. .
\ - , 
,'"
INVESTIGATION OF FRAUD 
A T. 
ST 
IN THE AID TO FAMILIES WITH

DEPENDENT CHILDREN (AFDC) PROGRAM

OFFICE OF INSPECTOR GENERAL 
ANALYSIS AND INSPECTIONS 
OFFICE  OF 
NOVEMBER 1987  OPPCE . OF mSPECTR 
The mission ot the ottic. ot Inspector General 
proote the etticiency, etteciveness  (OIG) is to
Stat- Depart  and integrity ot programs
i(nB tBhe) .U nIitt ed  ths  ot Heath and Hum Services
does  by developing method to 
traud, wae  Crted  detect and prevent
Inpecor Geaendr l akbuasse.   bSy estcattuat e in 1976, the
cuently  both the  tully
arnadc  mcl  rirnetcorvmed about prorAJ  or maandg thee mConqreessn  t problem and
p8rorm its 
ccnductinq audts, ine 8a8ctqoan.ti.o nThse  aOnJ: Gi necions  mission by
approxitey 1,  sttaicaly  with
coutr  located around the
200  sttt 
DAH 
AJT.  IHPEC'OHS 
Ol"CB OF 

Ths 
report ist hproeuce d tbyh the o-ttice major ottice owt  iAtnhl ytshies  and Inspections
t(OwA),o   are onect  hae ot uottcic ei noti oAnwst  an  J:eOsJt:igG.a tTihoen so.ther
Tshteu OeAsI   whctheh ot tiace re, tyiotcaly, short-tent
det8%e 
an vuadersUignie d to  1;aJ  etteciveness, etticiency
ty to trauc an abU8. 
Bm 
inion, 
entitled .State Imesiqation Pot lr",u d 
Aid to F  ies with Depeant Chc:en (AF)  IIi wn atshe
daic;ed to identity practice 
inestiqate an pro.acte  ua8d iD AStaFte ps troo pr:e vent, detect,
trauc in the 
aar.c.o w.h.e r qrter HcH :i.n.o lv_ent will  to identity
raatory , 1: imroe  aid the Stat..: and to
practices.

prepar 
' report vas  Inpecor 
by the Raqiona  Geeral,

Anysis and Inecions, 
taIttihc. ne shieooat  ndqsu. er Social Secity BraRacqhi,o no tItVic ien  octo njunction with
Paricipating in  Analysis and
the proj ect 
papla:  were the following
Chistopher Koeher,  Kaall
Proj  Lead.er  Douglas 
Prj ec  Aler
Vince Serio,  Liaison 
Mace
James E. Cliatt, J:IJ:, Ph. 
Kaia Bigha Scott Patterson
Roar Bro  Maelle Puell 
Alan Stubbs

Fernand.o Foyo  Josiah Townel
Ronald. Xalil 
James Wilson
 STATE INTIGATION 
FRUD IN TH AID TO FAMLIES 
DEPEEN CHLDRE (AF) PROG 
WITH 
RICH 
P.G KUESSNERO W 
INSPECTR  NOVEER 1987 
Control No. OAI-04-86-00066
 ..  ...   ...   ...   ...   ...   ...   ...   ...   ...   ...   ...   ..:  ...   ...   ...   ...   ...   ...  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  
. . . . . . . ..  ..  ..  ..  ..  . ..  ..  ..  ..  ..  ..  . ..  ..  ..  ..  ..  ..  .. .  ..  ..  ..  ..  ..  .. .  ..  . . . 
t \,

TABLE OF CONTENTS 
EXECUIVE  Y................................. 

INTODUCTION 
. . 1 
Purpose. 
Background.  Co . . 
Methodoloqy.  81 . . 
FINDINGS 
Extent  ot  AFDC  Fraud.  . . . . . . . . . . . . . . . . . . . . . . . . 3 
State Perception of AFDC Fraud............... 

Judicial Response to AFDC Fraud............ .

State Eftorts to Combat AFDC Fraud.......... 

CONCLUSION.  0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7 
0 . . . . . . . . . . . . . . 

RECOMMNDATIONS. 
APPENDICES 
List ot States visited..................... .A-1 
Instructions tor Form SSA 4110.............. B-1 
Examples of Semiannual Fraud Statistics..... C-1 
Methodoloqy of Computing Fraud Early 
Detection and Prevention Program Cost 
Avoidance savings........................... D-1 
Response trom Family Support 
E-l 
Administration.  STATE INTIGATION OF FRUD IN TH AID TO 
PROG 
FAMLIES WITH DEPENEN CHLDRE (AFDC) 
EXCUIV SUMY 
PUSE: 
The purpose ot this inspection is to determine

methods which States use to detect, investigate

and prosecute traud in the Aid to Families with

Dependent Children (AFDC) program and to identity

Departent 
areas where greater involvement by the 
Health and Human Services (HH) would aid the 
ot  traud. 
States in combating 
BACKGROUN 
the AFDC program, as stated in
Tthie  putrolsee    ot 
the social Security Act, is to 
rv  ot 
dependent children in their
encourage lithe care  ot  turish 
homes.. . by enabling each state to 
financial assistance and rehabilitation and other
services. 
HH program, with a
The AFDC is the tifth largest 
$7. 9 billion. The program
Federal cost in 1985  ot 
reached 3. 7 million tamilies consisting ot 11 million 
individuals in that same year. The AFDC is a 
d local 
cooperative program among Federal, State a 
governents, with state responsibilities including 
ing, 
establishment and maintenance ot systems tor detec 
traud. 
investigating and prosecuting 
Duing the 
this project, it 
research phase  ot 
became apparent that the States were interpreting 
traud difterently depending on the context in 
which the term was being used. When dealing with 
traud prosecutions, the States emphasized the need 
to establish an intentional misrepresentation of 
facts by the client. However, when traud. 
prevention was the objective, the States usually
broadened their detini 
traud to include
tion  so t misrepresentation ot 
cases in which the client'
tacts may have been unintentional. As a result, 
our study reflect that dual 
the tindings  ot  traud.  clarity,
interpretation of 
For the sake  ott raud that 
we have used the broader detinition  ot 
includes unintentional misrepresentations ot tacts

by clients for all our study findings and 
recommendations except those that deal only with

prosecutions and/or sanctions.  , ,

MAOR FIINGS:

The AFDC traud is a billion dollar problem that is not 
responding to traditional approaches to combating fraud. 
It otten amounts to an interest-free loan tor 
perpetrators who tace little risk of prosecution or other
punitive action. 
An emphasis on the prevention ot traud, combining the

I experience and intuition with the 
eligibility workers 
investigators' skills to identity and weed out 
misinformation in the preeligibili ty stage, would save 
approximately $800 million annually in Federal and state 
cost avoidances. One model for this concept which has
been success 
tully operated is the Orange County, 
Calitornia Fraud Early Detection and Prevention Program. 
It has been success tully transterred to many other 
jurisdictions throughout Calitornia and the nation. 
Computerized eligibility veritication has become a key 
tool in detecting traud even though the 1984 Detici 
Reduction Act (DEFR) mandate tor automated eligibility 
veritications only recently has taken eftect. A wide 
variety of computer data matches are being conducted in
States. 
Other ettective matches could be made, but 
problems exist over inter-jurisdictional access to data. 
The low priority AFDC traud detection receives in many

states may be attributable, in part, to the absence of

national leadership, guidance and assistance trom HH. 
actual AFDC traud cannot be accurately

The incidence  ot 
determined with existing data collection methods;

however, experts agree it is consistently understated.

The AFDC program has no provision, such as those in the

Food Stamp program, providing for administrative

traud. 
sanctions against perpetrators  ot 
Other than the normal administrative cost sharing, there

are no tinancial incentives tor the states to

aggressively detect traud and recover traud related

overpayments. In tact, states could tace increased

sanctions it such detection ettorts added to the error

rate.  Training in AFDC fraud prevention, detection and

considered inadequate in most states.

prosecution  is 
Little publicity is given to AFDC fraud detection

and prosecution. 
RECOMMATIONS: 
Based on our findings, we recommend that the Administrator, 
Family Support Administration (FSA): 
Revise regulations (45 CFR 235) to require that states

implement a preeligibili ty fraud detection and prevention

program, similar to the Orange County, California

program, as a condition of state plan approval.

