Action Needed To Avert Future Overpayments to States for AFDC Foster Care

Gao ID: HRD-81-73 April 20, 1981

Until the Adoption Assistance and Child Welfare Act was enacted, the Department of Health and Human Services (HHS) matched payments available to the states under the the Aid to Families with Dependent Children (AFDC) program for foster home care of dependent children. The act established fiscal year (FY) 1978 as a base year for the computation of future allotments of foster care moneys. A GAO review showed certain unallowable practices regarding FY 1978 reimbursements which, if not given prompt attention, could continue to improperly increase future foster care allotments to some states.

GAO found that over $12 million in private nonprofit agency foster family home administration costs, not eligible for federal sharing, were incurred by New York City and federally reimbursed. The states of New York and California were also reimbursed an undetermined amount for costs attributable to ineligible foster care enrollees. Since 1978, GAO has unsuccessfully attempted to have HHS take corrective action to recover amounts reimbursed to New York City for unallowable administrative costs. The longer HHS takes to correct the level of FY 1978 federal reimbursements, the larger the overpayments will be. Using FY 1978 as a basis for allotments to New York and California without adjusting for incorrect federal payments has resulted, and will continue to result, in reimbursements higher than those authorized. If there is a dispute between any state and HHS as to expenditures for a base year, the base amount may only be changed in the FY after the one in which the dispute is resolved. The foster family home administrative services, in dispute in several New York City contracts with private nonprofit agencies, are normally provided by state social service agencies.


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Director: Joseph F. Delfico Team: General Accounting Office: Human Resources Division Phone: (202) 512-7215

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