Department  of Health  and Human  Services 
OFFICE OF 
INSPECTOR GENERAL 
AFDC  PRE-ELIGIBILITY  VERIFICATION 
MEASURES 
AUGUST  1993  OFFICE  OF INSPECTOR  GENERAL

The  mission of the  Office of Inspector  General  (OIG),  as mandated  by Public  Law 95-452, as 
amended,  is to protect  the  integrity  of the  Department  of Health  and Human  Services (HHS) 
programs  as well as the  health  and welfare  of beneficiaries  served  by those  programs.  This 
statutory  mission is carried  out  through  a nationwide  network  of audits,  investigations,  and 
inspections  conducted  by three  OIG  operating  components:  the  Office of Audit  Services, the 
Office of Investigations,  and the  Office of Evaluation  and Inspections.  The  OIG  also informs 
the  Secretary  of HHS  of program  and management  problems  and recommends  courses  to 
correct  them. 
OFFICE  OF AUDIT  SERVICES

The  OIGS  Office of Audit  Services  (OAS)  provides  all auditing  services  for HHS,  either  by 
conducting  audits  with its own audit  resources  or by overseeing  audit  work done  by others. 
Audits  examine  the  performance  of HHS  programs  and/or  its grantees  and contractors  in 
carrying out  their  respective  responsibilities  and are intended  to provide  independent 
assessments  of HHS  programs  and operations  in order  to reduce  waste,  abuse,  and 
mismanagement  and to promote  economy  and efficiency throughout  the  Department. 
OFFICE  OF INVESTIGATIONS

The  OIGS  Office of Investigations  (01)  conducts  criminal,  civil, and administrative 
investigations  of allegations  of wrongdoing  in HHS  programs  or to HHS  beneficiaries  and of 
unjust  enrichment  by providers.  The  investigative  efforts  of 01  lead to criminal  convictions, 
administrative  sanctions,  or civil money  penalties.  The  01  also oversees  State  Medicaid  fraud 
control  units which investigate  and prosecute  fraud  and patient  abuse  in the  Medicaid  program. 
OFFICE  OF  EVALUATION  AND  INSPECTIONS 
The  OIGS Office of Evaluation  and Inspections  (OEI)  conducts  short-term  management  and 
program  evaluations  (called  inspections)  that  focus on issues of concern  to the  Department, 
the Congress,  and the  public.  The  findings and recommendations  contained  in these  inspection 
reports  generate  rapid,  accurate,  and up-to-date  information  on the  efficiency, vulnerability, 
and effectiveness  of departmental  programs. 
OEIS Atlanta  Regional  Office prepared  this report  under  the  direction  of Jesse  J. Flowers, 
Regional  Inspector  General  and Christopher  Koehler,  Deputy  Regional  Inspector  General. 
Principal  OEI  staff included: 
ATLANTA REGION  HEADQUARTERS 
Peggy Daniel,  Project  Leader  Emilie  Baebel 
Betty Apt  Susan  HardWick 
Joe  Townsel  Dave  Wright 
Jackie  Watkins  Ruth  Folchman 
For  additional  copies  of this report,  please  contact  the  Atlanta  Regional  Office  at 404-331-
4108.  Department  of Health  and Human  Services 
OFFICE OF 
NSPECTOR  GENERAL 
AFDC  PRE-ELIGIBILITY  VERIFICATION 
MEASURES  EXECUTIVE  SUMMARY