I S 
Consolidate FSA  antifraud efforts into one 
component with high visibility. This component

should have the responsbili ty 
to work closely with
states,' both directly 
and though the United Council 
on Welfare Fraud, to more sharply focus management 
attention on the prevention, deterrence and 
detection of fraud through the development of: 
an improved fraud reporting mechanism that collects 
useful information on the incidence and nature of 
fraud prevention, detection, prosecution and 
overpayment recovery activities, and provides timely, 
meaningful feedback to the states on statistical data 
as well as narrative descriptions of innovative
antif  aud techniques; 
spectru OI training 
a broad  and information packages 
to upgrade the skills of AFDC workers in combating 
fraud as well as to increase judicial and public 
awareness of the significance of AFDC fraud and the 
positive steps being taken to combat it; and 
a centralized information access center aimed at

improving state access to and use of available

Federal, state and private records to facilitate

the timely verification of eligibility factors in

order to prevent fraud and demonstrate Federal

leadership. 
iii
 .. . . .  . . ..
INTRODUCTION 
PUSE 
to determine methods which 
The purpose of this inspection  is 
states use to detect, investigate and prosecute fraud in the Aid 
to Families with Dependent Children (AFDC) program and to 
identify areas where greater involvement .by the Department of 
Health and Human Services (HHS) would aid the States in combating 
AFDC fraud. 
BACKGROUN 
The AFDC program was established under title IV of the Social 
Act (Part  401). 
Securi ty  A, section  The purpose was to encourage 
the care of dependent children in their own homes or in the 
homes of relatives by enabling each state to furnish financial
assistance and rehabilitation and other services.. . 
to needy 
dependent children and the parents or relatives with whom they 
strengten 
are living to keep, maintain and  family life and to 
help such parents or relatives to attain or retain capability for 
the maximum self-support and personal independence consistent 
with the maintenance of continuing parental care and
protection. . 
The AFDC is the fifth largest HHS program, ranking in Federal 
Secuity, Medicare, Medicaid and 
funding behind Social 
Supplemental Security Income. The combined Federal and State 
budget was $14. 4 billion in program monies for Fiscal Year 1984 
(Fiscal Year 1985 Federal cost was $7. 9 billion) which was 
distributed to an average of 3. 7 million families consisting of 
recipients. 
about 11 million individual 
The AFDC is a cooperative program among the Federal, State and
local governents 
with Federal regulations providing a degree of 
u2n3if5o)r.m ity in the areas of organization and eligibility (45 CFR
These regulati ns require that each State establish and 
maintain procedures for the detection, investigation and 
prosecution of fraud but allow the States considerable latitude 
in the methods they may use. The HHS, Family Support
Administration 
(FSA), Office of Family Assistance (OFA) is 
responsible for national administration of the AFDC program. 
Also within HHS, the Office of Inspector General (OIG) exercises
oversight responsibility for the integrity of the program. 
circutances 
The 
that constitute fraud can vary widely from 
State to State. Furthermore, the States interpret fraud 
differently depending on the context in which the term is being
used. 
For example, if the States are looking at fraud with an 
eye toward prosecution, fraud is apt to be any violation of a 
civil or criminal statute involving the intentional 
misrepresentation of facts for the purpose of obtaining 
unauthorized benefits or avoiding a reduction or termination of 
existing benefits. On the other hand, if the State is viewing  fraud trom the preventive standpoint, the interpretation of fraud

likely to be broadened to include cases that involve 
is  a result 
unintentional misrepresentation of the facts. As  , the 
findings of our study reflect the duality of these
interpretations. 
However, for the sake of clarity, we have used 
the broader interpretation of fraud that includes both the 
all 
intentional and unintentional misrepresentations of facts for 
the study findings and recommendations except those that relate
only to prosecutions and/ 
or sanctions. 
HEOOOLOY 
The data collection and analysis for this program inspection

included on-site personal discussions and the review of Federal

and state statutes, regulations and policies. Discussions were

22 states (listed in Appendix A) and

held with 460 officials 	 in 
62 county offices. Respondents were in six categories:

106	 state level AFDC staff and managers 
146	 state and local fraud investigators and 
managers 
160	 local welfare agency caseworkers and
supervisors

prosecutors

judges

elected county supervisor

460	 Total Respondents  FINDINGS

Given the continuing pressure to reduce unnecessary Governent 
a way 
spending, it  is  crucial that the AFDC program be managed  in 
that minimizes unintended expenditures while sending a clear 
message that program fraud will not be tolerated. This 
every part of the AFDC

inspection found a clear commitment  in 
setlriugcitburlee,.  bIet  it local, State or Federal, to serve those who are

an intolerable 
also found unanimity that fraud  system.  is  particularly
practice that demeans the entire 
need of assis ance. RFraude  sponis dents expressed 
damaging to those  in 
time and again that the limited resources that are available to

need simply cannot be squandered

assist those families truly  in 
on the gree

This inspection revealed that States are expending considerable 
effort and resources on the deterrence and detection of fraud. 
In the past, this effort has been focused on the traditional law 
enforcement approach of reacting to the occurrence of fraud. 
This approach emphasizes the detection, investigation, and 
prosecution of accomplished fraud as a deterrent to continuing 
violations. It uses prosecution and conviction rates together 
with related administrative or court-ordered restitution as its 
measures of success. This traditional approach must be
maintain  system. 
d to preserve the integrity of the  However, 
finnowd a iredinrectgions of  somea ofr theese r:eso
urces and efforts 
there  is  specific
which produces dramatically better results. Our 
EX 
AF 
OF  FRUD 
widely. In part, this is
Estimates of the extent of fraud vary 
due to the absence of consistent and reliable  also
data. It  is 
partly due to differing definitions and interpretations regarding 
fraud. In 
what constitutes  either case, this inspection 
discovered many problems with reporting of fraud incidences. 
exent of AF  caot 
The  fraud 
be reliably determined 
because valid statistical informtion is not available.

Pulic 
The form SSA 4110, Recipient Fraud in  Assistance 
Programs (Appendix B), was designed to gather information on 
State. 
instances of AFDC fraud in each  However, the data 
collected by these semiannual reports are outdated and
unreliable 
(extracts of which are attached at Appendix C). 
The FSA staff has reported that budget constraints have 
data. Furter, 
delayed publication of 4110  they report that 
meaningful. 
Even so 
only a small portion of 4110 data  is  staff.  , no 
anticipated change in 4110 was reported by FSA  The 
for Fiscal Year 1984 and, by

latest national compilation  is 
failing to require uniform reporting, permits identical type

cases to be treated as fraud in one State and non-fraud in
 another. Furter, some States did not even submit a report

those that did, many of the counties advised 
and, even  in  reports. 
that they had not contributed to the state submitted 
data, 
As a result of inconsistent, untimely and incomplete 
these reports are of little use in estimating the extent of
fraud. 
state officials report that they are perplexed by the

fraud reporting process and question the need for the

reports. 
The states are not aware of the uses made of the fraud 
data submitted to OFA, as little or no feedback has been
received. In fact, 
they are convinced that little use 
could be made of the data submitted. A comment from one 
reaction: 
official typifies the state 
"They  (the 
(OFA) won't tell us how to do them 
reports) and I can't ' see how they could
possibly use them. 
We can't even use the 
information we gather for them.

Many States have developed more realistic fraud reporting

formats for their own use.

