Foster Care Program:

Improved Processes Needed to Estimate Improper Payments and Evaluate Related Corrective Actions

GAO-12-312: Published: Mar 7, 2012. Publicly Released: Mar 28, 2012.

Additional Materials:

Contact:

Susan Ragland
(202) 512-8486
raglands@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

Although ACF has established a process to calculate a national improper payment estimate for the Foster Care program, the estimate is not based on a statistically valid methodology and consequently does not reflect a reasonably accurate estimate of the extent of Foster Care improper payments. In addition, the estimate deals with only about one-third of the federal expenditures for Foster Care, and is therefore incomplete. ACF’s methodology for estimating Foster Care improper payments was approved by the Office of Management and Budget (OMB) in 2004 with the understanding that continuing efforts would be taken to improve the accuracy of ACF’s estimates of improper payments in the ensuing years. ACF, however, continued to generally follow its initial methodology which, when compared to federal statistical guidance and internal control standards, GAO found to be deficient in all three phases of ACF’s estimation methodology—planning, selection, and evaluation. These deficiencies impaired the accuracy and completeness of the Foster Care program improper payments estimate of $73 million reported for fiscal year 2010.

ACF has reported significantly reduced estimated improper payments for its Foster Care maintenance payments, from a baseline of 10.33 percent for fiscal year 2004 to a 4.9 percent error rate for fiscal year 2010. However, the validity of ACF’s reporting of reduced error rates is questionable. GAO found that ACF’s ability to reliably assess the extent to which its corrective actions reduced improper payments was impaired by weaknesses in its requirements for state-level corrective actions. For example, ACF used the number of cases found in error rather than the dollar amount of improper payments identified to determine whether or not a state was required to implement corrective actions. As such, some states with higher improper payment dollar error rates were not required to implement actions to reduce these rates. GAO also found deficiencies in ACF’s Audit Resolution Tracking and Monitoring System that limited its ability to efficiently track and compare trends across states’ Single Audit findings.

Why GAO Did This Study

Each year, hundreds of thousands of the nation’s most vulnerable children are removed from their homes and placed in foster care. While states are primarily responsible for providing safe and stable out-of-home care for these children, Title IV-E of the Social Security Act provides federal financial support. The Administration for Children and Families (ACF) in the Department of Health and Human Services (HHS) is responsible for administering and overseeing federal funding for Foster Care. Past work by the HHS Office of Inspector General (OIG), GAO, and others have identified numerous financial deficiencies associated with the Title IV-E Foster Care program. GAO was asked to determine the extent to which (1) ACF’s estimation methodology generated a reasonably accurate and complete estimate of improper payments across the Foster Care program and (2) ACF’s corrective actions reduced Foster Care program improper payments. To complete this work, GAO reviewed HHS’s fiscal year 2010 improper payments estimation procedures, conducted site visits, and met with cognizant ACF officials.

What GAO Recommends

GAO is making seven recommendations to help improve ACF’s methodology for estimating improper payments for the Foster Care program and its corrective action process. HHS agreed that its improper payment estimation efforts can and should be improved, and generally concurred with four of the recommendations and agreed to continue to study the remaining three recommendations. GAO reaffirms the need for all seven recommendations.

For more information, contact Susan Ragland at (202) 512-8486 or raglands@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: On June 30, 2016, HHS' Administration for Children and Families (ACF) responded to our request for a status update on this recommendation. ACF stated that although it recognizes the importance of establishing an improper payment estimate that accurately measures improper payments in the Title IV-E Foster Care program. In order to be good fiscal stewards of Federal funding, when considering potential changes to the improper payment methodology, it is important to weigh any added benefits to any added costs. Since the GAO report was issued, ACF continued with its pilot reviews of administrative costs. After pilot testing an administrative cost review protocol, ACF has determined that it is not feasible at this time to regulate and implement another review protocol that would provide the data necessary to include specific administrative costs in its estimates of improper payments. ACF will, however, continue to employ its current methodology for calculating erroneous claims for administrative costs based on the child's eligibility for IV-E funding. Further, during a primary or secondary review, Federal funds claimed for the Title IV-E Foster Care maintenance payments, including related administrative costs, associated with error and non-error cases with ineligible payments are disallowed. Through this process, ACF examines the improper payment amount of administrative costs associated with Foster Care maintenance payments. While ACF does not separately estimate and report error rates associated with administrative costs outside of Foster Care maintenance payments, the total disallowance as a result of the review represents ineligible maintenance payments and associated administration for the error cases identified. Therefore, we consider this recommendation as closed, not implemented.