PURPOSE 
Todetermine  how  fraud  detection  measures  required  by the  1988  Family  Support  Act 
affected  States  pre-eligibility  verification  activities  to  prevent  inappropriate  Aid  to 
Families  with  Dependent  Children. 
BACKGROUND 
The  Aid to Families  with  Dependent  Children  (AFDC)  program,  Title  IV-A  of the 
Social  Security  Act,  provides  financial  assistance  to  families  with  children  who  are 
deprived  of support  due  to  death,  absence,  or  disability  of at  least  one  parent.  Some 
families  with  children  deprived  of support  due  to  unemployment  of the  principal  wage 
earner  may  also  receive  AFDC  assistance. 
States  must  follow  Title  IV-A  regulations  for  determining  AFDC  eligibility. 
Inappropriate  AFDC  payments  are  caused  by both  agency  and  client  (applicant  and 
recipient)  errors.  Agency  errors  occur  when  a State  fails  to  act  properly  on  known 
information.  Client  errors  may  result  from  an  applicants  or  recipients  unintentional 
misrepresentation  of circumstances  or intentional  misrepresentation.  Intentionally 
withholding  or misrepresenting  facts  may be  considered  fraud. 
Section  605 of the  1988 Family  Support  Act  required  States  to establish  pre-eligibility 
fraud  detection  measures  by October  1, 1989.  Further,  the  implementing  Federal 
regulations  required  States  to annually  evaluate  the  effectiveness  of their  measures 
and  provide  a written  report  of their  evaluations  to the  Administration  for  Children 
and  Families  (ACF).  The  first reports  were  due  by February  15, 1991. 
FINDINGS 
The 1988 Family Supprt  Act  had M&  q@ct  on State activitiesfor preventing 
inapproptite  MDC  pqments 
Only nine  States  changed  or adopted  fraud  detection  measures  following  passage  of 
the  Act because  States  believed  their  verification  measures  already  in place  met  the 
Acts requirements.  ACFS implementing  regulations  were  broadly  written,  allowing 
States  to use their  existing  pre-eligibility  verification  as fraud  detection  measures. 
States W  not routinely use all commonly  accepted pre-ehkibility verification measures 
Most  States  verified  income  and  assets  through  computer  matches  and  wage 
statements--one  of three  commonly  used  types  of pre-eligibility  verification  measures. 
i  States  said they  did not  consistently  use two other  types  of verification  measures,  third-
party  follow-up  and  investigative  staff, because  of (1) limited  resources,  and  (2) 
concern  that  it would  delay  application  processing.  States  must  adhere  to a federally 
mandated  standard  of promptness  that  requires  eligible  applicants  receive  AFDC 
payments  within  45 days from  the  date  of application. 
Some States did not evaluute pm-eligibility verification measures 
Twelve  States  in Federal  Fiscal  Year  (FY)  1990 and  18 in Federal  FY  1991 did not 
evaluate  their  pre-eligibility  verification  measures  as required.  Ten  of the  12 States 
that  did not  perform  required  evaluations  in FY  1990 also did not  do so in FY  1991. 
States  told  us they  did not  evaluate  their  pre-eligibility  verification  measures  because 
(1) it required  too  much  time  to track  the  measures,  and  (2) ACFS reporting 
requirements  focused  only on measuring  effectiveness  of fraud  investigative  units.  The 
required  format  for reporting  was not  applicable  to pre-eligibility  measures  most 
States  use,  such  as computer  matches. 
RECOMMENDATIONS 
The  Family  Support  Act  of 1988 did not  achieve  its intended  purpose  of improving 
pre-eligibility  verification  to detect  inappropriate  AFDC  payments.  We  continue  to 
believe  that  significant  opportunities  exist to reduce  fraud  and  inappropriate  payments 
through  strong  pre-eligibility  review  systems.  However,  under  ACFS regulations, 
States  can  comply  with  the  legislative  requirements  without  actually  improving  their 
pre-eligibility  verification  systems.  We  also  discovered  a major  disconnect  between 
regulations  which  prescribed  no specific  pre-eligibility  verification  activities  and 
evaluation  reporting  requirements  that  focused  only on measuring  the  effectiveness  of 
fraud  investigative  units.  Even  more  important,  the  current  reporting  requirements 
fail to provide  ACF  the  information  it needs  to make  management  judgments  about 
the  effectiveness  of specific  pre-eligibility  measures  or to advise  States  about  how to 
improve  them.  Therefore,  we recommend  that  ACF: 
1.	 Revise  its evaluation  reporting  requirements  to make  them  applicable  to all 
canmonly  used  types  of pre-eligibility  verification  measures,  not just  fraud 
investigative  units. 
2.	 Require  States  to periodically  evaluate  their  pre-eligibility  programs  and  report 
the  results  to ACF,  and  ensure  that  they  do so. 
3.	 Conduct  or sponsor  its own independent  evaluations  of State  pre-eligibility 
programs. 
4.	 Provide  States  with information  on effective  pre-eligibility  verification  measures, 
based  on States  evaluation  reports  and  ACFS own independent  evaluations  of 
States  pre-eligibility  programs. 
ii  AGENCY  COMMENTS

The  Acting  Assistant  Secretary  for Children  and  Families  commented  on the  report.

The  ACFconcurred  with30f  our4  recommendations.  Itdidnot  concur  with  our

recommendation  to revise  evaluation  reporting  requirements  to make  them  applicable

to all commonly  used  types  of pre-eligibility  verification  measures,  rather  than  just  to

fraud  investigative  units.  The  ACF  noted  in its comments  that  the  first year

experience  with the  evaluations  did not  provide  pertinent  information  about  successful

practices  States  use.  This is consistent  with  our  finding  that  the  evaluation

requirements  are  not  applicable  to commonly  used  types  of pre-eligibility  verification

measures,  and  the  evaluations  did not  produce  useful  information  for either  ACF  or

States.

We  support  ACFS  plans  to  use  State  demonstration  projects  to  evaluate  the  impact  of 
various  verification  measures.  However,  it will be  several  years  before  the  results  of 
such  an  evaluation  are  available.  In the  interim,  we  believe  that  ACF  should  collect 
data  on  the  effectiveness  of verification  measures  commonly  used  by States.  Such  data 
serves  as  performance  indicators  and  provides  important  trend  information  to  program 
managers  at  the  Federal,  State,  and  Local  level. 
... 
111  TABLE  OF  CONTENTS 
PAGE 
EXECUTIVE  suMMARY 
INTRODUCHON  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..o.  .o  Q1 
FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  -4 
Family  Support  Act  Had  Little  Effect  On

State  Activities  For  Preventing  Inappropriate

AFDC  Payments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .OO. .OS  4

States  Did  Not  Routinely  Use  All Commonly

Accepted  Pre-Eligibility  Verification  Measures  . . . . . . . . . . . . . . . . . . . . . . . . . 5

Some  States  Did  Not  Evaluate  Effectiveness  of

Pre-Eligibility  Verification  Measures  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...8

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

AGENCY  COMMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...12

APPENDICES 
A.	 Pre-Eligibility  Fraud  Detection  Measures  and 
Reporting  Requirements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l 
B.  Agency  Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-1

TABLES 
1.  Computer  Matches  UsedbyStates  . . . . . . . . . . . . . . . . . . . . . . . . . . . ...5

