Department of Health and Human Servces

OFFICE OF

INSPECTOR GENERAL

A REVIEW OF HHS CHILDREN'

PROGRAMS

:vCE. 
Richard P. Kusserow 
INSPECTOR GENERA 
q",faa 
I1 
MACH 
1992  OFFCE OF INSPECfOR GENERA 
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 Servce' (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 Offce of Audit Servces, the 
Office of Invcstigations, and the Offce of Evaluation and Inspections. The OIG also informs 
the Secretary of HHS of program and management problems, and recmmends courses to

correct them.

OFFCE OF AUDIT SERVICE 
The OIG's Office of Audit Servces (OAS) provides all auditing servce for HHS, either by

co'nducting audits with its own audit resources or by overseeing audit work done by others.

. Audits examine the performance of HHS programs and/or its grantee and contractors in 
carryng 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 ecnomy and effciency throughout the Department. 
OFFICE OF INTIGATIONS 
The OIG's Office of Investigations (01) conducts criminal, civi, and admitrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 
cral 
unjust enrichment by providers. The investigative effort of 01 lead to  convictions, 
overs 
administrative sanctions, or civil money penalties. The 01 also  State Medicaid fraud 
control units which investigate and prosecute fraud and patient abuse in the 
Medicaid program. 
AN 
OFFCE OF EVALUATION  INSPECTONS 
The OIG's Offce of Evaluation and Inspections (OEI) conducts shor-term management and

program evaluations (called inspections) that 
lOCUS on isues of concern to the Department

the Congress, and the public. Tbe findings and recmmendations contained in these inpetion 
report generate rapid, accurate, and up-to-date information on the effciency, wlnerabilty, 
and effectiveness of departmental programs. 
This report was prepared under the direction of Emile Baebel, Chef, Public Health and 
Human Servce, Offce of Evaluation and Inspetions. Participating in the project was: 
Susan E. Hardwick  Servces 
Department of Health and Human 

OFFICE OF

INSPECTOR GENERAL

REVIEW OF HHS CHILDREN'

PROGRAMS

Vl' 
Richard P. Kusserow 
INSPECTOR GENERA 
OEI-12-91-01510 
cIa  EXECUTIVE  SUMMAR 

PUROSE 
The purpose of this report is to consolidate recent Office of Inspector General (DIG) 
findings on programs of the Department of Health and Human Servces (HHS) that 
protect the health and welfare of children. 
BACKGROUN 
Children need adequate income, access to health care, positive opportunities for 
development, and stable family environments. HHS programs touch on all these 
fundamental needs. Some HHS programs have recently been expanded to provide 
more servces to children, and the Administration for Children and Familes (ACF) 
was created to faciltate coordination and cooperation among children s programs. 
While change is underway to improve servces for children, more improvements could 
be made. In the past few years, the OIG has released a number of reports 
recommending management or policy improvements in the programs of the 
Department that serve children. Our recommendations were targeted at improving 
ervces and program effciency and effectiveness. Agency offcials have 
the quality of 

implemented some of these recommendations. 
SCOPE 
This report has been organized into four broad issue areas that deal with the problems 
that some children face: income, health care, educational and developmental 
opportunities, and living environment. In each issue area, we identify how the 
Department deals with specific aspects. of these problems and the fidings of DIG 
reviews. 
ISUE 
ADEQUATE INCOME 
Maxmizing family economic self-suffciency through child support 
A specifc set of practices at the State and local level generally results in 
establishing patemity, the first step in 
child support. 
Many opportnities exist for improved child support collections with both AFDC 
and non-AFDC absent parents. 
Ineffective gamishment systems hamper child support collections.  Problematic cash management practices weaken the child support program. 
Reducing error and fraud in AFC 
Successful anti-fraud efforts help reduce the AFDC e"or rate. 
HEAll 
ADEQUATE 
Ensuring that States expand their eligibilty under existing Medicaid policy for 
pregnant women and children 
Many barrers ext in implementing new Medicaid policies for pregnant women 
and children. 
Reducing infant mortality and morbidity . 
Prenatal and perinatal care programs can be improved by special management 
strategies. 
Ensuring that children have health insurance 
Detecting and pursuing available health care for children of absent parents could 
be greatly improved. 
EDUCATIONAL AN DEVELOPMENTAL OPPORTUES 
Exanding and managing Head Start effectively 
The Head Start expansion poses many management challenges. 
Head Start partcipants from dysfnctional families are more difcult to 
serve. 
Exanding the monitoring effort of Head' Start to ensure program quality 
Procedures and tools for monitoring the Head Start program are incomplete. 
Ensuring that children receive high quality child care 
State child care regulations vary considerably from State 
to State.  STABLE LING ENVONMENT 
Identifyng potential administrative changes in the foster care system to control costs 
Administrative costs have rien dramatically, but most of the costs are actually for

child placement services.

Foster care maintenance payments are often made to ineligible children.

