State Advance Payments to Aid to Families With Dependent Children Recipients Are Inconsistent With Federal Regulations

HRD-80-50: Published: Feb 7, 1980. Publicly Released: Feb 7, 1980.

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The Aid to Families with Dependent Children (AFDC) program was examined regarding program policies, management characteristics, and operational procedures in six States and several of their local welfare agencies to identify areas in need of further audit or analysis. One of the issues concerning assistance payments was identified as warranting immediate attention. Pursuant to payment policies believed to be inconsistent with Federal regulations, the States of New York and Massachusetts are making advance payments to AFDC recipients and are obtaining 50 percent Federal participation. During 1978 these payments amounted to about $6 million in New York and about $33.6 million in Massachusetts. Of this, an undeterminable amount of the $6 million and about $1.4 million of the $33.6 million are overpayments, which may not be recouped. Federal regulations require that a State plan must specify a statewide standard, expressed in dollar amounts, to be used in determining the: (1) need of applicants and recipients; and (2) amount of the assistance payment. The most recent data available indicated that 22 States, including New York and Massachusetts, provided payments that along with any recipient income, equal 100 percent of the need standard for all recipients. Federal participation in the assistance payment is available on the basis that any recipient income plus the monthly payment does not exceed the need standard. The regulations further provide for Federal participation in the monthly AFDC grant only if the recipient was eligible on the date aid was paid.

The New York policy authorizes advance payment of AFDC funds upon request to recipients facing eviction or utility shutoffs for overdue payments. Essentially, these advance payments are loans, because they are in addition to the regular monthly grants. It is believed that this policy is inconsistent with Federal regulations because the additional moneys are: (1) more than the need standard in the approved State plan and are for expenses covered by prior months' grants; and (2) based on the assumption that a recipient will be eligible in the future. This policy does not limit the size, number, or total amount of advances a recipient can obtain and have outstanding. Although these advance payments are subject to repayment from future grants, if a case with an outstanding advance is discontinued from assistance, the advance payment is often not recouped. This results in abuse of the system and little incentive for recipients to budget regular assistance payments. The Massachusetts policy provides AFDC recipients with a portion of their assistance payment in advance quarterly payments. This, too, appears to be inconsistent with regulations because it presumes continued eligibility for a 3-month period. If an applicant becomes eligible during a quarter, he receives a prorated advance based upon the number of semi-monthly pay periods remaining in the quarter. If a recipient becomes ineligible at any time during the quarter, the State does not require repayment. GAO believes these payments should not be federally reimbursed.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Department of Health and Human Services has reviewed the matter and has decided that, based on a review of Federal law and regulation and New York's State program plan, the payment is eligible for Federal participation.

    Recommendation: The Secretary of Health, Education, and Welfare (HEW) should disallow claims for Federal participation in advance payments and initiate appropriate efforts to recover the Federal share of any outstanding advance payments.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of HEW should revoke the prior approval of the quarterly advance payment policy and limit Federal participation to payments for those months in each quarter that each recipient was eligible.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of HEW should require the Social Security Administration to review all State AFDC plans and regulations to see whether their payment policies are consistent with the Code of Federal Regulations.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of HEW should require the Social Security Administration to establish a mechanism within the administration to ensure that changes are made to those State plans with payment policies that are not consistent with the Code of Federal Regulations.

    Agency Affected: Department of Health and Human Services

 

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