2.  Third-Party  Follow-Up  UsedbyStates  . . . . . . . . . . . . . . . . . . . . . . . . . ..6

3.  Number  of States  Not  Evaluating  Verification  Measures  . . . . . . . . . . . . . .  8

4.  Number  of States  Reporting  Late  . . . . . . . . . . . . . . . . . . . . . . . . . . . ..10
 INTRODUCTION 
PURPOSE 
To  determine  how fraud  detection  measures  required  by the  1988 Family  Support  Act 
affected  States  pre-eligibility  verification  activities  to prevent  inappropriate  Aid to 
Families  with  Dependent  Children. 
BACKGROUND 
AFDC  Bogram 
The  Aid to Families  with Dependent  Children  (AFDC)  program,  Title  IV-A  of the 
Social  Security  Act, provides  financial  assistance  to families  with  children  who  are 
deprived  of support  due  to death,  absence,  or disability  of at least  one  parent.  Some 
families  with  children  deprived  of support  due  to unemployment  of the  principal  wage 
earner  may also receive  AFDC  assistance. 
Within  the  Department  of Health  and  Human  Selvices  (HHS),  the  Administration  for 
Children  and  Families  (ACF)  has Federal  responsibility  for AFDC.  States  administer 
the  AFDC  program  through  local  offices--either  district,  county,  or city.  Program  costs 
are  shared  by Federal  and  State  governments.  The  Federal  government  pays50 
percent  of the  administrative  costs and  a percentage  of the  AFDC  payments.  The 
percentage  varies  by State  and  is determined  by a formula  using Department  of 
Commerce  statistics.  Generally,  poorer  States  receive  a larger  Federal  contribution 
than  affluent  States  for AFDC  payments.  In some  States,  counties  pay part  of the 
non-Federal  portion  of AFDC  payments. 
Although  States  must  follow Title  IV-A regulations  for determining  AFDC  eligibility, 
administrative  procedures  vary from  State  to State.  Generally,  the  regulations  require 
that  applicants  complete  an application,  and  caseworkers  verify information  on the 
application  to determine  eligibility  and  amount  of financial  assistance.  Caseworkers  do 
this by (1) thoroughly  interviewing  applicants,  (2) examining  documents,  such  as birth 
certificates  and  social  security  cards,  (3) checking  third-party  sources,  such  as talking  to 
neighbors  about  an applicants  household  composition,  and  (4) running  computer 
matches  with  State  departments  of labor  to document  wages  and  unemployment 
benefits.  Title  IV-A regulations  require  that  recipients  report  any event  that  might 
affect  AFDC  payments,  such as marriage  or change  in income. 
1
 Lwpppriate  AFDC  Payments 
Inappropriate  AFDC  payments  are  caused  by both  agency  and  client  (AFDC  applicant 
and  recipient)  errors.  Agency  errors  occur  when  a State  fails to act properly  on 
known  information.  Client  errors  occur  when  an applicant  or recipient  fails to 
accurately  report  facts which might  affect  AFDC  payments. 
Client  errors  may result  from  an applicants  or recipients  unintentional 
misrepresentation  of circumstances  or intentional  misrepresentation.  Intentionally 
withholding  or misrepresenting  facts  may be  considered  fraud. 
Because  of concern  over  inappropriate  payments,  ACF  requires  States  to operate  a 
quality  control  (QC)  program.  Using  Federal  guidelines,  State  reviewers  examine  a 
statistically  valid  sample  of cases  to determine  accuracy  of payments  and  eligibility 
decisions.  Federal  QC  reviewers  assess  the  correctness  of State  findings  by re-
examining  a sub-sample  of the  State  sample.  Differences  between  the  State  and 
Federal  findings  are  then  reconciled  to produce  an official  State  error  rate.  States  use 
QC reviewtso determine  the  cause  of errors  and  design  corrective  action  plans. 
Potential for Preventing Inappropriate PaymenB 
In November  1987, we reported  on States  investigation  of fraud  in the  AFDC 
program.  We  found  that  States  expend  considerable  effort  and  resources  to detect 
overpayments  and  prosecute  suspected  fraud.  However,  we also found  that  front-end 
verification  activities  to prevent  inappropriate  payments  prior  to establishing  eligibility 
are  more  effective  than  attempts  to recover  overpayments.  We,  therefore, 
recommended  that  ACF,  formerly  the  Family  Support  Administration,  revise 
regulations  to require  States  to implement  a pre-eligibility  fraud  detection  and 
prevention  program  as a condition  of State  plan  approval. 
Congress  included  the  recommendation  in Section  605 of the  1988 Family  Support 
Act,  Public  Law  100-485.  This Act  amended  the  Social  Security  Act  to require  States 
to establish  pre-eligibility  fraud  detection  measures  by October  1, 1989. 
Evaluation of Pre-Elilility  Verification Measures Effectiveness 
ACF  Federal  regulations  require  AFDC  State  agencies  to evaluate  the  effectiveness  of 
their  pre-eligibility  fraud  detection  verification  measures  each  Federal  fiscal year. 
Written  copies  of the  evaluation  reports  must  be  submitted  to ACF  regional  offices by 
February  15 of the  following  Federal  fiscal year.  The  first reports  were  due  February 
15, 1991. 
For  each  pre-eligibility  verification  measure  contained  in a State  plan,  the  evaluation 
has to contain  at a minimum  the 
1)  number  of suspected  fraud  cases  identified, 
2  2)  number  of identified  fraud  cases  that  are  investigated, 
3)	 number  of the  investigated  fraud  cases  that  are  found  to be  ineligible,  and  the 
number  to be  eligible  for a reduced  grant  amount,  and 
4)	 total  projected  monthly  dollar  savings resulting  from  reduced  grants  and  cases 
found  to be  ineligible. 
Additionally,  the  evaluation  report  has to contain  a brief  narrative  assessment  of the 
relative  effectiveness  of each  pre-eligibility  verification  measure  used  by a State.  The 
assessment  is to be  based  on the  numbers  reported  in items  1-4 above.  States  can 
also use  other  evaluation  methods  to support  their  assessments.  Appendix  A contains 
the  June  12, 1990 evaluation  reporting  requirements  ACF  issued  to States. 
SCOPE  AND  METHODODGY 
We  surveyed  all 50 States  and  the  District  of Columbial  to identi~  pre-eligibility 
verification  measures  used  to prevent  inappropriate  AFDC  payments.  We  did not 
separate  State  pre-eligibility  verification  measures  to distinguish  those  used  to detect 
unintentional  or intentional  (fraud)  misrepresentation  of applicant  eligibility 
information.  States  generally  do not  distinguish  the  measures  by type  of 
misrepresentation  because  an effective  measure  will detect  either  type  (unintentional 
and  intentional). 
We  mailed  a standardized  questionnaire  to all 51 States  on July  15, 1992.  A total  of 
50 States  returned  completed  questionnaires  by December  10, 1992.  As needed,  we 
conducted  telephone  interviews  with State  AFDC  staff to obtain  clarification  of and 
elaboration  on their  responses  to the  mailed  questionnaire. 
We  interviewed  staff from  ACF  and  the  American  Public  Welfare  Association 
(APWA)--an  advocacy  organization  of which  all State  welfare  agencies  are  members. 
This  inspection  was conducted  in accordance  with  the  Quality Standards for Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
lFor  convenience  in summarizing  survey results,  we considered  the  District  of 
Columbia  as a 51st State. 
3  FINDINGS

