Human Service Programs
Demonstration Projects Could Identify Ways to Simplify Policies and Facilitate Technology Enhancements to Reduce Administrative Costs Gao ID: GAO-06-942 September 19, 2006The cost of administering human service programs has been a long-standing concern among policy makers interested in ensuring that federal programs are run in a cost-efficient manner so that federal funds go directly to helping vulnerable people. Little is known about how administrative costs compare among programs, or about opportunities to better manage these costs. GAO looked at (1) how administrative costs are defined and what rules govern federal and state participation in funding these costs; (2) what is known about the amounts of administrative spending and how they have changed over time; and (3) what opportunities exist at the federal level to help states balance cost savings with program effectiveness and integrity. GAO's review included seven programs: Adoption Assistance, Child Care and Development Fund (CCDF), Child Support Enforcement (CSE), food stamps, Foster Care, Temporary Assistance for Needy Families (TANF), and Unemployment Insurance (UI). To address the questions, GAO reviewed laws, analyzed spending data, and visited five states.
The statutes and regulations for the seven programs define administrative costs differently, even though many of the same activities are performed to administer the programs. The laws for each program also include different mechanisms for state and federal participation in funding administrative costs, including matching rates, block grants, and spending caps. The seven programs combined spent $21 billion on administration, as defined in law, making up about 18 percent of total program spending in fiscal year 2004. However, amounts varied widely across the programs and states. Administrative spending varied from 2 percent in CCDF to 58 percent in Foster Care, with the exception of CSE in which all program spending is considered administrative. Between fiscal years 2000 and 2004, administrative spending increased in five of the seven programs, generally at a lower rate than total program spending. The federal government may help balance administrative cost savings with program effectiveness and integrity by simplifying policies and facilitating technology improvements. Simplifying policies--especially those related to eligibility determination processes and federal funding structures--could save resources, improve productivity, and help staff focus more time on performing essential program activities. By helping states facilitate technology enhancements across programs, the federal government can help streamline processes and potentially reduce long-term costs. Over the past 20 years, many attempts to streamline processes across programs have had limited success due, in part, to the considerable challenges that streamlining program processes entail. GAO believes one challenge in particular--the lack of information on the effect streamlining efforts might have on program and administrative costs--is thwarting progress in this area.
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-06-942, Human Service Programs: Demonstration Projects Could Identify Ways to Simplify Policies and Facilitate Technology Enhancements to Reduce 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:
September 2006:
Human Service Programs:
Demonstration Projects Could Identify Ways to Simplify Policies and
Facilitate Technology Enhancements to Reduce Administrative Costs:
Human Services Programs:
GAO-06-942:
GAO Highlights:
Highlights of GAO-06-942, a report to Chairman, Subcommittee on Human
Resources, Committee on Ways and Means, House of Representatives
Why GAO Did This Study:
The cost of administering human service programs has been a long-
standing concern among policy makers interested in ensuring that
federal programs are run in a cost-efficient manner so that federal
funds go directly to helping vulnerable people. Little is known about
how administrative costs compare among programs, or about opportunities
to better manage these costs. GAO looked at (1) how administrative
costs are defined and what rules govern federal and state participation
in funding these costs; (2) what is known about the amounts of
administrative spending and how they have changed over time; and (3)
what opportunities exist at the federal level to help states balance
cost savings with program effectiveness and integrity. GAO‘s review
included seven programs: Adoption Assistance, Child Care and
Development Fund (CCDF), Child Support Enforcement (CSE), food stamps,
Foster Care, Temporary Assistance for Needy Families (TANF), and
Unemployment Insurance (UI). To address the questions, GAO reviewed
laws, analyzed spending data, and visited five states.
What GAO Found:
The statutes and regulations for the seven programs define
administrative costs differently, even though many of the same
activities are performed to administer the programs. The laws for each
program also include different mechanisms for state and federal
participation in funding administrative costs, including matching
rates, block grants, and spending caps.
The seven programs combined spent $21 billion on administration, as
defined in law, making up about 18 percent of total program spending in
fiscal year 2004. However, amounts varied widely across the programs
and states. Administrative spending varied from 2 percent in CCDF to 58
percent in Foster Care, with the exception of CSE in which all program
spending is considered administrative. Between fiscal years 2000 and
2004, administrative spending increased in five of the seven programs,
generally at a lower rate than total program spending.
Figure: Fiscal Year 2004 Combined Federal and State Administrative and
Other Spending (and Administrative Spending as a Percentage of Total
Spending):
[See PDF for Image]
Source: GAO analysis of data from HHS, DOL, and USDA.
[End of Figure]
The federal government may help balance administrative cost savings
with program effectiveness and integrity by simplifying policies and
facilitating technology improvements. Simplifying policies”especially
those related to eligibility determination processes and federal
funding structures”could save resources, improve productivity, and help
staff focus more time on performing essential program activities. By
helping states facilitate technology enhancements across programs, the
federal government can help streamline processes and potentially reduce
long-term costs. Over the past 20 years, many attempts to streamline
processes across programs have had limited success due, in part, to the
considerable challenges that streamlining program processes entail. GAO
believes one challenge in particular”the lack of information on the
effect streamlining efforts might have on program and administrative
costs”is thwarting progress in this area.
What GAO Recommends:
To identify ways to reduce administrative costs, Congress should
consider authorizing state and local demonstration projects designed to
simplify eligibility determination and other processes for federal
human service programs. None of the responsible agencies commented on
the recommendation to Congress.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-942].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Cynthia Fagnoni at (202)
512-7215 or fagnonic@gao.gov.
[End of Section]
Contents:
Letter:
Results in Brief:
Background:
Although Similar Types of Administrative Activities Occur across
Programs, Definitions of Administrative Costs and the Federal Funding
Role Vary:
Administrative Spending Varied across Programs but Generally Increased
at a Lower Rate Than Total Spending:
The Federal Government May Help Balance Administrative Cost Savings
with Program Effectiveness and Integrity by Simplifying Policies and
Facilitating Technology Enhancements:
Conclusion:
Matter for Congressional Consideration:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Administrative Cost Activities Recognized by Program
Statutes and Regulations:
Appendix III: Comments from the Department of Health and Human
Services:
Appendix IV: GAO Contact and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Description of the Seven Selected Programs:
Table 2: Fiscal Year 2004 Federal and State Program Spending and
Agencies Responsible for Administering the Seven Selected Programs:
Table 3: Level of Government Responsible for Design and Funding of the
Seven Selected Programs:
Table 4: Rules Governing State and Federal Funding of State
Administrative Costs:
Figures:
Figure 1: Fiscal Year 2004 Combined Federal and State Administrative
and Other Spending in Billions (and Administrative Spending as a
Percentage of Total Spending):
Figure 2: Fiscal Year 2004 State and Federal Shares of Administrative
Spending:
Figure 3: Distribution of Combined Federal and State Administrative
Spending by States for Fiscal Year 2004 (as a Percentage of Total
Program Spending):
Figure 4: Combined Federal and State Administrative Spending, Fiscal
Years 2000 to 2004 (Nominal Dollars):
Figure 5: Percent Change in Combined Federal and State Administrative
Spending, Fiscal Years 2000 to 2004:
Figure 6: Federal and State Administrative Spending as a Percentage of
Total Program Spending, Fiscal Years 2000 to 2004:
Abbreviations:
ACF: Administration for Children and Families:
AFDC: Aid to Families with Dependent Children:
CalWIN: CalWORKs Information Network:
CCDBG: Child Care and Development Block Grant:
CCDF: Child Care and Development Fund:
CSE: Child Support Enforcement:
DOL: U.S. Department of Labor:
FNS: Food and Nutrition Service:
FY: fiscal year:
HHS: U.S. Department of Health and Human Services:
IT: Information Technology:
LIHEAP: Low-Income Home Energy Assistance Program:
N/A: not applicable:
OMB: Office of Management and Budget:
SCHIP: State Children's Health Insurance Program:
SSA: Social Security Administration:
SSI: Supplemental Security Income:
TANF: Temporary Assistance for Needy Families:
UI: Unemployment Insurance:
USDA: U.S. Department of Agriculture:
United States Government Accountability Office:
Washington, DC 20548:
September 19, 2006:
The Honorable Wally Herger:
Chairman:
Subcommittee on Human Resources:
Committee on Ways and Means:
House of Representatives:
Dear Mr. Chairman:
The federal government spends hundreds of billions of dollars annually
on programs that support vulnerable people. While most of this money is
used for direct benefits and services, such as cash assistance or child
care services, a portion of the money also goes toward the cost of
administering the programs. Spending on administration has been a long-
standing concern among policy makers interested in ensuring that
federal programs are run in a cost-efficient manner so that federal
funds go directly to helping vulnerable people. While each of the human
service programs typically has some information available on the costs
associated with administrative activities, little is known about how
these administrative costs compare among the programs and whether
opportunities exist to better manage these costs at the federal level.
The importance of administering federal programs in an efficient manner
is heightened by the fiscal challenges facing the nation and the need
to update the federal government's programs and priorities to meet
current and future challenges.
Both federal agencies and states play important roles in administering
and funding many of the federal programs that support vulnerable
people. These programs may have different goals, but all were
established to assist vulnerable populations, and as such, the federal
and state administrators are tasked with the common goal of serving
those eligible for program benefits and services. Likewise, federal and
state administrators must ensure that funds allocated for program
benefits and services are provided only to those who are eligible.
To better understand these issues, we examined: (1) how administrative
costs are defined in selected programs and what rules govern federal
and state participation in funding these costs; (2) what is known about
the amounts of federal and state administrative spending for selected
programs and how they have changed over time; and (3) what
opportunities exist at the federal level to help states balance cost
savings with program effectiveness and integrity. As agreed with your
office, we focused our study on seven key programs: Adoption
Assistance, Child Care & Development Fund (CCDF), Child Support
Enforcement (CSE), the Food Stamp Program, Foster Care, Temporary
Assistance for Needy Families (TANF), and Unemployment Insurance (UI).
These programs are among the largest programs serving vulnerable
populations and each has annual federal outlays of over $1 billion.
Each of the programs also is funded in part through state
contributions.
To address all of our research questions, we interviewed federal
officials from each of the programs and the Office of Management and
Budget (OMB), and we conducted state and local interviews in
California, Maryland, Michigan, Ohio, and South Carolina. We selected
these states to provide a range of total program spending and share of
spending on administration as well as a mixture of state and county
administrative structures, urban and rural demographics, and geographic
location. Although our selection includes a range of states, our
findings are not generalizable beyond the states included in our study.
In addition, to address our first research question, we reviewed laws
and regulations on definitions of administrative costs and federal-
state participation in funding these costs for the selected programs.
We also reviewed relevant circulars issued by the OMB. To address our
second question, we analyzed administrative spending data, as defined
for financial reporting purposes by program laws and regulations, for
each program for fiscal years 2000-2004, including federal and state
shares of spending. Fiscal year 2004 data were the most recent data
available for all seven programs at the time of our review. We assessed
the reliability of the administrative spending data by interviewing (1)
agency officials knowledgeable about the data and (2) state officials
in the five states we visited knowledgeable about the data as reported
to the federal government. We also reviewed state single audit reports
and talked to state auditors in the states we visited to identify any
known problems with the administrative spending data or the technology
systems that store the data. Our reviews and discussions did not
identify significant problems with the data. We determined that these
data were sufficiently reliable for the purposes of this report.
To address our third question, we interviewed federal officials from
each of the programs and the OMB as well as state and local program
officials about administrative costs, options for reducing costs while
preserving services, and challenges to and consequences of these
options. During the interviews we also inquired about any interactions
between our key programs and other programs that support vulnerable
people, including Medicaid, the State Children's Health Insurance
Programs (SCHIP), the Low-Income Home Energy Assistance Program
(LIHEAP), and housing programs. In addition, we interviewed state audit
officials from the five states about any similar work they have
conducted. We also reviewed our prior work related to this issue.