Improving the quality and availabilty of servces in the State child 
welfare system 
Administrative barrers cause excessive delays in freeing children for adoption. 
Placing minority children in adoptive homes often requires special practces. 
Improving access to treatment and support servces for drug-exposed and abandoned 
children 
Crack babies have a tremendous impact on the child welfare 
system. 
Many obstacles ext to placing boarder babies in adoptive homes, but some cities 
are successfl. 
iii  . . . . . . . . . . ..  ...  ...  ...  ...  ...  ...   ..  .... .  ....   '....   ....   .... ... . ...  ...  ....   .. .   ....   ....  . ... .  ....  .  .....    .....    .. ..    .... .   . ... .  .  .. ..  .  .. ..  .  . ... .   . ... .  .  ... ..    . ....     .....     ..... .    . .... .     ......      ......      ......      ......     ..... .....    . 
. . . ..  ...   ...   ...   ...   ...   ...   ....    .....     .....     .....     ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      ......      .....     .....     .....     .....     .....     .....     .....     .....     .....     .....     ....    ... .  ... .  . . . ..   ..  ...   ...  ...   ...   .... .  
TABLE OF CONTENTS

SUMY 
EXECUIV  D..... 
80  0 ..".0.0",. 
INODUCTION. . 
ISSUES  . . . . . . . . . . . . . . . . . . . . . . 3

Adequate Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . . . . . . . . . . . 3

Maxmizing family economic self-suffciency through child support. . . . . . . . . 3

Reducing error and fraud in AFDC 
............................... 5

Adequate Health Care  . . . . . . . . . . . 6

Ensuring that States expand their eligtbilty under existing Medicaid policy for

pregnant women and children  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Reducing infant mortality and morbidity. 
. 7

Ensuring that children have health' insurance  . . . . . . . . . . . . . . . . . . . . . . . . 8

Educational & Developmental Opportunities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Exanding and managing Head Start effectively

Exanding monitoring effort of Head Start to ensure program quality. . . .. 

Ensuring that children receive high quality child care

Stable Living Environment 
Identifyng potential administrative changes in the foster care system to control 
costs 
Improving the quality and availabilty of servces in the State child welfare 
system 
Improving access to treatment and support servces for drug-exposed and 
abandoned children 
ENDNOTES  INTRODUCTION

PUROSE 
The purpose of this report is to consolidate recent Offce of Inspector General (DIG) 
findings on programs of the Department of Health and Human Servces (HHS) that 
protect the health and welfare of children. OIG reports generally examine a specific 
issue dealing with a specific program, but the range of subject matter the DIG has 
examined has allowed for coverage of broad Issues and the programs related to those 
issues. By consolidating the main points of these reports, we hope to provide a more 
comprehensive examination of children s issues and how the Department is dealing 
with those issues. 
BACKGROUN 
Many of today s children face significant hardships--broken familes, malnutrition, 
physical and emotional abuse, disease, and lack of developmental and educational 
opportunities. These hardships have been compounded by societal problems such as 
drugs, povert, homelessness, and AIS. No single solution exists for the problems 
that face children today. Children need adequate income, access to health care 
positive opportunities for development, and stable family environments. 
Programs of HHS touch on all these fundamental needs. Aid to Families with 
Dependent Children (AFDC) and Child Support Enforcement (CSE) help to ensure 
income security for familes. Medicaid provides health care to children. The Head 
Start Program provides educational and developmental activities during the formative 
pre-school years. The Foster Care and Adoption Assistance program works to ensure 
that vulnerable children live in stable environments. Numerous smaller programs 
address children s needs as well. 
The Secretary has a strong commitment to improving HHS programs for children as 
evidenced in his Program Directions, a departmental strategic plan for dealing with 
these issues now and in the near future. Almost all of the Program Directions involve 
children s programs either directly or indirectly. 
Some HHS programs have recently been expanded to provide more servces to 
children. By FY 1991, the Head Start program was projected to expand enrollment by 
an additional 150 000 children as well as to improve the quality of servce provided. 
The Omnibus Reconcilation Act (OBRA) of 1989 required all States to set a 
minimum Medicaid income eligibilty threshold at 133 percent of the Federal poverty 
level for both pregnant women and children below age six.  OBRA 90 called for 
States to annually phase in coverage for all children up to age 19 in familes with 
incomes below 100 percent of povert.2 Child care legislation was enacted in 1990 
and regulations have been developed (although not yet finalized).  Another step forward for children was the creadon of the Administration for Children 
and Familes (ACF), which consolidated the Family Support Administration. and the 
Office of Human Development Servces. . Now, many of the programs that provide 
servces to children are administered by one agency. The consolidation will facilitate 
coordination and cooperation among children s programs. 
While change is underway to improve servces for children, more improvements could 
be made. In the  , the DIG has released a number of reports 
past few years
recommending management or policy improvements in the programs of the 
'Department that serve children. Our recommendations were targeted at improving 
the quality of servces and program efficiency and effectiveness. Agency officials have 
implemented some of these recommendations. 
SCOPE 
This report has been organized into four broad issue areas that deal with the problems 
that some children face: income, health care, educational and developmental 
opportunities, and living environment. In each issue area, we identify how the 
Department is involved in dealing with specific aspects of these problems and the 
findings and major recommendations of DIG reviews. The following areas and 
programs are covered: Child Support Enforcement, Aid to Familes with Dependent 
Children, Medicaid, prenatal care tart, child care, foster care, adoption, and 
, Head 
drug-exposed children.  ISSUES