THE  1988 FAMILY  SUPPORT  ACT  HAD  LITTLE  EFFIKX  ON  STATE

ACrMTIES  FOR  PREVENTIN  G INAPPROPRIATE  AFDC  PAYMENTS

The  1988 Family  Support  Act required  States  to have  appropriate  measures  to detect

fraudulent  applications  for aid to families  with dependent  children  prior  to the

establishment  of such aid.  However,  most  States  made  essentially  no changes  to their

existing  eligibility  and  fraud  detection  techniques  following  the  Act.

Prior  to passage  of the  Act, States  generally  conducted  computer  matches  and

followed  up with third  parties  as needed  to verify conditions  of eligibility.  For

example,  States  conducted  computer  matches  with Department  of Labor  and  other

State  and  Federal  databases.  When  applicant-provided  information  was questionable,

States  followed  up with  third  parties,  such  as employers.  Also,  26 States  used  pre-

eligibility  investigative  staff to conduct  home  visits to explore  cases with  questionable

information.

After  passage  of the  Act,  only nine  States  changed  or adopted  pre-eligibility

verification  measures.  Six of the  nine  States  that  adopted  new measures  added

computer  matches  with  additional  agencies,  two added  pre-eligibility  investigative  units,

and  one  added  a profile  of error  prone  cases based  on quality  control  data.  Before

the  Act,  38 States  conducted  computer  matches  with  IRS.  The  same  38 States

conducted  computer  matches  after  passage  of the  Act.

The  States  made  little  changes  to their  pre-eligibility  verification  measures  because

States  already  had  measures  in place  which they believed  met  the  requirements  of the

Act.  The  implementing  regulations  were  broadly  written,  allowing  States  to use  a

range  of fraud  detection  measures  that  could  be  tailored  to their  own needs  and

circumstances.  ACFS regulations  did not  require  a particular  program,  but  gave

examples  of what  many  States  were  already  doing.  Such  examples  included,  but  were

not  limited  to, automated  data  matches  to establish  the  accuracy  of statements  on

applications,  use  of error  prone  profiles,  home  visits or third-party  contacts,  credit

bureau  inquiries,  and  training  on investigative  interviewing  techniques.  The  wording  in

the  regulations  was widely interpreted  by States  as allowing  them  to continue  as in the

past  without  changing  any procedures  or techniques.  To  satisfy the  requirements  of

the  regulations,  States  now just  label  pre-eligibility  verification  as fraud  detection

measures.  One  State  agency  program  official  made  the  following  statement.

The  regulations  do not  require  or mandate  an early  fraud  [detection] 
program  at all, but  rather  require  a mere  description  of existing 
measures  used  to verify eligibility  and  to report  annually  to DHHS  on 
their  effectiveness.  In effect,  they  [the  regulations]  mandate  a study  and 
an annual  report,  rather  than  a program. 
4
 STATESDID NOT  ROUTINELY  USE  ALL  COMMONLY  ACCEPTED PRE-
ELIGIBILITY VERIFICATION MEASURES 
Collectively,  States  used  three  different  types  of pre-eligibility  verification  measures  to 
prevent  inappropriate  AFDC  payments.  The  measures  were  (1) computer  matches 
with Federal  and  State  databases  to verify income  and  assets,  (2) follow-up  with  third 
parties,  such  as employers,  neighbors,  and  landlords,  to verify income,  residence,  and 
household  composition,  and  (3) investigative  staff  to conduct  field visits to verify 
conditions  of eligibility. 
Most  States  verified  income  and  assets  through  computer  matches  and  wage 
statements.  They  verified  other  conditions  of eligibility,  such  as household 
composition  and  identity,  by examining  birth  certificates  and  social  security  cards. 
States  did little  follow-up  through  contacts  with third  parties  and  home  visits to veri~ 
applicant-provided  eligibility  information. 
Comyx.u& Matches  Vi  Ihcome  and AsseB 
States  used  computer  matches  to verify an applicants  income  and  assets.  The 
computer  matches  included  the  Income  and  Eligibility  Verification  System  (IEVS). 
The  IEVS,  mandated  by Congress  in the  Deficit  Reduction  Act  of 1984, was a 
computer  matching  system  that  included  matches  with Federal  and  State  databases 
and  other  public  assistance  files.  For  example,  computer  matches  with  Social  Security 
Administration  wage  records  and  State  employment  agencies  verified  and  detected 
reported  and  unreported  income.  Motor  vehicle  and  credit  bureau  matches  verified 
and  detected  applicants  assets.  Internal  Revenue  Service  matches  detected  unearned 
income,  such  as interest  and  dividends.  Table  1 shows computer  matches  States 
commonly  used  to verify income  and  assets.  States  used  one  or more  of the  eight 
types  of computer  matches.  Four  States  used  all eight  of the  computer  matches. 
TABLE  1 
COMPUTER  MA17HES  USED BY STATES 
STATES  STATES THAT 
COMPUTER  MAlrHEs  THAT USED  USED  ON-LINE 
(Toverifyincomeandassets)  MEASURE  MATCHING 
II  UNEMPLOYMENT  COMPENSATION  *  I  47  138 
11 STATE  VEIERANS  ADMINETRATION  19  /1 
II BENDEX(So&l security benefitsand earnings)*  I  43  125 
II  I  I 
STATE  EMPLOYMENT  AGENCY  *  42  33 
II  INTERNAL  REVENUE  SERVICE*  I  19 
5
 lkhi-P@y  Cbntacts Vini!fiConditiims of El&i.bility,But Are Rarely Used 
States  rarely  verified  applicant-provided  information  with  third  parties.  Nine  States  or 
less routinely  followed  up using third  parties  to verify applicant-provided  information 
to prevent  inappropriate  AFDC  payments.  Most  States  conducted  third-party 
verification  of eligibility  conditions  on an as-needed  basis.  As-needed  means  States 
conducted  follow-up  activities  only when  information  on an application  was clearly 
questionable.  Follow-up  with third  parties  usually involved  (1) caseworkers  asking  an 
applicant  to bring  in written  documentation,  such  as a statement  from  a landlord 
verifying  residence,  (2) caseworkers  contacting  a third  party  by phone  or mail  to verify 
conditions  of eligibility,  and  (3) investigative  staff making  home  visits to 
resolve  inconsistent  applicant  information.  Table  2 shows the  extent  that  the  50 States 
responding  to our  survey  conducted  follow-up  with  third  parties. 
TABLE  2 
THIRD-PARTY  FOLLOW-UP  USED BY STATES 
STATES THAT	
ROUTINELY  STATES THAT  USED	
mLLow-uP WITHTHmD  usEDFOLLOW-UP  lxx.Low-uP 
PARTIES 
(To veri@ conditions of eligibility)  TECHNIQUES  As-NEEDED 
HOME  VISllll  2  34 
EMPLOYERS 
8  36 
NEIGHBORS  6  36 
\  LANDLORDS  19  I 35  II 
Follow-up  with  third  parties  on a routine  basis was usually  conducted  at the  time  of 
application  or at semi-annual  reviews.  One  State  said they  conducted  third-party 
activities  monthly. 
Specialized Investigative StafiAre  PaWrly  Effective 
Twenty-eight  States  had  specialized  investigative  staff in selected  counties  to