May state officials  . of fraud to 
estimted the magnitude
ben 
reported. 
be much higher than has previously 
The opinion of State fraud staff was sought to fill the void 
caused by the lack of statistically reliable data on the 
fraud. 
extent of  state administrators, investigators and 
eligibility workers estimated fraud from 3 to more than 
50 percent of the AFDC population. The most common estimates 
centered around 30 percent, with respondents who work closer 
to the service delivery level generally estimating higher
than others.

furer  tht 
reported 
state officials  fraud perptrators'

detection techniques. 
sophistication is keeping pace with automated fraud

To evade computerized wage matches and other screens 

such as those required by the Deficit Reduction Act of
1984 
(DEFRA), perpetrators are increasing their use of 
false identities (e. g., nambesi,r tS)oc, ial Security numers 
and dates and/or places of  bogus residences and 
commercial mail receiving services. Work "off the books" 
well. 
for cash is increasing as  These types of fraud, 
involving the active concealment of income, assets or

multiple entitlement, are difficult to detect, even  in 
automated environment.  Althouqh the exact extent of fraud in the AFDC proqram remains

unknown, these state opinions suqqest that AFDC fraud is a

billion dollar problem. Quantitative  data on fraud prevention 
efforts provided later in this report support these opinions

fraud. 
about the extent of AFDC 
AF 
STATE PERCEPlON OF  FRUD 
The attention and priority qi 
ven to AFDC fraud varies widely from 
state to state. Clearly, respondents are frustrated when efforts 
to thwart perpetrators are ineffective. An increasinq numer of 
efforts. 
states are re-examininq their AFDC fraud 
May state  comfortl.e deal.ing with
agencies are more 
overayments than they are with supected fraud. 
Some agencies have policies prohibitinq the use of the word

"fraud" by other than investiqative staff. One aqency 
intentional client error. 
directs staff to use the term 
Respondents reported that such attitudes seem to be 
encouraqed by OFA in its fFocuuse ron,  error rates and overpayment 
DEFR.  fraud investiqation is 
recoveries under 
viewed as a labor intensive and cost inefficient process

wohilfe foviecrpaeymernt  riecsove rry aectivonse area falri snimpqler :a nd more

cost effective. The attitude expresseq by one State budqet

"If you try to emphasize it (AFDC' fraud), you
lose two ways. 
The liberals criticize you for 
squandering scarce resources on pseudo-issues 
. and the conservatives point to convictions and 
I I 
tell you,  told you so. I I just hold my nose 
and hope it qoes away. 
The el.igibil.ity worker is the cornerstone of the states' 
fraud detection effort but is often poorly prepared for
this 
responsibil.i ty. 
I primary responsibility 
The eliqibility workers  is to

need, includinq 
provide vital assistance to families in 
Stamps. In addition to this 
AFDC, Medicaid and Food 
demandinq task, they are expected to use their 
interviewinq skills to weed out fraud by applicants 
during the initial application process and to identify 
recipients who have enqaqed in fraudulent acts subsequent 
to entitlement. Even where circustances indicative of 
fraud are uncovered, for example, by a computerized 
records match, it is usually the eligibility worker who 
must evaluate the match results and decide whether a 
appropriate. 
fraud referral is  There are a numer of factors which limit the eligibility 
workers' abllity to effectively deal with the high incidence

of fraud they believe exists in their caseload:

Heavv Caseloads and Processina Time Reauirements

In many states, the workers report that their caseloads 
are so heavy that it is difficult to adequately screen 
out questionable information. Addi tionally, states are 
under standards of promptness which require the workers 
This 
to process claims as quickly as possible. 
combination of heavy workloads and processing time 
standards limits the extent to which an eligibility 
waoprkepr lciacn avenritfsy .q uestionable information supplied by
Given these conditions, workers often adopt a priority 
which satisfies their perception of management' s desire
to " As a 
get the check out and ask questions later. 
result, potential fraud cases are unlikely to be referred
because "time simply is not available to develop the 
suspected fraud to the point where a referral for 
criminal investigation can be clearly supported. 
Moreover, there was reluctance to refer cases for fraud 
investigation because such referrals usually resulted in 
additional work for the already pressed eligibility
worker. In 
addition, months often lapse between referral 
investigation. 
and completion of the 
Inadeauate Trainina

Most eligibility workers reported that they received too 
little training, and that training received usually
consisted of on-the-j ob experience. While many workers 
and investigators reported that this type of on-the-j 
training worked out well, nearly all respondents reported 
a need for quality, fo  al training in detection and
investigation techniques. In the 
states where the 
training was of high quality, the results were apparent 
terms of the individuals' confidence in their 
both  in  attained.
ability to perform the job and in the results 
Furter, 
many investigators, particularly those without a 
formal law enforcement background, reported a need for 
good quality procedural manuals to guide their 
investigations and ensure that all evidentiary standards
are met. 
Some states, notably Wisconsin, did have good
investigati ve 
manuals which help to achieve and maintain 
a higher degree of professionalism in fraud detection and
investigation.  Proaam Inconsistencies 
Most respondents reported a need for closer coordination 
between the Federal agencies on AFDC, Food stamp and
Medicaid programs. The differences in eligibility 
factors and reporting requirements, as well as the 
markedly different avenues available for addressing 
fraud, increase the level of difficulty for the 
administering agency and especially for the welfare 
worker who must deliver services under these programs. 
The states are aware of the HHS and Department of

Agricul ture intent to simplify program administration

(Notice of Intent to Develop Requlations published in the

Federal Reaister on February 19, 1985) but report that

little progress seems to have been made.

Frud 
detection and deterrence are not priority issues
for may State-elected officials  progam 
and AFDC 
maager . 
Eligibili ty 
workers in many states perceived a low statewide 
commi tment to fraud detection though they see a high 
motivation toward error reduction caused by the imposition of 
fiscal sanctions for failure to meet the error rate targets 
originally set in the Michel Amendment. Their perception of
management' s emphasis on producing a technically accurate and 
timely product often- works against the aggressive detection 
of fraud. To meet the timeliness standards, the workers 
sometimes suppress "intuitions" that the information supplied 
by the applicant, though seemingly sufficient to establish 
factual. 
eligibility, may not be complete or  Within this. 
context, the worker is expected to conduct investigative work 
case. 
of a varied nature on each  This inspection found 
little evidence of such work. 
Many respondents indicated that the perceived lack of 
commi tment to fraud detection and deterrence in the AFDC 
program results directly from a similar lack of 
tment by the Federal Government. 
commi  They further 
indicated that the HHS focus on error rates and sanctions 
may be acting as a barrier to fraud detection because 
aggressive fraud detection could result in the 
errors. 
identification of even more  They responded that 
the best way for antifraud efforts to improve at the 
state and county levels would be for the Federal
Governent to give antifraud 
efforts high priority and 
level. 
visibility at the national 
Though there is no specific and visible organizational

responsibility within OFA for AFDC fraud matters, OFA has
 subject. 
not been completely silent on this  Through its 
varied components, OFA collects data from the states on 
ects 
fraud cases, has approved some demonstration proj 
aimed at improved fraud prevention and prosecution, 
played a key role in the development of regulations for 
and, 
implementation of the antifraud DEFRA requirements; 
in 1985, issued a Fraud Control Digest which was a 
compilation of self-described fraud control measures
undertaken by a numer of states. 
May 
eligibility workers view the fraud investigation and 
ineffective. 
prosecution process as being 
The eligibility worker often sees the fraud investigation 
time. 
occurs, 
effort as a waste of  Even when prosecution 
the most common result is an order to make restitution. 
Seldom is puni ti ve action taken. In fact, while
resti tution is 
ther directly to the agency
being made,  ei 
or through the cours, the offender often remains on the 
exreme 
AFDC grant. An  example was related by a county 
AFDC supervisor about a recipient who was found 
ineligible because of concealed income: 
"Following a guilty verdict and an order to make

monthly restitution, the recipient reapplied for

AFDC payments claiming that a combination of one

lost source of income and the added expense of

the cour-ordered restitution 
made her eligible
for payments. At the 
appeals level, the claim 
was allowed and payment in the exact amount of

the court-ordered restitution was authorized. 

AEliFgi bility workers report that the lenient response to
comunities. 
fraud is well known in the 
Some recipients, even those with multiple offenses, have
reportedly adopted very casual atti 
tudes toward fraud and 
the states' antifraud efforts. This leaves workers with 
a bad taste for fraud deterrence and the miscreant 
recipient for whom they must often continue to provide 
service. One eligibility worker pointed out with
disdain: 
II After all my work proving that she was 
a fraud, she only got a slap on the

wrist and an order to repay the money. 
Two days later she was in here reapplying

for payments, bragging that we couldn't do

anyting to 
her because the Staj tae iwlo.u ldn't 
put a mother with children in  I know 
she'll do the same thing again, but why

should I waste my time sending it to the
 investigator. 
She'll just be back in here

laughing in my face again.

