HHS Moves To Improve Accuracy of AFDC Administrative Cost Allocation:

Increased Oversight Needed

HRD-81-51: Published: May 18, 1981. Publicly Released: Jul 1, 1981.

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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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: A HHS task force evaluated the staffing and work load levels in late 1982 and recommended that current staffing levels be maintained.

    Recommendation: The Secretary of Health and Human Services should evaluate existing staffing and work load levels to ensure that both DCA and OFA have enough technical capacity and staff to effectively review, approve, and monitor the implementation of cost-allocation plans and quarterly claims for reimbursement.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: Recent HHS monitoring shows that its November 1981 draft cost-allocation guidance to states is being followed, which fulfills the intent of this recommendation.

    Recommendation: The Secretary of Health and Human Services should issue guidelines establishing a system of uniform cost principles, procedures, and methodology for all welfare cost-allocation plans.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: The state allocation plans noted in the report as needing revision were revised and the $6.6 million was recovered.

    Recommendation: The Secretary of Health and Human Services should instruct DCA and OFA to follow up on the GAO findings to ensure that appropriate recovery of federal funds occurs.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: Guidelines were issued in September 1983.

    Recommendation: The Secretary of Health and Human Services should develop adequate guidelines for DCA and OFA to use in future cost-allocation plan review efforts.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Implemented

    Comments: Administrative instructions defining DCA and OFA responsibilities were issued in June 1982.

    Recommendation: The Secretary of Health and Human Services should define the specific cost-allocation plan review and monitoring responsibilities of the Divison of Cost Allocation (DCA) and the Office of Family Assistance (OFA).

    Agency Affected: Department of Health and Human Services

  6. Status: Closed - Implemented

    Comments: HHS officials gave specific emphasis for comprehensive cost-allocation plan reviews during meetings with regional staff in 1982 and 1983.

    Recommendation: The Secretary of Health and Human Services should instruct DCA and OFA to conduct comprehensive reviews of state cost-allocation plans to identify areas in which the federal government may be bearing more than its fair share of AFDC administrative costs.

    Agency Affected: Department of Health and Human Services

 

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