investigate  applicant-provided  information  that  appeared  questionable.  Specialized

investigative  staff made  field visits to third  parties,  such as neighbors  and  landlords,  to

verify  questionable  applicant-provided  information.  For  example,  investigative  staffs

were  used  to confirm  whether  an absent  parent  was living in a home  with  children  for

whom  AFDC  had  been  requested.  Two of the  28 States  said they  added  pre-eligibility

investigative  staff after  passage  of the  Act.  States  with investigative  staff had  slightly

more  (about  3 percent)  applications  withdrawn  or denied  than  States  without

investigative  units.  This  suggests  that  field work  done  by investigative  staffs  resulted  in

better  detection  of fraudulent  information  reported  by applicants.

The  28 States  with  county  investigative  staff included  those  that  we had  examined  in

our  original  study in 1987.  The  investigators  continue  to be  effective  in detecting

fraudulent  application  information.  Program  staff  associated  with them  said  the  units

6  are  effective  partly  because  they  can make  unannounced  home  visits.  Also,  they  said 
the  effectiveness  of the  investigative  units  is evidenced  by a quick  turnaround  on 
referrals--usually  within  one  week.  The  effectiveness  of the  investigative  units  is 
further  indicated  by the  number  of counties  in one  State  that  has formed  such units. 
Since  1987, the  number  of counties  in that  State  increased  from  23 to 46. 
Reasom  S@e.s Did Not Routinely Use All Commonly Acceptid  he-eligibility  V&rijication 
Measures 
States  said they  did not  routinely  use third-party  follow-up  and  investigative  staff for 
pre-eligibility  verification  because  of (1) limited  resources  and  (2) compliance  with a 
45-day processing  standard  for AFDC  payments. 
State  agency  program  officials  said limited  resources,  such as State  budget  cuts, 
prevent  staff from  verifying  much  of the  applicant-provided  information  that  could 
affect  their  AFDC  eligibility.  State  agency  program  officials  said State  budget  cuts 
have  caused  staff  shortages,  thereby  increasing  eligibility workers  caseloads.  To 
illustrate,  one  county  AFDC  program  official  reported  an AFDC  caseload  increase  of 
40 percent,  while  the  AFDC  staff decreased  by 10 percent.  Further,  APWA  figures 
show an  average  national  AFDC  caseload  growth  of 29.1 percent  for the  period  July 
1989 through  August  1992.  The  growth  in AFDC  cases  for individual  States  ranged 
from  2.2 percent  to over  100 percent  during  that  period. 
State  AFDC  program  officials  also said they  did not  routinely  use measures  such  as 
third-party  follow-up  because  they  could  not  allow pre-eligibility  verification  to delay 
application  processing.  States  must  adhere  to a federally  mandated  standard  of 
promptness.  This  standard  requires  that  applicants  must  receive  AFDC  payments 
within  45 days from  the  date  of application.  In most  instances,  disposition  of an 
application  must  be  processed  within  30 days to allow time  for printing  and  mailing 
checks. 
Compliance  with the  45-day standard  places  a certain  amount  of pressure  on States 
and  counties  to accept  applicant-provided  information  without  verification.  To 
illustrate,  at least  two States  have  been  sued  due  to untimely  processing  of AFDC 
applications.  In one  of the  two States,  a court  order  required  that  counties  accept  an 
applicants  written  statement  regarding  a number  of eligibility  factors.  In this State, 
fiscal penalties  were  tied  to a countys average  processing  time  and  percentage  of 
applications  processed  within  the  time  standard.  In the  other  State,  a new policy was 
initiated  on  minimal  verification  at intake.  This State  now only verifies  social 
security  numbers,  earned  income,  and  pregnancy. 
7
 SOME STATES DID NOT EVALUATE  PRIMLIGIBILITY  VERIFICATION 
MEASURES 
The  ACF  implementing  regulations  for the  Family  Support  Act  require  States  to 
annually  evaluate  the  effectiveness  of their  pre-eligibility  verification  measures. 
However,  about  one-fourth  of the  States  did not  evaluate  their  pre-eligibility 
verifications  in Federal  Fiscal  Year  (FY)  1990 and  about  one-third  did not  evaluate  in 
Federal  FY  1991.  Table  3 shows the  number  of States  not  evaluating  their  measures 
in each  year. 
TABLE  3 
THE NUMBER  OF STATES NOT EVALUATING 
VERIFICATION  MEASURES  EACH  YEAR 
STATES NOT 
PERFORMING  ANNUAL 
FISCALYEAR 
FEDERAL  EVALUATIONS 
1990  12 
1991  18 
Ten  of the  12 States  that  did not  perform  required  evaluations  in FY  1990 also  did not 
do so in FY  1991. 
Reasons for Not Evahatihg 
States  told  us they  did not  evaluate  their  pre-eligibility  verification  measures  because  it 
required  too  much  time  to track  the  measures.  To  illustrate  the  time  required,  three 
State  agency  program  officials furnished  the  following  comments. 
The  evaluation  would  require  (1) a case-record-by-case  record  review  of the 
 