ADEQUATE INCOME 
The Department of Health and Human Servces administers two priary programs 
that provide familes with income assistance and security--Child Support Enforcement 
and Aid to Familes with Dependent Children. Child support enforcement, in 
reinforcing the need for individual and parental responsibilty and as a method of 
offsetting the AFDC program, is a strong and important element of the Family 
Support Act of 1988. The CSE program provides grants to States to enforce 
obligations of absent parents to support their children by locating absent parents 
establishing paternity when necessary, and establishing and enforcing child support 
orders. All familes with an absent parent can receive servces from CSE, whether 
AFC 
they receive  benefits or not. Since many single-parent familes live close to the 
poverty level, the regular payment of child support may be essential in avoiding 
welfare dependency. 
When child support is not paid or is not suffpient, AFC becomes the income source 
of last resort. More specifically, a family unit becomes eligible for AFDC when a 
dependent child, under 18 years of age, is deprived of parental support as the result of 
a parent s death, mental or physical incapacity, loss of employment, or most common 
absence from the home. With the passage of the Family Support Act of 1988, the 
AFDC philosophy shifted to assisting needy children and parents in moving from 
welfare dependency to self-suffciency. 
The Office of Inspector General conducts reviews of the CSE and AFC programs to 
ensure that eligible persons are receiving servces and benefits, and that the programs 
run efficiently and effectively. DIG studies have addressed the problem of lack of 
adequate income for children and familes from the perspective of (1) maxizng 
family economic self-sufficiency through child support and (2) reducing error and 
fraud in AFDC. 
fam 
axmizin  ecnomic self-sufciency though chid support 
One of the main steps towards ensuring income security of children and familes is 
maxmize family economic self-sufficiency through child support paid 
by the absent 
AFC 
parent, both for  familes and non-AFDC familes. Failure to pay child support 
can have devastating economic effects on the custodial parent and children. In many 
3 However
cases, welfare dependency is the only option. , even though child support is 
a tremendous resource, approximately one-third of non-custodial parents do not pay 
child support and many others do not pay what the court has ordered them to pay. 
The crucial first step of child support enforcement is establishing paternity and the 
DIG examined effective paternity establishment practices. In addition, we have also 
found ways to increase child support collections through periodically and systematically  reviewing absent parent earnings and through strengthening wage garnishment 
programs. 
res 
spci set of prctes at th State an loal leel genUy 
chi 
establihig patem, th  in  support 
fi stp 
Establishing paternity is the first step towards making certain that child support 
is paid. Different States have different approaches and practices for paternity 
establishment. However, some practices are more effective than others. 
DIG study found that successful paternity establishment is the result of the 
following practices: (1) soliciting support for the paternty establishment 
program, (2) clarifyng responsibilty for obtaining intake information, (3) 
promoting improved parental cooperation, (4) streamlining adjudication of 
paternity establishment, and (5) instituting effective case management 
5 These practices can 
controls. improve the rate of paternity establishment. 
opport er 
chi 
Many  for imprved  support collctns wih both AFDC 
and non-AFDC absen parents 
AFC 
We found that while  absent parents may have little or no earnngs when
AFC 
eligibilty is initially established, their earnings generally increase over 
AFC 
time. Accordingly, child support collections of  parents could be 
increased significantly if CSE agencies would systematically review the earnings 
of absent parents.6 In addition, we found that a logical, systematic review of 
non-AFDC child support cases would also substantially increase child support 
collections. Some of the non-AFC cases did at one time receive AFC 
benefits and some arrearages were incurred at that time. We estimated 
between $765 and $850 milion could be collected by targeting those parents 
AFC 
currently earnng over $10 000, whose cases presumably represent 
arrearages stil owed. The Federal savings represented by this range would be 
approximately $245 to $270 mil on. 
We recommended that the Offce of Child Support Enforcement (OCSE) 
annually match Social Security Administration (SSA) or Internal Revenue 
Servce (IRS) records, relying on data submitted by the States. The ACF 
agreed that there is a great deal of potential for increasing child support 
collections, but ACF did not concur with the recommendation since it goes 
beyond the review and modification requirements of the Family Support Act of 
1988. 
A specific group of non-AFDC parents that we examined was Federal 
employees. We identified more than 65 000 absent parents who work for the 
Federal Government and who may owe as much as $284 milion in past due 
child support. We estimated that current annual child support payments could 
be increased conservatively by $46.6 milion. We recommended that States 
implement immediate wage withholding. The OCSE agreed with the  recommendation and States were to implement this requirement by November 
1990. 
ha 
Ineectie garnhm syst  chi suport collns. 
Although wage withholding is an effective method of increasing child support 
collections, employers encounter problems with garnishment systems. We 
found that Federal and non-Federal employers had systems for processing child 
, but that the 
support garnishments in compliance with Federal regulations
employers encountered impediments to timely and effcient processing of child 
support garnishments. These impediments include lack of detailed guidance 
regarding State and Federal laws for child support garnishments, lack of 
standardized forms for court orders, State and court requests for data that 
require departures from their normal pay and disbursement cycles, and lack of 
electronic funds transfer capabilty. by State withholding agencies and other 
collection authorities. We determined that only one Federal and one non-
Federal employer in our sample collected fees to cover costs of processing child 
support garnishments.

