eligible children due to
1996 income standards.
State: South Carolina;
Penetration rate in 2000: 55%;
Penetration rate in 2004: 24%;
Percentage point change in penetration rate between 2000 and 2004:
(31)%;
Reason cited for change greater than 5%: Technical problems with
SACWIS; Issues concerning administrative costs for cases where
maintenance payments are funded from Supplemental Security Income
instead of IV-E.[E].
Source: State officials.
Note: Pennsylvania did not provide changes in the penetration rate
because counties calculate their own rates for IV-E reimbursement;
however, state officials reported that the statewide rate had not
changed over the past few years.
[A] Illinois, Maryland, Michigan, Kansas, and California reported a
change of 5 percent or less, for which we did not request an
explanation.
[B] In California, the statewide rate is used for budgeting purposes;
counties calculate their own rate for IV-E reimbursement.
[C] The federal IV-E rules issued in January 2000 created stricter
requirements for the state to prove that it is contrary to the welfare
of a child to remain in their home and that the state had made
reasonable efforts to prevent removal.
[D] New York provided two rates--one for upstate counties and one for
New York City; both rates decreased about 10 percent. The rates shown
in the table are for the upstate counties.
[E] If a child is eligible for IV-E and receives Supplemental Security
Income (SSI), the state has the choice to fund the family's maintenance
payments from SSI rather than IV-E funds. However, the state may claim
federal financial participation under IV-E for administrative
activities performed on behalf of that child.
[End of table]
Cost Claims for Candidates and Children Served by the Juvenile Justice
System:
The portion of total administrative costs states spend on behalf of
candidates results in spending differences among states. Eight states
reported that candidates were responsible for administrative costs
ranging from 1 percent in Michigan to 73 percent in South Carolina, as
shown in table 5. Claiming costs for candidates can help states offset
declines in their IV-E eligible population. For example, while New
York's eligible population decreased by almost 44 percent between
fiscal years 2000 and 2004, the costs charged for candidates more than
doubled during this time period. In addition, South Carolina, which had
an overall decline in IV-E administrative costs between fiscal years
2000 and 2004, reported that IV-E reimbursement for candidates
increased from about $965,000 in fiscal year 2000, to more than $3.7
million in fiscal year 2004.
Table 5: Costs for Foster Care Candidates as an Approximate Percentage
of Total Fiscal Year 2004 IV-E Foster Care Administrative Costs:
State[A]: South Carolina;
Percentage of IV-E administrative costs that were for foster care
candidates in FY 2004[B]: 73[C].
State[A]: Wisconsin;
Percentage of IV-E administrative costs that were for foster care
candidates in FY 2004[B]: 50.
State[A]: Texas;
Percentage of IV-E administrative costs that were for foster care
candidates in FY 2004[B]: 46[C].
State[A]: New York;
Percentage of IV-E administrative costs that were for foster care
candidates in FY 2004[B]: 25[D].
State[A]: Illinois;
Percentage of IV-E administrative costs that were for foster care
candidates in FY 2004[B]: 9.
State[A]: Washington;
Percentage of IV-E administrative costs that were for foster care
candidates in FY 2004[B]: 7.
State[A]: Kansas;
Percentage of IV-E administrative costs that were for foster care
candidates in FY 2004[B]: 2.
State[A]: Michigan;
Percentage of IV-E administrative costs that were for foster care
candidates in FY 2004[B]: 1[E].
Source: State officials.
[A] Data for California, Pennsylvania, and Maryland were not available
at the state level. However, Sacramento County in California, reported
that about 27 percent of costs were for such children and Delaware
County in Pennsylvania reported that about 40 percent of costs were for
candidates.
[B] These percentages represent the proportion of IV-E costs only and
do not include the amount for costs charged to other sources such as
Medicaid.
[C] South Carolina and Texas charged some case management costs to
Medicaid.
[D] New York reported that this was for local district costs.
[E] Michigan used some Social Service Block Grant (SSBG) and TANF funds
for case management costs for candidates.
[End of table]
According to an ACF official, state claims for candidates vary because
states differ in their interpretation of regulations regarding
reimbursement of costs for these children and some states are more
aggressive in their candidate claiming practices. Pennsylvania
officials told us that Region III had disallowed claims related to
candidates because the state had not appropriately applied a
penetration rate to the pool of costs, as required by HHS. State
officials commented that it had used the same approved allocation
method since it began claiming costs for candidates in the last 10 to
15 years and was not told until recently that the method was not in
accordance with HHS cost allocation principles. In addition, in 2005,
the HHS Office of Inspector General and ACF regional staff recommended
large disallowances of costs claimed for candidates in Delaware and
Virginia respectively. Delaware was denied almost $6 million of claims
for quarters from December 1999 through June 2003 for also not applying
a penetration rate to candidate costs. For Virginia, more than $28
million was denied for 8 quarters in fiscal year 2003 through fiscal
year 2005 for absence of a methodology for allocating costs for
candidates, charging for unallowable activities, failure to demonstrate
that the children were eligible, and other problems with documentation.
Michigan officials told us they reduced the amount of costs claimed on
behalf of candidates because they did not want to risk the region
denying reimbursement for certain claims based on insufficient
documentation of caseworker effort or candidacy status.
States may also receive reimbursement for administrative claims for IV-
E eligible children that receive services through the juvenile justice
system, both children receiving services as candidates and those in
placement settings that are not operated primarily for detention. Three
states--California, Pennsylvania, and Texas--reported increases in IV-
E claims for children receiving services in the juvenile justice
system. Pennsylvania officials said that the state had reviewed the
activities of juvenile justice workers and determined that they were
conducting case management activities comparable to child welfare
workers, such as developing a case plan and providing services to keep
those children in their home. Submitting claims for administrative
costs for these children in accordance with the state's approved cost
allocation plan had resulted in significant increases in IV-E
reimbursement. Texas officials reported that 165 of the state's 254
counties had agreements with the state to pass along a portion of their
juvenile justice costs for IV-E reimbursement. California officials
reported that their counties also had such agreements; Los Angeles
County Probation Department officials reported that expenditures for
these children increased from about $22 million in fiscal year 2001 to
more than $40 million in fiscal year 2005--an increase of nearly 85
percent.[Footnote 19]
Claims for Children in Ineligible Facilities:
Most of the states we reviewed reported increasing their IV-E
reimbursement by charging for costs related to eligible children placed
in certain types of settings ineligible for foster care maintenance
payments. The most commonly used ineligible setting in fiscal year 2004
was the home of unlicensed relatives, utilized by 6 of 11 states
responding to this question as shown in table 6. Kansas charged costs
for children in six different types of ineligible facilities, such as
hospitals and detention centers. Two states, Michigan and South
Carolina, reported that they did not charge IV-E for children in any
ineligible facility.
Table 6: Ineligible Facilities Used by Certain States to Claim IV-E
Administrative Costs in Fiscal Year 2004A:
State: California;
Unlicensed relative care: [Empty];
Psychiatric or medical hospitals: check;
Detention centers: [Empty];
Public institutions that accommodate more than 25 children: [Empty];
Facilities operated primarily for children determined to be delinquent:
check;
Other: [Empty].
State: Illinois;
Unlicensed relative care: check;
Psychiatric or medical hospitals: [Empty];
Detention centers: [Empty];
Public institutions that accommodate more than 25 children: [Empty];
Facilities operated primarily for children determined to be delinquent:
[Empty];
Other: [Empty].
State: Kansas;
Unlicensed relative care: check;
Psychiatric or medical hospitals: check;
Detention centers: check;
Public institutions that accommodate more than 25 children: check;
Facilities operated primarily for children determined to be delinquent:
check;
Other: check[B].