The presence of an active, visible and effective fraud
inestigation 
critical to the integrity of
the AF progafmunction.   is
Nearly all respondents agreed that an aggressive
investigative 
function, together with its threat of criminal 
prosecution, must be present if the States are to succeed in 
combating fraud. The organizational responsibiiity for this
acti vi ty 
varied widely among the States, ranging from the 
establishment of investigation staff in State Offices of 
assignent of investigative 
Inspectors General to the 
responsibility to the eligibility workers. 
Though there is inadequate data to measure the relative

effectiveness of the different organizational placements

of the investigative responsibility, two elements were

consistently present in successful fraud investigation

operations: 
Management invol vement--The commitment of the

Gpoverrnoer, kvey leeginslattivie coomminttee.s,  and top

program managers produced environments that led

to more aggressive fraud detection and

Proximity/responsiveness of fraud units to

eligibility worker--Those units that were

accessible to the eligibility worker and that

emphasized timely responses to fraud referrals

were viewed by program staff as the more

effective investigation units.

AF 
recoure to 
The absence of an administrative  fraud 
prosecution is viewed by some as an indication of the 
deterence. 
lack of Federal commtment to AFDC fraud 
Respondents reported that the administrative hearing 
process in the Food Stamp program provides a meaningful
ternati ve to criminal 
al  prosecution by eliminating 
dependency on an overloaded court system to deal with
fraud. 
In the Food Stamp program, the law allows the 
State or county to disqualify a recipient for 6 months if 
found guilty of fraud by an administrative hearing 
officer. A second guilty finding through this 
afdmirnisatratuive pdroces.s  results in disqualification for
12 months. 
A third such finding can lead to permanent 
disqualification. Those involved in investigation of Food 
Stamp fraud believe that the administrative sanctions deter There is no similar administrative action the states can take 
against adult offenders to more directly deal with AFDC
fraud. 
state respondents believe that such an authority 
could be equally effective in the AFDC program, particularly 
to deter repeat offenders. 
One state official expressed frustration over the seeming

indifference to AFDC fraud with the following comment:

"USDA (Food Stamps) is way ahead of you guys in 
addressing fraud. Sometimes we ask ourselves if 
anyone in HHS really cares. 
The recoveryg orft sfr aud-related overpayments from

continuinq 
are restricted in the same way as

recover for non-fraud overyments. 
Secuity Act for the 
The same standards set by the Social 
recovery of overayments, in general, are applied equally 
fraud. . This 
to those resulting from  restriction on the 
witheld 
amount that can be  from continuing grants means 
that the recovery of fraudulently obtained funds is, at 
best, a protracted process which often results in only a
partial recovery. In 
effect, the fraud becomes an 
interest-free loan with a particularly favorable
repayment schedule. 
AF 
JUICIA 
RESPONSE TO  FRUD 
re. not talking 
"We'  about Dillinger here, but some of the 
judges treat (AFDC) fraud like a parking violation. 
This quote from a frustrated fraud investigator typified 
spectru. 
one end of the  On the other side, this 
inspection found some program agencies, prosecutors and 
fraud. 
judges working well together to address AFDC 
prog 
Fraud in the AFDC  seldom results in punitive
action. 
Over two-thirds of the AFDC cases referred for prosecutiqn

are declined or settled in the pretrial stage, with the

emphasis on recoupment. The remainder of the cases usually

resul t in suspended sentences and an order requiring

restitution, but without any penalty, interest or fine being

assessed. Often the perpetrator continues to recei 
ve AFDC 
payments.  sentence or other puni ti ve
there a j ail 
action.  Rarely  is 
Such lenient handling of . AFDC  an efficient means of
frausd  ysteism  . 
moving cases through the court  However, any 
deterrent effect that could come from the investigation and
 prosecution process is diluted. The reluctance of judges to 
recommend j ail sentences is well known and could serve as an 
cheating. 
inducement to some to risk  While the volume of 
AFDC fraud alone makes it impractical and undesirable to 
prosecute all cases, many respondents, as indicated by the 
above quote, felt that the present practices are not tough 
fraud. 
enough on those committing 
Many prosecutors and judges view welfare fraud as a minor

offene that clutters an already overburened cour
docet. 
Respondents complained that even blatant fraud cases were 
often dealt with in a cursory fashion by the courts. 
Investigators have been told by judges not to bring "that 
kind of case (AFDC fraud) to me again.  Most courts, 
particularly those in urban areas, are crowded with cases 
of rape, assault, robbery, murder, etc., which are 
realistically viewed by most people as more serious 
crimes than welfare fraud. Accordingly, AFDC fraud 
receives little priority in the court system. As one
judge said: 
"I have people stabbing each other with ice

picks, and I resent hearing cases of poor

mothers who tried to beat the system.

said: 
Another judge in a large city 
"I got tired of state investigators bringing

court. I 
poor mothers into my  don't hear 
those kind of cases any more.

prog 
Same judges said that AtheF   officials should be 
doing more to prevent  fraud and should develop
admistrtive  crimal 
prosecution. 
alternatives to 
Many judges see AFDC fraud as a basic program problem

that should be addressed by program managers through more

vigorous screening of AFDC applications to weed out those

families who are cheating.  judges are at a loss as 
Also 
to how to handle a case of fraud involving the mother of 
several minor children. They are concerned that

insufficient management attention is being focused on
fraud prevention 
and, as a result, the courts are taking 
a bum rap" for not dealing with the fallout of this poor 
management practice. One judge relayed the complaint of 
his parole officer who felt that the local welfare agency 
... using his office 
is "  as a collection agency for AFDC
and Food Stamp overpayments.  Although the judges 
collectively acknowledged their responsibility to hear 
serious cases of welfare fraud, many suggest that program  managers look to themselves for a more reasonable and

effective solution than criminal prosecution for the

case.

typical AFDC fraud 
An offense treated as a prosecutable crime in one part of a

another. 
state may not be handled as such in 
study.
every geographic area of the 
This was seen  in 
type and amount are

Massachusetts, cases identical  in 
prosecuted in Springfield, ana handled simply as overpayments

Boston. In rural 
Tennessee,
for administrative recoupment  in  Nashville 
, an
ai d$300e cnase tries ulted  in  incarceration: while  in 
al type case was not even submitted for a prosecutive
decision. In 
rural Michigan, one convicted AFDC offender 
investigator: 
complained to an 
"This  Detroit. 
(offense) isn't even a crime  in 
The maj or reason for this inconsistent punishment is the 
areas, 
overcrowding of court dockets, particularly in urban 
fraud. 
to the point that the system is not responsive to AFDC 
The local political environment and changing public pressures 
often impact on prosecutive priori ties. In addition, AFDC 
fraud is viewed as a victimless crime by many prosecutors and 
seriously. 
judges while others treat it more 
Clearly , 
criminal prosecution alone is not an effective 
fraud. 
deterrent to AFDC  The courts simply cannot handle the
addi tional cases and are ill-prepared to deal with the 
typical welfare cheater. The resultant appearance of 
leniency toward AFDC fraud may, in fact, be serving as an 
cheat. 
inducement to some to 
AF 
STATE EFFORTS TO COMBAT  FRUD 
Those States and counties that had developed aggressive anti

fraud efforts demonstrated strong management commitments toward

the reduction of fraud and other payment errors. As an example,

the two southern California counties that implemented aggressive

fraud prevention strategies did so as a result of a sincere

management focus on the reduction of all errors, including those

fraud. 
originating from  Not only did this focus result in 
the 
significant reductions in the level of fraud but also  in 
maintenance of a high quality program with consistently low error

rates. 
are: 
Some of the techniques used by the States to eliminate fraud 
Frud 
Early Detection And Prevention (FRD) 
The most impressive antifraud effort identified during this 
inspection is the FRD program developed by Orange County,  California. The  predicated on a partnership

