HHS Moves To Improve Accuracy of AFDC Administrative Cost Allocation

Increased Oversight Needed Gao ID: HRD-81-51 May 18, 1981

The Department of Health and Human Services (HHS) is responsible for ensuring that state cost-allocation plans, upon which federal financial participation in administrative costs for the Aid to Families with Dependent Children (AFDC) program are based, accurately reflect the federal reimbursable share of costs.

The principle oversight agencies of HHS are not adequately reviewing, analyzing, and questioning data in state cost-allocation plans either before or after their approval. A GAO review of administrative costs in four states indicated that the federal government may be incurring unnecessary charges which, in two of these states, could amount to $6.6 million annually. Overcharges are occurring because HHS has not provided its oversight agencies with adequate review guidance, a clear definition of their respective roles for reviewing cost-allocation plan implementation, and sufficient staff to accomplish their work effectively. Erroneous reimbursement claims have been a longstanding problem. HHS has not required a uniform method of accumulating and allocating states' costs and has approved some methods which cannot ensure that administrative cost expenditures in a given program are as directly proportional to the administrative support received as possible. The varying methods of cost allocation also preclude HHS from making meaningful comparisons of administrative cost expenditures among states. HHS has not developed guidelines for distributing costs in welfare cost-allocation plans and does not require states to distribute administrative costs on any standardized basis. States are allowed considerable latitude in developing cost accumulation and allocation methodology. By developing a welfare cost-allocation guide, some corrective action is underway.


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