We issued two related reports in June and July 2006 that focused on the
administrative costs of the Adoption Assistance and Foster Care
programs (GAO-06-649, Foster Care and Adoption Assistance: Federal
Oversight Needed to Safeguard Funds and Ensure Consistent Support for
States' Administrative Costs, June 2006) and the Child Support
Enforcement program (GAO-06-491, Child Support Enforcement: More Focus
on Labor Costs and Administrative Cost Audits Could Help Reduce Federal
Expenditures, July 2006). We coordinated our data collection efforts
for all three reports. Therefore, some of the information on the Child
Support Enforcement, Adoption Assistance, and Foster Care programs in
this report is drawn from work conducted for the earlier reports. For
example, for this report, we supplemented our data collection efforts
with administrative spending data collected for the other two reports
as well as information collected from interviews conducted for the
other reports. We also coordinated efforts to assess the reliability of
the administrative spending data used in the three reports.
We conducted our work between July 2005 and August 2006 in accordance
with generally accepted government auditing standards. See appendix I
for more details on our scope and methodology.
Results in Brief:
The activities that are defined as administrative costs in statutes and
regulations differ across the seven programs in our review, and the
programs are subject to various federal funding rules and funding
types. In the states we visited, state and local program officials
conduct similar activities to operate each program, such as determining
eligibility, monitoring program quality, and developing and maintaining
information technology (IT) systems. However, for financial reporting
purposes, these activities may be defined as administrative costs in
one program but not in another, in accordance with federal statutes and
regulations. For example, the TANF regulations and CCDF legislation
defining administrative costs specifically exclude costs associated
with providing direct program services, while Food Stamp legislation
specifically includes the costs of providing direct program services
such as certifying applicant households and issuing food stamp benefits
as administrative costs. The statutes and regulations defining
administrative costs differ across the programs in part because these
programs have evolved separately over time. The programs have different
missions, priorities, services, and clients, and jurisdiction for these
programs is spread among numerous congressional committees and federal
agencies, each of which has a role in defining what is an
administrative cost. In addition to differences in definitions of
administrative costs, the laws for each program also include different
mechanisms for state and federal participation in funding
administrative costs, including specific matching rates, block grants,
and spending caps. These funding mechanisms play a role in managing the
federal government's financial risk and can affect state spending
decisions by providing financial incentives and funding restrictions.
While funding mechanisms can create incentives for states to limit
administrative spending, officials in each of the states we visited
cautioned that if administrative spending is reduced too far, it can
negatively affect client services.
In recent years, combined federal and state administrative spending
generally increased at a lower rate than the increase in total spending
in five of the seven selected programs, but varied widely across
programs. In fiscal year 2004, the seven programs combined spent $21
billion on administrative costs, as defined by each program's statutes
and regulations, amounting to about 18 percent of total program
spending. The percentage spent on administration varied from 2 percent
in CCDF, to 58 percent in Foster Care, with the exception of CSE in
which all program spending is considered administrative. Because of the
differences in which activities are defined as administrative costs for
financial reporting purposes, a program with high administrative
spending is not necessarily less efficient than a program with low
administrative spending. In recent years, the amounts spent on
administration increased in five of the seven selected programs, but,
in most cases, increased at a lower rate than total program spending.
As a result, the percentage spent on program administration declined in
five of the programs. In addition, while there are limited federal data
on what specific costs make up administrative spending, officials in
the five states we visited reported that staff costs and IT were among
the largest costs associated with running their programs. Officials
reported that for some of the programs in our review, personnel costs
may be higher than necessary, in part because of complex administrative
processes and outdated information systems that require substantial
staff time.
The federal government may help balance long-term administrative cost
savings with program effectiveness and integrity by simplifying
policies and facilitating technology improvements. Simplifying
policies--especially those related to eligibility determination
processes and federal funding structures--could save resources, improve
productivity, and help staff focus more time on performing essential
program activities, such as providing quality services and accurate
benefits to recipients. For example, the Food and Nutrition Service
(FNS) allows some states to use TANF, Medicaid, and Supplemental
Security Income (SSI) income and resource definitions for purposes of
determining Food Stamp Program eligibility. In addition, by helping
states facilitate technology enhancements across programs, the federal
government may help streamline processes and potentially reduce long-
term costs. For example, by receiving verified electronic data from the
Social Security Administration (SSA), some states are able to determine
SSI recipients' eligibility for food stamp benefits without having to
separately collect and verify applicant information. Officials told us
that this arrangement saves administrative dollars and reduces
duplication across programs while protecting program integrity.
Together, simplified policies and improved technology could streamline
administrative processes and potentially reduce administrative costs.
We acknowledge that all levels of government have attempted to
streamline processes across human service programs for the past 20
years. However, many of these efforts have had limited success due, in
part, to the considerable challenges that streamlining program
processes entail, such as the challenge of achieving consensus among
the numerous congressional committees and federal agencies involved in
shaping human service program policies and a lack of information on how
program changes would affect particular populations. We believe one
challenge in particular--the lack of information on the effect
streamlining efforts might have on program and administrative costs--is
thwarting progress in this area.
We suggested in our prior work (GAO-02-58) in 2001 that Congress
consider authorizing state and local demonstration projects designed to
simplify and coordinate eligibility determination and other processes
for federal human service programs. While both the House and Senate
have considered proposals to authorize such demonstration projects,
legislation was not enacted. We continue to believe that demonstration
projects would provide more information on how streamlining processes
may help reduce administrative costs and, further, believe that any
projects should have an evaluation component to test the long-term cost-
effectiveness of the projects. In commenting on the draft report, the
U.S. Department of Health and Human Services (HHS) agreed with the
report's emphasis on the need for cost-effective administration of
federal programs, FNS officials suggested we add more detailed
information to the report in several areas, and the U.S. Department of
Labor (DOL) provided only technical comments. None of the agencies
commented on our suggestion to Congress.
Background:
The federal government funds a wide array of programs intended to
provide benefits and services or both to individuals, families, and
households needing financial assistance or other social supports.
Representing a range of programs available through federal and state
partnerships, the seven programs in this review have different goals
and purposes, and, thus, provide a range of benefits and services to
specific target populations. For example, the Food Stamp Program
provides nutrition assistance to low-income individuals, while the CSE
program helps custodial parents, regardless of income, collect child
support payments from noncustodial parents.[Footnote 1] Table 1
provides a brief description of each of the programs covered in this
report.
Table 1: Description of the Seven Selected Programs:
Program: Adoption Assistance;
Description: The Adoption Assistance program, authorized under title IV-
E of the Social Security Act, assists states in finding adoptive homes
for eligible children with special needs. The program provides funds to
states to assist in providing adoptive families with ongoing financial
and medical assistance for adopted children with special needs as well
as funds to support staff training and administrative costs.
Program: CCDF;
Description: CCDF, authorized by the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996, assists low-income families,
families receiving temporary public assistance, and those transitioning
from public assistance in obtaining child care so that they can work or
attend training or education. With this block grant, states develop and
pay for child care programs. Within certain federal guidelines, states
have discretion in deciding how these funds will support child care,
who will be eligible, and what payment mechanism will be used.
Program: CSE;
Description: CSE is a joint federal and state partnership established
in 1975 under title IV-D of the Social Security Act to ensure that
parents financially support to their children. State CSE programs are
primarily responsible for carrying out the basic activities for
locating noncustodial parents, establishing paternity and support
orders, and collecting and distributing child support payments.
Although the states administer the child support enforcement program,
the federal government plays a major role, which includes funding 66
percent of the program, establishing policies and guidance, and
overseeing and monitoring state CSE programs' compliance with federal
requirements.
Program: Food Stamp Program;
Description: The Food Stamp Program, established in 1964, is designed
to provide basic nutrition to low- income individuals and families in
the United States by supplementing their income with benefits to
purchase food. The federal government pays the full cost of food stamp
benefits and shares the states' administrative costs. The federal
government promulgates program regulations and ensures that state
officials administer the program in compliance with federal rules. The
states administer the program by determining whether households meet
the program's income and asset requirements, calculating monthly
benefits for qualified households, and issuing benefits to participants
on an electronic benefits transfer card.
Program: Foster Care;
Description: The Foster Care program, authorized under title IV-E of
the Social Security Act, helps states provide care for eligible
children who need placement outside their homes--in a foster family
home or an institution. This program provides funds to states to assist
with the costs of foster care maintenance for eligible children,
administrative costs to manage the program, and training for program
staff and foster parents.
Program: TANF;
Description: Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 replaced Aid to Families with Dependent
Children (AFDC) with TANF, which marked the end of federal entitlement
assistance. TANF ended unlimited matching funding for family cash
welfare and created fixed-block grants to states. The block grant
covers benefits, administrative expenses, and services targeted to
needy families and gives states great flexibility to design their own
TANF programs. States must spend a specified amount of state funds on
eligible low-income families--known as the maintenance-of-effort
requirement.
Program: UI;
Description: The UI program, established in 1935, serves to: (1)
temporarily replace a portion of earnings for workers who become
unemployed through no fault of their own and (2) facilitate the
reemployment of UI claimants. UI is made up of 53 state-administered
programs that are subject to broad federal guidelines and oversight.
Source: GAO.
[End of table]
The programs included in this review also represent a wide range of
spending, from $2.9 billion for Adoption Assistance to $37 billion for
UI. For fiscal year 2004, total spending, including administrative and
all other spending, for the seven programs was $119 billion.
Additionally, each of the seven selected programs is administered or
overseen by one of three different federal departments. Table 2 shows
the agency responsible for each program and total program expenditures
for fiscal year 2004, the most current year available.
Table 2: Fiscal Year 2004 Federal and State Program Spending and
Agencies Responsible for Administering the Seven Selected Programs:
Agency: Department of Agriculture/Food and Nutrition Service;
Program: Food Stamp Program;
Total program spending, fiscal year 2004 (in billions): $29.8.
Agency: Department of Health and Human Services/Administration for
Children and Families;
Program: Adoption Assistance;
Total program spending, fiscal year 2004 (in billions): 2.9.
Agency: Department of Health and Human Services/Administration for
Children and Families;
Program: CCDF;
Total program spending, fiscal year 2004 (in billions): 9.4.
Agency: Department of Health and Human Services/Administration for
Children and Families;
Program: CSE;
Total program spending, fiscal year 2004 (in billions): 3.2[A].
Agency: Department of Health and Human Services/Administration for
Children and Families;
Program: Foster Care;
Total program spending, fiscal year 2004 (in billions): 8.6.
Agency: Department of Health and Human Services/Administration for
Children and Families;
Program: TANF;
Total program spending, fiscal year 2004 (in billions): 25.8.
Agency: Department of Labor/Employment and Training Administration;
Program: UI;
Total program spending, fiscal year 2004 (in billions): 37.0[B].
Source: GAO analysis of HHS, USDA, and DOL data.
[A] All CSE spending is administrative. The CSE program reported total
federal and state administrative expenditures as $5.3 billion for
fiscal year 2004. However, total spending on the program is offset by
child support collections for families who received benefits from the
TANF and Foster Care programs, resulting in net program expenditures of
$3.2 billion.
[B] In the UI program, federal law gives responsibility for
administrative funding to the federal government; however, some states
supplement federal funding with state funds. We did not include the
state share in our analysis because historical data on state spending
were not available for all of the years included in our review.
[End of table]
The programs covered by this review have varying federal-state
relationships in administering and funding the programs. The level of
government with responsibility for designing the rules, services, and
processes varies by program. Some programs have federally standardized
designs while other programs provide states with flexibility to develop
their own eligibility criteria, benefit levels, and program rules. All
of the programs are funded through some form of federal-state
partnership; however, the rules governing funding responsibility vary
widely by program. Table 3 summarizes the level of government with
which responsibility for the design and funding resides for each of the
seven programs.
Table 3: Level of Government Responsible for Design and Funding of the
Seven Selected Programs:
Program: Adoption Assistance;
Design[A]: Federal/state;
Funding for[B]: Benefits/services: Federal/state;
Funding for[B]: Administration: Federal/state.