FRD program  is 
between the eligibility worker and investigator in order to 
identify and prevent fraud during the application process. 
This program has saved considerable amounts of AFDC funds in 
avoided grant payments (which, if paid, may never have been 
recouped). An HHS-sponsored review of the Orange County 
program, made public in October 1985, indicated that FRD 
Federal, 
returns between $16. 60 and $33. 81 in savings to the 
governents for 
state, and county  every $1. 00 Epent on 
operating costs. At present, there are 23 California 
counties receiving state tunds to operate FRD programs'  The 
California legislature has a pending bill mandating the FRD 
program. statewide and has estimated the annual state savings 
4 million. 
from such legislation at $60.
In the 
FRD program, investigative staff are assigned to work 
, in each 
ith the eligibility staff district office and 
conduct prompt (usually within 8 calendar days in Orange 
County) in-depth investigations into suspicious allegations 
payments. Brief reports
made by applicants for ' AFDC 
sumarizing the 
eligibility worker' s suspicions are made to 
the investigator if the applicant appears to be eligible but 
the worker suspects that one or morfea losfe t.h Ie fs tatements 
the 
establishing this eligibility are 
investigation reveals that the applicant has misrepresented

the facts, this information is relayed to the eligibility

worker who denies tho e applications that had not already

been withdrawn by the applicant as a result of the

investigation. The principal focus of the FRD program is 

prevent undeserved AFDC payments: criminal prosecution is

secondary . 
The FRD program, because 
it emphasizes prevention, puts a 
fraud. 
This 
very broad interpretation on what is included in 
broader definition includes unintentional misrepresentations 
FRD, 
of facts by clients. For the purposes of  it is enough 
to know that something in the application for benefits raised 
a red flag and caused the eligibility worker to make a
referral. If
' the 
subsequent investigation finds
normally rej ected as
misrepresentation, the case  is 
ineligible. In a small minority of cases prosecution may be
sought. 
Many respondents, including several FSA staff, are 
bothered by such a broad interpretation of fraud and would 
prefer that the process be renamed. Many states prefer to 
call the system fraud prevention and to treat it in that
fashion. 
Regardless of the  a popular and
name, the system  is  intake. 
effective method of screening out ineligibles at 
The Orange County program, on which the FRD program was 
patterned, was first piloted in early 1980. It involved 
moving existing investigative staff from their traditional

post-enti tlement 
placement to the front-end of the  enti tlement procedure. Because the process proved so 
successful, additional staffing was provided to handle the
increasing numer of preeligibility investigations. 
similarly effective process was implemented about the same 
time in neighboring San Diego County. The basic difference 
s program is 
between these operations is that Orange County' 
under the direct supervision of the County District Attorney 
while San Diego s is managed by the Department of Social 
Services and uses eligibility workers instead of fraud 
investigators. A California Auditor General Report, released
in Decemer 
1986, noted several advantages of using fraud
investigators. 
primary among these is the ability of fraud 
investigators to use many more investigative techniques 
wi thout the applicants' consent. Also, the fraud 
investigators are empowered to review many more sources of
information than is the investigative caseworker. This 
report looked at three counties which had a total of 8, 642
referrals. In 
this sample; 1, 585 applications were denied
and 824 were withdrawn. 
Of the 106, 075 initial AFDC applications handled by 21
California counties 
(excluding San Diego) in calendar year 
1985, 19, 062 (17. 97 percent) were referred for pre-
eligibility investigations and 5, 652 (5. 33 percent of total 
applications) resulted in the denial or withdrawal of the
claim. 
This process allows eligibility workers to transfer 
that portion of their work load which they are least prepared 
to handle to a staff that are trained to deal with suspicious
cases.  , the cases handled in the 
Approximately 76 percent of
FRD program during 
calendar year 1985 involved issues such 
as residence, deprivation, and household composition that 
could not be identified or resolved through an automated
screen or records match. 
The remaining 24 percent involved 
income or assets, some of which would presumably be detected 
by the Income and Earnings Verification System (IEVS)
mandated by DEFR. 
Based on the earlier reported findings 
that active concealment of income and assets is growing, it 
is estimated that half of this 24 percent involve employment

off the books" and other disguised income that would not be 
screens. 
detected by IEVS or other automated 
that, 
One eligibility worker in Orange County pointed out 
prior to the inception of the FRD program, 
"These frauds were often ignored because we

didn't have the time or the clout to prove

the cl ient was lying. 
The intuition of the eligibility worker for suspicious

applications and the expertise of the investigator in

establishing the facts are the tools needed and used most
 effectively in this partnership to weed out fraud before a
loss of funds occurs. This intui ti ve 
approach complements, 
and may even enhance, the less discriminating elements of 
automated eligibility verifications whiqh are required under
DEFR. 
This program contains provisions to protect the
rights of applicants for public assistance. Each individual 
whose application is denied or withdrawn as a result of the 
FRD program is provided a complaint form and advised of 
his/her right to file the complaint either in person or by
mail. 
FRD program
In 1984, the 20 counties operating the 
completed more than 19, 000 investigations, which resulted in 
these,
the withdrawal or denial of 7, 457 applications. Of 
only 
11, complaints were filed and 7 of these were unrelated 
to the FRD program. Moreover, only nine individuals who had 
been denied payments as a result of the FRD program in 1985 
had applied for hearings. Of the nine hearings, three are 
e six that have been concluded

still pending and five of  county. 
were decided in favor of the 
The state of Arizona and some counties in Colorado, Georgia

Kansas, New Jersey, and Wisconsin have implemented or are

planning implementation of similar fraud detection and

prevention. efforts patterned more or less after the Orange

County experience. 
Verification of Eligibility Factors

Computer matching has reportedly ushered in a new era in AFDC 
numer of cases 
fraud detection. It has uncovered a large 
that previously went undetected. 
A large percentage of AFDC
fraud results . 
from the failure of a recipient to report 
income or assets. Matches with state wage records, bank 
insurance, 
records, motor vehicle registrations, unemployment 
and similar automated records are regarded by respondents as 
fraud. 
the most effective method of detecting this type of 
Respondents estimate that 75 to 95 percent of fraud

pertaining to unreported income or assets occurs shortly

after eligibility. This technology enables the rapid

comparison of relevant data from different sources and has

proven highly effective in reducing losses due to overpayment

caused by fraud. 
Unlike most other states visited, California, Colorado, 
Illinois, and North Carolina place considerable emphasis on 
computer matching to verify initial and continuing
eligibility. 
California has had significant success with its 
Assets Clearance Match which identifies unreported or under 
state proj ects 
reported interest-bearing bank accounts. The 
savings of $13 million in Fiscal Year 1987 from this program
alone.  Nort 
One  Carolina county, without the automation 
capabilities of larger counties, places an increased emphasis

on more proficient preeligibility interviewing to reduce

fraud. As a result, the county has been effective in

eligible. 
excluding as many as one-third of applicants as 
These eligibility verifications, both automated and non-

DEFR. 
automated, parallel those required by  The 
demonst  ated effectiveness of these antifraud techniques 
lends support to the mandated national implementation of

eligibility verifications of DEFR. 
Incentives for Fraud Detection, Prosecution and Related

overayment Recoveries 
In state-supervised, county-administered programs where the 
counties' share of operating costs is higher than their share 
and, to 
of grant costs, aggressive "detection, investigation, 
some extent, prevention of fraud may not be attractive to the 
counties from a cost-benefit standpoint. The savings and 
recoveries from these efforts that can be claimed by a county 
are based on the percentage of the county' s grant cost and, 
thus, are small in proportion to both the total savings and
antifraud acti vi ty operating costs. For example,
California'  FRD program revealed 
s experience with the 
average benefit-t -cost ratio of 2. 1 to 1 for the counties, 
governents 
were 
whereas th  ratios for the state and Federal 
10. 1 and 17. 8 to 1, respectively. To remedy this fiscal 
. disincentive, California is 
proposing to relieve the counties 
FRD. 
of operating costs of  CUrrently, the nonfederal share 
(50 percent) of the operating costs of this program is 
divided equally between the state and counties. In a like 
manner, Colorado recently enacted legislation to provide a 
fiscal incentive for combating fraud by permitting the 
counties to retain 50 percent of the state' s share of AFDC 
overpayments. 
recoveries resulting from fraud related 
Two states have developed innovative approaches to collect
fraud-related overpayments. 
In Massachusetts, the AFDC 
agency can formally establish itself as a priority lienholder 
in order to attach current or future assets of perpetrators. 
In this manner, ' sources not reachable by traditional offset 
and refund procedures can be attached to satisfy those 
ov.erpayments that have proven difficult to collect. 
Michigan, recovery methods include the interception of state 
tax refunds.  CONCLUSION

a stopgap measure to be used

"Prosecution  is 
until something can be done to prevent fraud.