State: Maryland;
Unlicensed relative care: check;
Psychiatric or medical hospitals: [Empty];
Detention centers: [Empty];
Public institutions that accommodate more than 25 children: [Empty];
Facilities operated primarily for children determined to be delinquent:
[Empty];
Other: [Empty].
State: Michigan;
Unlicensed relative care: [Empty];
Psychiatric or medical hospitals: [Empty];
Detention centers: [Empty];
Public institutions that accommodate more than 25 children: [Empty];
Facilities operated primarily for children determined to be delinquent:
[Empty];
Other: [Empty].
State: New York[C];
Unlicensed relative care: [Empty];
Psychiatric or medical hospitals: [Empty];
Detention centers: [Empty];
Public institutions that accommodate more than 25 children: [Empty];
Facilities operated primarily for children determined to be delinquent:
[Empty];
Other: [Empty].
State: Pennsylvania;
Unlicensed relative care: check[D];
Psychiatric or medical hospitals: [Empty];
Detention centers: [Empty];
Public institutions that accommodate more than 25 children: [Empty];
Facilities operated primarily for children determined to be delinquent:
[Empty];
Other: [Empty].
State: South Carolina;
Unlicensed relative care: [Empty];
Psychiatric or medical hospitals: [Empty];
Detention centers: [Empty];
Public institutions that accommodate more than 25 children: [Empty];
Facilities operated primarily for children determined to be delinquent:
[Empty];
Other: [Empty].
State: Texas;
Unlicensed relative care: check;
Psychiatric or medical hospitals: [Empty];
Detention centers: [Empty];
Public institutions that accommodate more than 25 children: [Empty];
Facilities operated primarily for children determined to be delinquent:
[Empty];
Other: [Empty].
State: Washington;
Unlicensed relative care: [Empty];
Psychiatric or medical hospitals: [Empty];
Detention centers: [Empty];
Public institutions that accommodate more than 25 children: [Empty];
Facilities operated primarily for children determined to be delinquent:
[Empty];
Other: check[E].
State: Wisconsin;
Unlicensed relative care: check;
Psychiatric or medical hospitals: [Empty];
Detention centers: [Empty];
Public institutions that accommodate more than 25 children: [Empty];
Facilities operated primarily for children determined to be delinquent:
[Empty];
Other: [Empty].
Source: State officials.
[A] These kinds of facilities may provide services to foster care
children but are ineligible for foster care maintenance payments.
[B] Kansas also charged for secure care facilities.
[C] New York charges for the listed facilities when a child spends at
least 1 day of the month of the time study in the above IV-E setting.
[D] Pennsylvania only places a child in unlicensed relative care if
ordered by a judge.
[E] Washington claims costs for "for profit foster homes."
[End of table]
The Deficit Reduction Act of 2005,[Footnote 20] limiting states'
ability to claim administrative costs for children in unlicensed foster
homes or ineligible facilities will decrease federal expenditures to
most of these states. Effective retroactively to October 1, 2005,
states are prohibited from charging administrative costs for children
in these facilities with one exception--they may charge these costs to
IV-E for eligible children residing in an unlicensed relative home, but
only for 12 months or for the average amount of time it takes the state
to license the home, whichever is shorter.[Footnote 21] Kansas
officials estimated that as a result of this rule, their claims could
be reduced by as much as $10 million a year and Texas officials
estimated that their claims would decrease by about $3 million
annually.
Differences in Federal Funding Sources:
State IV-E administrative costs differ among states based on the extent
that states charge other federal programs instead of IV-E. Three of the
11 states reported using one or more federal funding sources in fiscal
year 2004 to fund some services for costs reimbursable by IV-E. They
used block grant funding under programs such as TANF and SSBG to reduce
their overall share of costs because they do not require a match of
state funds, and there is less restriction on their use. Additionally,
two of the three states charged costs to Medicaid that required a state
match of less than 50 percent.
* South Carolina officials reported using TANF emergency assistance
funds to cover most costs associated with a child in foster care for
the first 12 months; using TANF eliminated the need of a state match.
They said that IV-E program funds are used primarily for costs
associated with preparing and participating in judicial proceedings,
eligibility determination, licensing and home studies.
* Michigan officials said that their IV-E claims decreased when they
began charging activities they thought would be challenged by the ACF
regional office to another funding source, such as SSBG or TANF. For
example, Michigan began charging about 60 percent of foster care
training costs to SSBG because of disagreements with ACF in developing
their allocation methodology.
* Washington officials said that prior to 2001, Medicaid was used to
fund some case management services for all children that were eligible
for Medicaid, including those that were IV-E eligible. However, the
Center for Medicare and Medicaid Services (CMS) objected and negotiated
with the state to no longer use Medicaid for these services. This
change resulted in additional charges to IV-E and contributed to the 27
percent increase in the amount of case management claims from fiscal
year 2000 to fiscal year 2001.
States Implemented Initiatives to Improve Services, but the Extent That
Improvements Are Related to Changes in IV-E Expenditures Is Unclear:
Officials in all 11 states reported initiating efforts to improve
services to children in their foster care and adoption assistance
programs to address findings from federal reviews, state studies, or
lawsuits; however, an increase or decrease in IV-E spending cannot be
linked to changes in services for children. One reason is that spending
may go up or down unrelated to services. For example, while hiring more
staff has shown to improve services, changing methods used to track
staff time and costs may have little or no effect on services. In
addition, because states make extensive use of non-IV-E funding
sources, the change in IV-E expenditures does not necessarily reflect
changes in the overall funding of states' child welfare systems.
All states reported taking action to improve services to children in
their foster care programs, using funding from IV-E and other sources.
Between fiscal years 2001 and 2004, ACF evaluated all 50 state child
welfare programs through the Child and Family Services Review (CFSR).
[Footnote 22] These reviews evaluated states on outcomes for children
related to safety, permanency, and well-being and on systemic factors
such as the statewide information, case review, and quality assurance
systems. In response to any identified deficiencies, states developed a
program improvement plan (PIP) to document planned corrective actions,
which was reviewed and approved by ACF. The most common initiatives
were those to expedite permanency planning, increase staff and
training, and collaborate with courts to facilitate a child's permanent
placement and improve services as shown in table 7.
Table 7: Foster Care Program Services Increased or Implemented Since
Completion of CFSR Reviews for 11 States:
State: California;
Recruit foster families: check;
Training foster care parents: check;
Licensing activities: check;
Increase family and support services: check;
Increase in-person contact with child: check;
More outreach to biological parents: [Empty];
Increase monitoring of contract provided services: [Empty];
Increase use of private contractors: [Empty];
Collaborate with courts: check;
Other: check;
State: Illinois;
Recruit foster families: [Empty];
Training foster care parents: check;
Licensing activities: [Empty];
Increase family and support services: check;
Increase in-person contact with child: [Empty];
More outreach to biological parents: check;
Increase monitoring of contract provided services: [Empty];
Increase use of private contractors: check;
Collaborate with courts: check;
Other: check;
State: Kansas;
Recruit foster families: [Empty];
Training foster care parents: [Empty];
Licensing activities: [Empty];
Increase family and support services: check;
Increase in-person contact with child: [Empty];
More outreach to biological parents: [Empty];
Increase monitoring of contract provided services: [Empty];
Increase use of private contractors: [Empty];
Collaborate with courts: [Empty];
Other: check;
State: Maryland;
Recruit foster families: check;
Training foster care parents: check;
Licensing activities: check;
Increase family and support services: [Empty];
Increase in-person contact with child: [Empty];
More outreach to biological parents: [Empty];
Increase monitoring of contract provided services: check;
Increase use of private contractors: check;
Collaborate with courts: check;
Other: [Empty].