    Recommendation: In order to more accurately and completely estimate improper payments for the Foster Care program and ensure that its methodology is statistically valid, the Secretary of Health and Human Services should direct the Assistant Secretary for the Administration for Children and Families to augment procedures for estimating and reporting Foster Care program improper payments, to include administrative costs.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Not Implemented

    Comments: On June 30, 2016, HHS' Administration for Children and Families (ACF) responded to our request for a status update on this recommendation. ACF stated that, while it agrees that it should use the best data available while balancing the goal of appropriate measurement with the cost and burden placed on states. ACF has considered GAO's recommendation and determined that it is not feasible to implement given the lack of a national data source for transaction-level data for Title IV-E Foster Care payments and the significant burden that would be placed on states to assemble such information for all Title IV-E Foster Care cases. In addition, such a change would require an agreement between the Children's Bureau and the Office of Management and Budget (OMB) as well as potential changes to existing Federal regulations in order to require the collection of such information and update the review protocol. ACF will continue to use the existing OMB-approved methodology for estimating improper payments. Therefore, we consider this recommendation as closed, not implemented.

    Recommendation: In order to more accurately and completely estimate improper payments for the Foster Care program and ensure that its methodology is statistically valid, the Secretary of Health and Human Services should direct the Assistant Secretary for the Administration for Children and Families to develop and implement procedures to provide a statistically valid methodology for estimating and reporting Foster Care program improper payments based on complete and accurate payment data.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: The Administration for Children and Families (ACF) generally concurred with this recommendation. In June 2014, ACF submitted a fiscal year 2013 national improper payment estimate with estimation procedures which included a statistically valid method for aggregating state level margins of error to derive an overall program estimate which-although not adjusted for minimal inflation-satisfied the intent of our recommendation.

    Recommendation: In order to more accurately and completely estimate improper payments for the Foster Care program and ensure that its methodology is statistically valid, the Secretary of Health and Human Services should direct the Assistant Secretary for the Administration for Children and Families to revise existing procedures for calculating a national improper payment estimate for the Foster Care program to include a statistically valid method for aggregating state-level margins of error to derive an overall, inflation adjusted, program estimate.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Not Implemented

    Comments: In June 2016, the Administration for Children and Families (ACF) stated that this recommendation is not consistent with existing regulations and HHS does not think it is necessary to amend those regulations in response to this recommendation. ACF requires states to develop a formal Performance Improvement Plans (PIP) when the state is found not in substantial compliance on a primary review (e.g., five or more ineligible cases). In addition, ACF has been working to enhance its assessment of state strengths and areas needing improvement on every review. ACF staff provide specific feedback on-site to state agency representatives about the state's performance at the conclusion of each review. Later, a comprehensive report is issued to the state agency to confirm the findings of the on-site review, highlight program strengths and areas needing improvement, and recommend steps the state needs to take to improve program function, prevent claiming for ineligible children or services, and maximize Federal Financial Participation for eligible children. States are strongly urged to take further corrective actions for better performance outcomes or risk being financially penalized on future reviews. Lastly, ACF has also implemented other ongoing corrective actions, including: conducting on-site reviews and post-site review activities, providing training and technical assistance to state agencies, supporting the Court Improvement Program, publicizing best practices, and targeting outreach. Therefore, we consider this recommendation as closed, not implemented.