This quote from an assistant district attorney expresses a

sentiment shared by many of the 460 officials interviewed for

this study. The  a billion dollar problem that will

AFDC fraud  is 
not go away if left unaddressed. Eliminating fraud from the AFDC 
program will require the commitment of management resources at 
governent. 
all levels of  As this study demonstrates, much has 
already bee  done by the HHS, the States, and the counties to 
combat fraud, but the problem persists. 
The traditional response to fraud, detection followed by

prosecution and recovery of the fraudulently obtained payments, 

has proven to be ineffective in dealing with all but the most

flagrant violators. Welfare workers are frustrated because they

see little action being taken against offenders. As a result,

they have a low commitment to the detection and referral of fraud

for investigation. Violators who are investigated and prosecuted 
receive little more than a "slap on the wrist" because the 
criminal justice system cannot adequately deal with welfare
mothers. 
The recovery of fraud-related overpayments, whether
ordered by the courts or pursued aclinistrati 
typically a
vely,  is 
protracted process that often fails to recoup the lost funds. 
This ineffective response to AFDC fraud must be reversed in order

to raise public confidence in this program and to ensure that

funds will be available to provide assistance to those families

who are truly in need. To eliminate the perceived high level of

fraud from the AFDC program, an aggressive and balanced strategy

needed: 
consisting of the following elements  is 
. management commitment to the reduction of fraud and other 
payment errors: 
front-end fraud detection that couples interviewer

experience and intui tion 
wi th investigative skills to 
identify and prevent frau

automated eligibility verifications such as those

required under DEFR to systematically detect unreported

income and resources: and
 a traditional investigation and prosecution function to deal

with perpetrators that elude the fraud prevention efforts or

commit the fraud subsequent to eligibility determination.

The concept of redirecting part of the investigative function to 
the front of the process is the key to this strategy that will 
save as much as $818. 5 million in avoided costs (see Appendix D 
savings). 
This 
for additional details regarding these estimated 
step will be an effective complement to the automated front-end 
DEFR. 
eligibility verification required by  Coupling these 
aggressive fraud prevention efforts with a more discriminating 
effort, 
emphasis on prosecution, a bolstered overpayment recovery 
ori ty 
and the au  to assess administrative penal ties, where 
appropriate, will demonstrate that fraud will no longer be 
tolerated in the AFDC program. 
by: 
This requires that HHS take the lead in combating AFDC fraud 
working with the states to develop, test, and transfer

effective fraud prevention, detection, and investigative

skills: 
making better use of the fraud reporting process to focus

public, congressional, prosecutorial and judicial attention

on the severity of AFDC fraud: and

including, 
tormulating and espousing a clear antifraud policy 
where appropriate, the development of legislative proposals 
that provide states with the means to more effectively deal
witn fraud. 
The FSA comments on. the draft report aref uirntcelurd cedla artif iAcpapetinodinx:  
Two points raised in FSA comments need 
indicated that they are unable to accept the report I s 
The FSA' 
estimte of a billion dollars a yea in 
fraud and the 
complementa finding that 
savings of $800 million a year 
exerience 
could be achieved because quality control  does not 
levels. 
show error rates at such 
We recognize that existing quality control data does not 
report. 
While 
support the extent of fraud identified in this 
the quality control process does uncover some fraud, that 
FRD. 
process misses the heart of the fraud detections by 
deprivation, 
These cases are characterized by unsubstantiated 
household composition, and residence. They are detected by 
investigative field work, unannounced home visits, and 
etc., 
collateral contacts with neighbors, local businesses, 
all of which are techniques more readily practiced by 
criminal investigators. The quality control activity is an 
essential component of the AFDC program but is principally a

paper review process. Accordingly, it cannot be depended
 upon to measure the extent of fraud since a significant

portion of fraud can be detected only through the

investigative techniques listed abov

furer 
FRD-like 
The FSA  indicated that mandating a 
progam 
(See Recommendations, page 20) could result in
the elimation 
proor gdi.l ution of proven preeligibili
verification 
We believe that mandating a front-end, fraud prevention
effort like FRD can only 
enhance other preeligibili 
State. 
activity ongoing in a  The selective identification of 
a small' numer of 
suspicious cases for investigation is the 
FRD. 
foundation of  This permits the identification of 
misinformation that could not be detected by computerized
front-end matching programs. Therefore, it complements 
efforts. 
rather than dilutes such  Such a mandate could 
FRD-like 
easily be written to assure that a  program would 
supplement any existing successful programs.  RECOMMENDATIONS

To address the billion dollar AFDC fraud problem identified in 
this inspection, the following actions are recommended for the 
Administration: 
Administrator, Family Services 
Revise regulations (45 CFR 235) to require that states 
implement a preeligibility fraud detection and prevention 
program similar to the FRD program used in California and 
other a eas of the country as a condition of state plan
approval. 
I S scattered 
Consolidate and increase the visibility of OFA 
antifraud efforts in a specific component with the 
responsibility to work closely with States, both directly an 
through the united Council on Welfare Fraud, to more sharply 
focus management attention on the prevention, detection, and 
of: 
deterrence of fraud through the development 
an improved fraud reporting mechanism that collects 
useful information on the incidence and nature of fraud 
prevention, detection, prosecution and overpayment
recovery acti vi ties, and provides timely, meaningful 
feedback to the States on statistical data as well as 
narrative descriptions of innovative antifraud
techniques; 
spectru of training 
a broad  and information packages to 
upgrade skills in combating fraud and to increase 
judicial and public awareness of the significance of AFDC 
it;
fraud and the positive steps being taken to combat 
and 
a centralized information center aimed at improving state 
access to and use of appropriate Federal, state, and 
private records to facilitate the timely verification of 
fraud. 
eligibility factors in order to prevent  APPENICES
 APPEIX 
II A II

22 STATE VISITE
 PR 
AF 
FRUD  INSPECTION 
22 STATE VISITD 
ARZONA
CAFORN

COLORA 
CONNCTCU 
FLRIDA 
GEORGIA
It.OIS 
IOWA
MAYL

MASACHSET 
MICHGA 
MISSISSIPPI
NE 
YORK 
CAOLI 
NORT 
OHIO

OREGON

PESYLVA

TESEE

WASHIGTON

WISCONSIN

WYOMIG
 "B"
APPENIX 
INSTRUCTONS FOR FORM SSA-4110
 r- '

Department of Health and Human Services

Social Security Administration

Office of Policy

Office of Research and Statistics

Division of Family Assistance Studies

INSTRUCTIONS 
FOR 
PROGRA 
SSA-4ll0, RECIPIENt FRAUD IN PUBLIC ASSISTANCE 

Content:  Form SSA-4ll0 provides information on administrative and 
legal actions taken during a six-month period on cases involving
questio  of recipient fraud, and recent developments and problems 
in the prevention and detection of recipient fraud. 

Requirements:	 A report on Form SSA-4ll0 is required semianAn uraelployr
 t
of all States (i.e., October-March and April-September).
the month following the end

is due not later than the lastre dpaoyr to.f

of the period covered by the 

to: 
Send the report 
Submittal procedure:

(1)	 Division of Family Assistance Studies 
Office of Research and Statistics, SSA 
Room 2227, Mary E. Switzer Building 
330 C Street, S. 
C. 20201 
Washington, D.
(2) . Assistance Regional Commissioner, OFA 
B-1
 ' .
. .
and Le al 
(SSA-4110): Administrative 
Instructions for Part I

Action on Cases Invol vinq a Question of Fraud 
General Definitions

reported 1n this section relate to

The statistical items to be 
the fiscal year regardless of

cases that were in process during  Consider a case

hen the case initially became suspect of fraud. 
 a enc

. as soon as a determination has been omratd ea b  u
estion 
as .in rocess
of the evidence to su 
ersonnel on the sufficienc  in process. as soon as

Consider a case as no longer 8

ef fraud.  evidence to support a

terminaticn of insufficient 
there is a d 
is a determination of sufficient

question of fraud or there 
the fullest extent that

evidence and the fraud bas been pursued to 

case initially reported as having

will be attempted. If a 
ew evidence and is subsequently

insufficient evidence acquires 
 evidence, the case is counted

viewed as having sufficient 
twice--nce as an insufficient case and once as a sufficient case

the decision took

each time 1n the appropriate period(s) in whiche
 vidence, report 
place. 
For a case viewed as having sufficient 
(or lack thereof) that occurred by the end
each action or decision 
e period. If 
action is taken by both agencya cpteirosonnsn.e l .nd
For 
of 
legal personnel in the same period, report both

agency empowered to

example, if a case was referred to an 
same period, report the

prosecute and ended 1n conviction in the

case in both 1.  1 and 2. 
AFDC, Hed cal Assistance, and Food Stamp Columns

reported on this fOrM.