State: Michigan;
Recruit foster families: [Empty];
Training foster care parents: check;
Licensing activities: [Empty];
Increase family and support services: [Empty];
Increase in-person contact with child: [Empty];
More outreach to biological parents: check;
Increase monitoring of contract provided services: [Empty];
Increase use of private contractors: [Empty];
Collaborate with courts: check;
Other: check;
State: New York;
Recruit foster families: [Empty];
Training foster care parents: check;
Licensing activities: check;
Increase family and support services: check;
Increase in-person contact with child: [Empty];
More outreach to biological parents: check;
Increase monitoring of contract provided services: [Empty];
Increase use of private contractors: [Empty];
Collaborate with courts: check;
Other: check;
State: Pennsylvania;
Recruit foster families: [Empty];
Training foster care parents: [Empty];
Licensing activities: [Empty];
Increase family and support services: [Empty];
Increase in-person contact with child: [Empty];
More outreach to biological parents: [Empty];
Increase monitoring of contract provided services: [Empty];
Increase use of private contractors: [Empty];
Collaborate with courts: check;
Other: check;
State: South Carolina;
Recruit foster families: check;
Training foster care parents: check;
Licensing activities: [Empty];
Increase family and support services: check;
Increase in-person contact with child: check;
More outreach to biological parents: check;
Increase monitoring of contract provided services: check;
Increase use of private contractors: [Empty];
Collaborate with courts: check;
Other: [Empty].
State: Texas;
Recruit foster families: check;
Training foster care parents: [Empty];
Licensing activities: check;
Increase family and support services: check;
Increase in-person contact with child: check;
More outreach to biological parents: check;
Increase monitoring of contract provided services: [Empty];
Increase use of private contractors: [Empty];
Collaborate with courts: check;
Other: [Empty].
State: Washington;
Recruit foster families: [Empty];
Training foster care parents: check;
Licensing activities: [Empty];
Increase family and support services: [Empty];
Increase in-person contact with child: check;
More outreach to biological parents: [Empty];
Increase monitoring of contract provided services: check;
Increase use of private contractors: [Empty];
Collaborate with courts: check;
Other: [Empty].
State: Wisconsin;
Recruit foster families: check;
Training foster care parents: check;
Licensing activities: check;
Increase family and support services: check;
Increase in-person contact with child: check;
More outreach to biological parents: check;
Increase monitoring of contract provided services: [Empty];
Increase use of private contractors: [Empty];
Collaborate with courts: check;
Other: check;
Source: State officials.
[End of table]
While all 11 states made changes to program services in response to
CFSR findings, some also had other reasons: the Maryland legislature
provided resources to reduce the ratios of caseworkers to children in
response to concerns about program deficiencies due to staff shortages,
and Washington made changes as part of a settlement in a lawsuit. The
actions states took to achieve program improvements varied. For
example,
* Expediting permanency planning. Most states we studied reported an
increased emphasis on family preservation and support services and more
outreach to biological parents in an effort to either maintain children
in their homes or to expedite reunification if the child is in foster
care. Some states have implemented "Concurrent Planning" programs in
which at the same time that efforts are being made for reunification,
other permanency goals, such as adoption, are pursued should
reunification fail. [Footnote 23] For example, in California, Los
Angeles County officials reported positive results with their
concurrent planning program. Between fiscal years 2003 and 2005,
reunification of children with their families within 12 months or less
increased from about 36 percent to 45 percent. In addition, during this
same time period, adoptions within 23 months or less increased from
about 9 percent to 15 percent.
* Increased collaboration with courts to remove barriers and improve
services. Ten states reported increased coordination or collaboration
with the courts to improve services provided by either their foster
care or adoption assistance programs or both. For example, Pennsylvania
officials reported establishing a statewide Legal Services Initiative
in which paralegals work with caseworkers to move cases through the
system faster and reduce the time that a child is in foster care.
Officials in one county said that this initiative had helped to reduce
a child's time in foster care from an average 38 months to about 27 to
28 months between fiscal years 2000 and 2005.
Some states provided new resources or reallocated existing resources
for their PIP to address the deficiencies identified in their CFSR and
one state reported that state budget limitations made it difficult to
develop or implement their PIP; For example, the California legislature
approved more than $13 million to develop the California Child and
Family Service Review System. This system, a part of the state PIP,
requires California's counties to conduct self-assessments, improvement
plans, peer quality case reviews, and data integrity improvements.
Wisconsin and Texas reported reallocating existing resources for new
staff position to implement program improvement strategies. On the
other hand budget limitations in Kansas made it difficult to maintain
progress in all areas that were identified as needing improvement and
lead the state agency to renegotiate their program improvement goals
with ACF.
HHS Oversight of Program Spending Has Been Compromised by an Absence of
Strategic Risk-Based Monitoring:
HHS has not implemented a strategic approach in its monitoring efforts
to ensure adequate control over program spending. The number and skills
of financial specialists located in the regional offices are not
correlated with the risk of states claiming inappropriate costs. In
addition, according to officials, HHS does not have a current financial
review manual, and regional offices have developed their own protocols
resulting in inconsistent review of claims across states. HHS did
clarify policies in several critical areas that affect spending--
including the use of Medicaid funding for case management services--but
these policies were not consistently applied across regions.
HHS has not targeted its resources to high-risk regions:
Staffing levels and the financial expertise of regional office staff
reviewing states' claims for reimbursement of their administrative
costs have decreased over time, and HHS has not shifted or targeted its
remaining resources to high-risk areas or states. Financial specialists
in HHS's 10 regional offices are tasked with a variety of financial
oversight responsibilities including:
* Review quarterly expenditures.
* Provide technical assistance to states regarding fiscal policy and
cost allocation issues.
* Review and resolve findings from the Single Audit.
* Review cost allocation amendments and make recommendations to the
Division of Cost Allocation.
* Provide support for the IV-E Eligibility Reviews.
* Provide support for HHS Inspector General's IV-E audits and
inspections.
According to officials, the number of financial specialists with the
necessary expertise has declined since the early 1990s. This decline
resulted primarily from retirements and a change in staff roles and
responsibilities. Typically, the regions have 2-3 financial specialists
for oversight of ACF programs. In region VII, three financial
specialists review 3 percent of national IV-E administrative costs for
4 states, while three financial specialists in region V review 17
percent of national IV-E costs for 6 states. Additionally, one
financial specialist with limited experience with the IV-E programs,
reviewed costs for California that amounted to more than 30 percent of
national administrative spending in fiscal year 2004. Figure 6
illustrates the percentage of total administrative costs by HHS
regional office.
Figure 6: Percentage of Fiscal Year 2004 Total Foster Care and Adoption
Assistance Administrative Costs for States Located In HHS's 10 Regional
Offices:
[See PDF for image]
Source: GAO analysis of HHS data.
Note: Percentages add to more than 100 due to rounding.
[End of figure]
Financial specialist positions across the country have increasingly
been filled with staff that have a programmatic rather than a financial
background, a concern shared by headquarters and regional staff. For
example, one regional grants manager told us that the IV-E programs in
his region are particularly vulnerable to unallowable state claims
because, in addition to a significant workload, two financial
specialists have little experience and lack the financial skills to
review claims in accordance with cost allocation plans. In addition,
officials from two regions cited inadequate training resources.
According to ACF central office officials, degrees in accounting or
finance are no longer required for these positions.