We proposed that ACF direct State CSE agencies to establish an electronic 
fund transfer system that has the capabilty of expediting the payment process. 
The ACF has moved forward with the Electronic Funds Transfer Pilot Program 
which will transfer funds electronically to provide a seamless flow of collections 
and information from the employer to the child support agency. 
Problemati cash managem prcties weak th chi support pram. 
Some of the cash management practices in the State CSE programs are 
problematic. In some CSE programs (1) interest and other income is not offset 
against child support expenditures, (2) controls are not adequate for handling 
unidentified payments, (3) collections are deposited untimely and/or in non-
interest bearing accounts, and (4) un distributable/unidentified IV-D collections 
are not adequately allocated between the Federal and State Government to 
distribute the applicable Federal share. We recommended that OCSE work 
with the States to improve cash management practices. As a result, OCSE 
review the totality 
distributed a nationwide bulletin requesting that each State 
of their operations for weaknesses in internal control over handling 
collections. 
AFC 
Reducing error and fraud in 
Limited resources at the State and Federal levels force the AFDC program to avoid 
payment errors as well as ensure that benefits go to those familes who are truly 
eligible. Error control and fraud control are crucial components of the AFDC system; 
l:lt is why the DIG has focused on those areas.  Succes ant-frud efort help rede th AFDC enr rate 
We identified three reasons some States are more 
successful than others in 
AFC 
reducing  payment errors and determned those factors that prevent most 
States from meeting their AFDC error rate reduction goals. First, the threat of 
AFC 
fiscal disallowances compels States to emphasize 
error rate reduction. 
Second, States successful in error reduction have fostered the attitude that 
every person in the AFDC network statewide is important and accountable for 
assuring accurate benefit payments.u Third, pre-entitlement fraud screening, 
Welfare Fraud Early Detection and Prevention 
as used in the California 
program, has been effective at reducing AFDC fraud. This program 
investigates irregularities in applications quickly and effciently, disallowing 
applicants who provide misinformation on their application. On the other 
hand, most traditional law enforcement approaches to reduce AFC fraud 
have been ineffective. As a result of the DIG study, ACF revised regulations 
effective October 1989 to require that States implement a pre-eligibilty fraud 
detection and prevention system as a condition of State plan approval.12 
ADEQUATE HEATH 
Medicaid is the major HHS program that helps finance health care for children when 
they are not covered by private insurance. It provides grants to States for medical 
care for low-income persons, the majority of which are children and familes. Each 
State administers its own Medicaid program, setting eligibilty and coverage standards 
within broad Federal guidelines. Within Medicaid, the Early and Periodic Screening, 
Diagnosis and Treatment (EPSDT) program is specifcally for children and is designed 
to assure the availability and accessibilty of required health care servces as 
well as 
help children use servces effectively. 
Other programs within the Department focus on delivering health care servces to 
children and mothers. These programs include the Maternal and Child Health Care 
Block Grant and the Community and Migrant Health Centers. Additionally, a special 
initiative, the Comprehensive Perinatal Care Program, has provided funding to 
community and migrant hea th centers, specifically for periatal care. 
In addition to the specific programs that provide health care, the CSE program is 
required by statute to assure that children of-absent parents are covered by the absent 
parent s health insurance. This requirement 
has the potential to be the deciding factor 
in whether a child receives health care. 
The DIG reviews whether the health programs are ensuring that their servces are 
accessible to eligible children and familes, run in an effective manner, and utilzed 
appropriately. Recent DIG work has examined Medicaid expansions to ensure that 
States effectively expand their eligibility for pregnant women. Studies have assessed 
managing and implementing infant mortality programs. The DIG has also reviewed  the CSE program s compliance with the requirement that children be covered by their 
absent parent s health insurance. 
Enurg  extig 
that States exand their eligibilty under  Medcad 
policy for
pregnant women and chidren 
Lack of adequate health care for women and children prompted Congress to enact 
significant Medicaid eligibilty expansions in recent years. The Omnibus Reconcilation 
Act (OBRA) of 1986 enabled States to expand eligibilty for women to receive 
Medicaid-covered prenatal care.13 However, we have found problems with these 
. expansions. 
Many barr ext in impleg ne Medaid poli  pregnt wome 
for 
and chilen.

We found that problems exist in implementing the new Medicaid expansions. 
First, some States are not aggessively enrolling pregnant women in Medicaid 
and do little or no outreach.  Next, women are not completing the 
cumbersome application process due to lengthy, complex forms and multiple 
application sites and appointments. Lastly, States have diffculty recruiting 
prenatal care providers because many providers do not accept Medicaid 
patients. This shortage of obstetricians limits States' capacity to deliver 
adequate and timely prenatal care. 
To address these problems, we recommended that HCF A develop a 
comprehensive outreach strategy, simplify and streamline the application 
process, and develop incentives to increase provider participation. 
Reducig inant mortty and morbidity 
In 1990, the United States ranked 21st . among industrialized countries in infant 
mortality-- 1 deaths per 1000 live births.  Although the infant mortality rates in the 
United States have decreased during the past decade, the rate of decline has slowed in 
recent years. Infant mortality rates among certain ethnic groups and in certain urban 
and rural geographic area remain highP Federal, State, and local programs exist to 
help reduce the infant mortality rate. DIG studies have examined some of these 
programs. 
petal 
Prenatal and  care programs can be improved by specil management 
strateg. 
The Comprehensive Perinatal Care Program (CPCP) provides supplemental 
funds for enhancing perinatal care systems in community and migrant health 
centers to improve the pregnancy outcomes and health status of women and 
infants served by these centers. We found 
that the goals and objectives set 
forth in CPCP grant proposals approved by the Public Health Servce (PHS)  have been in accord with the intended purposes of the program. However
, we 
also found that many areas of the country with high rates of infant mortality
have not been receivg CPCP funds. In response to our report, PHS revised 
the grant approval process to require CPCP grantees to submit both a budget 
and a narrative report detailng the specific uses of the funds. In addition, PHS 
reexamined its approach for allocating CPCP funds to assure that these limited 
funds are targeted to areas of highest need.