Only cases involving AFDC fraud are to be 

is 1n conjunction with Medicaid or Food Sta

If the AFDC fraud 
1f all three programs

his

fraud, place it in the appropriate box and 
are involved record these cases in the right most column. 

of the agency that raised

classification should be used regardalcestiso
 n on the case.
the questio  of fraud or that took 
ecific Instructions

Action by Agency Personnel

raud. 
Evidenee not sufficient to succort a question of f

Line lA. 

Enter the total number of cases for which a decision was ma

was insufficient to support a

Agency persor.nel that the evidence

question of fraud. 
Evidence sufficient, case referred to agency

Line 18 (1). 
 Enter the total number of cases for

empowered to prosecure cases. 
period to refer the ease to

which a decision was made during the 

the agency empowered to prosecute cases regardless of whether all

referral had been completed by

procedures necessary to make the 
the end of the period.

B-2  . .
. '
Evidence sufficient, case not referred to agency

reas  Enter . the number of case 
Line 19 (2). 
 rQs  cure cas 
empowered 
to which a declsion was made during
n each o  e subcategories for 
to the agency empowered to
e period cnaots sto.  refer the case  case 
prosecure  Select the most compelling reason why the  those 
was not referred. Establish additcioansael sr.e ason categories if

Use a separate sheet
listed do not apply to all of atdhdee
 d. Co not. include mere than five 
more than three reasons wercaet .ego  called .other. if such a 
percent of the Cdses in a 
est.ablished. 
category is 
Line 18 (3).  Evidence sufficient, pendinq decision etcot erde fferar utdo  for 
rosecute cases. Cases of sus 
aaenc  the sufficien 
owered to
 et been made re ardin 
which a decision has not 
or unsufficienc of the eVldence should not be re orted on this

made. Enter the total number 0

orm untl  such a deC1S10n 1Sth e. pericd for which no decision had 
cases on hand at the end of 

been made with respect to whether to refer the case to the agency

empowered to prosecute.

II. 
Action by agency empowered to prosecute cases 
reason.  Ent.er the number of cases 
Lin  Prosecution declined, 
2A.  ch a decision was made during

in each of the sUb-categories for wh

the period not to prosecute. Select the most compelling reason 
Est.ablish additional reason 
not. prosecuted. 
why the case was  all of the cases. 
list.ed do not. apply to  Use 
categories if those  t.hree reasons were added. Do not

a separate sheet if more than

re than fi ve percent of the cases in a category called
includether is established. 
. if such a category 
Pre-prosecution diversions.  Enter the total number 
prior 
Line 2B.  to deciding

prosecution. 
cases for which a settlement was arranged  Include all cases

whether to decline or initiate 

of the period regardless of

that have this status at the endinitiated.

whether the settlement has been 

Prosecution initiated, outco  Enter the number of 
the 
Line 2C. 

cases for which prosecutiOn was completed or pteernmdininatge.d S edluercitn gt
 he 
period by appropriate outcomet. haen ds ttahteu sn uomfb etrhe cases at the end of 
outcome that best describes 
 failed to indict, . as 
other outcomes such as 8
the period. Specify 
necessary. Use a separate sheet if more than two outcomes were
cases in a 
added. 
Co not include mere than five percent of the 
other  if such a category is established. Under 
category called . art and ac uitted
convictions include those cases convicted in 
include only those cases that were
in part.  under dismissals,  Under 
of information was obtained. 
dismissed after an indictment 

pre-trial, pre-decision daifvteerr sions, includpe rcoasseecs uftoer.  wUhnidcehr  ac
ase 
deciding to 

settlement was arranged 

oending, include cases for which prosecution was lnltiated bu

of the period.

outcome had been reached bV the end 

B-3  .. 
- ...
. .
..: :' . . ",.
8. .

"" s"
 Only cases
decision on action to be taken. 

Case pendin 
prosecute case when th

Line 20. 
referred to the agencY empowered to

decision on the actlinoen .t o be taken has not been made ShOU

Enter the total number of cases on-hand at
lnc uded on thlS

e end of t e per  in the aqency empowered to prosecuttae kceans.e  s

for which no decision had been made on the action to be 
Nature of the

Instructions for Part II (SSA-4ll0

Statistical Data Reported in Part 1

1. 
Describe in this portion of the report the accuracy and Whenever 
completeness o! the statistical data reported in Part the 
accurate S'tatevide data are not. available, use this part ofI . 
report to explain the method of estimation and/or the entent
the State lde coverage used to complete the itemsi tienm ,P aderstc
 ribe

coverage and/or estimation procedures varied by 

Include an explanation of why accurate State

items separately. 
wide data were not available.

(SSA-4l10): Methods of Cealing
1nstructions for Part III 

Questions  of Recipient Fraud 
wi th 
the 
Describe in this portion ofa thet reeport. recent developments in 

prevention and detection of recipient fraud as well AS problems

that have been encountered. Clearly identify whether the 
ts a situation in the State as a whole or only a
information refle 
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&ft1hprlnll d,," DII :rlbt ...,thi repotlng perlod In m., be. q,,".lon n. cae.. In wh lnU'y In Idch .t",. m.thde .. 10 th .. . "..,,,. '.aud .nd ImprOWlMnll  "obllme: .ncilled b. IIcipl.nl '""d .nd "'pI ....n 10 ,nol". thl In dlliin. whh ,,"lIonl 0' probleme  CIO""': .nforum.n, .lIcl,11 .nd with law c. D,velopln. .f coop...,I.. relalionahlp.  n. chili" .f ..."d.  "" "pOlAlta ..coenatlonlon IIPOIU .ncopl.. ., qutl'ione 0' IIcipl,nl ',aud. an olh.. COtnll. r. Add Including luWt..lon. or In'orma,lon ".1.. of.cf '0 th '0 th. IUbi.el ..Ia o' 'Klpltnl frlUd tha' 
 APPEIX 
"C" 
SEH 
AF 
EXLE 
OF  FRUD 
DEVPE 
STATISTICS  FROM FORM SSA-41.1.0   
- N
- O
- I
- T
------ A QUES IERRMNDING  200 214030 230 4t1 15088 215 1111011 125 114 5UU 
-   EE 2
- T RP
- R
- O
-- PP  D . 
----- TO SURAt.I  B NOTBRRE 312  17211 211 2621031585 296800 128 5184  126 418 130 125' 913  0510 
----------- HLr  SUFFICIENT . OF r  CASASE EFERRm REF 141  2858 132 121  116  155' 160 1089 2001  633  240  486 523  10301 3
- U   CR
-   E
- H C
- N
- E
-----  1914 EVID TOTAL  653  254151  121  321  403 1061 101 234  !HiO 1089 1364 535  22 213  It.  158  111 1523 164 240 125  1)40  1550  92154 
H 2
C
R
A
H H
H 
UU83 - TION  ' 51 15536 452  2865  180  742  1919 621  211 1642  2033  390  301 210  880 852  262  9498 
AU HCV TaiER  E NOT ENT '10  A QUESD  ,  2
W OC NCCIRTAU
UH U VIDEUFFIUPPOF FR
l ESSO
.  OTAL  653  124 69695 815 121  3186  583 1010 10t 294 1115 960 3008  545  291 23t15  2881  548  111 1523 461 510 111 1826 2192  1812  2252 
T 2 2
3
A 
I
M
STATB  ALABAMA ALASKA ARXANSAS CALIFORNIA COLORAO CONNECTICUt' DELAWARE DIBT. or COLUFLORIDA "AWA II
ILLINOIS INDIANA IOWA KANSAS ItENTUCn LOUISIAN HAINE HICHIGAN HINNESOTA HONTANA NEBRASKA NEW HAHPSHIII NEW JERSEY NEW HEXICO DUO'A NORTH OHIO OKLAHOHA RHODE ISLAND SOUTH CAROLINA SOUTH DAKOTA TENNESSEB TEXAS UTAH VERMONT VIRGINIA WASHINGTON WEST VIRGINIA
WISCONSIN WYOMING VIRGIN ISLANDS