number  of AFDC  rejections,  (2) a determination  as to whether  or not  a 
rejection  was a result  of deliberate  applicant  misrepresentation,  and  (3) a 
determination  of which verification  measure  listed  in the  State  Plan  was 
responsible  for  detecting  any applicant  misrepresentation. 
The  evaluation  would  be  extremely  labor  intensive  and  of questionable  quality, 
	
due  to the  manual  process  that  would  be  required  and  the judgmental  nature  of 
information  to be  collected.  Each  case  technician  would  be  required  to keep 
track  of whether  he  or she required  an applicant  to provide  additional 
documentation,  whether  or not  the  additional  documentation  supported  the 
applicants  previous  statements  or documentation,  and  the  fiscal impact  of using 
the  correct  information. 
The  evaluation  would  be  extremely  counterproductive  because  the  time 
	
involved  in developing,  making  entries  into,  and  maintaining  such  a reporting 
8
 system would  decrease  the  resources  available  for pre-eligibility  fraud  detection 
measures. 
Also,  some  State  agency  program  officials  said they  did not  evaluate  measures  because 
ACFS reporting  requirements  focused  only on measuring  effectiveness  of fraud 
investigative  units.  The  required  format  for reporting  was not  applicable  to pre-
eligibility  measures  most  States  use,  such as computer  matches.  Appendix  A contains 
the  evaluation  reporting  requirements. 
Twenty-two  of the  50 States  responding  to our  survey did not  have  fraud  investigative 
units,  and,  therefore,  were  not  able  to use the  mandated  format.  About  half  of the 
State  agency  officials without  fraud  investigative  units  said no mechanisms  are  in place 
to collect  the  data  required  by the  regulations.  Creating  a mechanism  to do so would 
increase  both  costs  and  workloads  disproportionately  to any benefits  that  might  be 
gained  from  evaluating  the  measures. 
Finally,  one  State  agency  program  official  said, In short,  the  reporting  of the  activity is 
in danger  of becoming  more  important  than  the  desired  results. 
m@Y  coWOl  Reviews  Serve  as Rmy  for Evaluations 
States  without  fraud  investigative  units  have  sought  other  ways to evaluate  their 
measures.  For  example,  States  use quality  control  (QC)  error  rates  to satisfi  the 
evaluation  reporting  requirements.  Three  State  agency  program  officials  made  the 
following  comments  about  using QC  data. 
We have  a built-in  evaluation  in the  QC  process  and  this evaluation  is more 
	
significant  than  the  currently  mandated  annual  report. 
QC data  proves  that  workers  are  utilizing  the  States  pre-eligibility  fraud 
	
detection  measures  and  those  measures  are  effective. 
We have  chosen  to evaluate  pre-eligibility  fraud  detection  measures  examining 
 
QC sample  data  for evidence  that  the  current  measures  are  not  working  and  to 
identify  areas  where  additional  measures  might  be  cost  effective.  Because  [an] 
annual  QC  sample  is a reasonably  valid  random  sample  of the  caseload,  the 
results  of the  evaluation  should  be generally  reflective  of the  caseload  as a 
whole. 
States l%oviding Lute Evaluation Reports 
The  ACF  regulations  for implementing  the  Family  Support  Act  also  require  States  to 
submit  a written  report  to ACF  regional  offices by February  15 of the  following 
Federal  fiscal year,  and  to submit  any appropriate  amendments  to their  State  plans. 
However,  only 38 States  in FY  1990 and  32 in FY  1991 submitted  a written  report. 
9
 The  States  that  did perform  required  evaluations  frequently  submitted  the  written 
reports  late,  i.e., after  February  15.  For  example,  20 of the  38 States  (about  53 
percent)  who submitted  reports  in 1990 were  late.  In 1991, 15 of 32 States  (about  47 
percent)  submitted  reports  late.  Table  4 shows the  number  of States  submitting 
reports  late. 
TABLE  4 
THE  NUMBER  OF STATES REPORTING  LATE 
r 1 
MONIH(S)  LATE  STATES IN  STATES IN 
FY  1990  N  1991 
Less than 1 month  8  5 
I I 
1-2  months  6  5 
I 
I 
3-4  months  1  0 
I  I 
5-6  months  4  4 
I  1 
7-8  months  1111 
1OTAL  120  I  15 
10
 RECOMMENDATIONS