Cognizant ACF officials cited an increased workload and competing
responsibilities as obstacles to oversight of program spending. For
example, due to time staff spent on quarterly expenditure reviews and
Title IV-E eligibility reviews, according an official in one region,
the resolution of Single Audit findings were not always accomplished in
the required 6-month time frame and, as a result, questioned costs were
not always promptly recovered. In addition, officials from two regions
noted that they suspect states are not claiming training costs
correctly, but cited a lack of resources to effectively address the
problem. Of the six regions we spoke with, officials from three
reported 0 dollars disallowed during fiscal years 2000 to 2004 while
officials from the other three reported disallowances ranging from
about $18 to $24 million.[Footnote 24]
Although ACF is aware of problematic claiming practices in some states,
ACF has not taken a strategic approach to assess risk and target its
resources accordingly. Effective agency control structures depend on
assessing risk and implementing oversight activities to address those
areas identified at greatest risk. [Footnote 25] However ACF's ability
to provide strategic oversight is complicated by regional structures
that differ. In some regions, staff are assigned oversight
responsibility by state and review multiple ACF programs, while in
other regions, staff are assigned oversight responsibility by program
and review multiple states. An additional complication is the absence
of direct authority over regional financial specialists. In most
regions, financial specialists are supervised by Program Office
Managers who report to the Regional Administrator rather than the
Office of Grants Management, the entity responsible for approving
federal expenditures to states. ACF has a restructuring effort underway
to ensure more consistent policy administration of ACF programs that
may address this issue. The estimated completion date is the end of
fiscal year 2006.
Lack of standard guidance and absence of information sharing among HHS
offices limit financial oversight:
HHS does not have a current financial review guide to standardize
oversight across regions, and oversight findings among various regional
offices have not been shared to better ensure consistency and
appropriateness of federal expenditures to states, according to
regional and central officials we interviewed. HHS last issued a review
guide over 15 years ago, and while staff in multiple regional offices
have begun an effort to compile a current financial review guide
consisting of best review practices, this guide is not expected to be
completed for at least 3 years. In the interim, each region follows its
own monitoring process and the level of oversight varies according to
regional practice.
* Triggers for review. Some regions review changes in cost claims of
more than 5 percent by specific category such as case management, while
at least one region only reviews changes of 5 percent for total claims,
without determining whether there were larger cost changes within
categories. One region took action to ensure states appropriately
claimed their costs by category, but officials from another region told
us they do not pay attention to how states categorize costs.
* Claims analysis. Region IX officials said they recently started
analyzing California's claims to compare the most recent 4 quarters of
costs to the previous 4 quarters, while one method used in Region V is
to compare costs from quarter to quarter using a ratio of
administrative costs to the average number of children in foster care.
Region IV officials told us they use a standard set of spreadsheets
comparing claims across states in the region to analyze trends in
expenditures and differences in states' claims.
* On-site reviews. Region VII officials, who were responsible for 3
percent of 2004 expenditures, indicated that financial specialists
visit their respective states quarterly to trace state expenditures to
original documents or review a selected sample of expenditures to
ensure compliance with specific regulations. Region IV officials,
responsible for 8 percent of expenditures, discontinued quarterly
reviews due to a reduction in resources 5 years ago, and now have a
goal for financial specialists to visit some of their assigned states
once a year. Officials in Region V, responsible for 17 percent of
fiscal year 2004 expenditures, noted that financial specialists rarely
conduct on-site reviews. In addition to lack of standardization in
review of claims, inadequate guidance from HHS headquarters has
resulted in key differences in the approval of state claims.
* Regions vary in the technical assistance provided to states.
According to regional officials, states did not uniformly identify and
adequately document their processes used to classify children as
candidates. One state official noted that its region helped the state
develop a document that would meet requirements to claim candidate
costs appropriately; however, other states did not receive similar
technical assistance.
* Region officials allow states to treat children differently in
calculating their penetration rate. A state in one region removed cases
with pending eligibility from its total count of children, resulting in
higher federal reimbursement, while this practice was disallowed for a
state in a different region.
* Officials from one region with oversight responsibility for the
Medicaid program assert that there is a wide disparity in the amount of
costs for case management activities states submit to the Medicaid
program for children in foster care that some medical costs should be
charged to the IV-E program.[Footnote 26]
However, ACF took action in 2005 to standardize state claiming
practices in three important areas that were subsequently included in
the Deficit Reduction Act of 2005:
* administrative costs claimed for children living in facilities that
are not eligible for maintenance payments;
* administrative costs claimed for children living in an unlicensed
foster family home; and:
* time frames for determining or re-determining a child's eligibility
for IV-E programs.
ACF and CMS jointly issued guidance in 2001 to clarify which foster
care costs could be charged to Medicaid rather than IV-E, but according
to CMS officials, this guidance contained errors that caused confusion
regarding appropriate targeted case management (TCM) claims. Since
2004, CMS policy regarding the use of TCM services for children in
foster care has been based on a 2004 Administrator's decision that
denied approval of a Medicaid state plan amendment requested by
Maryland to provide TCM services to children in the state's foster care
program because such services were available under the IV-E
program.[Footnote 27] However, CMS has not consistently applied its
policy for allowable TCM services.[Footnote 28] The Deficit Reduction
Act superseded previous policy clarifications and defined TCM services
as well as activities that are not permitted for children in foster
care such as assessing adoption placements.
The lack of information sharing among regions further compromises
oversight. According to central and regional officials, financial
specialists do not routinely communicate with other regions or
headquarters to discuss issues related to state claiming practices.
Quarterly conference calls to discuss financial oversight were
discontinued due to scheduling difficulties about 2 years ago according
to officials in one region. While there is a monthly call between
headquarter and regional staff regarding the IV-E programs, these calls
focus primarily on programmatic rather than fiscal concerns.
Additionally, while information on the amount of expenditures deferred
and disallowed as well as the reason for each quarter is collected
through ACF's Grants Application Tracking System, this information is
not summarized and shared across regions. ACF central office officials
told us they could not provide reliable data on the amount of claims
that are disallowed each year. Further, one official noted that
financial specialists are not held accountable for updating the final
amounts disallowed following resolution between ACF and the states.
Although ACF and DCA officials both conduct reviews of the foster care
and adoption assistance programs' administrative claiming practices,
these offices do not routinely coordinate to share findings in order to
prioritize areas for review in other states, according to officials in
one region. For example, although officials in two regions and the HHS
central office cited problems with how states have documented and
allocated costs for candidates, according to one regional official, DCA
has not systematically reviewed state allocation procedures to address
this problem. Officials from two regional offices expressed frustration
at the minimal level of involvement DCA has in terms of reviewing cost
allocation practices. One official indicated that DCA often relied on
ACF regional officials to address questions related to the technical
aspects of claiming processes, though this was primarily the
responsibility of DCA. According to HHS's Office of Inspector General,
in the past, DCA staff reviewed state cost allocation plans annually
but this no longer occurs, due to a reduction in staff.
OIG audits continue to find gaps in oversight of state cost allocation
plans and program regulations. From October 2004 through April 2006,
the OIG recommended disallowances of more than $20 million related to
administrative costs in seven states. Audits found inappropriate
training claims, claims made to cost centers not approved in the
state's cost allocation plan, and inappropriate methods used to
calculate costs for children identified as candidates for foster care.
As of April 2006, an additional eight audits were in progress.
Conclusions:
Federal spending to support state administration of the Foster Care and
Adoption Assistance programs increased between fiscal years 2000 and
2004, but a few states have accounted for most of this change. While
federal expenditures under Title IV-E have reflected an increase in
some states' spending for child welfare systems over this time period,
they also reflect more concerted efforts by states to identify costs in
the child welfare system that are allowable for federal reimbursement.
While we could not link IV-E spending to changes in services, states
uniformly reported taking action to improve services in response to
federal oversight reviews of their overall child welfare system.
Ensuring that the oversight environment and monitoring activities for
foster care and adoption assistance administrative costs are consistent
across states is a critical aspect currently missing in federal efforts
to support state administration of the Foster Care and Adoption
Assistance programs while maintaining control over program spending.