Program: CCDF;
Design[A]: Federal/state;
Funding for[B]: Benefits/ services: Federal/state;
Funding for[B]: Administration: Federal/ state.
Program: CSE;
Design[A]: Federal/state;
Funding for[B]: Benefits/ services: N/A[C];
Funding for[B]: Administration: Federal/state.
Program: Food Stamp Program;
Design[A]: Federal;
Funding for[B]: Benefits/services: Federal;
Funding for[B]: Administration: Federal/ state.
Program: Foster Care;
Design[A]: Federal/state;
Funding for[B]: Benefits/services: Federal/state;
Funding for[B]: Administration: Federal/state.
Program: TANF;
Design[A]: Federal/state;
Funding for[B]: Benefits/ services: Federal/state;
Funding for[B]: Administration: Federal/ state.
Program: UI;
Design[A]: Federal/state;
Funding for[B]: Benefits/ services: State[D];
Funding for[B]: Administration: Federal.
Source: GAO.
[A] Defined as the level of government that is primarily responsible
for availability, eligibility, and benefit amount determination.
[B] Defined as the level of government that supplies the primary source
of funding for the benefit or for administering the benefit. If
substantial funding comes from more that one source, both sources are
listed. Some additional funding may come from sources not listed in the
table.
[C] All CSE spending is considered administrative.
[D] State unemployment taxes pay for regular benefits and half of
extended benefits, while federal taxes pay half of extended benefits.
[End of table]
An individual low-income family is likely to be eligible for and
participate in several human service programs. For example, in 2001, 88
percent of families receiving TANF also received food stamp benefits
and 98 percent received Medicaid. The programs are typically
administered out of a local assistance office that offers benefits from
several programs. Depending on the administrative structure of the
local assistance office, a family or individual might provide necessary
information to only one caseworker who determines eligibility and
benefits for multiple programs, or they might work with several
caseworkers who administer benefits for different programs.
Because eligibility determination as well as other activities are often
conducted jointly for multiple programs, some programs require states
to have a process to ensure that costs are appropriately charged to the
correct federal programs for federal reimbursement purposes. The cost
allocation process is the formal process for sharing the costs of
activities that are performed jointly for more than one program. Formal
"cost allocation plans" specify how costs for those activities are to
be covered by the various programs. For example, when a local
eligibility worker determines that an applicant is eligible for TANF,
food stamp benefits, and CCDF, the cost of her or his time is allocated
across these programs in accordance with the state's approved cost
allocation plan. These costs are then reported as administrative or
programmatic costs, depending on the laws and regulations governing
funding for each of the programs.
Although Similar Types of Administrative Activities Occur across
Programs, Definitions of Administrative Costs and the Federal Funding
Role Vary:
Across the seven programs in our review, the legal definitions and the
federal funding rules for administrative costs vary. The statutes and
regulations for each program define administrative costs differently,
even though many of the same activities are performed to administer the
programs. The laws for each program also include different mechanisms
for state and federal participation in funding administrative costs,
including specific matching rates, block grants, and spending caps,
which can affect state decisions on administrative spending.
Definitions of Administrative Costs Vary across Programs:
Although many of the programs we reviewed conduct similar activities to
administer the program, not all of the activities are defined in laws
and regulations as administrative costs for financial reporting
purposes.[Footnote 2] Based on our analysis of information collected
from state and local officials, we identified several categories of
administrative activities that are common across many of these
programs. In particular, we found that the administration of each
program involves at least (1) determining who is eligible to
participate in the program or processing applications for new
participants, (2) monitoring program quality, (3) conducting general
program management and planning, (4) developing and maintaining IT
systems, and (5) training employees, either at the state or local
levels. All of the programs also issue benefits or provide services to
eligible participants, with the exception of CSE, which generally
collects and distributes payments from noncustodial parents to
custodial families. Additional activities, such as case management and
outreach, are performed in only some of the programs or some states.
However, the statutes and regulations for each program differ on which
of these activities are defined as administrative costs and which are
not. For example, the TANF regulations and CCDF statute defining
administrative costs specifically exclude costs associated with
providing direct program services, while Food Stamp statute
specifically includes the costs of providing direct program services,
such as certifying applicant households and issuing food stamp
benefits, as administrative costs. In addition, some statutes and
regulations are more comprehensive in identifying which activities or
items are specifically included or excluded from the definition of
administrative costs. For example, while UI legislation allows for
amounts "necessary for the proper and efficient administration" of
state programs with few other qualifiers, the Food Stamp legislation
and regulations list dozens of specific costs, including such items as
audit services, advisory councils, building lease management, and
certain advertising costs. Appendix II identifies the activities and
items that are specifically included in the definitions of
administrative costs in the statutes and regulations for each program.
Nonetheless, most of the lists of activities in program statutes and
regulations are only illustrative and not exhaustive. Phrases such as
"these activities may include but are not limited to—" are commonplace
and leave the exact definitions of administrative costs somewhat
ambiguous. Such ambiguity may lead to inconsistent interpretation of
the definitions of administrative costs. Our prior work on
administrative costs in the Adoption Assistance and Foster Care
programs found that state program officials and HHS regional offices
make different decisions as to what costs are appropriate to claim as
administrative.
The statutes and regulations defining administrative costs differ
across the programs in part because these programs have evolved
separately over time and have different missions, priorities, services,
and clients. The CSE program, in particular, differs from the other
programs in our review in that CSE does not provide public financial
benefits to its participants; rather, CSE services include collecting
and distributing payments from noncustodial parents to custodial
families, other states, and federal agencies. In addition, although the
programs conduct similar activities, differences in missions and
priorities may add to differences in spending on particular activities.
For example, the Food Stamp Program's extensive requirements for
monitoring program quality may result in more spending on this activity
than for a program with few quality control requirements.
The number of congressional committees and federal agencies involved in
developing laws and regulations for these programs has also contributed
to differences in the definitions of administrative costs and can make
coordination across programs difficult. The division of legislative and
executive responsibility allows multiple points of access for Members
of Congress, interest groups, and the affected public, but the various
legislative committees and executive agencies do not necessarily
collaborate with each other to develop consistent laws and regulations
across programs. Federal legislation for all of the programs in our
review, except the Food Stamp Program, is under the jurisdiction of the
Senate Finance Committee and the House Ways and Means Committee,
although some aspects of these programs are under the jurisdiction of
other congressional committees. Federal regulations for Adoption
Assistance and Foster Care, CCDF, CSE, and TANF are developed by
various offices within the HHS Administration for Children and
Families; Food Stamp Program regulations are developed by the U.S.
Department of Agriculture (USDA) Food and Nutrition Service; and UI
regulations are developed by the DOL Employment and Training
Administration.
Federal and state officials we interviewed disagreed on whether it was
problematic to have different definitions of administrative costs
across programs. According to officials from the OMB, whose role is to
improve administrative management of federal programs, differences in
legal definitions of administrative costs across programs are not a
barrier to program management. OMB officials stated that it is
important to accept that programs are different and that it may not be
possible to compare costs across programs. A number of state budget
officials responsible for financial reporting, however, described how
the variation in definitions of administrative costs creates
difficulties. For example, one budget official stated that it can be
difficult to develop coding for accounting and budgeting that can be
used across programs and, as a result, it can be difficult to monitor
costs accurately. A budget official in another state argued, similarly,
that having consistent definitions of administrative costs and
consistent caps on administrative spending would help to simplify the
process for allocating costs across programs and, therefore, might
reduce costs. On the other hand, state officials responsible for
developing program policies and overseeing local implementation of the
programs reported fewer difficulties with the differences in
administrative cost definitions. Several of these officials reported
that they pay little attention to which aspects of their jobs are
defined as administrative activities and which are not.
Federal and State Participation in Funding Administrative Costs Is
Governed by Matching Rates, Block Grants, and Spending Caps:
Federal and state participation in funding the administrative costs of
human service programs is governed by federal laws that establish
matching rates, block grants, spending caps, and other funding
mechanisms. These funding mechanisms, described below, play an
important role in managing the federal government's risk and can affect
states' spending behavior by producing financial incentives and funding
restrictions.
* Matching rates--In programs funded through federal matching rates,
the federal government covers a portion of states' spending on program
administration. For example, if a program has a 50-percent matching
rate, the federal government is obligated to reimburse states for 50
percent of their spending on administration, as defined in
law.[Footnote 3] Funding of Foster Care, Adoption Assistance, CSE, the
Food Stamp Program, and a portion of CCDF include matching
rates.[Footnote 4]
* Block grants--Block grants provide states with a statutorily fixed
amount of funding. TANF[Footnote 5] and a portion of CCDF are funded
through block grants. The TANF block grant does not change when
caseloads change, nor is it adjusted for inflation. In both TANF and
CCDF, states are required to spend a certain amount of their own funds
to be eligible to receive the full amount of federal funds.
* Spending caps--Spending caps limit the amount or percent of state or
federal funds that can be spent for particular purposes. For example,
the TANF statute prohibits states from spending more than 15 percent of
federal funds received on administrative costs, while the CCDF statute
prohibits states from spending more than 5 percent of aggregate program
funds on administrative costs.[Footnote 6]
* Other funding rules--The legislation governing the funding of
administrative costs for the UI program gives responsibility for
administrative funding to the federal government. DOL uses information
gathered from the states to determine how much of the available funds
each state will receive. While states are not required to spend their
own funds on administrative costs, over 40 states chose to provide
additional state funds to cover some administrative costs of the UI
program in 2004.
Table 4 summarizes the rules governing state and federal funding of
administrative costs. The table identifies for each program the federal
funding mechanism and any federal matching rates, caps on
administrative expenditures, and other rules regarding funding of
administrative costs.
Table 4: Rules Governing State and Federal Funding of State
Administrative Costs:
Program: Adoption Assistance;
Federal funding mechanism: Matching rate;
Federal matching rate for administrative expenditures: 50%;
Cap on administrative expenditures: N/A;
Other rules regarding funding of administrative costs: 75% federal
matching rate for training expenditures.
Program: CSE;
Federal funding mechanism: Matching rate;
Federal matching rate for administrative expenditures: 66%;
Cap on administrative expenditures: N/A;
Other rules regarding funding of administrative costs: 90% federal
matching rate for lab costs of paternity testing[A]; The federal
government also provides incentive funds to encourage states to achieve
program goals.
Program: Food Stamp Program;
Federal funding mechanism: Matching rate;
Federal matching rate for administrative expenditures: 50%[B];
Cap on administrative expenditures: N/A;
Other rules regarding funding of administrative costs: 100% federal
grant coverage for some employment and training costs.
Program: Foster Care;
Federal funding mechanism: Matching rate;
Federal matching rate for administrative expenditures: 50%;
Cap on administrative expenditures: N/A;
Other rules regarding funding of administrative costs: 75% federal
matching rate for training expenditures.
Program: CCDF;
Federal funding mechanism: Combination of block grant and matching
rate;
Federal matching rate for administrative expenditures: 50% to 77%, as
determined by formula for each state[C];
Cap on administrative expenditures: 5% of aggregate funds;
Other rules regarding funding of administrative costs: N/A.
Program: TANF;
Federal funding mechanism: Block grant;
Federal matching rate for administrative expenditures: N/A;
Cap on administrative expenditures: 15% of State Family Assistance
Grant;
Other rules regarding funding of administrative costs: N/A.
Program: Unemployment Insurance;
Federal funding mechanism: Other;
Federal matching rate for administrative expenditures: N/A;
Cap on administrative expenditures: N/A;
Other rules regarding funding of administrative costs: N/A.
Source: GAO analysis of HHS, USDA, and DOL data.
[A] As a result of the Deficit Reduction Act of 2005, Pub.L. 109-171
(Feb. 8, 2006), the higher federal matching rate for laboratory costs
of paternity testing will be reduced to the general federal CSE
matching rate of 66-percent beginning October 1, 2006.