On the local level through an in-depth review of the Boston Healthy Baby 
Program, important insights we gained into how infant mortality programs can 
be managed to achieve the best results include (1) using vital statistics data to 
target geographical areas where. high risk women reside and developing 
aggressive outreach networks in those target areas using various neighborhood 
resources; (2) using a standardized screening process to identify women at high 
risk within the target area and developing program guidelines for triage 
purposes; (3) ensuring that contact with program staff occurs at time of 
screening; (4) placing first level priority on funding for clinical servces that are 
stable and adequate to meet demand and developing formal liages between 
prenatal care sites and hospitals to enhance continuity of care for each case; 
and (5) providing educational and social servces to high risk women beginning 
in the first trimester and using multidisciplinary staff to design servce plans 
based on individual client needs.  . These implementation strategies can 
contribute significantly to the success of Federal, State, and local efforts to 
lower the incidence of inant mortality. 
Enurg 
that chidren have heath inurance 
Children must have health insurance to receive adequate health care. However, the 
National Commission on Children estimates that 8.3 milion children do not have 
health insurance; one-half of these children live below the povert line. Medicaid 
20 Some children lack coverage 
covers only an estimated 59 percent of. poor children.
because the parents' employers do not provide health insurance. 21 However, many 
children belong to familes in which an absent parent may be eligible for health 
insurance through an employer that could provide coverage for the employee 
children. Although required by law, this does not always happen. As a result, the 
children may remain uninsured, or, if eligible, they may receive Medicaid, thus making 
Medicaid the primary payer. We have examined this issue of absent parent liabilty in 
depth and found significant room for improvement. 
purg 
coul
Dbeteec tgig raend atly iamvailpbler oheavlthe cdare  for chilen of absent parents 
To ensure health coverage for children, the DIG found that State CSE agencies 
should petition for including medical support as part of all child support orders. 
This would allow State Medicaid programs to avoid expenditures for medical 
servces for the children of these covered absent parents and could result in  Medicaid program savings of $33 milion annually.22 23 We then determined 
that, as of June 1, 1990, only 46 percent of State CSE programs had criteria 
developed by State Chid Support Enforcement 
agencies to target cases with 
high potential for medicai support and to identify the most effective criteria and 
practices, as Federal regulations require. Further, we found that less than half 
of the 54 States can modify existing court orders for the sole purpose of 
including medical support. 
We recommended that ACF enforce current regulations 
regarding targeting 
medical support and place additional emphasis on its importance. As 
a result 
the requirement for States to develop criteria is now being audited for 
substantial compliance, and the review of targeting criteria is now included in 
the Program Results Audit Guide. The ACF has also 
since issued regulations 
that state that the availabilty of reasonably priced insurance must be treated as 
adequate grounds for petitioning for 
modification of the support order. 
Additionally, a loophole exists for some absent parents due to the Employee 
Retirement Income Security Act of 1974 (ERISA). Because self-insurers are 
exempt under ERISA from State regulation of insurance, ERISA prevents 
States from assuring that many AFC dependent children are covered under 
their absent parents' group health insurance plans. The pool of self-insurers 
has grown considerably since passage of ERISA, increasing the signficance of 
this gap in coverage. In 1985, almost half of firms with 100 employees or more 
were self-insured, doubling the figure from four years earlier. 
As more and 
more businesses self-insure, the exposure for the Medicaid program in fiancing
health care for employees and their children grows. We recommended that 
HCFA and ACF address ERISA preemption problems when drafting a 
legislative proposal to require States to prohibit discrimination in insurance 
plans on the basis of residence. 
EDUCATIONAL AN DEVLOPMENTAL OPPORTUNIES 
HHS funds programs that provide developmental and educational activities for 
children that might not have them otherwse. Foremost of these programs is Head 
Start, providing comprehensive educational, nutritional, social, health and other 
services primarily to low income preschool children and their familes. It has recently 
been expanded to include many more children and to strengthen the program. 
HHS funds a number of child care 
programs. The major new program resulted from 
the passage of the Child Care and Development Block Grant Act of 1990. This block 
grant will provide financial assistance to low-income familes to help them find and pay 
for quality child care. It will also improve the quality and increase the supply of child 
26 Other child care programs include At-
care available to all families.
Risk Child

Care, JOBS Child Care, Transitional Child Care, and many smaller programs such as 
Comprehensive Child Development Centers, Child Care Licensing Grants, Dependent  Care Grants, Temporary Child Care and Crisis Nurseries, and Child Development 
Scholarships. 
As with all HHS programs, the Inspector General has oversight authority of the Head 
Start program. The OIG conducts reviews of the Head Start program to ensure that 
it provides quality servces to eligible children and monitors the effectiveness and 
efficiency of its management. To that end, we have examined the program 
responsiveness to familes with many problems, its management and monitoring, and 
its capacity for expansion. Additionally, with the growing number of child care 
initiatives and concern over the quality and safety of care, we have also examined 
enforcing State child care regulations. 
Sta effecely 
Exanding and managig Head 
Because of the recognized need for educational and developmental activities, Congress 
increased funding for the Head Start program from $1.24 bilion in FY 
1989 to $1.95 
bilion in FY 1991. Total enrollment was expected to increase from 451,
000 chidren 
to nearly 600 000 children.27 In recent years, Head Start staff have expressed 
concern over the growing number of multiproblem familes enrollng in the program. 
Because of the severe nature of the problems in some of the famies, they are unable 
28 Both the rapid expansion and the 
to benefit fully from the Head Start program.
participants from dysfunctional familes pbse management challenges for the Head 
Start program, and we examined these areas to assist ACF in meeting these 
challenges. 
exnsn  managem 
Head Start  chaUeges. 
Th  poes many 
We assessed the Head Start system s capacity to successfully manage the rapid 
enrollment expansion and found that it presents problems. First
, grantees are
meeting enrollment expansion goals but are experiencing problems in obtaining 
suitable space. They believe that more lead time for expansion implementation 
will help resolve this problem. Additionally, 
grantees express more optimism
than Federal staff that enrollment expansion wil improve the quality of 
servces. Both regional and headquarters Head Start staff claim a serious lack 
of resources to assist and assess grantees in upcoming expansions, as well as a 
lack of timely information on grantee enrollment progress. 
In response to the study, ACF added 13 additional staff members to 
headquarters in FY 1991, and more staff will be added in the regional offices if 
the budget permits. The ACF also stated that every effort will be made to 
provide more lead time to grantees, and to track expansion progress, a data 
collection system is being considered. 
As an additional check on the management capacity of Head Start grantees, we 
analyzed the results of over 1 200 nonfederal audits of individual grantees 
conducted in the three y  ars prior to the expansion. As a result, we were able  to alert the Head Start program to problems of accountabilty, grants 
management, and cash management. We recommended that the ACF 
financial management and accountabilty, 
reevaluate all important aspects  of 
inc1uding technical assistance, monitoring, financial reporting, trackig audit 
reports, and audit resolution. We also recommended financial management 
capabilty reviews for new grantees and traini  g and oversight to correct 
persistent deficiencies.