The lack of updated guidance and coordination among HHS's oversight
offices has resulted in disparate practices that may be causing HHS to
miss opportunities for safeguarding federal funds and preventing HHS
from providing consistent support for states efforts to serve Title IV-
E eligible children. Requiring states to break out administrative costs
into various categories was intended to provide more visibility to
spending patterns, but this has not been achieved due to lack of
enforcement by some ACF regional offices. Further, the absence of a
risk-based approach in the allocation of oversight staff weakens ACF's
control over program spending. Without consistent and appropriate
oversight and monitoring, HHS has little assurance that Title IV-E
resources are being safeguarded to serve eligible children.
Recommendations for Executive Action:
To better safeguard federal resources and ensure consistent federal
support for state administration of foster care and adoption
assistance, we recommend that the Secretary of the Department of Health
and Human Services direct the Assistant Secretary for the
Administration for Children and Families to take the following five
actions:
* Expedite the development of the financial review guide regions use to
monitor state claims for federal reimbursement and develop an effective
means of communicating current policy and oversight findings across
regions and states.
* Coordinate with other HHS offices such as the Division of Cost
Allocation and CMS to ensure consistent policy implementation across
regions and states.
* Standardize the method states use to calculate the percentage of
children served by foster care and adoption assistance programs that
are eligible for federal reimbursement of administrative costs.
* Through ACF regional offices, remind states that reporting
administrative costs by certain categories is a requirement and provide
technical assistance to help states comply with the requirement.
* Assess the relative risk of improper federal expenditures to states
for administrative costs and redistribute oversight staff accordingly.
Agency Comments and Our Evaluation:
We received written comments on a draft of this report from HHS that
are reprinted in appendix II. HHS did not explicitly agree or disagree
with our five recommendations, but stated that it would implement or
consider implementing four of them in whole or in part. Specifically,
HHS said that it would implement our recommendation to issue guidance
to state agency staff, reminding them of the need to comply with
federal reporting requirements and the availability of regional office
staff to provide technical assistance. Regarding our recommendation
that HHS standardize the method states use to calculate the percentage
of children served by foster care and adoption assistance programs that
are eligible for federal reimbursement of administrative costs, HHS
said that this calculation is straightforward and that it would discuss
the issue of state inconsistencies with its regional staff to ascertain
if there is a problem and how best to address it. HHS said that an
ongoing organizational restructuring expected to be completed by
September 30, 2006, affected immediate implementation decisions for two
recommendations. HHS said it would wait until after this restructuring
to determine its ability to implement our recommendation to expedite
the development of a financial review guide and implement a more
effective means of sharing current policy and oversight findings across
regions. While HHS said it would take our recommendation to
redistribute oversight staff under advisement as it proceeds with its
restructuring effort, HHS viewed its implementation as impractical
because it could require either relocating staff across the country or
reassigning fiscal responsibility to program staff. However, HHS also
said that it would continue to focus on areas where there is the
greatest need for intervention. Regarding our recommendation on
coordination among HHS's offices, HHS described some existing
coordination activities but did not indicate that it would ensure
consistent policy implementation across regions and states.
We do not believe organizational restructuring reduces HHS's continual
responsibility to safeguard federal resources and ensure consistent
federal support for state administration of foster care and adoption
assistance programs. Therefore, we continue to recommend that HHS take
action to ensure that its regional staff are providing consistent
oversight of state implementation of federal policy and that the
oversight results of its various offices are effectively coordinated to
ensure consistent federal support for state administration of foster
care and adoption assistance. Further, we do not believe that HHS's
inability to immediately physically relocate staff among regional
offices precludes redistributing oversight responsibility among
regional staff, and we continue to recommend that HHS use a risk-based
approach to do so.
We will send copies of this report to congressional committees, the
Secretary of Health and Human Services, and other interested parties.
We will also make copies available to others on request. In addition,
the report will be available at no charge on GAO's Web site at
[Hyperlink, http://www.gao.gov].
If you have any questions about this report, please contact me at (202)
512-7215 or ashbyc@gao.gov. Other contacts and acknowledgments are
listed in appendix III.
Sincerely yours,
Signed by:
Cornelia M. Ashby:
Director, Education, Workforce and Income Security:
[End of section]
Appendix I: IV-E Expenditures for Administrative Costs by State:
State: Washington;
2000 IV-E administrative claims for expenditures: $23,974;
2004 IV-E administrative claims for expenditures: $58,128;
Change in claims for expenditures from FY 2000 - FY 2004: $34,154;
Percent change in claims for expenditures from FY 2000 - FY 2004:
142.5.
State: New Hampshire;
2000 IV-E administrative claims for expenditures: 3,860;
2004 IV-E administrative claims for expenditures: 9,182;
Change in claims for expenditures from FY 2000 - FY 2004: 5,322;
Percent change in claims for expenditures from FY 2000 - FY 2004:
137.9.
State: Texas;
2000 IV-E administrative claims for expenditures: 37,327;
2004 IV-E administrative claims for expenditures: 69,313;
Change in claims for expenditures from FY 2000 - FY 2004: $31,986;
Percent change in claims for expenditures from FY 2000 - FY 2004: 85.7.
State: Wyoming;
2000 IV-E administrative claims for expenditures: 828;
2004 IV-E administrative claims for expenditures: 1,370;
Change in claims for expenditures from FY 2000 - FY 2004: $542;
Percent change in claims for expenditures from FY 2000 - FY 2004: 65.5.
State: Alaska;
2000 IV-E administrative claims for expenditures: 8,083;
2004 IV-E administrative claims for expenditures: 13,121;
Change in claims for expenditures from FY 2000 - FY 2004: 5,038;
Percent change in claims for expenditures from FY 2000 - FY 2004: 62.3.
State: Indiana;
2000 IV-E administrative claims for expenditures: 11,352;
2004 IV-E administrative claims for expenditures: 18,360;
Change in claims for expenditures from FY 2000 - FY 2004: 7,008;
Percent change in claims for expenditures from FY 2000 - FY 2004: 61.7.
State: West Virginia;
2000 IV-E administrative claims for expenditures: 6,215;
2004 IV-E administrative claims for expenditures: 9,841;
Change in claims for expenditures from FY 2000 - FY 2004: 3,626;
Percent change in claims for expenditures from FY 2000 - FY 2004: 58.3.
State: Oregon;
2000 IV-E administrative claims for expenditures: 18,945;
2004 IV-E administrative claims for expenditures: 26,619;
Change in claims for expenditures from FY 2000 - FY 2004: 7,674;
Percent change in claims for expenditures from FY 2000 - FY 2004: 40.5.
State: Virginia;
2000 IV-E administrative claims for expenditures: 36,627;
2004 IV-E administrative claims for expenditures: 50,859;
Change in claims for expenditures from FY 2000 - FY 2004: 14,232;
Percent change in claims for expenditures from FY 2000 - FY 2004: 38.9.
State: New Jersey;
2000 IV-E administrative claims for expenditures: 30,928;
2004 IV-E administrative claims for expenditures: 42,320;
Change in claims for expenditures from FY 2000 - FY 2004: 11,392;
Percent change in claims for expenditures from FY 2000 - FY 2004: 36.8.
State: Pennsylvania;
2000 IV-E administrative claims for expenditures: 149,289;
2004 IV-E administrative claims for expenditures: 191,708;
Change in claims for expenditures from FY 2000 - FY 2004: 42,419;
Percent change in claims for expenditures from FY 2000 - FY 2004: 28.4.
State: Arkansas;
2000 IV-E administrative claims for expenditures: 18,412;
2004 IV-E administrative claims for expenditures: 23,595;
Change in claims for expenditures from FY 2000 - FY 2004: 5,183;
Percent change in claims for expenditures from FY 2000 - FY 2004: 28.2.
State: New York;
2000 IV-E administrative claims for expenditures: 178,104;
2004 IV-E administrative claims for expenditures: 210,775;
Change in claims for expenditures from FY 2000 - FY 2004: 32,671;
Percent change in claims for expenditures from FY 2000 - FY 2004: 18.3.