[B] The 50-percent federal share of state and local administrative
expenses is reduced by $197 million a year to account for costs covered
by grants for TANF, resulting in an actual federal share paid under the
Food Stamp Program that is slightly below 50 percent.
[C] Federal matching rate applies only to one component of CCDF
funding, which is available to states that achieve required levels of
state spending.
[End of table]
Administrative Funding Mechanisms Can Affect State Spending:
Administrative funding mechanisms can create financial incentives that
affect state spending behavior; however, state responses to these
incentives vary, according to the federal and state officials we
interviewed. In some cases, matching rates can encourage states to
spend more money on a program because for each dollar of its own
resources the state invests, the state receives additional federal
funding for the program. For example, the grants manager in one of the
states we visited said that the federal matching rate gives the state
an incentive to maintain its funding and to provide more services. In
other cases, however, state officials reported that they limit their
use of federal matching funds because they have limited state resources
to invest in the program. For example, a budget official in one of the
states we visited reported that when a new expenditure could be charged
to either the Food Stamp Program, which has a matching rate, or the
TANF block grant, the state or county might decide to use the TANF
funds to avoid the need for the state to provide additional funding to
meet its share of the matching funds. However, block grants also create
general incentives for states to meet demand for services with limited
spending because the federal funding amount is fixed. CCDF officials in
Michigan stated that because they receive a fixed amount of funding,
running the program efficiently is always in the front of their minds.
Spending caps on the percentage of a block grant that can be spent on
administrative costs are, by definition, designed to limit spending.
However, officials in four of the five states we visited said that the
CCDF and TANF caps on administrative spending were not a major factor
in their administrative spending decisions. TANF administrative
spending in the states we visited was well below the 15-percent cap.
Nationally, state spending on administration was 7.7 percent for TANF
and 2.3 percent for CCDF in fiscal year 2004. Some CCDF officials
reported that their administrative spending decisions were influenced
more by state limits on administrative spending than by the federal
spending cap. For example, the California Department of Education
estimates that for fiscal year 2006-2007, only 1 percent of program
funds will be available for program administration due to current state
budget constraints. This amount is well below the federal 5-percent
cap, because, according to CCDF program officials in California, the
state legislature wanted to put every possible dollar into additional
child care vouchers.
In addition, the funding allocation method for the UI program is
designed to encourage states to administer their programs efficiently.
Total funding appropriated for the UI program is less than the amount
the states report needing to administer their UI programs. To promote
efficiency, DOL reduces the requests of states with higher costs for
certain "controllable" aspects of the budget by greater percentages
than lower cost states. For example, the longer it takes a state to
process claims, the greater its reduction in the allocation process.
Federal UI officials we interviewed argued that this process provides
states with an incentive to increase efficiency. However, some state
officials argued that the funding process creates disincentives for
states to improve efficiency and reduce administrative spending. For
example, they argued that if they invest in technologies that improve
their efficiency in administering the program, they do not get to keep
the savings they gain. Rather, spending less in one year could result
in less federal funding the next year.
While funding mechanisms can create incentives for states to limit
administrative spending, officials in each of the states we visited
cautioned that if administrative spending is reduced too far, it can
negatively affect client services. Several officials described how
reduced administrative spending due to state budget cuts had already
affected the quality of their services. For example, state human
service officials in Maryland stated that a hiring freeze has resulted
in a slower rate of application processing and an increase in Food
Stamp administrative errors, such as eligible applicants being denied
benefits. Local human service officials in Michigan reported that
budget cuts had resulted in increased office waiting times for
applicants and the elimination of services such as home visits and
prevention services.
Administrative Spending Varied across Programs but Generally Increased
at a Lower Rate Than Total Spending:
Administrative spending for the seven programs combined, as defined for
financial reporting purposes by program statutes and regulations, made
up about 18 percent of total program spending in fiscal year 2004.
However, amounts varied widely across the programs and states. Between
fiscal years 2000 and 2004, administrative spending increased in five
of the seven programs, but generally increased at a lower rate than
total program spending. Officials in the five states we visited
reported that staff and technology made up a large portion of the
administrative spending in their programs.
In 2004, Administrative Spending for the Selected Programs Combined Was
about 18 Percent of Total Program Spending, but Spending Varied Greatly
across Programs and States:
In fiscal year 2004, administrative spending, as defined for financial
reporting purposes by program statutes and regulations, amounted to
about 18 percent[Footnote 7]--or $21 billion--of the $119 billion in
total program spending for the seven programs combined; however, there
were large differences in the amounts spent by programs and states. As
shown in figure 1, the amount spent on administration varied widely
among the seven programs, ranging from $200 million in CCDF to $5.2
billion in the Food Stamp Program and $5.3 billion in CSE. As a
percentage of total program spending, administrative spending ranged
from 2 percent in CCDF to 58 percent in the Foster Care program, with
the exception of CSE in which all program spending is considered
administrative.[Footnote 8] While administrative spending amounts
varied significantly across the seven programs, this variation does not
necessarily indicate that certain programs are more efficiently
administered. Instead, differences in spending largely reflect the
differences in how each program's laws and regulations define what
counts as an administrative cost. As a result, comparing spending
across programs is not a useful means for determining efficiency.
Figure 1: Fiscal Year 2004 Combined Federal and State Administrative
and Other Spending in Billions (and Administrative Spending as a
Percentage of Total Spending):
[See PDF for image]
Source: GAO analysis of data from HHS, DOL, and USDA.
[A] All CSE spending is administrative. The CSE program reported total
federal and state administrative expenditures as $5.3 billion for
fiscal year 2004. However, total spending on the program is offset by
child support collections for families who received benefits from the
TANF and Foster Care programs, resulting in net program expenditures of
$3.2 billion.
[B] UI data are only estimates because the administrative spending data
provided by DOL were by fiscal year, while the benefit data were
provided by calendar year. In addition, in the UI program, federal law
gives responsibility for administrative funding to the federal
government; however, some states chose to supplement federal funding
with state funds. We did not include the state share in our analysis
because historical data on state spending were not available for all of
the years included in our review. The state share accounted for about
$260 million in administrative spending in 2004.
[End of figure]
Each of the seven programs in our review is funded through a
combination of federal and state contributions. For the seven programs
combined, federal funds made up roughly 60 percent--or $13 billion--of
the $21 billion spent on administration in fiscal year 2004.[Footnote
9] Federal spending accounted for roughly half or more of the total
amount spent to administer each of the seven programs. Figure 2 shows
the federal and state shares of administrative spending for each
program. These shares are largely representative of the different
funding requirements set in law for each program, as described earlier
in the report.[Footnote 10] For example, the federal government matches
state administrative spending at specified rates in four of the seven
programs. The federal match rate set out by law for administrative
spending in the CSE program is 66 percent, while the match rate for the
Adoption Assistance, Food Stamp, and Foster Care programs is 50
percent.[Footnote 11] (See table 4, for a description of the matching
rates and other funding rules that govern state and federal spending in
each program.)
Figure 2: Fiscal Year 2004 State and Federal Shares of Administrative
Spending[A]:
[See PDF for image]
Source: GAO analysis of data from HHS, DOL, and USDA.
Note: The federal matching rate and the actual share of spending that
the federal government pays, in practice, may differ slightly, because
of the detailed rules governing the sharing of expenses and application
of the federal matching rate.
[A] State and federal shares of administrative spending for the CCDF
program are not available.
[B] The $3.5 billion in federal spending does not include amounts that
the federal government paid to states in incentive payments. In
addition, as reported in GAO-06-491, net federal expenditures--those
that are reduced by child support collections distributed to TANF and
Foster Care programs and fees charged for certain services--for fiscal
year 2004 were about $2.8 billion. In this report, we did not deduct
these collections from the reported spending amounts.
[C] In the UI program, federal law gives responsibility for
administrative funding to the federal government; however, some states
supplement federal funding with state funds. We did not include the
state share in our analysis because historical data on state spending
were not available for all of the years included in our review. The
state share accounted for about $260 million in administrative spending
in 2004, amounting to 9 percent of UI administrative spending.
[End of figure]
As with spending across programs, in fiscal year 2004, the combined
federal and state amount spent on administration also varied greatly by
state within programs, as shown in figure 3. In some programs, this
variation is considerable. For example, in the Foster Care program, the
percentage of total program spending on administration in fiscal year
2004 ranged from 21 percent to 86 percent. Such variation may suggest
some opportunities for improved administrative efficiencies in some
states; however, other factors also may account for the wide ranges in
the percent spent on administration. Specifically, in the Foster Care
and Adoption Assistance programs, our prior work cited differences in
states' claiming practices as well as differences in oversight among
HHS regional offices that may contribute to differences in state
administrative spending.[Footnote 12] In addition, federal officials we
interviewed said that, given high fixed costs, a small state might
expend a higher percentage of its total program budget on
administration than a larger state that serves more people with the
same fixed costs. Our recent work on administrative costs in CSE
suggests that states' structures for administering their support
programs may also contribute to the cost of running the
programs.[Footnote 13] Specifically, we reported that from fiscal year
2000 to fiscal year 2004, the median net federal expenditure for CSE
agencies with state-operated programs decreased about 4 percent while
the median net federal expenditure for county-operated programs
increased about 11 percent. A few officials we interviewed said that
states with county-administered programs required more administrative
spending due to the duplication of effort at the county and state
levels. However, in Ohio--a state with a county-administered structure-
-officials reported that while the county-administered system may
contribute to some inefficiencies, moving to a state-administered
system would require the state to equalize pay scales and building
costs around the state, which would likely increase administrative
spending.
Figure 3: Distribution of Combined Federal and State Administrative
Spending by States for Fiscal Year 2004 (as a Percentage of Total
Program Spending)A:
[See PDF for image]
Source: GAO analysis of data from HHS, DOL, and USDA.
[A] All CSE spending is considered administrative; therefore, there is
no range across the states of percent of total spending on
administration.
[B] Our calculation for percent of total spending on CCDF
administrative costs includes maintenance of effort spending and
expenditures from all open appropriation years in FY 2004. The cap on
CCDF administrative spending excludes maintenance of effort spending
and applies to a single fiscal year's appropriation, the funds from
which need not necessarily be spent in the year of the appropriation.
Thus, the percentages shown above do not necessarily indicate that some
states are spending above the legal cap.
[C] For the UI program, the figure only includes federal administrative
spending and does not include additional state spending.
[End of figure]
In Recent Years, Administrative Spending Has Risen in Most of the
Selected Programs, but at a Lower Rate Than Total Program Spending:
From fiscal years 2000 to 2004, administrative spending increased in
most of the seven programs covered in this review, but at a lower rate
than total program spending. As shown in figure 4, from fiscal years
2000 to 2004, combined federal and state administrative spending rose
in five of the seven programs: Adoption Assistance, CSE, Food Stamp,
Foster Care, and UI. In the remaining two programs, CCDF and TANF,
administrative spending declined. CCDF administrative spending hovered
just above $200 million,[Footnote 14] declining slightly, while TANF
administrative spending declined by $300 million over the 5
years.[Footnote 15]
Figure 4: Combined Federal and State Administrative Spending, Fiscal
Years 2000 to 2004 (Nominal Dollars):
[See PDF for image]
Source: GAO analysis of data from HHS, DOL, and USDA.
[A] CCDF administrative spending data are not available prior to 2001.
[B] The CSE program reported total federal and state administrative
expenditures as $5.3 billion for fiscal year 2004. However, total
spending on the program is offset by child support collections for
families who received benefits from the TANF and Foster Care programs,
resulting in net program expenditures of $3.2 billion.
[C] UI administrative spending data only include the federal share.
State shares are only available from 2002 through 2004.
[End of figure]
In each of the five programs in which administrative spending rose, it
increased by between about 17 and 19 percent over the 5 years.
