At the outset it should be recognized that virtually all of the
issues and recommendations as specified in the draft report are the
very same arguments which have been continuously advanced by the states
since 1973. Thus, without equivocation, I can assure you that the
report soundly reflects this Department's position on the quality control
system and fiscal sanctions.

Furthermore, I was extremely encouraged to note that the "theme" of the report both recognizes and reinforces the basic fact that effectiveness of the AFDC program is a joint responsibility of both state and federal governments. To operate in other than a climate of cooperation simply further breeches a state-federal partnership and detracts from our commitment to meet the needs of dependent children.

With respects to the specific contents of the report, there are several points which requires correction and others which merit consideration. On page four (4), top paragraph, the word "often" is inappropriate. Reviewers not only verify eligibility factors with the recipient but they always verify them with collateral sources. In chapter 2 (see page 8, paragraph 3, point 2), the reader may well misinterpret the statement that quality control systems "...do not allow for program and practice difference among states." It should be made clear that while the system does acknowledge permissible state practice, federal error rate calculation process (i.e., regression analysis formula) does not.

KALMAN R. HETTLEMAN
Secretary

GAO note:

The page references in this appendix may not correspond to the page numbers in the final report.

APPENDIX V

APPENDIX V

On the matter of social security numbers (SSN) (see pages 26-27),
the narrative is incorrect which, in turn, leads to an unclear explanation.
That is, Quality Control Reviewers in Maryland do verify, during the home
visit, that the recipient has, or has applied for, an SSN. In the event
neither can be verified, then the case is in error. Since Maryland and
Maine utilize the same procedures, one is left without an explanation for
the difference in the SSN related errors found in each state during the
January June, 1978 review period.

Two other technical points are (1) the absence of Maryland's data in the table on page 41 and (2) the meaning of the sentence ("Finding and reporting unrelated secondary errors...") on page 45.

-- see

Turning to more substantive issues, there are several points which
were not addressed and one (i.e., current months circumstances
Chapter 4) which potentially invites real confusion. The report recommends
that the "current months circumstance" become a basis for additional error
determination. If adopted, this would require that quality control define
an erroneous payment in a manner inconsistent with existing federal policy
(see CFR 233.20). I am of the position that this recommendation is
unnecessary given the pending revisions (i.e., payment adjustment lag) to
the AFDC quality control system.

Subjects that were not addressed in the report are elaborated as

follows.

First, it should be recognized, and stated, that the current quality control system more adequately serves the management needs of the federal government than it does state governments. Specifically,

(1) statistically valid statewide samples cannot
adequately assess program performance at the
sub-state level;

(2) requirements for semi-annual reviews effectively
discourages active participation by quality
control personnel in the corrective action
planning process; and,

(3) state calculated error rates, and reviews, are
relatively meaningless because the federal
re-reviews are the basis for "official" error
rate calculations.

APPENDIX V

APPENDIX V

In light of these circumstances, I would suggest that the recommendations in Chapter 5 of the report be re-stated in a manner that encourages and supports greater flexibility on the part of the federal and state agencies in the area of statistical sampling design and methodology.

Second, little acknowledgement is given to the fact that the support
functions of quality control (e.g., data analysis, special studies,
corrective action implementation, etc.) must also compete for the same
pool of resources that are utilized for program administration. Given
the realities of limited administrative funding and shifting priorities,
more emphasis should be placed upon an allocation strategy that would
assure these quality control support functions can be both realized and
operationalized.

Finally, the report, but briefly, mentions the requirement for
federal agencies to provide technical assistance to individual states
(see page 3). This point should be strengthened in the report. With
their national perspective on state operations, the Social Security
Administration should be systematically working with states to implement
"best practices" which have proven effective in other locales. Thus,
I would recommend that the report identify this requirement and encourage
the Social Security Administration to institute procedures whereby technical
assistance is routinely and continuously made available to the operational
components of state welfare agencies.

Without summarizing the foregoing, I would also like to reinforce
your recognition of quality control as a management tool. Realizing
that state welfare administrations are, too, concerned with program
performance and operational efficiency, we are also mindful of the need
for systems and technologies that do not constrain legitimate efforts in
attaining these goals. As such, I am a strong advocate for a quality
control system that addresses a mixed balance of flexibility and
standardization. I firmly believe that with this report and a more
realistic appraisal of the state-federal relationship, a balanced
approach can be achieved.

If you wish further information or clarification on the points I have raised, please do not hesitate to contact me.

Sincerely,

RGL/blj

Richard G. Lacombe, Director
Income Maintenance Administration

CCS:

Kalman R. Hettleman, Secretary
Bill B. Benton, Deputy Secretary

I am responding to your request for comments on the draft report entitled "Opportunities for Getting Better Management Information from Quality Control.'

The report accurately expresses the sentiments of the New York State Department of Social Services and hopefully it will provide some impetus returning the Quality Control program to the status of an effective management tool rather than the guideline for fiscal sanctions.

Our only negative comment involves the suggestion to eliminate the administrative period and require the reporting of errors under five dollars. process of reporting misspent funds, the administrative period is one of the few rational principles in the program. The requirement to report and record changes in circumstance takes time over and above the necessity to provide a ten day notice in the event of a closing or reduction in 'grant. Thirty days does not seem to be an inordinate amount of time when you consider that it takes six months to release an audit report.

Secondly, errors under five dollars produce inconsequential results but impact the case error rate disproportionately. We realize that the payment error rate is the prime measure of efficiency. However, case error rates are public information and when these are taken out of context, they only tend to produce bad publicity.

Thank you for the opportunity to review and comment on this report and we hope your recommendations receive proper consideration by Congress and consequently, the Department of Health, Education and Welfare.

(105069)

Sincerely,

A Lurker
Luskin

James A. Durkin, Director
Office of Audit &

Quality Control