The  Family  Support  Act  of 1988 did not  achieve  its intended  purpose  of improving 
pre-eligibility  verification  to detect  inappropriate  AFDC  payments.  We  continue  to 
believe  that  significant  opportunities  exist to reduce  fraud  and  inappropriate  payments 
through  strong  pre-eligibility  review  systems.  However,  under  ACFS regulations, 
States  can  comply  with the  legislative  requirements  without  actually  improving  their 
pre-eligibility  verification  systems. 
We  also discovered  a major  disconnect  between  regulations  which  prescribed  no 
specific  pre-eligibility  verification  activities  and  evaluation  reporting  requirements  that 
focused  only on measuring  the  effectiveness  of fraud  investigative  units.  Even  more 
important,  the  current  reporting  requirements  fail to provide  ACF  the  information  it 
needs  to make  management  judgments  about  the  effectiveness  of specific  pre-eligibility 
measures  or to advise  States  about  how to improve  them.  Therefore,  we recommend 
that  ACF: 
1.	 Revise  its evaluation  reporting  requirements  to make  them  applicable  to  all 
commonly  used  types  of pre-eligikil.ity verification  measures,  not just  fraud 
investigative  units.  This will eliminate  a technical  problem  that  has made  it 
difficult  or unnecessary  for States  to report  annually  on pre-eligibility  systems 
such  as improved  computer  matching  protocols. 
2.	 Require  States  to periodically  evaluate  their  pre-eligibility  programs  and  report 
the  results  to ACF,  and  ensure  that  they  do so.  The  simple  annual  reporting 
requirement  now in effect  does  not  provide  the  kind  of information  needed  to 
determine  which  pre-eligibility  verification  techniques  work  best,  and  which  are 
cost  effective.  More  insightful  evaluations  are  needed.  The  ACF  needs  to 
provide  guidance  to the  States  as to what  kind  of evaluative  information  should 
be  supplied,  and  how often,  and  should  assess  the  quality  and  appropriateness 
of the  evaluation  methodologies  used. 
3.	 Conduct  or sponsor  its own independent  evaluations  of State  pre-eligibility 
programs.  Such  studies  should  use methodologies  of sufficient  rigor  as to allow 
identification  of approaches  and  techniques  that  are  most  effective  in reducing 
fraud  before  applicants  are  approved  for receiving  benefits. 
4.	 Provide  States  with information  on effective  pre-eligibility  verification  measures, 
based  on States  evaluation  reports  and  ACFS own independent  evaluations  of 
States  pre-eligibility  programs.  States  must  use the  most  effective  ways to 
prevent  inappropriate  payments  in the  AFDC  program.  With  the  new 
administration  streamlining  welfare  policy by focusing  on work  requirements 
and  limiting  benefit  periods,  attention  to eligibility will be  increasingly 
important.  AGENCY  COMMENTS

We  circulated  the  draft  report  for comment  to the  Acting  Assistant  Secretary  for 
Children  and  Families  (ACF),  the  Assistant  Secretary  for Management  and  Budget 
(ASMB),  and  the  Acting  Assistant  Secretary  for Planning  and  Evaluation  (ASPE). 
Appendix  B shows the  full text  of the  comments  provided  by ACF.  ASMB  and  ASPE 
did not  comment  on the  report. 
The  ACF  concurred  with  3 of our  4 recommendations.  It did not  concur  with  our 
recommendation  to revise  evaluation  reporting  requirements  to make  them  applicable 
to all commonly  used  types  of pre-eligibility  verification  measures,  rather  than  just  to 
fraud  investigative  units.  The  ACF  noted  in its comments  that  the  first year 
experience  with the  evaluations  did not  provide  pertinent  information  about  successful 
practices  States  use.  This  is consistent  with  our  finding  that  the  evaluation 
requirements  are  not  applicable  to commonly  used  types  of pre-eligibility  verification 
measures,  and  the  evaluations  did not  produce  useful  information  for either  ACF  or 
States. 
We  support  ACFS plans  to use State  demonstration  projects  to evaluate  the  impact  of 
various  verification  methods.  However,  it will be  several  years  before  the  results  of 
such an  evaluation  are  available.  In the  interim,  we believe  that  ACF  should  collect 
data  on the  effectiveness  of verification  measures  commonly  used  by States.  Such  data 
serves  as performance  indicators  and  provides  important  trend  information  to program 
managers  at the  Federal,  State,  and  Local  level. 
12
 PRIZ-ELIGIBILITYFRAUD DETIWHON MEASURES AND REPORTING 
REQUIREMENTS 
A-1  ...  . 
with 
I  flEGF  ~: 
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TU  .  STATE ADMINIS~~E  AND OTEER INTEREST= 
 
ORGANIZA~ONS  AND AGZNCI= 
SUE3ECT    Pre-Eligibility  Fraud Dete-ian 
 
Measures  and Reportfig  RequL-ements 
RELATED

REFERENC~E  S  . 45 CFR 235.3-11
. 
BACKGROUND  ..  On Aprii 20, 1989 an Inter&  Final 
Rule was published  in the FED=  REGIS=

that provided  for  (1) the estili~mt  of

pre-eligibility  fraud detection measures,  and

(2) an annual evaluation  of the effectiwess

of the pre-eligtiilitY  fraud detection

process.

REPORTING

~NsTRU~IQNS  :  In accordance  with  45 CFR 235.111  (c), the 
State agency is required  ea  make  a  writt= 
evaluation  for each Federal  fiscal year of 
de  effectiveness  of its v=eification 
measures  and submit  a  copy  of the evaluation 
to the FSA Regional  Office by February L5 af 
The firs=

the following  Federal  fiscal year. 
ot these reports  (the one for FY L990) *  due

in the FSA Region2&  Office by  F*~  L5J 
199L.