Administrative spending declined by 3 percent in CCDF and by 12 percent
in TANF. Figure 5 shows the percent change in administrative spending
during this time period for each of the seven programs. Over the same
period, the rate of price inflation was 9 percent.[Footnote 16]
Therefore, as illustrated in the figure, in the five programs in which
administrative spending increased between fiscal years 2000 and 2004,
the increase was much smaller when adjusted for inflation, shrinking to
an increase of less than 10 percent in each program.
Figure 5: Percent Change in Combined Federal and State Administrative
Spending, Fiscal Years 2000 to 2004:
[See PDF for image]
Source: GAO analysis of data from HHS, DOL, and USDA.
[A] Administrative spending data for CCDF are not available prior to
2001; thus, changes in administrative spending in CCDF are based on
2001 through 2004 data.
[B] The UI administrative spending data only include the federal share
because state spending was only available for 2002 through 2004. When
including the state share, the nominal percent change in combined
federal and state administrative spending for 2002 to 2004 was -4
percent.
[End of figure]
In the five states we visited, officials reported that staff salaries
and benefits were among the largest costs associated with running their
programs. According to DOL's wage index, average salaries and benefits
for state and local government workers increased by 16 percent between
2000 and 2004.[Footnote 17] The percent change in administrative
spending for the majority of the programs in this review was slightly
higher than this average, ranging between about 17 percent and 19
percent, as previously stated. In two of the programs, CCDF and TANF,
the percent change fell below this average. While administrative
spending may include several other types of spending beyond staff
salaries and benefits, such as overhead and IT, rising salaries and
benefits may explain some of the increase in spending among the
programs in this review.
Although administrative spending increased between fiscal years 2000
and 2004 in the Adoption Assistance, Food Stamp, and UI programs, it
increased at a lower rate than total program spending. As a result, in
these three programs, as well as CCDF and TANF, administrative spending
declined compared to total program spending between fiscal years 2000
and 2004, as shown in figure 6, indicating that the amount spent on
direct benefits and services was rising faster than the amount spent on
administering these benefits and services. Administrative spending
increased compared to total program spending in one program, Foster
Care.
Figure 6: Federal and State Administrative Spending as a Percentage of
Total Program Spending, Fiscal Years 2000 to 2004:
[See PDF for image]
Source: GAO analysis of data from HHS, DOL, and USDA>
Note: All CSE spending is considered administrative; therefore, there
are no changes over time in the percentage of administrative spending.
[A] Administrative spending data for CCDF are not available prior to
2001.
[B] UI administrative spending data only include the federal share.
State shares are only available from 2002 through 2004. In addition, UI
data are only estimates because the administrative spending data were
available by fiscal year, while the benefit data were available by
calendar year.
[End of figure]
In the Five States We Visited, Many Program Officials Told Us That They
Spend a Large Portion of Their Administrative Dollars on Staff Costs
and Technology:
Officials in the five states we visited reported that staff and IT
account for substantial portions of the spending related to operating
their programs. In all five states we visited, officials reported that
spending on staff, including salaries and benefits, was among the
largest costs associated with running their programs, in part because
certain program rules are complicated, requiring a considerable amount
of staff time. To the extent that these costs are included in programs'
definitions of administrative costs, this will affect the programs'
reported administrative spending. As we have reported in our prior
work,[Footnote 18] eligibility determination activities make up a
substantial portion of administrative spending for some programs.
Policy experts and researchers have found that the complexity and
variations in eligibility rules have increased substantially the staff
resources needed to determine eligibility and benefit levels and
thereby increased the costs of administering programs. Some of the
officials in the states we visited said that multiple or outdated IT
systems also require a great deal of staff time. For example, front-
line staff and officials we interviewed reported that in order to
determine eligibility, staff must manually work outside the computer
systems to work around problems in the systems. In addition, county
officials we interviewed in one state said that the same client
information must be entered into three separate systems.
While outdated IT systems increase the staff resources needed at the
local level, officials in four of the five states we visited reported
that developing and maintaining IT systems also require a significant
amount of administrative dollars. For example, in California, county
officials we interviewed reported that two new case management systems
have been expensive to develop and implement. They said that initial
system problems and training for staff to learn the new systems added
to the costs. However, officials in a few states said they believed
that their new systems will eventually reduce administrative effort and
they expected administrative costs to decrease as a result.
The Federal Government May Help Balance Administrative Cost Savings
with Program Effectiveness and Integrity by Simplifying Policies and
Facilitating Technology Enhancements:
The federal government, including both Congress and the executive
agencies, may help balance long-term administrative cost savings with
program effectiveness and integrity by simplifying policies and
facilitating technology improvements. Simplifying policies--especially
those related to eligibility determination processes and federal
funding structures--could save resources, improve productivity, and
help staff focus more time on performing essential program activities,
such as providing quality services and accurate benefits to recipients.
In addition, by helping states facilitate technology enhancements
across programs, the federal government can help streamline processes
and potentially reduce long-term costs. Together, simplified policies
and improved technology could streamline administrative processes and
potentially reduce administrative costs. We acknowledge that all levels
of government have attempted to streamline processes across human
service programs for the past 20 years. However, many of these efforts
have had limited success due, in part, to the considerable challenges
that streamlining program processes entail, such as the challenge of
achieving consensus among the numerous congressional committees and
federal agencies involved in shaping human service program policies,
and a lack of information on how program changes would affect
particular populations. We believe one challenge in particular--the
lack of information on the effect streamlining efforts might have on
program and administrative costs--is thwarting progress in this area.
Simplifying Federal Policies May Save Administrative Costs by Reducing
Cumbersome and Duplicative Work:
Our current and previous reviews indicate that simplifying policies--
especially those related to eligibility determination processes and
federal funding structures--could potentially save resources, improve
productivity, and help staff focus more time on performing essential
program activities, such as providing quality services and accurate
benefits to recipients. Simplifying policies is particularly important
for those programs that are administered jointly at the local level. In
many localities, single offices administer TANF, food stamp benefits,
CCDF, Medicaid, and SCHIP, and make referrals to or have some
interaction with CSE, Adoption Assistance, Foster Care, UI, LIHEAP, and
housing programs. Even though the programs are administered jointly,
each has its own funding structure and eligibility rules, which can be
cumbersome and require duplicative effort from staff. For example, when
a family applies for TANF and food stamp benefits, the caseworker
applies different rules and tests to determine who is eligible for
benefits from either or both programs. This determination can be
complicated as most programs have different definitions of who is a
part of an eligible unit. In the Food Stamp Program, an eligible unit,
or household, generally consists of all the persons who purchase food
and prepare meals together. In TANF, the eligible unit (which states
define in accordance with certain federal requirements) often includes
only dependent children, their siblings, and the parents or other
caretaker relatives. Consequently, a family member may be eligible for
benefits in one program and ineligible for benefits in another program.
To ensure that time is divided among and allocated to the correct
programs, most of the local staff we spoke with track the amount of
time they spend working on different programs and report this
information to financial managers. Local financial managers then
determine what portion of staff's time is defined as administrative
costs in each of the programs and charge the programs appropriately.
Our current and previous reviews show that these involved procedures
stem, in part, from programs having different target populations,
different federal funding silos, and different statutory and regulatory
requirements. Excessive time spent working through complex procedures
can consume resources and diminish staff's ability to focus on other
activities that preserve program effectiveness and integrity. Many of
the state and local officials we visited emphasized that one of the
best ways to balance cost savings with program integrity and
effectiveness is to simplify program eligibility determination
processes and funding structures across programs:
Simplify Eligibility Determination Processes: According to state and
local officials, the complexity and variation in financial eligibility
rules have contributed to the time-consuming and duplicative
administrative processes. The administrative processes can be
particularly time consuming when caseworkers determine eligibility for
more than one program at a time, a common practice when applicants may
be eligible for multiple programs. The issues raised during our site
visits echo what we reported to Congress in 2001.[Footnote 19] In that
report, we identified federal statutes and regulations as a source of
some of this variation, although states do have considerable
flexibility, especially in programs such as TANF, in setting
eligibility rules. Some states have taken advantage of recent changes
and additional flexibility granted by the federal government to
simplify eligibility determination processes across programs. For
example, states may automatically extend eligibility to food stamp
applicants based on their participation in the TANF cash assistance
program--a provision referred to as "categorical eligibility." Another
way states have simplified eligibility processes is by aligning program
rules. For example, officials in Maryland told us that they took
advantage of the flexibility offered by the Farm Security and Rural
Investment Act of 2002 (the "Farm Bill") and matched the Food Stamp
Program rules for counting income and assets to TANF and Medicaid
rules. This allows them, for example, to determine the value of a car
the same way across programs. Maryland officials believe that this
change has helped them to provide benefits and services more quickly
and accurately. While some states have taken advantage of such
flexibility, others have not. In a 2004 report on state implementation
of the Farm Bill's options, we concluded that although federal law and
program rules allowed states to align food stamp reporting rules with
those of other assistance programs, state officials in most states had
not made the broad changes that would result in greater consistency
among programs.[Footnote 20] State decisions to increase program
alignment may have been hindered by concerns regarding the cost of
programming changes into state computers and the concern that benefit
costs may increase. On the other hand, savings could result from
reducing the administrative burden on caseworkers. Ultimately, it is
not clear whether costs would rise or savings would be realized.
Simplify Funding Structures: Because the programs are financially
supported through different federal funding streams and mechanisms,
state officials argue that serving the needs of families
comprehensively and efficiently is difficult. Similar to the variation
in eligibility rules, program administrators face an array of different
funding sources associated with different federal programs, each with
its own financial reporting requirements, time frames, and other rules.
Often, to meet individuals or families' needs, states fund a range of
services drawn from multiple programs and funding sources. For example,
to provide child care subsidies, some states use funding from both TANF
and CCDF to assist families, but very different rules apply to
reporting requirements and funding restrictions, complicating program
administration. Many believe that being able to draw funds from more
than one federal assistance program, simplifying the administrative
requirements for managing those funds, consolidating small grants, or
standardizing administrative spending caps across programs would ease
states' administrative workload and reduce administrative spending. To
experiment with simplifying funding structures, Ohio's child welfare
department officials told us they received a waiver in 1997 to
implement a flexible-funding demonstration project. Participating
counties received a monthly allotment to fund any child services free
of any eligibility and allocation restrictions. According to Ohio state
officials, during the first 6 years of the demonstration, 11 of the 14
counties operated below the average costs, resulting in a total savings
of $33 million.
The need for simplifying program policies, including both those related
to simplifying eligibility determination processes and funding
structures, has been voiced recurrently for the past several decades.
Stretching as far back as the 1960s, studies and reports have called
for changes to human service programs, and we issued several reports
during the 1980s that focused on welfare simplification. In the early
1990s, a national commission as well as a congressionally created
advisory commission suggested ways to simplify policies and procedures,
including steps such as developing a common framework for streamlining
eligibility requirements, formulating standard definitions, and easing
administrative and documentation requirements. To address these issues,
Congress has acted in the past to simplify the federal grant system.
For example, the Omnibus Budget Reconciliation Act of 1981 consolidated
a number of human service programs into several block grants that
allowed for greater state and local autonomy and flexibility in
designing strategies to address federal objectives.[Footnote 21] More
recently, in 1996 Congress replaced the previous welfare program with
the TANF block grant and consolidated several child care programs into
one program, providing states with additional flexibility to design and
operate programs.[Footnote 22] In addition, numerous pilot and
demonstration projects have given particular states and localities
flexibility to test approaches to integrating and coordinating services
across a range of human service programs. While the need for
simplification of program policies has been widely acknowledged, there
has also been a general recognition that achieving substantial
improvements in this area is exceptionally difficult. For example,
implementing systematic changes to the federal rules for human service
programs can be challenging because of differences among federal
program goals and purposes and because jurisdiction for these programs
is spread among numerous congressional committees and federal agencies.