State: California;
2000 IV-E administrative claims for expenditures: 713,090;
2004 IV-E administrative claims for expenditures: 812,000;
Change in claims for expenditures from FY 2000 - FY 2004: 98,910;
Percent change in claims for expenditures from FY 2000 - FY 2004: 13.9.
State: Louisiana;
2000 IV-E administrative claims for expenditures: 32,787;
2004 IV-E administrative claims for expenditures: 37,024;
Change in claims for expenditures from FY 2000 - FY 2004: 4,237;
Percent change in claims for expenditures from FY 2000 - FY 2004: 12.9.
State: Vermont;
2000 IV-E administrative claims for expenditures: 5,192;
2004 IV-E administrative claims for expenditures: 5,765;
Change in claims for expenditures from FY 2000 - FY 2004: 573;
Percent change in claims for expenditures from FY 2000 - FY 2004: 11.0.
State: Alabama;
2000 IV-E administrative claims for expenditures: 14,972;
2004 IV-E administrative claims for expenditures: 16,544;
Change in claims for expenditures from FY 2000 - FY 2004: 1,572;
Percent change in claims for expenditures from FY 2000 - FY 2004: 10.5.
State: Ohio;
2000 IV-E administrative claims for expenditures: 129,198;
2004 IV-E administrative claims for expenditures: 138,244;
Change in claims for expenditures from FY 2000 - FY 2004: 9,046;
Percent change in claims for expenditures from FY 2000 - FY 2004: 7.0.
State: Montana;
2000 IV-E administrative claims for expenditures: 6,165;
2004 IV-E administrative claims for expenditures: 6,416;
Change in claims for expenditures from FY 2000 - FY 2004: 251;
Percent change in claims for expenditures from FY 2000 - FY 2004: 4.1.
State: Wisconsin;
2000 IV-E administrative claims for expenditures: 67,738;
2004 IV-E administrative claims for expenditures: 69,558;
Change in claims for expenditures from FY 2000 - FY 2004: 1,820;
Percent change in claims for expenditures from FY 2000 - FY 2004: 2.7.
State: Colorado;
2000 IV-E administrative claims for expenditures: 27,380;
2004 IV-E administrative claims for expenditures: 27,503;
Change in claims for expenditures from FY 2000 - FY 2004: 123;
Percent change in claims for expenditures from FY 2000 - FY 2004: 0.4.
State: Total increase of 21 states:
2000 IV-E administrative claims for expenditures: [Empty];
2004 IV-E administrative claims for expenditures: [Empty];
Change in claims for expenditures from FY 2000 - FY 2004: $317,779;
Percent change in claims for expenditures from FY 2000 - FY 2004:
[Empty].
State: Tennessee;
2000 IV-E administrative claims for expenditures: 14,281;
2004 IV-E administrative claims for expenditures: 5,900;
Change in claims for expenditures from FY 2000 - FY 2004: (8,381);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
58.7.
State: Delaware;
2000 IV-E administrative claims for expenditures: 10,388;
2004 IV-E administrative claims for expenditures: 5,443;
Change in claims for expenditures from FY 2000 - FY 2004: (4,945);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
47.6.
State: Mississippi;
2000 IV-E administrative claims for expenditures: 10,655;
2004 IV-E administrative claims for expenditures: 6,414;
Change in claims for expenditures from FY 2000 - FY 2004: (4,241);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
39.8.
State: D.C;
2000 IV-E administrative claims for expenditures: 18,869;
2004 IV-E administrative claims for expenditures: 12,225;
Change in claims for expenditures from FY 2000 - FY 2004: (6,644);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
35.2.
State: South Carolina;
2000 IV-E administrative claims for expenditures: 12,556;
2004 IV-E administrative claims for expenditures: 8,706;
Change in claims for expenditures from FY 2000 - FY 2004: (3,850);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
30.7.
State: Kentucky;
2000 IV-E administrative claims for expenditures: 29,420;
2004 IV-E administrative claims for expenditures: 20,757;
Change in claims for expenditures from FY 2000 - FY 2004: (8,663);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
29.4.
State: Oklahoma;
2000 IV-E administrative claims for expenditures: 22,672;
2004 IV-E administrative claims for expenditures: 16,203;
Change in claims for expenditures from FY 2000 - FY 2004: (6,469);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
28.5.
State: Kansas;
2000 IV-E administrative claims for expenditures: 28,883;
2004 IV-E administrative claims for expenditures: 21,066;
Change in claims for expenditures from FY 2000 - FY 2004: (7,817);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
27.1.
State: Missouri;
2000 IV-E administrative claims for expenditures: 45,378;
2004 IV-E administrative claims for expenditures: 35,478;
Change in claims for expenditures from FY 2000 - FY 2004: (9,900);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
21.8.
State: Connecticut;
2000 IV-E administrative claims for expenditures: 63,860;
2004 IV-E administrative claims for expenditures: 50,351;
Change in claims for expenditures from FY 2000 - FY 2004: (13,509);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
21.2.
State: North Carolina;
2000 IV-E administrative claims for expenditures: 36,934;
2004 IV-E administrative claims for expenditures: 29,950;
Change in claims for expenditures from FY 2000 - FY 2004: (6,984);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
18.9.
State: Michigan;
2000 IV-E administrative claims for expenditures: 78,626;
2004 IV-E administrative claims for expenditures: 65,005;
Change in claims for expenditures from FY 2000 - FY 2004: (13,621);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
17.3.
State: Iowa;
2000 IV-E administrative claims for expenditures: 16,068;
2004 IV-E administrative claims for expenditures: 13,309;
Change in claims for expenditures from FY 2000 - FY 2004: (2,759);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
17.2.
State: North Dakota;
2000 IV-E administrative claims for expenditures: 7,656;
2004 IV-E administrative claims for expenditures: 6,347;
Change in claims for expenditures from FY 2000 - FY 2004: (1,309);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
17.1.
State: Idaho;
2000 IV-E administrative claims for expenditures: 5,615;
2004 IV-E administrative claims for expenditures: 4,741;
Change in claims for expenditures from FY 2000 - FY 2004: (874);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
15.6.
State: Florida;
2000 IV-E administrative claims for expenditures: 112,247;
2004 IV-E administrative claims for expenditures: 94,854;
Change in claims for expenditures from FY 2000 - FY 2004: (17,393);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
15.5.
State: Rhode Island;
2000 IV-E administrative claims for expenditures: 9,640;
2004 IV-E administrative claims for expenditures: 8,380;
Change in claims for expenditures from FY 2000 - FY 2004: (1,260);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
13.1.
State: Massachusetts;
2000 IV-E administrative claims for expenditures: 47,276;
2004 IV-E administrative claims for expenditures: 41,114;
Change in claims for expenditures from FY 2000 - FY 2004: (6,162);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
13.0.
State: Nebraska;
2000 IV-E administrative claims for expenditures: 10,650; 2004 IV-E
administrative claims for expenditures: 9,363;
Change in claims for expenditures from FY 2000 - FY 2004: (1,287);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
12.1.
State: Minnesota;
2000 IV-E administrative claims for expenditures: 58,293;
2004 IV-E administrative claims for expenditures: 51,505;
Change in claims for expenditures from FY 2000 - FY 2004: (6,788);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
11.6.
State: South Dakota;
2000 IV-E administrative claims for expenditures: 3,052;
2004 IV-E administrative claims for expenditures: 2,729;
Change in claims for expenditures from FY 2000 - FY 2004: (323);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
10.6.
State: Arizona;
2000 IV-E administrative claims for expenditures: 29,609;
2004 IV-E administrative claims for expenditures: 26,662;
Change in claims for expenditures from FY 2000 - FY 2004: (2,947);
Percent change in claims for expenditures from FY 2000 - FY 2004: -
10.0.
