COMPTROLLER GENERAL'S
REPORT TO THE CHAIRMAN,
SENATE FINANCE COMMITTEE

BETTER MANAGEMENT INFORMATION
CAN BE OBTAINED FROM THE
QUALITY CONTROL SYSTEM USED
IN THE AID TO FAMILIES WITH
DEPENDENT CHILDREN PROGRAM

DIGEST

Over $900 million paid to poor families
under the Aid to Families with Dependent
Children (AFDC) program was paid in error
during 1978. This estimate, which includes
overpayments to eligible families and
payments to ineligible families, is based
on data reported by the quality control
system. (See p. 1.)

The quality control system was estab-
lished to improve administration of the
AFDC program by identifying errors and
developing corrective actions to eliminate
them. The system is also the basis for
fiscal sanctions against the States for
erroneous payments in excess of error
tolerance levels. (See p. 2.) There is
a congressional conference directive for
sanctions based on quality control error

rates.

Fiscal sanctions create an adversary rela-
tionship between the Federal Government
and the States at a time when a cooperative
effort is needed to reduce errors. Using
the quality control system as the basis
for sanctions limits the system's value
as a means for improving payment processes.

Because a high error rate will result in
sanctions, there is an incentive to identify
fewer errors. To be most effective, the
quality control system should identify
as many errors as possible. This will
give management more information to develop
corrective action plans. (See ch. 2.)

Tear Sheet. Upon removal, the report

cover date should be noted hereon.

i

HRD-80-80

Several weaknesses in the system reduce its value to program managers for improving administration of the AFDC program. The overall effect of weaknesses is to limit the value of information that the system produces on errors and causes of errors. The following weaknesses were noted:

--Both State and Federal quality control reviews differ from State to State and Federal region to region. Some case reviews include extensive verification of eligibility and grant amount factors, while others rely heavily on statements by recipients. The Department of Health, and Human Servcies (HHS) 1/ has recognized the differences between quality control reviews, but has not determined how this affects the identification of incor

rect payments. (See ch. 3.) HHS regional offices do not follow consistent procedures in assessing State quality control operations, and HHS has no assessment system for its regional offices' quality control functions.

--The quality control system does not provide for reporting incorrect payments of less than $5 or those caused by changes in circumstances that occur during the payment review month or the month before it (administrative period). The system also provides for reporting only one error cause per case even if there are several. Program management is thereby denied information that could be useful for devising corrective actions for procedural or other problems causing such errors. (See p. 26.)

1/On May 4, 1980, a separate Department of Education was created. The part of the Department of Health, Education, and Welfare responsible for the activities discussed in this report became the Department of Health and Human Services.

Tear Sheet

--The data resulting from the quality control review can be valuable for error reduction purposes if it is carefully analyzed. Quality control data were not being adequately analyzed at either the State or Federal level. (See ch. 5.)

RECOMMENDATION TO THE

APPROPRIATIONS COMMITTEES

The House and Senate Appropriations Com-
mittees should retract a congressional
conference directive for Federal fiscal
sanctions against the States based on
the AFDC quality control error rates.

RECOMMENDATIONS TO THE

SECRETARY OF HHS

The Secretary should:

--Assess regional quality control procedures to insure adequacy and consistency and establish guidelines for reviews of State quality control cases by HHS regional offices, including criteria for making home visits to recipients and third-party verifications.

--Increase regional monitoring and periodic assessments of State quality control operations as well as HHS monitoring of its regional quality control operations.

--Change the Federal regulations to require
reporting of incorrect payments of less
than $5 and those occurring because of
changes during the administrative period.
--Require the States to report all causes
of incorrect payments detected during
the quality control review process.

--Encourage the States to perform more detailed analyses of quality control data to identify the causes of errors and provide management with better information for developing corrective actions.

-Require the Commissioner of the Social Security Administration to perform more analysis and special studies of quality control data to identify appropriate corrective actions for assisting States in their error reduction efforts.

AGENCY COMMENTS AND GAO EVALUATION

Regarding GAO's recommendation to retract the sanctions directive, HHS did not favor full retraction, while five of the six States GAO visited were in favor of such action. GAO still believes sanctions are not appropriate.

Regarding GAO's recommendations to the
Secretary of HHS for more standardized
quality control review procedures, in-
creased data reporting, and additional
data analysis, State officials gen-
erally agreed. HHS officials said
that efforts now underway would bring
about the improvements GAO believes
are needed. Some States and HHS did
not agree that incorrect payments of
less than $5 and those occurring be-
cause of changes in the administra-
tive period should be reported. Dis-
agreement generally centered around
the cost of correcting these errors
and their effect on error rates.

GAO is not proposing that such errors be necessarily corrected, only that they be reported for management analyses and evaluation purposes. GAO also recognizes that error rates may go up if such incorrect payments are reported, but believes that not tying error rates to sanctions will allay the States' concerns in this respect.

More detailed discussions of State
and agency comments and GAO's evalua-
tion can be found on pages 15, 24, 30,
and 36 of this report.