An additional challenge to systematic policy simplification efforts is
the lack of information on the costs and effects of these efforts. Lack
of information on the potential cost to the federal government of
streamlining policies has been a limiting factor in moving forward in
this area. In our 2001 report, we concluded that determining
eligibility across human service programs is cumbersome and can be
simplified; however, we said that additional information is needed
about the effects these simplification efforts would have on both
program and administrative costs. Similarly, a Congressional Research
Service review of pilot and demonstration projects on service
integration strategies--one way to simplify policies--found that there
was little information on the cost-effectiveness of these
strategies.[Footnote 23] Information is also lacking on the potential
effects that streamlining policies would have on various populations.
Streamlining policies could expand client access and increase
caseloads, but it could also limit access for particular populations,
depending on which policies were adopted. In addition, no definitive
information exists to demonstrate the type and extent of changes that
might result in reduced administrative costs or to demonstrate how
strategies might work differently in different communities. To help
address this issue, we asked Congress in our 2001 report to consider
authorizing state and local demonstration projects designed to simplify
policies. Recent legislative proposals in both the House and the Senate
have sought to increase states' abilities to waive federal program
rules to address program simplification issues, although some
provisions have been criticized by policy makers and others for
allowing states too much latitude to set aside federal rules considered
important to protecting program integrity and services to people in
need. One legislative proposal, included as part of broader welfare
legislation, passed in the House but has not been enacted into law.
Facilitating Technology Enhancements across Programs May Save
Administrative Costs by Creating More Efficient Processes:
Our previous and current work indicates that the federal government can
help streamline processes and potentially reduce long-term costs by
facilitating technology enhancements across programs. Technology plays
a central role in the management of human service programs and keeping
up with technological advancements offers opportunities for improving
the administration of human services. Recognizing the importance of
automated systems in state-administered federal human service programs,
for more than 2 decades, Congress has provided varying levels of
federal funding to encourage states to implement certain systems to
improve the efficiency of some programs. The federal agencies have also
played a role in helping states implement IT systems to streamline
their processes. For example, agencies responsible for child welfare,
CSE, and the Food Stamp Program must review and approve states' IT
planning documents before federal technology funds are passed down to
states. In contrast, no specific federal regulations guide states' use
of federal TANF or CCDF funds for IT systems. DOL provides some
technical assistance to states under the UI program.
With congressional and federal support, states have increasingly relied
on technology to streamline their program processes. Having modern
systems that support multiple human service programs is important for
streamlining eligibility processes and providing timely and accurate
services. For example, the counties we visited in California developed
a single IT system, known as CalWIN.[Footnote 24] This system--like
others around the country--replaced several separate IT systems and
automated the eligibility determination processes across multiple and
complex programs, such as TANF, the Food Stamp Program, and Medicaid.
According to some officials, while the new system has experienced some
problems, it has already improved program integrity and is intended to
reduce administrative costs. Additionally, many believe that sharing
data across programs and agencies can further streamline processes.
Data-sharing arrangements allow programs to share client information
that they otherwise would each collect and verify separately, thus
reducing duplicative effort, saving money, and improving integrity. For
example, by receiving verified electronic data from SSA, state human
service offices are able to determine SSI recipients' eligibility for
food stamp benefits without having to separately collect and verify
applicant information. According to South Carolina officials we
interviewed, this arrangement saves administrative dollars and reduces
duplicative effort across programs.
While most agree that IT can help streamline processes, our previous
and current work shows that technology projects are difficult, and many
fall short of expectations, creating additional work for staff or
compromising program integrity. Although many states' computer systems
for TANF, the Food Stamp Program, and Medicaid are already integrated,
we found that states are often using IT systems that are outdated,
error-prone, and do not effectively share information with additional
human service programs. This compounds the challenges in updating
technology in a human services environment that increasingly requires
coordination across programs. For example, the Michigan Department of
Human Services is in the process of implementing a new integrated IT
system that is intended to replace the three systems that staff
currently use to process eligibility for several programs. Michigan
officials explained that the third system was initially intended to
replace the other two systems. However, due to political and financial
reasons and a lack of commitment, only the first phase of the project
was implemented. As a result, the system failed to replace the other
systems and created an additional step in the enrollment process. The
ability to share data across programs also may be limited by laws that
have been established to protect individuals' privacy. For example,
while state CSE programs sometimes utilize information from other
federal programs, they are often prohibited by law from sharing
information about their own clients. Michigan CSE officials noted that
the CSE program must protect its clients' information because it
handles money from private citizens rather than providing government
benefits. Another concern regarding efforts to further enhance
technology is that there is limited information available on the cost-
effectiveness of some of these systems. Finally, our previous
collaborative work with other organizations highlighted challenges
related to obtaining federal funding for information systems.[Footnote
25] To the extent that state IT systems support more than one human
services program, state cost allocation plans for systems development
and acquisition projects must be approved by each federal agency
expected to provide funding, in addition to the regular approval
process.
To address concerns about IT systems funding and to identify other ways
that the federal government may facilitate states' technology
improvements, we recommended in April 2000 that a multiagency federal
working group be created.[Footnote 26] In response to this
recommendation as well as state complaints about the approval process,
agencies within HHS and USDA convened a working group to improve the
federal approval process. This group made some progress in identifying
needed changes to the federal process. However, after about a year of
work, the progress stalled, due to changes in leadership at the
agencies involved and a lack of consensus among the federal partners
about the direction to take in improving the federal process.[Footnote
27] This helps to highlight the challenges involved in identifying and
reaching agreement on needed improvements to existing processes,
particularly when multiple programs and agencies are involved. More
information on specific barriers that states face when attempting to
make technology improvements when federal funds are involved could help
facilitate progress in this area.
Progress on technology improvements could be further facilitated
through greater collaboration across program agencies and levels of
government. At the time of our visit, officials in Ohio said that in
their efforts to replace their outdated IT system for TANF and the Food
Stamp Program, they would have appreciated more information about what
other states were doing to implement more efficient and economical IT
systems. Officials stated that while they had talked to other states
about their experiences developing IT systems, more comprehensive
information on best practices would save states time and money. Some
agencies are successfully collaborating and sharing best practices. For
example, counties that we visited in California successfully shared
technology information that helped to save resources. Officials in San
Mateo County, California, reported that by automating the case
management process for the Medicaid and Food Stamp programs through
call centers, they avoided spending additional dollars on personnel
costs associated with rising case levels. According to county
officials, this strategy has helped them reduce staff's workload, avoid
increased administrative costs, and increase integrity across programs.
Officials in nearby Santa Cruz County reported that they adopted this
strategy after learning of its effectiveness in San Mateo County.
Michigan UI officials reported that DOL has a strong partnership with
state UI agencies. DOL sponsors a central online forum for sharing
technology information. Michigan UI officials noted that this effort
provides a forum for exchanging ideas and learning from the mistakes of
others. DOL's initiative has helped states develop call centers and
developed sample computer programming code for Internet claims systems,
which it shared with states. Further sharing of technology strategies
like these across programs, states, and agencies potentially could
yield more cost savings elsewhere.
Conclusion:
To use taxpayer dollars responsibly, federal programs must be
administered in a cost-efficient manner. Administrative costs are an
important component of the total cost of providing supports to
vulnerable people. This report shows slow but steady increases in
administrative spending among many of the human service programs
included in this review, although administrative spending increased at
a lower rate than total program spending. Spending data cannot be
compared across programs due to programmatic differences, and little
information is available regarding what level of administrative
spending for human service programs is appropriate. Even so, there are
opportunities available to the federal government to assist state and
local governments in better identifying and implementing cost-saving
initiatives that also ensure accurate and timely provision of benefits
and services. However, minimal information is available on which
opportunities are most effective and what any actual cost savings might
be.
The costs associated with running human service programs have been a
long-standing concern for policy makers interested in maximizing the
dollars that go directly to helping vulnerable people. While all levels
of government have made efforts to reduce the time and money required
to run these programs, it is unclear the extent to which these efforts
have actually reduced costs. This is especially true with efforts to
streamline processes across programs by simplifying program rules and
facilitating technology enhancements. Simplifying policies across
programs may increase or decrease the number of eligible individuals,
which in turn may affect program costs. Technology enhancements likely
come with start-up costs and may initially create additional work for
staff. Because of the complexities of such strategies for streamlining
processes, there are no easy solutions for reducing administrative
costs. However, it is appropriate to move forward to test the cost-
effectiveness of various strategies. Only then can more systematic
approaches be taken to maximize the dollars that are spent to run human
service programs.
Our previous work recommended that Congress consider authorizing state
and local demonstration projects designed to simplify and coordinate
eligibility determination. Maintaining the status quo of stovepiped
program rules and policies related to eligibility determination and
other processes will continue to result in program rules that are
complex and vary across programs and processes that are duplicative and
cumbersome to administer. Providing states with demonstration
opportunities would allow them to challenge the current stovepipes and
open the door to new cost-efficient approaches for administering human
service programs. Demonstration projects would allow for testing and
evaluating new approaches that aim to balance cost savings with program
effectiveness and integrity. The information from these evaluations
would help the federal government determine which strategies are most
effective without investing the time and resources in unproven
strategies. Congress can allow for such approaches to thrive by not
only giving states opportunities to test these approaches but by
following up to identify and implement successful strategies. While it
may be difficult to fully determine the extent to which observed
changes are the result of the demonstration projects, such projects
would be useful to identify lessons learned. Members of Congress have
identified the usefulness of demonstration projects, and both the House
and Senate have considered proposals to authorize such demonstration
projects, although legislation has not been enacted. Therefore,
continued efforts are needed to move forward.
Matter for Congressional Consideration:
As suggested in our prior work (GAO-02-58), we continue to believe that
Congress should consider authorizing state and local demonstration
projects designed to streamline and coordinate eligibility
determination and other processes for federal human service programs.
Such projects would provide states and localities with opportunities to
test the cost-effectiveness of changes designed to simplify or align
program rules, expand data sharing across agencies, or enhance
information technology systems to facilitate eligibility determinations
and other processes.
Once authorized, states and localities or both could submit proposals
for demonstration projects and relevant federal agencies working in a
coordinated manner could review them, suggest modifications as needed,
and make final approval decisions. Federal agencies should consider
certain criteria for the demonstration projects, including oversight
and internal controls to help ensure that effectiveness and integrity
are preserved and vulnerable populations are protected. Demonstration
projects would include waivers of federal statutes and regulations as
needed and deemed appropriate. While our review covered seven federal
support programs, we are not suggesting that the demonstration projects
must include all of these programs or exclude others. States should be
given the opportunity to try various approaches aimed at streamlining
processes that consider all feasible programs.
Projects must be given sufficient time to be fully implemented and must
include an evaluation component. Cost neutrality of both administrative
and program costs would be most desirable for federal approval of these
projects. However, projects should not be rejected solely because they
are unable to guarantee cost neutrality over the short run. It would be
expected that, over a period of time, state and federal efforts to
streamline processes would create administrative cost savings that
could help offset any increased program costs. Evaluations of the
projects should include an analysis of whether administrative cost
savings were indeed achieved in the long-run, which specific laws or
regulations were waived to facilitate the project, and whether the
effectiveness and integrity of program services were maintained. To
enhance the information from each of the projects, Congress should
consider authorizing a capping report that would compile information
from each the individual demonstration projects and identify lessons
learned.
Agency Comments:
We shared a draft of this report with HHS, USDA, and DOL for comment.
HHS agreed with the report's emphasis on the need for cost-effective
administration of federal programs and noted that HHS has taken steps
to increase cost-effectiveness in a number of the programs it oversees.
HHS also provided a number of specific examples of Child Care Bureau
efforts. HHS's written comments appear in appendix III.