di 
Hea Start partpant frm dysftinal fami are more  to sere. 
For many reasons Head Start participants from dysfunctional familes are more 
difficult to serve.  , mental, and 
Dysfunctional. familes face serious physical
social problems. These comprehensive needs of dysfunctional familes create 
special challenges for Head Start grantees, but almost all grantees believe that 
Head Start is the best program for children from dysfunctional families despite 
additional demands placed on staff. Income guidelines, performance standards 
and lack of resources limit grantees' abilty to serve some of the children from 
dysfunctional familes who are not eligible for Federal "safety net" programs. 
We recommended that Head Start revise its enrollment criteria to provide 
greater flexibilty to enroll children from dysfunctional familes and use its 
discretionary grant authority to develop ways of providing better access to 
community resources and to develop and test new and better approaches for 
Head Start grantees to assist dysfunctional familes. 
progr 
Exanding monitorig effort of Head Sta to ensure  quaty 
Program monitoring is essential for a successful Head Start program. Section 651 of 
the Head Start Act requires ACF to perform periodic evaluations and cost analyses to 
measure program impact as well as Head Start agencies' abilty to perform grant 
activities. 
Procedes and tools for monirig the Head Start prom are inomplete. 
We found that monitoring the Head Start program is dificult because ACF has 
not established or implemented procedures necessary to measure performance 
of Head Start agencies. Although performance standards have been 
established, ACF has not developed the needed criteria to determne 
the extent 
of an agency s compliance with these standards. Also, ACF has not formalized 
procedures needed to effectively manage high risk agencies in its program 
instructions. Because of this, we recommended that ACF establish and 
implement improved procedures to assure that the extent of an agency 
compliance with the performance standards is determined and used as a basis 
33 ACF agreed with our 
for establishing uniform ratings for agencies.
recommendation and plans to continue to make improvements in the Head 
Start monitoring system which is ACF's most important mechanism for assuring 
program compliance.  Monitoring is also diffcult because the data maintained on the management 
information systems utilized in the Head Start program is incomplete. The 
incomplete data raise concerns as to their accuracy and usefulness to program 
offcials for evaluating program performance, analyzing operating costs, and 
34 As a result 
assisting in making decisions about program administration.
ACF currently has underway several efforts which will improve inormation 
systems. 
The statute requires every Head Start grantee to conduct an annual self-
assessment of its program, but the regulations do not provide guidance on how 
self-assessment should be done. Despite the lack of guidance, we found that 
virtually all grantees are conducting 
self-assessment annually, as required. 
Nearly all grantees use the Self Assessment Validation Instrument (SA VI) for 
conducting self-assessment, but many have concerns about its length 
complexity, and comprehensiveness. 
Ensurg that chidren recive high quaty chid cae 
As a result of the changing demographics of the work force, more children are placed 
in day care, and they should receive high quality care that provides developmental 
opportunities. To that end hild Care and Development Block Grant (P.
, the  L. 101
508) was enacted on November 5, 1990. 'States are required to use at least 20 percent 
of the block grants funds to improve the quality of child care provided. Areas where 
States may use the funds are monitoring and complyig with State and local licensing 
36 We examined current State regulatory enforcement 
and regulatory requirements.
efforts in child care as well as effective State enforcement practices. 
chi  consbly frm 
State 
care r  ti1l vary  State to State. 
Regulations regarding child care arrangements varied significantly among the 
States. Many tyes of settings were not regulated. Even when a setting was 
regulated, the nature and force of the regulations varied in such areas as health 
and safety requirements, child care staff requirements and staff-to-child ratios. 
Enforcing the regulations that did exist was just as problematic; inspections 
were time consuming and legal sanctions were diffcult to enforce, even in cases 
of imminent danger. 
We also identified effective practices which States should consider adopting to 
improve their enforcement of existing regulations. These practices included 
administrative closures, consent agreements, investigative protocols, inspection 
review techniques, monetary incentives and penalties, and training and technical 
assistance for providers.
 STABLE LWNG ENVONMENT 
Many HHS programs seek to promote family preservation and to protect vulnerable 
children living in unstable envionments.  E of the Social Security Act or 
Title 
Foster Care and Adoption Assistance reimburses States for the cost of maintenance 
payments and administrative costs associated with running the program. In the 
adoption assistance portion of Title N-E, HHS reimburses States for administrative 
costs incurred in running the program and for adoption subsidies to familes who 
adopt special needs children. The Title N;.BChild Welfare Servces Program 
funds 
servces designed to protect and promote children s welfare, prevent abuse and 
neglect, promote family preservation, and place children in suitable adoptive homes 
when family preservation is not possible. The Title XX Social Servces Block Grant is 
another major source of funding for social servces that can help create a stable 
environment for children. 
The DIG has focused on the effectiveness, efficiency, and quality of foster care and 
child welfare servces. But. we have explored the human aspect as well. One specific
population that we have examined is the drug-exposed infant. 
Identig 
potential administrtie changes in the foster cae sytem to control costs 
Growing congressional and departmental concern exists over the rapid 
rate of cost 
escalation in the foster care program. Before any changes can be made to provide 
expanded or new servces to children, costs must be brought under control in the 
current program. Two areas of foster care show great potential for cost savigs-
administrative costs and unallowable maintenance payments--and we have examined 
these areas in detail. 
Admistratie costs have rien dfa11tiall, but mot of th costs are actull for 
chil placemt seres. 
Foster care administrative costs rose from $143 milion in FY 85 to 
$400 milion 
in FY 88. Two primary reasons have caused the administrative costs to 
increase: (1) the 
expanded definition of allowable activities under Title 
L. 96-272 and (2) a broad interpretation of that definition by the 
Departmental Appeals Board (DAB). The DAB ruled that Federal Financial 
Participation (FFP) was allowable for preplacement and other costs incurred 
for children not yet determined to be eligible for foster care maintenance 
payments. Only 20 percent of these administrative costs, however, relate to 
administering the foster care program. The other 80 percent of the 
administrative costs are actually child placement servces, allowed under P. 
96-272. Thus, relative to foster care, the term "administrative costs" is a 
misnomer because it includes activities related to the delivery of social servces. 
The States' practices for maxmizing Federal reimbursement have resulted in 
costs. This trend is expected to continue as 
significant increases in Title 