    Recommendation: To help ensure corrective action strategies effectively reduce Foster Care program improper payments, the Secretary of Health and Human Services should direct the Assistant Secretary for the Administration for Children and Families to develop and implement procedures requiring states to implement and report on corrective actions whenever a state's estimated improper payment dollar error rate exceeds a specified target level for the program.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Not Implemented

    Comments: In June 2016, the Administration for Children and Families (ACF) stated that this recommendation is not consistent with existing regulations and HHS does not think it is necessary to amend those regulations in response to this recommendation. ACF requires states to develop a formal Performance Improvement Plans (PIP) when the state is found not in substantial compliance on a primary review (e.g., five or more ineligible cases). In addition, ACF has been working to enhance its assessment of state strengths and areas needing improvement on every review. ACF staff provide specific feedback on-site to state agency representatives about the state's performance at the conclusion of each review. Later, a comprehensive report is issued to the state agency to confirm the findings of the on-site review, highlight program strengths and areas needing improvement, and recommend steps the state needs to take to improve program function, prevent claiming for ineligible children or services, and maximize Federal Financial Participation for eligible children. States are strongly urged to take further corrective actions for better performance outcomes or risk being financially penalized on future reviews. Lastly, ACF has also implemented other ongoing corrective actions, including: conducting on-site reviews and post-site review activities, providing training and technical assistance to state agencies, supporting the Court Improvement Program, publicizing best practices, and targeting outreach. Therefore, we consider this recommendation as closed, not implemented.

    Recommendation: To help ensure corrective action strategies effectively reduce Foster Care program improper payments, the Secretary of Health and Human Services should direct the Assistant Secretary for the Administration for Children and Families to establish and implement procedures requiring periodic assessments of state-level improper payment target levels, including targets associated with Title IV-E secondary reviews, for the Foster Care program for which states are to implement and report on corrective actions.

    Agency Affected: Department of Health and Human Services

  6. Status: Closed - Implemented

    Comments: At the time of the report, HHS agreed to continue to study this recommendation. In March 2014, ACF completed its implementation of system updates to enhance the reporting capabilities of ARTMS and enable users to search for specific audit findings by various criteria, including all criteria specified in our recommendation.

    Recommendation: To help ensure corrective action strategies effectively reduce Foster Care program improper payments, the Secretary of Health and Human Services should direct the Assistant Secretary for the Administration for Children and Families to enhance Audit Resolution Tracking and Monitoring System (ARTMS) reporting capabilities to provide data on the status of actions taken to address Single Audit findings concerning states' Foster Care program payments, such as providing reporting capabilities to allow ARTMS users to search for specific audit findings by type of finding, grantee, state, region, or across years.

    Agency Affected: Department of Health and Human Services

  7. Status: Closed - Implemented

    Comments: ACF agreed with our recommendation. In December 2012, ACF issued an updated Title IV-E Foster Care Eligibility Review Guide and Instrument. Updates to the review guide and instrument included additional information and clarifications on identifying and reporting all types of improper payments.

    Recommendation: In order to more accurately and completely estimate improper payments for the Foster Care program and ensure that its methodology is statistically valid, the Secretary of Health and Human Services should direct the Assistant Secretary for the Administration for Children and Families to augment guidance to teams gathering state-level Foster Care program improper payment estimate data to include specific procedures to follow in identifying and reporting any underpayments and duplicate or excessive payment errors.

    Agency Affected: Department of Health and Human Services

 

Explore the full database of GAO's Open Recommendations »

Nov 30, 2016

Nov 17, 2016

Sep 15, 2016

Sep 7, 2016

Jul 8, 2016

Mar 14, 2016

Mar 10, 2016

Feb 23, 2016

Nov 9, 2015

Sep 16, 2015

Looking for more? Browse all our products here