In their comments, officials from the USDA Food and Nutrition Service
suggested that, in order to acknowledge the complexity of the Food
Stamp Program, we add more detailed information to the report on
several topics, including: differences in administrative cost
definitions, how programmatic requirements may affect costs, state by
state cost comparisons, program level impact analyses on past proposed
changes to eligibility rules, and strategies for facilitating
technology. We added more information where appropriate, although our
focus in this report remains on a national perspective across programs
rather than in-depth, program specific or state-level analyses. In
addition, the officials questioned the use of the GDP to adjust for
inflation and stated that staff salaries and benefits constitute a
large proportion of total costs. As we state in the report, we used
nominal dollars to discuss historical administrative spending. In
addition to nominal dollars, we used GDP to discuss the percent change
in spending over time. Recognizing that staff salaries and benefits
make up a large portion of spending, we also used DOL's Employment Cost
Index to discuss how average salaries and benefits for state and local
government workers changed over time.
DOL, as well as HHS, provided technical comments, which we incorporated
in the report where appropriate. None of the agencies commented
directly on the matter for congressional consideration.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of the report until 30 days
after its issue date. At that time, we will send copies of this report
to the Secretaries of the Departments of Agriculture, Health and Human
Services, and Labor; relevant congressional committees; and others who
are interested. Copies will be made available to others upon request,
and this report will also be available on GAO's Web site at [Hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me on (202) 512-7215. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. Additional GAO contacts and acknowledgments are
listed in appendix IV.
Sincerely,
Signed by:
Cynthia M. Fagnoni:
Managing Director, Education, Workforce, and Income Security Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
We designed our study to provide information on (1) how administrative
costs are defined in selected programs and what rules govern federal
and state participation in funding these costs; (2) what is known about
the amounts of federal and state administrative spending for selected
programs and how they have changed over time; and (3) what
opportunities exist at the federal level to help states balance cost
savings with program effectiveness and integrity. To obtain information
on these issues, we compiled expenditure data for each of the programs
covered in this review, conducted state and local site visits,
interviewed federal program officials, and reviewed relevant laws,
regulations, and reports. We focused our study on seven key programs:
Adoption Assistance, Child Care & Development Fund (CCDF), Child
Support Enforcement (CSE), the Food Stamp Program, Foster Care,
Temporary Assistance for Needy Families (TANF), and Unemployment
Insurance (UI).
We issued two related reports in June and July 2006 that focused on the
administrative costs of the Adoption Assistance and Foster Care
programs (GAO-06-649, Foster Care and Adoption Assistance: Federal
Oversight Needed to Safeguard Funds and Ensure Consistent Support for
States' Administrative Costs, June 2006) and the Child Support
Enforcement program (GAO-06-491, Child Support Enforcement: More Focus
on Labor Costs and Administrative Cost Audits Could Help Reduce Federal
Expenditures, July 2006). We coordinated our data collection efforts
for all three reports, so some of the information on the CSE, Adoption
Assistance, and Foster Care programs in this report is drawn from work
conducted for the earlier reports. For example, for this report, we
supplemented our data collection efforts with spending data collected
for the other two reports as well as information collected from
interviews conducted for the other reports. We also coordinated efforts
to assess the reliability of the administrative spending data used in
the three reports.
We conducted our work between July 2005 and August 2006 in accordance
with generally accepted government auditing standards.
Analyses of Program Spending Data:
We obtained spending data for each of the seven programs from the
departments of Agriculture, Health and Human Services, and Labor. We
analyzed administrative spending data for each program, as defined for
financial reporting purposes by program laws and regulations, for
fiscal years 2000-2004, including federal and state shares of spending.
Fiscal year 2004 data were the most current data available at the time
of our review. We also analyzed 2004 state spending data to learn about
the variations in spending across states. We assessed the reliability
of the administrative spending data by interviewing (1) agency
officials knowledgeable about the data and (2) state officials in the
five states we visited knowledgeable about the data as reported to the
federal government. We also reviewed state single audit reports and
talked to state auditors in the five states we visited to identify any
known problems with the administrative spending data or the systems
that store the data. Our reviews and discussions did not identify
significant problems with the data. We determined that these data were
sufficiently reliable for the purposes of this report.
Visits to State Agencies and County Offices:
We visited state agencies and county offices in five states--
California, Maryland, Michigan, Ohio, and South Carolina. The counties
we visited were: San Mateo and Santa Cruz Counties in California,
Wicomico County in Maryland, Wayne County in Michigan, Butler and
Licking Counties in Ohio, and Newberry County in South Carolina. We
selected the states to provide a range of total program spending and
share of spending on administration, as well as a mixture of state and
county administrative structures, urban and rural demographics, and
geography. Although our selection includes a range of states, our
findings are not generalizable beyond the states included in our study.
In each of the five states, we visited at least one county office to
talk to county program officials and local staff. We developed a
questionnaire to capture the types of administrative activities that
occur in each program at the state and local levels. We asked the state
and local program officials we visited to fill out the questionnaire,
and we analyzed the results to learn how administrative activities
compared across the programs. We interviewed state and local program
officials and staff about administrative activities, costs, options for
reducing costs while preserving services and challenges to and
consequences of these options. During the interviews, we also inquired
about any interactions between our key programs and other programs that
support vulnerable people, including Medicaid, the State Children's
Health Insurance programs (SCHIP), the Low-Income Home Energy
Assistance Program (LIHEAP), and housing programs.
Interviews of Federal Officials, State Auditors, and Experts:
We interviewed federal program officials at the departments of
Agriculture, Health and Human Services, and Labor and the Office of
Management and Budget about administrative costs, options for reducing
costs while preserving services and challenges to and consequences of
these options. In addition, we conducted phone interviews with state
audit officials from the five states about any similar work they have
conducted. We also discussed our objectives with representatives from
the American Public Human Services Association, Center for Law and
Social Policy, and National Governors Association. These discussions
covered each of the objectives and the participants shared their views
and insights.
Reviews of Laws, Regulations, and Reports:
We reviewed laws and regulations on definitions of administrative costs
and federal/state participation in funding these costs for the selected
programs. We also reviewed relevant circulars issued by the Office of
Management and Budget. We obtained and reviewed A-133 state single
audit reports for the states we visited. In addition, we reviewed
documents and reports prepared by the Center for Law and Social Policy,
Congressional Research Service, and other research organizations as
well as several prior GAO reports.
[End of section]
Appendix II: Administrative Cost Activities Recognized by Program
Statutes and Regulations:
Eligibility determination/enrollment;
Adoption Assistance and Foster Care:
* Determination and re-determination of eligibility;
* Fair hearings and appeals;
CCDF: [Empty];
Food Stamps;
* Costs of certifying applicant households;
* Fair hearings;
TANF:
* Activities related to eligibility determinations;
UI[A]: [Empty].
Benefit issuance;
Adoption Assistance and Foster Care: [Empty];
CCDF: [Empty];
Food Stamps:
* Acceptance, storage, protection, control, and accounting of coupons;
* Issuance of coupons to all eligible households;
TANF: [Empty];
UI[A]: [Empty].
Quality control;
Adoption Assistance and Foster Care: [Empty];
CCDF:
* Audit services as required by regulation;
* Coordinating the resolution of audit and monitoring findings;
* Maintaining substantiated complaint files in accordance with
regulatory requirements;
* Monitoring program activities for compliance with program
requirements;
Food Stamps:
* Audit services;
* Program investigations and prosecutions;
TANF:
* Fraud and abuse units;
UI[A]: [Empty].
Program management and planning;
Adoption Assistance and Foster Care:
* Providing short-term training to current or prospective foster or
adoptive parents and the members of the state licensed or approved
child care institutions providing care to children foster care or
adoption assistance;
* Rate setting;
* Training personnel employed or preparing for employment by the state
or local agency administering the plan;
CCDF:
* Coordinating the provision of Child Care and Development Fund
services with other federal, state, and local child care, early
childhood development programs, and before-and after-school care
programs;
* Developing agreements with administering agencies in order to carry
out program activities;
* Evaluating program results;
* Planning, developing, and designing the Child Care and Development
Fund program;
* Preparing the application and plan;
Food Stamps:
* Advisory Councils;
* Management studies[B];
* Proposal costs[B];
* Training and education;
TANF:
* Monitoring programs and projects;
* Preparation of program plans, budgets, and schedules;
UI[A]: [Empty].
Outreach;
Adoption Assistance and Foster Care:
* Recruitment and licensing of foster homes and institutions;
CCDF:
* Providing local officials and the public with information about the
program, including the conduct of public hearings;
Food Stamps:
* Advertising (for limited purposes);
* Exhibits;
* Food stamp informational activities, but not including recruitment
activities;
TANF:
* Public relations;
UI[A]: [Empty].
Case management;
Adoption Assistance and Foster Care:
* Case management and supervision;
* Case reviews;
* Development of the case plan;
* Placement of the child;
* Preparation for and participation in judicial determinations;
* Referral to services;
CCDF: [Empty];
Food Stamps: [Empty];
TANF: [Empty];
UI[A]: [Empty].
IT Systems;
Adoption Assistance and Foster Care:
* All expenditures of a state to plan, design, develop, install and
operate the statewide automated child welfare information system
(without regard to whether the system may be used with respect to
foster or adoptive children other than those on behalf of whom foster
care maintenance or adoption assistance payments may be made);
* Costs related to data collection;
CCDF: [Empty];
Food Stamps:
* Automated data processing and information retrieval systems[B];
* Implementing and operating the immigration status verification
system;
TANF:
* Management information systems not related to the tracking and
monitoring of TANF requirements (e.g., for a personnel and payroll
system for state staff);
UI:
* All of the reasonable expenditures attributable to the costs of the
implementation and operation of the immigration status verification
system.
Reporting;
Adoption Assistance and Foster Care:
* Costs related to reporting;
CCDF:
* Preparing reports and other documents related to the program for
submission to the Secretary of Health and Human Services;
Food Stamps: [Empty];
TANF:
* Preparing reports and other documents;
UI: [Empty].
Overhead;
Adoption Assistance and Foster Care:
* A proportionate share of related agency overhead;
CCDF:
* Administrative services, including such services as accounting
services, performed by grantees or subgrantees or under agreements with
third parties;
* Indirect costs as determined by an indirect cost agreement or cost
allocation plan pursuant to regulation;
* Managing or supervising persons with certain administrative and
implementation responsibilities;
* Other costs for goods and services required for the administration of
the program, including rental or purchase of equipment, utilities, and
office supplies;
* Salaries and related staff costs;
* Travel costs incurred for official business in carrying out the
program;
Food Stamps:
* Accounting;
* Bonding;
* Budgeting;
* Building lease management;
* Building space and related facilities[B];
* Capital expenditures[B];
* Central stores;
* Communications;
* Costs incurred by agencies other than the State[B];
* Depreciation and use allowance;
* Disbursing service;
* Employee fringe benefits;
* Employee morale, health, and welfare costs;
* Insurance[B];
* Legal expenses;
* Maintenance and repair;
* Materials and supplies;
* Memberships, subscriptions, and professional activities;
* Motor pools;
* Payroll preparation;
* Personnel administration;
* Preagreement costs[B];
* Printing and reproduction;
* Procurement service;
* Professional services[B];
* Salaries;
* Taxes;
* Transportation;
* Travel;
TANF:
* Costs for general administration and coordination of programs,
including contract costs and all indirect or overhead costs;
* Costs for the goods and services required for administration of the
program such as the costs for supplies, equipment, travel, postage,
utilities, and rental of office space and maintenance of office space,
provided that such costs are not excluded as a direct administrative
cost for providing program services;
* Procurement activities;
* Salaries and benefits of staff performing administrative and
coordination functions (but not salaries and benefits for program
staff);
* Services related to accounting, litigation, audits, management of
property, payroll, and personnel;
* Travel costs incurred for official business and not excluded as a
direct administrative cost for providing program services;
UI:
* The cost of mailing unemployment compensation statements, even if
information about the earned income credit is mailed along with it
(except that a portion of the mailing costs may be counted as a non-
administrative cost if the inclusion of materials related to the tax
credit increases the postage required to mail the information).
Source: GAO analysis of applicable program statutes and regulations.
Note: Child Support Enforcement program statutes and regulations do not
contain specific definitions of administrative costs.
[A] While the UI program legislation does identify two specific
activities that are covered as administrative costs, a much broader
range of activities is actually covered because each state receives
"such amounts as the Secretary of Labor determines to be necessary for
the proper and efficient administration of its unemployment
compensation law."