more States become sophisticated in capturing additional costs. We  recommended that legislative action be taken to limit Federal participation. 
FY 1991, Congress enacted requirements to States to separately report 
placement costs but did not enact cost containment provisions.3 
oft ma  ingile chien
Foste carl!  are  to 
mainnce 
pa 
, FF 
Under Title IV- is allowed for foster care maintenance payments to a 
child when certain conditions are met. We found in New York that 67 percent 
of maintenance payments--$141.3 milion ($70.6 milion Federal share )--were 
unallowable for FFP. Further, DIG estimated that at least 
$61.4 millon ($30. 
milion Federal share) of claimed administrative costs associated with ineligible 
40 In the District of 
maintenance payments were also unallowable for FFP.
Columbia, we found that 76 percent of claimed foster care maintenance 
payments-- 9 millon Federal share) was iieligible for FF. 
$l1.8 million ($5.
We attributed this extremely high rate of ineligibilty to a widespread disregard 
of Federal regulations and the District of Columbia s Departent of Human 
Servces' own policies and procedures. We recommend that the States 
reimburse the Federal Government for these unallowable foster care 
maintenance costS. 
Improvig the qualty and avaabilty of servce in the State chid welfare sytem 
To fully protect children in families that have problems, the servces provided by the 
child welfare system must be improved. When a child cannot be returned to his or 
her original home, then proceedings begin for adoption. Waiting to be adopted can 
be difficult for children, but the adopti(m process can be improved to make it easier 
for the children, the courts, and the child welfare system. We have identified some 
problems in the foster care and adoption system. 
Admistratie barr cause exese delas in freeg chien for adptin. 
Administrative barrers in the child welfare system cause the most excessive 
delays in freeing children for adoption. Under P.L 96-272, a State cannot 
obtain Federal foster care funds for a child unless reasonable efforts to 
maintain the child in the family were made. Continued Federal funding is 
contingent upon a State making  familes. The 
re.asonable efforts to reunite 
specific definitions of "reasonable efforts to maintain and to reunite" are left to 
the State. The primary barrier to implementing permanent plans of adoption 
was the inability of the child welfare agencies to meet the "reasonable efforts 
standard to the satisfaction of State courts in a timely manner. Also, long-term 
planning is often made after the child has been in care for considerable 
periods, and limited management commitment and lack of staff and servces 
playa significant role in the failure to make "reasonable efforts. 
Many barrers and delays also arise from the legal and judicial systems. Case 
records do not contain legally acceptable documentation of the "reasonable  hospital delivery, perinatal care, and foster care to just these 8 974 children 
through age 5 will cost approximately $500 milion. Additional interventions 
cost considerably more. For example, Florida estimates an annual cost of over 
$40 000 per child to get crack babies ready for school. Even costs after age 5 
will be substantial because special education, residential treatment, juvenile 
detention
, etc. are all costly. 
Not only is care for crack babies costly, but crack baby cases also are more 
time consuming and more complex than the average child welfare case 
requiring extensive tracking and follow-up, interagency coordination, and 
professional case management. Fift to 75 percent of identified crack babies go 
home with their mother or relative, and an estimated 30 to 50 percent go into 
foster care. Many children may be left with their natural parents because no 
foster placements are available. 
In response to our report, ACF co-sponsored a national conference with the 
Maternal and Child Health Bureau in PHS on prenatal substance abuse 
exposure and is developing educational material for child welfare workers. The 
PHS is conducting a national evaluation of the different approaches 
utiled to 
reduce drug abuse. The Offce of Substance Abuse Prevention and the Office 
Maternal and Child Health are jointly funding demonstration grant projects that 
focus on prevention, education, and treatment of pregnant and postpartum 
women and their infants. The National Institute on Drug Abuse has funded 
treatment research demonstration projects which include intensive prenatal 
outreach, drug treatment for women, and developmental assessment and follow-
up for the prenatally drug expo ed infants. 
Many obstacle ext to placig board babie in adptie home, but some 
suces 
are 
Boarder babies, infants who remain in the hospital even though medically ready 
for discharge, usually have serious medical problems which are often due 
fetal exposure to drugs. Babies also stay in the hospital due to questions about 
the parents' abilty to care for the babies and lack of care alternatives. A 
number of complex legal obstacles to placement of these babies also exist, such 
a establishing legal abandonment and terminating parental rights. Some of the 
12 cities visited have been successful in making timely placements. Their 
successes have resulted in significant decreases in hospital overstays and the 
number of boarder babies.  ,,,,,     ,,,,,,"""""      """"""
ENDNOTES