The  must cantain  ab a.dnimUIU th= 
repo* 
fallowing ixzfo-tion  for eack af *  p
eLigibilitY verifi=tiom  meas~  oanx~ 
in the State plan: 
(1)  The n-er  of suspe-=  fraud case 
identified.  , 
. 
- . . .  .. ---..>  -  ---  
-, 
z

(4)  The total prajected ~on~  dollar

amouna resulting  f~om reduced grants and

cases found ta be ineligible.

In  addition, the repart mus& cantain a  hrie~ 
narrative  assessment  of the relative 
effactiveness of each of the pre-eligib ility 
verification  measures  contained  in the Sta=e 
plan.  This assessment  should be based on &e

&zmbers reported  above.  Collateral

information  and other evaluation  methods

be used, but are nok required.

ATTACHMENT  :  Final Rule

October  1, 1989

INQUIRIES TO  :  Regional Administrators,  FSA

4Zason  Turner

Directar

Office  af FadLy  Assistance
 APPENDIX  B 
AGENCY  COMMENTS 
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DATE :  by  26,  1993,  -> m
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TO:  Bryan  B.  Mitchell  A  .:? c+ ~ 
Principal  Dep	 N  i -.  m 
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.:(~,~ 
FROM:  Laurence  J.  Lo  ----. - ,,> u 
Acting  Assis 
?.pR 
for  Children  and  Families  ?A=> 
Z 
SUBJECT  :  Comments  on  the  OIG  Draft  Report  Entitled  AFDC  Pre-
Eligibility  Verification  Measures,lS  OEI-O4-9I-OO1OO 
We  have  reviewed  the  subject  report  and  offer  the  following 
comments  with  regard  to  the  recommendations.  We  also  have  some 
technical comments  and  suggestions  for  your  consideration  in 
preparing  the  final  report. 
1.	 That  ACF  revise  its  evaluation  reporting  requirements  to 
make  them  applicable  to  all  commonly  used  types  of  pre-
eligibility  verification  measures~  not  just fraud 
investigative  units. 
ACF  co mment 
We  do not concur, because the first year~s experience did not 
provide pertinent information regarding successful practices.  AS

an alternative to revising our reporting requirements, we are

examining replacing the reporting requirements with state

demonstration projects that will include rigorous evaluation

designs to assure that valid conclusions can be made on the

effectiveness of pre-eligibility fraud detection measures.

.
OIG  Rec~endatlm 
2.	 That ACF require States to periodically evaluate their pre

.digibilitygmqrams  and repo~  the resullw.~o ACF.,-d  .,,,,
 

-.

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hey do ~0-
-.

ACF  co~ent

We  cmcur.  It  is our practice to provide feedback to States. 
However, the first years experience did not provide pertinent

and useful informatim.  As mentioned in eur =omments to

recommendation 1, we are considering carefully designed  State 
demonstration projects that will provide productive information,

and at the same time, be less burdensome on the States.

--.  --- ., 
. 
Page 2 - Bryan B. Mitchell  .. 
OIG Recommendatio~

3.	 That  ACF  conduct  or  sponsor  its  own  independent evaluations   
of  State  pre-eligibility  programs. 
w F Comment

We  concur. 
OIG Recommendation 
4.	 That ACF provide States with information on effective

pre-eligibility verification measures, based on States

evaluation reports and ACFIS  own  independent  evaluations  of 
States!  pre-eligibility  programs. 
ACF  CoIIUUent
We  concur,  however,  the  information  obtained  from  the  first 
years experience did not provide pertinent and useful 
information regarding effective practices on pre-eligibility 
verification measures.  As indicated in our comments to 
recommendation 1, we are considering carefully designed State

demonstration projects that will enable us to provide States with

information on effective measures.

Tec hn ical  Comments 
1.
 First full  paragraph  under  9RECOMXBNDATIONS,~  page  ii.  The 
third  sentence  of  this  paragraph  states:  However,  ~d= 
ACFQS  regulations,  States  can  comply  with  the  legislative 
requirements  without  actually  improving  their  pre-
eligibility  verification  systems.m  This  is  incorrect.  The 
regulations  at  45  CFR  235.111(c)  require  State  agencies  to 
subntit  appropriate  plan  amendments  to  the  ACF  Regional 
Office based on the findings ef the annual evaluation.  The 
clear regulatory expectation is that  if the annual 
evaluation shows that certain measures  ineffective in 
are 
preventing fraud, the State agency will take corrective

action to remedy the deficiency.

.. 
A..  ,.- .::.!. .,.,...,,
 ...,..
  .  ....  .

-.< 
2.
 .Y~fiZ-:q~&aph  under -~==~=  ~9e  40  ~e+cond  .:.

andtiird sentences sta~  thatz  The implementing

regulations were broadly written, allowing States to use a

range of fraud detection measures that could be tailored to

their own needs and circumstances.  ACFfs regulations did

not require a particular ~rogram, but gave examples of what

many States were already doing.  These statements neglect

to point out that the statutory language of section

402(a) (45) of the Social Security Act is imprecise and only

calls for States to implement appropriate measures*to

...-.  ... .  .  . 
Page 3- Bryan B. Mitchell

detect  fraudulent  applications.  The  examples  included  in

oux  regulations  at  45  CFR  235.ill(b)  (2)  were  rell~le

measures  that  a  number  of  States  found  effective  m

Specifying ~datoq  

identifying  ineligible  applications. 
measures in these regulations was inappropriate since there

Wmagic bulletsw with respect to techni~es  or

~oc~dures  for detecting fraudulent applications.  We

suggest that you revise this paragraph to include the

aforementioned  points. 
our comments or if we can be of 
If  you  have  any  Cpestions  about 
further assistance, please do not hesitate to call. 
. .  ...,.   .. 
,..  . 
...