[B] These costs are allowable only with approval from the USDA Food and
Nutrition Service.
[End of table]
[End of section]
Appendix III: Comments from the Department of Health and Human
Services:
Department Of Health & Human Services:
Office of Inspector General:
Washington, D.C. 20201:
AUG 22 2006:
Ms. Cynthia M. Fagnoni:
Managing Director:
Education, Workforce, and Income Security Issues:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Ms. Fagnoni:
Enclosed are the Department's comments on the U.S. Government
Accountability Office's (GAO) draft report entitled, "Human Service
Programs-Demonstration Projects Could Identify Ways to Reduce
Administrative Costs" (GAO-06-942), before its publication. These
comments represent the tentative position of the Department and are
subject to reevaluation when the final version of the report is
received.
The Department provided several technical comments directly to your
staff.
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
designed 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 U.S.
Government Accountability Office's (GAO) Draft Report Entitled, "Human
Service Programs-Demonstration Projects Could Identify Ways To Reduce
Administrative Costs" (GAO-06-942):
The Department of Health and Human Services (HHS) appreciates the
opportunity to comment on the U.S. Government Accountability Office's
(GAO) draft report.
General Comments:
We strongly agree with the report's emphasis on the need for cost-
effective administration of Federal programs and HHS has taken steps to
increase cost-effectiveness in a number of the programs that it
oversees. For example, ACF's Child Care Bureau (CCB) identifies and
disseminates information about the cost-effectiveness of various
administrative strategies that States, Territories, and Tribes might
use when implementing the Child Care and Development Fund (CCDF). CCB
has incorporated analyses looking at cost-effectiveness into many of
its research and evaluation efforts, including projects looking at
child care provider training approaches and at market rate surveys used
to set provider payment rates. CCB's improper payments initiative is
pilot-testing a method to measure errors associated with client
eligibility determination, which includes an analysis of the costs
involved. As part of the improper payments initiative, CCB is providing
technical assistance to facilitate States' technology enhancements-
another key area highlighted in the GAO report. Through a technology
conference in 2005 and other means, CCB is providing opportunities for
States to learn from each other about strategies and best practices,
including efforts to integrate data and systems across programs.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
Cynthia Fagnoni (202) 512-7215:
Acknowledgments:
The following staff members made major contributions to the report:
Heather McCallum Hahn (Assistant Director), Cady S. Panetta (Analyst-
in-Charge), David Bellis, William Colvin, Cheri Harrington, Gale
Harris, Sheila McCoy, Luann Moy, and Tovah Rom.
[End of section]
Related GAO Products:
Child Support Enforcement: More Focus on Labor Costs and Administrative
Cost Audits Could Help Reduce Federal Expenditures. GAO-06-491.
Washington, D.C.: July 6, 2006.
Foster Care and Adoption Assistance: Federal Oversight Needed to
Safeguard Funds and Ensure Consistent Support for States'
Administrative Costs. GAO-06-649. Washington, D.C.: June 15, 2006.
Means-Tested Programs: Information on Program Access Can Be an
Important Management Tool. GAO-05-221. Washington, D.C.: March 11,
2005.
Food Stamp Program: Farm Bill Options Ease Administrative Burden, but
Opportunities Exist to Streamline Participant Reporting Rules among
Programs. GAO-04-916. Washington, D.C.: September 16, 2004.
TANF and Child Care Programs: HHS Lacks Adequate Information to Assess
Risk and Assist States in Managing Improper Payments. GAO-04-723.
Washington, D.C.: June 18, 2004.
Food Stamp Program: Steps Have Been Taken to Increase Participation of
Working Families, but Better Tracking of Efforts Is Needed. GAO-04-346.
Washington, D.C.: March 5, 2004.
Human Services: Federal Approval and Funding Processes for States'
Information Systems. GAO-02-347T. Washington, D.C.: July 9, 2002.
Welfare Reform: States Provide TANF-Funded Work Support Services to
Many Low-Income Families Who Do Not Receive Cash Assistance. GAO-02-
615T. Washington, D.C.: April 10, 2002.
Food Stamp Program: States' Use of Options and Waivers to Improve
Program Administration and Promote Access. GAO-02-409. Washington,
D.C.: February 22, 2002.
Human Services Integration: Results of a GAO Cosponsored Conference on
Modernizing Information Systems. GAO-02-121. Washington, D.C.: January
31, 2002.
Means-Tested Programs: Determining Financial Eligibility Is Cumbersome
and Can Be Simplified. GAO-02-58. Washington, D.C.: November 2, 2001.
Food Stamp Program: Program Integrity and Participation Challenges. GAO-
01-881T. Washington, D.C.: June 27, 2001.
Food Stamp Program: States Seek to Reduce Payment Errors and Program
Complexity. GAO-01-272. Washington, D.C.: January 19, 2001.
Benefit and Loan Programs: Improved Data Sharing Could Enhance Program
Integrity. GAO/HEHS-00-119. Washington, D.C.: September 13, 2000.
Welfare Reform: Improving State Automated Systems Requires Coordinated
Federal Effort. GAO/HEHS-00-48. Washington, D.C.: April 27, 2000.
Food Stamp Program: States Face Reduced Federal Reimbursements for
Administrative Costs. GAO/RCED/AIMD-99-231. Washington D.C.: July 23,
1999.
Food Stamp Program: Various Factors Have Led to Declining
Participation. RCED-99-185. Washington, D.C.: July 2, 1999.
Welfare Reform: Few States Are Likely to Use the Simplified Food Stamp
Program. GAO/RCED-99-43. Washington, D.C.: January 29, 1999.
Welfare Programs: Opportunities to Consolidate and Increase Program
Efficiencies. GAO/HEHS-95-139. Washington, D.C.: May 31, 1995.
Means-Tested Programs: An Overview, Problems, and Issues. GAO/T-HEHS-
95-76. Washington, D.C.: February 7, 1995.
Welfare Simplification: States' Views on Coordinating Services for Low-
Income Families. GAO/HRD-87-110FS. Washington, D.C.: July 29, 1987.
Welfare Simplification: Thirty-Two States' Views on Coordinating
Services for Low-Income Families. GAO/HRD-87-6FS. Washington, D.C.:
October 30, 1986.
Welfare Simplification: Projects to Coordinate Services for Low-Income
Families. GAO/HRD-86-124FS. Washington, D.C.: August 29, 1986.
Needs-Based Programs: Eligibility and Benefit Factors. GAO/HRD-86-
107FS. Washington, D.C.: July 9, 1986.
FOOTNOTES
[1] Noncustodial parents are those who do not have custody of their
children.
[2] As used in this report, the phrase "administrative spending as
defined for financial reporting purposes" is used to describe federal
and state spending that, by applicable federal statutes and
regulations, is reportable as administrative expenses of the program.
[3] The federal matching rate and the actual share of expenditures that
the federal government pays, in practice, may differ slightly, because
of the detailed rules governing the sharing of expenses and application
of the federal matching rate.
[4] CCDF is funded by a combination of discretionary and entitlement
funding through the Child Care and Development Block Grant (CCDBG).
Discretionary funds are subject to the annual appropriations process
and are allocated among states according to a formula; states are not
required to match these discretionary funds. CCDF also provides
entitlement (or "mandatory") funding to states. After reserving an
amount for payments to Indian tribes and tribal organizations,
remaining entitlement funds are allocated to states in two components.
First, each state receives a fixed amount each year, as established in
law; no state match is required for these funds. Second, remaining
entitlement funds are allocated to states according to each state's
share of children under age 13. States must meet maintenance-of-effort
and matching requirements to receive these funds. In addition to
amounts provided to states specifically for child care, states may also
transfer up to 30 percent of their TANF block grant allotment into
their CCDBG.
[5] The bulk of federal TANF funds are provided to states in a basic
block grant called the State Family Assistance Grant, totaling $16.5
billion for the 50 states and the District of Columbia. The TANF
statute also provides for supplemental grants to states that meet
certain criteria and matching contingency funds that can provide
additional funding during recessionary periods if certain conditions
are met.
[6] The 5-percent spending cap applies to the total Child Care and
Development Fund, and need not be applied individually to each of the
component funds --the discretionary, mandatory, and matching (including
the state share) funds. However, the spending cap does not apply to the
states' maintenance-of-effort expenditures.
[7] All CSE spending is considered administrative. When including CSE,
the programs combined spent 17.5 percent of total program spending on
administration. When excluding CSE from the calculation, the other
programs combined spent 13.6 percent of total program spending on
administration.
[8] In addition, in fiscal year 2004, CSE collected $4.38 in child
support payments for every dollar spent on the program, also known as
the cost-effectiveness ratio.
[9] Data on the state and federal shares of administrative spending are
not collected for the CCDF program. In fiscal year 2004, combined
federal and state administrative spending for CCDF equaled $212
million. With or without including the $212 million in CCDF
administrative spending, total administrative spending for the selected
programs combined equaled roughly $21 billion.
[10] These funding requirements have not changed significantly since
fiscal year 2000 and the state and federal shares of administrative
spending have remained largely the same over time.
[11] CCDF also has matching rates that are determined by a formula set
in law and that vary by state from 50 percent to 77 percent.
[12] See GAO, Foster Care and Adoption Assistance: Federal Oversight
Needed to Safeguard Funds and Ensure Consistent Support for States'
Administrative Costs, GAO-06-649 (Washington, D.C.: June 15, 2006).
[13] See GAO, Child Support Enforcement: More Focus on Labor Costs and
Administrative Cost Audits Could Help Reduce Federal Expenditures, GAO-
06-491 (Washington, D.C.: July 6, 2006).
[14] Administrative spending data for CCDF are not available prior to
2001; thus, changes in administrative spending in CCDF are based on
fiscal years 2001 through 2004 data.
[15] Nominal dollar spending amounts and percentages are used in the
text of the report, unless otherwise noted.
[16] We used the Gross Domestic Product (GDP) price index to calculate
inflation-adjusted dollars.
[17] Data from the DOL's Bureau of Labor Statistics Employment Cost
Index.
[18] Means-Tested Programs: Determining Financial Eligibility is
Cumbersome and Can Be Simplified, GA0-02-58 (Washington, D.C.: Nov. 2,
2001).
[19] GAO-02-58.
[20] GAO, Food Stamp Program: Farm Bill Options Ease Administrative
Burden, but Opportunities Exist to Streamline Participant Reporting
Rules among Programs, GAO-04-916 (Washington, D.C.: Sept. 16, 2004).
[21] For more information, see GAO, Block Grants: Characteristics,
Experience, and Lessons Learned, GAO/HEHS-95-74 (Washington, D.C.: Feb.
9, 1995).
[22] For more information, see GAO, Welfare Reform: States Are
Restructuring Programs to Reduce Welfare Dependence, GAO/HEHS-98-109
(Washington, D.C.: June 17, 1998) and GAO, Welfare Reform: With TANF
Flexibility, States Vary in How They Implement Work Requirements and
Time Limits, GAO-02-770 (Washington, D.C.: July 5, 2002).
[23] Cheryl Vincent, The "Superwaiver" Proposal and Service
Integration: A History of Federal Initiatives (Washington, D.C.:
Congressional Research Service, April 13, 2005).
[24] The two counties we visited, San Mateo and Santa Cruz, are a part
of an 18-county consortium that helped to develop CalWIN.
[25] GAO, Human Services Integration: Results of a GAO Cosponsored
Conference on Modernizing Information Systems, GAO-02-121 (Washington,
D.C.: Jan. 31, 2002).
[26] GAO, Welfare Reform: Improving State Automated Systems Requires
Coordinated Federal Effort, GAO/HEHS-00-48 (Washington, D.C.: Apr. 27,
2000).
[27] GAO, Human Services: Federal Approval and Funding Processes for
States' Information Systems, GAO-02-347T (Washington, D.C.: July 9,
2002).
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