1. Omnibus Reconcilation Act of 1989, Public Law 101-239. 
2. Omnibus Reconcilation Act of 1990, Public Law 101-964. 
3. National Commission on Children, "Beyond Rhetoric: A New American Agenda 
for Children and Familes " 1991, p. 99. 
4. National Commission on Children, p. 97. 
5. Office of Inspector General  Effective Paternity Establishment " OAI-06-89-00910 
January 1990. 
6. Office of Inspector General  Follow Up of AFDC Absent Parents " OEI-05-89
01270, August 1991. 
7. Office of Inspector General  Child Support Enforcement of Non-AFC Clients 
OAI-05-88-00340, June 1989. 
8. Office of Inspector General  Improvements in CSE Collection Process Could 
Generate Milions " A-12-89-00154, October 1989. 
9. Office of Inspector General  Garnishment Orders for Child Support " A-12-91
00016, June 1991. 
10. Office of Inspector General  Cash Management by State Child Support 
Agencies " A-12-91-000l8, July 1991. 
11. Office of Inspector General  Errors Resulting in Overpayment in the AFDC 
1987. 
Program " OAI-04-86-00024, June 1987. 
12. Office of Inspector General  State Investigation of Fraud in the AFDC Program 
OAI-04-86-00066, November 
13. Omnibus Reconcilation Act of 1986,. Public Law 99-509. 
14. Office of Inspector General  Access to Medicaid-Covered Prenatal Care: 
Management Advisory Report " OEI-06-90-00162, October 1990. 
15. Office of Inspector General  Medicaid Exansions for Prenatal Care: State and 
Local Implementation " OEI-06-90-00l60, February 1992. 
16. National Commission on Children, p. 119. 
17. Office of Inspector General  Comprehensive Perinatal Care Program " OEI-Ol
90-00460, November 1990
, p. 1.  ,,,,,,,,,         """"""""", "
18. "Comprehensive Periatal Care Program. 
19. Office of Inspector General, ' 'Lcal Management and Implementation Strategies 
to Reduce Infant Mortality: A Management Advisory Report " OAI-01-88-01420, July 
1989. 
20. National Commission on Children, p. 136. 
21. National Commission on Children, p. 135. 
22. Offke of Inspector General  Child Support Enforcement and Absent Parent 
Medical Liabilty," OAI-07-86-00045, Septem  er 1987. 
23. Offke of Inspector General  Coordination of Third Pa1rt L9iab8ilty9 In.fo rmation 
between CSE and Medicaid " OAI-07-880086, December 
24. 
Offke of Inspector General  State Child Support Enforcement Criteria for 
Targeting Medical Support " OEI-07-90-00120, August 1991. 
25. Office of Inspector General  Effect of ERISA on State Insurance Laws " OEI-12
91-01420, September 1991. 
26. Child Care and Development Block Grant Act of 1990, Public Law 101-508. 
27. Office of Inspector General  Readiness to Exand Head Start Enrollment " OEI
02-91-00741, August 1991, p. 1. 
28. Office of Inspector General  Dysfunctional Familes in the Head Start Program
OAI-09-89-01000, November 1989, p. 2. 
29. "Readiness to Exand Head Start Enrollment. 
30. Offke of Inspector General  Head Staff: Summariation of Grantee Audit 
Problems " A-07-91-00425, January 1992. 
31. "
Dysfunctional Familes in the Head Start Program. 
32. Head Start Act, Public Law 97- , as amended by P.L 101-120 and P.L. 101-501. 
33. Office of Inspector General  Head Start Performance Evaluation and High Risk 
Determinations " A-04-90-00009, February 1991. 
34. Offke of Inspector General  Opportunities for Improved Management Efficiency 
of the Head Start Program, Automated Management Information Systems " A-04-90
00012, February 1991. 
35. Office of Inspector General  Head Start Self-Assessment " OEI-04-89-00790 
February 1991.  ,,,,,,,,        """"""""
36. Child Care and Development Block Grant, Public. Law 101-508. 
37. Office of Inspector General, "Enforcing Child Care Regulations " OEI-03-89
00700, February 1990. 
38. Office of Inspector General  Effective Practices in Enforcing Child Care 
Regulations " OEI-03-89-00701, February 1990. 
39. . Office of Inspector General  Opportunities for Cost Containment by Modifyng 
Federal Reimbursement to States for Administrative Costs Under the Foster Care 
Program," OAI-05-87-0012, October 1987. 
40. Office of Inspector General  Review of Foster Care Maintenance Payments 
Claimed Under 'ritle IV-E of the Social Security Act: New York " A-02-87-020l6 
June 1990. 
41. Office of Inspector General  Review of Foster Care Maintenance Payments 
Claimed Under Title IV-E of the Social Security Act: District of Columbia " A-03-88
00551, August 1990. 
42. Office of Inspector General  Barrers to Freeing Children for Adoption,'  OEI-06
89-01640, February 1991. 
43. Office of Inspector General  Minority Adoptions " OAI-02-88-00640, June 1988. 
44. Office of Inspector General  Crack Babies " OEI-03-89-01540, June 1990
, p. 1. 
45. "Crack Babies. 
46. Office of Inspector General  Boarder Babies: A Management Advisory Report," 
OEI-03-89-01541, June 1990.