State: New Mexico;
2000 IV-E administrative claims for expenditures: 14,248;
2004 IV-E administrative claims for expenditures: 13,105;
Change in claims for expenditures from FY 2000 - FY 2004: (1,143);
Percent change in claims for expenditures from FY 2000 - FY 2004: -8.0.
State: Georgia;
2000 IV-E administrative claims for expenditures: 36,396;
2004 IV-E administrative claims for expenditures: 34,145;
Change in claims for expenditures from FY 2000 - FY 2004: (2,251);
Percent change in claims for expenditures from FY 2000 - FY 2004: -6.2.
State: Nevada;
2000 IV-E administrative claims for expenditures: 11,411;
2004 IV-E administrative claims for expenditures: 10,780;
Change in claims for expenditures from FY 2000 - FY 2004: (631);
Percent change in claims for expenditures from FY 2000 - FY 2004: -5.5.
State: Utah;
2000 IV-E administrative claims for expenditures: 17,097;
2004 IV-E administrative claims for expenditures: 16,442;
Change in claims for expenditures from FY 2000 - FY 2004: (655);
Percent change in claims for expenditures from FY 2000 - FY 2004: -3.8.
State: Maryland;
2000 IV-E administrative claims for expenditures: 64,909;
2004 IV-E administrative claims for expenditures: 62,858;
Change in claims for expenditures from FY 2000 - FY 2004: (2,051);
Percent change in claims for expenditures from FY 2000 - FY 2004: -3.2.
State: Maine;
2000 IV-E administrative claims for expenditures: 8,013;
2004 IV-E administrative claims for expenditures: 7,879;
Change in claims for expenditures from FY 2000 - FY 2004: (134);
Percent change in claims for expenditures from FY 2000 - FY 2004: -1.7.
State: Illinois;
2000 IV-E administrative claims for expenditures: 115,402;
2004 IV-E administrative claims for expenditures: 113,541;
Change in claims for expenditures from FY 2000 - FY 2004: (1,861);
Percent change in claims for expenditures from FY 2000 - FY 2004: -1.6.
State: Hawaii;
2000 IV-E administrative claims for expenditures: 14,521;
2004 IV-E administrative claims for expenditures: 14,507;
Change in claims for expenditures from FY 2000 - FY 2004: (14);
Percent change in claims for expenditures from FY 2000 - FY 2004: -0.1.
State: Total decrease of 30 states;
2000 IV-E administrative claims for expenditures: [Empty];
2004 IV-E administrative claims for expenditures: [Empty;
Change in claims for expenditures from FY 2000 - FY 2004: ($144,866);
Percent change in claims for expenditures from FY 2000 - FY 2004:
[Empty].
State: Total change in claims for expenditures;
2000 IV-E administrative claims for expenditures: [Empty];
2004 IV-E administrative claims for expenditures: [Empty];
Change in claims for expenditures from FY 2000 - FY 2004: $172,913;
Percent change in claims for expenditures from FY 2000 - FY 2004:
[Empty].
Source: Analysis of HHS data.
[End of table]
[End of section]
Appendix II: Comments from the Department of Health and Human Services:
DEPARTMENT OF HEALTH & HUMAN SERVICES:
Office of Inspector General:
JUN 6 2006:
Ms. Cornelia M. Ashby:
Director, Education, Workforce, and Income Security Issues:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Ms. Ashby:
Enclosed are the Department's comments on the U.S. Government
Accountability Office's (GAO) draft report entitled, "FOSTER CARE AND
ADOPTION ASSISTANCE: Federal Oversight Needed to Safeguard Funds and
Ensure Consistent Support for States' Administrative Costs" (GAO-06-
649). These comments represent the tentative position of the Department
and are subject to reevaluation when the final version of this report
is received.
The Department appreciates the opportunity to comment on this draft
report before its publication.
Sincerely,
Signed by:
Daniel R. Levinson:
Inspector General:
Enclosure:
The Office of Inspector General (OIG) is transmitting the Department's
response to this draft report in our capacity as the Department's
designated focal point and coordinator for U.S. Government
Accountability Office reports. OIG has not conducted an independent
assessment of these comments and therefore expresses no opinion on
them.
Comments Of The Department Of Health And Human Services On The
Government Accountability Office's Draft Report Entitled, "Foster Care
And Adoption Assistance: Federal Oversight Needed To Safeguard Funds
And Ensure Consistent Support For States' Administrative Costs" (GAO-
06-649):
The U.S. Department of Health and Human Services (HHS) appreciates the
opportunity to comment on the draft report. We look forward to working
with the Government Accountability Office (GAO) on this and other
pertinent issues addressed in this report.
GAO Recommendation:
To better safeguard Federal resources and ensure consistent Federal
support for State administration of foster care and adoption
assistance, we recommend that the Secretary of the Department of Health
and Human Services direct the Assistant Secretary for the
Administration for Children and Families to take the following five
actions:
* Expedite the development of the financial review guide regions use to
monitor State claims for Federal reimbursement and develop an effective
means of communicating current policy and oversight findings across
regions and States.
* Coordinate with other HHS offices such as the Division of Cost
Allocation and the CMS to ensure consistent policy implementation
across regions and States.
* Standardize the method States use to calculate the percentage of
children served by foster care and adoption assistance programs that
are eligible for Federal reimbursement of administrative costs.
* Through HHS regional offices, remind States that reporting
administrative costs by certain categories is a requirement and provide
technical assistance to help States comply with the requirement.
* Assess the relative risk of improper Federal expenditures to States
for administrative costs and redistribute oversight staff accordingly.
HHS Response:
As indicated in the report, HHS's financial management staff in several
regional offices has begun an effort to compile a current financial
review guide consisting of best review practices. HHS has begun an
organizational restructuring that will include both financial
management and fiscal staff and anticipates completion by the end of
fiscal year 2006. HHS should then be better able to determine its
ability to expedite the development of the financial review guide, as
well as implement a more effective means of sharing with regional staff
oversight findings across regions and States. Until then, however, HHS
will continue to use the Child Welfare Policy Manual and Program
Instructions to communicate pertinent program policy to the regions and
the States.
HHS coordinates with the Division of Cost Allocation (DCA) on a regular
basis since HHS is responsible for providing comments on cost
allocation plans and amendments submitted to DCA by States. As noted in
the report, in conjunction with DCA, HHS reviews State cost allocation
methods to ensure that the cost distribution to the Department's
programs is appropriate and accurate. HHS also continues communicating
with CMS staff regarding current and proposed policy as it impacts the
title IV-E foster care program, particularly around target case
management and costs associated therewith.
While GAO may have identified one inconsistency among the regions
regarding calculation of a title IV-E penetration rate, HHS does not
believe this is a widespread problem. As described in the report, the
calculation of a penetration rate is straightforward. HHS will address
this topic with regional staff to ascertain if there is a problem and
how best to address it.
HHS will issue written guidance to State agency staff reminding them of
the need to complete all categories of administrative costs as required
on States' title IV-E financial reports (form HHS-IV-E-1) regarding the
availability of regional staff to provide technical assistance to
States and regarding HHS's role in ensuring States' compliance.
HHS will take this recommendation under advisement as we proceed with
our organizational restructuring. HHS views this recommendation as
impractical because it would require either relocating staff across the
country or reassigning fiscal responsibilities to program staff (a
strategy GAO documents in this report as inappropriate). HHS will
continue to focus on areas where there is the greatest need for staff
intervention.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Cornelia M. Ashby (202) 512-7215:
Staff Acknowledgments:
In addition to those named above, Lacinda Ayers, Assistant Director,
Rebecca A. Christie (Analyst-in-Charge), Deirdre G. Brown, and Nancy
Purvine made key contributions to this report. Jim Rebbe, Jerry Sandau,
and Jay Smale also provided key technical assistance.
FOOTNOTES
[1] Medicaid is a federal-state program that finances medical and
health services for eligible individuals and provides funds to states
for targeted case management services that help low income individuals
gain access to needed medical, social, educational, and other services
and coordinates individuals' use of providers. Targeted case management
enables states to provide case management services to a defined group
or groups of Medicaid-eligible individuals without providing the same
service to all Medicaid beneficiaries statewide, as normally required
by Medicaid law. Groups are targeted primarily on the basis of shared
characteristics, such as children placed in foster care. The federal
government matches state Medicaid spending for medical assistance
according to a formula based on each state's per capita income. The
federal share can range from $0.50 to $0.83 for every dollar spent;
therefore, some states may receive a higher federal match rate for
administrative costs associated with foster care children if these
costs are charged to Medicaid rather than IV-E.
[2] However, states are required to maintain a significant portion of
their own historic financial commitment to their welfare programs as a
condition of receiving their full TANF allotments.
[3] Pub. L. No. 101-508 (1990).
[4] There are some limitations in the data we used for our analysis.
The data ACF provided represent states' claims for reimbursement rather
than actual IV-E expenditures and reflect when the states made the
claims to the federal government rather than when the costs were
incurred. States may make corrections to claims within 2 years of their
original filing. When they make such corrections, these are attributed
to the year the corrected claim is made, rather than the year the claim
was incurred. Therefore, ACF data can include prior quarter claims for
costs incurred over the past 2 years and not previously reported. Prior
quarter claims made up about 7 percent of 2000, 2001, and 2002
claims;17 percent of 2003 claims; and 10 percent of 2004 claims. Claims
data will differ from federal reimbursement reported in two ways.
First, claims data includes payments that may have been deferred and
possibly denied by HHS and reports them in the year they are claimed,
rather than the year they are paid. Secondly, claims data includes
claims that HHS has disallowed and will, therefore, never be paid;
however, according to officials, this represents a very small portion
of states' claims.
[5] These numbers have been adjusted for inflation in fiscal year 2000
dollars. The nominal increase was 17 percent, from approximately $2.5
billion to $2.9 billion.
[6] Training costs are the exception and reimbursed at 75 percent.
[7] On Form ACF IV-E-1, Title IV-E Foster Care and Adoption Assistance
Financial Report: State Quarterly Report of Expenditures and Estimates,
this category is titled "State and Local Administration." For
simplification and purposes of our review, we use the term, "child
placement services," to refer to case management services for children
placed in foster care and at risk of being placed in foster care as
well as other administrative costs such as eligibility determination
and SACWIS operating costs.
[8] Pub. L. No. 101-508 (1990).
[9] Costs for SACWIS Development are charged only to the Foster Care
program.
[10] The penetration rate is not applied to eligibility determination
costs because costs related to determining whether a child is eligible
for Title IV-E reimbursement are allowable regardless of whether the
child is found to be eligible or not.
[11] While this guidance was issued in 2001, due to objections from
states and other interested parties that HHS did not allow for public
comment, HHS sought to codify the guidance and issued a notice of
proposed rulemaking in January 2005.
[12] Pub. L. No. 109-171 (2006).
[13] The Deficit Reduction Act also effectively nullified the 9th
Circuit U.S. Court of Appeals decision of Rosales v. Thompson, 321 F.
3rd 835 (2003), which allowed a state to determine in some instances
whether a foster child would have met the AFDC portion of the Title IV-
E eligibility requirements while living in the home of a relative like
a grandmother.
[14] The inflation adjustment was made using 2000 as the base year.
Without adjusting for inflation, the increase was 17 percent, or $409
million.
[15] This decline may be in part due to a decline in the foster care
caseload eligible for IV-E due to program rules that rely on 1996
income standards to determine eligibility. CBO projects a steady
decline for nearly 10 years.
[16] Using nominal numbers all three categories had increased costs:
child placement services costs increased by $383 million, costs related
to the development of SACWIS increased by $15 million, and staff
training costs increased by $11 million.
[17] In addition to foster care and adoption assistance, other programs
impacted by the budget cuts included child and adult protective
services, child care, food assistance, domestic violence prevention,
and welfare.
[18] These state funding amounts were not adjusted for inflation.
[19] These figures were not adjusted for inflation.
[20] Deficit Reduction Act of 2005, Pub. L. No. 109-171 (2006).
[21] States may charge administrative costs for children in unlicensed
homes only for as long as the length of the time it normally takes to
license a home or up to 12 months--whichever is shorter. For children
placed in other ineligible facilities, such as psychiatric or medical
hospitals, claims may be made but only for 1 calendar month and only if
they are subsequently moved back to an eligible setting.
[22] The CFSR is a results-oriented, comprehensive monitoring review
system designed to assist states in improving outcomes for children and
families who come into contact with the nation's public child welfare
systems. It was developed and implemented by HHS in response to the
mandate of the Social Security Amendments of 1994 to promulgate
regulations for reviews of states' child and family services.
[23] The Adoption and Safe Families Act of 1997, Pub. L. No. 105-89,
encourages the use of Concurrent Planning, and it requires that states
make reasonable efforts to find permanency for children who cannot
return to their biological parents.
[24] This figure excludes disallowances that resulted from the Title IV-
E Eligibility Reviews.
[25] See GAO 05-176. The five components of internal controls are (1)
control environment--creating a culture of accountability within the
entire organization--program offices, financial services, and regional
offices--by establishing a positive and supportive attitude toward
improvement and the achievement of established program outcomes; (2)
risk assessment--identifying and analyzing relevant problems that might
prevent the program from achieving its objectives. Developing processes
that can be used to form a basis for measuring actual or potential
effects of these problems and manage their risks; (3) control
activities--establishing and implementing oversight processes to
address risk areas and help ensure that management's decisions--
especially about how to measure and manage risks--are carried out and
program objectives are met; (4) information and communication--using
and sharing relevant, reliable, and timely information on program-
specific and general financial risks. Such information surfaces as a
result of the processes--or control activities--used to measure and
address risks; and (5) monitoring--tracking improvement initiatives
over time, and identifying additional actions needed to further improve
program efficiency and effectiveness.
[26] In June 2005, GAO reported that Georgia and Massachusetts were
charging Medicaid for costs that appeared to be unallowable under CMS
policy. Specifically the claims were for services that appeared to be
integral components of non-Medicaid programs. CMS has denied claims for
similar programs in other states. In fiscal year 2002, for example, CMS
denied a state plan amendment proposal to cover TCM services in
Illinois, and in fiscal year 2004 it found TCM claims in Texas
unallowable, in part because the TCM services claimed for reimbursement
were considered integral to other state programs. In Texas, such
children were served by the state's child welfare and foster care
system. See GAO, Medicaid Financing' Use of Contingency-Fee Consultants
to Maximize Federal Reimbursements Highlights Need for Improved Federal
Oversight, GAO-05-748 (Washington, D.C.: June 2005).
[27] See CMS, Disapproval of Maryland State Plan Amendment No. 02-05,
Docket No. 2003-02 (Aug. 27, 2004). The Administrator's decision was
based in part on a statement in the legislative history accompanying
the legislation authorizing coverage for TCM services that payment for
TCM services must not duplicate payments to public agencies or private
entities under other program authorities. See H.R. Recheck; No. 99-453,
at 546 (1985). We did not evaluate the bases for CMS's policy as part
of this review.
[28] In June 2005, GAO recommended that CMS clarify and communicate its
policies on TCM and ensure policies were consistently applied across
states. See GAO, Medicaid Financing' Use of Contingency-Fee Consultants
to Maximize Federal Reimbursements Highlights Need for Improved Federal
Oversight, GAO-05-748 (Washington, D.C.: June 2005).
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