L 
A
T
O
T ER  049 119  124 296 6:U  629  008  418  111 820  133  511 
H 2 4 9
T
O
P D 
L HIE
ASV
SPECIHARDINVOL
  H'f  12  22  :I .  91 15  10  58  01
 05  11  31  98 
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T M 5 1 9
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E RE
S UG
O BN
R HA
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T9
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WEAR NT 71 51 21 13 11 12 01
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E8 AE
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Y1 LL
C  LO
NR AV
EE MN
AGOB SI
 T
OC
 T O T U  2  1 1 2  2 U 5  6 0  8  4  6  8 1  9 9  1  5 
G CASI SY - - - CASE NOREFBRI 31 11272911 26IO58 2980 92 518 12 4111 41125 11 3121
NL
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OHIO
OKLAHOMA
RHODE ISLAND SOUTH CAROLI NA
SOUTH DAKOTA
TENNESSEE TEXAS UTAH VERHON' VIRGINIA WASHINGTON WEST VIRGINIA
WISCONSIN WYOMING VIRGIN ISLANDS
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---  TIO
-----  OUES ERRAL
D I NO
 110 
- A FN
- --- . " PORT  REPE
- P   
---- O SUAUD
  NOTRRED 152
 407 
- TR EE
-  F SF
--------- CASES  FFICIENTOF  CAE ERRED RE 258 
-   U SF
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----- D HE984
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- N1 O
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ACTION BY  TOTAL  259  103
 1:S
 114  1036 
A

I
B
STATE  ALABAHA
ALASKA
ARKANSAS
CALI FOrtN I A
COLORADO
rONNECT leUT
DELAWARE DIST. OF tOLU"FLORIDA HAWA II
ILLINOIS I NO I ANA
IOWA KANSAS
KENTUCKY
LOUISIANA
MINE
HICHIGAN HINNESOTA
HONTANA
NEBRASKA
NEW HAHPSHIRE
NEW JERSEY NEW HEXICO NORTH DAKOTA
OHIO
OKLAHOHA RHODE I BLAND SOUTH CAROLINA
BOUTH DAKOTA
TENNESSEE TEXAS UTAH VERMONT VIROINIA WASHINOTON WEST I,'IROINIA WISCONSIN WVOM I NO V I RO I N 19LANDS  ( I) ,  5 
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rr . !'"  Ct\ I 0  E NOT HRED  (,I
 192  407 
UT' ;':Nn 'iLl"  Ct\!ikEFt
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'WN;nN  r. fr,TE:  "tArIAHA  I.LAm" iUWAN!..,S cm. I FW(N I A entOIiI\DO
f.ONNECf . r.UT l. AWARE OF eOl-UND HiT, FtOR I DA
HAWA II
J I.LI NOI S
INUJANA
lU'oIA I(AN5A9
f(rNTUCVV
LOUIf.IIANA
HAINF
HI CIH CiAN
HINNffoOTA HONfANA NHiRAUVA NEW HAMPSHIRE
NEW JERSEV Ni:W HEX leD
NORTH DAI OTA
OHIO
on .AHOHA
 ORE BON RuonE I BLAND SIlUT.. Ct\ROL INA
SOUTH DAVOTA
TENUI:5SEE TfXA9 UTAtt V(' r.-MnN r VllrJNJA Wt\!iHI NGTON weST v. n'NIA W I!CON! . N I.,VIIH' NI3
V WG' N ISLANDS   '
.
:!,. ., 1 ' I joi "  I';! n NI' iNti I/n: 1:; I fI" Ut, fI:r II'"  111 III TAuo  20.  344 
.... . "I:,;nIJI- ,.0_- .  Ct\liE PHIIHNG 1"1 
(.  Ntf :-l.!(.Jf: 1t'-... ..-.-...-. .._. -- N OTHER OUTCOMES 
--.-.--.-- - -.---..... ,,  ol 1'1(1/1  IHr.Tl1EU - U' r-d - TIH AI. f'm::-('Lr.IGIOAL D I Vf:RS IONS 
: - "'-'--'--'.------'-'-..'" -- .. . ...--.- ..-,.....- . '.. ..._...,... -._"..- " rn r'II\, !It:UIC\' (MPOtln ro rr:IJTE : l:f,!.,1m'1'0, 0 . nHCIH 0 U':TIJIU 1'\';E:5 - ;U:tlTION INITH';TI RI.!'  8M I S!JTOTAL COtIV I CTI ON!i Ar.OU 11 TOLS D I  1", 8"1  I:!
I:!  I)'  I:!  II'  117 :!5 
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A f'RD I 
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A

I
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STATE  AI /\lAMA I.I\GI' A Am r.NGAr, CAL I FOI(N I A COLORAno CnNNECTlCUT Dn AWI\RE
OIST. OF COLUMFLOHIDA IIAWAII ILLINOIS I NO IANA IOWA t:ANSAS HNTUCt'Y llJUI SIANA MI\ I NE M I CH I aAN MINNESOTA MONTANA NfIIRAS. NEW HI\Mf'SHIRE NEW JEkSEV
NEW hE'1( I NIJRTH DAKOTA UHIO 01 LI\HOMA UFcflilJN tiunm.: ISLAND f.nltTH CAROLINA SUUTH ()AfOTA TENNE!i5EE TEXAS UT.'\tI VERNONT V I r,B I II 1/\  WII!iH I NIHON 
WEm I.ml1lNIA W HiCONS I N WynN I 1""
I !;LANnS
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 7'"  162 
N
C (\
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5TnTE	 AI. nMHA
At itSrA
Am:ANSAn CnL I rOliNIA COI or,nno
t:ONNlCT ICUT DL:LI\WAHE DinT. UF COLUMfLnR I nA HAWA II
ILLINOIS
INDIANA
Wi-'A
I' I\NSnS I:FNJUCI(V U)U I S II\NA MA I Nt:
M I CHI RAN
ttl NNEGOT MONT ANA Nt: liRA!iI A NEW HAMPSHIRE
SEV NEW JE NEW HEX ICD NORTH DAKOTA
OHIO OI:LAHOHA OAEGON RHODE ISLAND 5DIJTH CI\ROLINA OTA 5U1ln. DA',TENNESSEE XAS UTAH V(RHONT VItU1INIA Wn!JtlNGTON WFST VIRGINIA W 15r.ON!H N
YUH I NO "I RU I N 15LANDS   
- N
- O
- I
- T
--- UES RAL
NG
 14'
,:5
:S2  147  S93 
--  Q ERDI :
- A FN
-   EE
- T RP
- R
- O
------ O SUPPAUD   NOT RRED  98 '  ft9 475  819  701  3:S  110  317  127 1002 2:5 867  4893 
- TR EE
--- NT F F CASREF
-------- MP (:(\5E9  BUFF ICIEO ASE EFERRED  737  107' :S2  101 ;Sl  112  161  10:5  240B 
-- Tn E  CR
-- i II:
------ D FOD( 1904 VIDE OTAL  105  100 1212  '55 219  80B  BI3  211 138  429  147 1163  1119  7B94 
N  T
AH
C RC
DA
FM
NNEL . (.J9BJ -  TION  174  2B62 173  216  141  3943 
O  S
RSR' T TO
UE
Pf.BE NOT  Q
AI3ENC'f  OCTO V I DENCE UFFICIENUPPORT AF FRAUD 
Y ESSO
B
T ION  OTAL  IUS  137 1212  267 964 220  BOS 119  3615 221  211 140  476 140  363 1201  1262  11837 
C T
A
A

1
8
STATE  ALABAMA ALASKA ARKANSAS CALIFORNIA COLORADO CONNECTICUT DELAWARE DIST. OF COLUHfLOR I DA HAWA II
ILLINOIS
INDIANA IOWA KANSAS KENTUCKY LOUISIANA MA I NE HICHIGAN HINNESOTA HONTANA NEBRASKA NEW HAMBHIRE NEW JERSEY  NEW HEX ICO NORTH DAOTA OHIO Ot(LAHOI OREGON RHODE ISLAND SOUTH CAROL INA SOUTH Df\OTA
TENNESSEE TEXAS UTAH VERMONT VIRGINIA WASHINGTON WEST VIRGINIA WISCONSIN WYOMING VIROIN IBLANDS
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C-12
 APPEIX 
"D" 
IlODOLO 
OF COMPING COST AVOIDACE SAVIGS

PRION 
FROM FRUD EAY DETCTION AN  (FRD)
 ------------
MEODOLOY OF CO!uU'J.J.G  COST AVOIDANCE SAVINGS 
FRUD EAY DETCTION AN PREION (FRD) 
the 
FRD program 
Since the California counties involved  in 
include large and small as well as urban and. rural populations 
their experiences should translate well to other counties 
throughout the Nation. 
Total 'Payment Potential 
The numer of AFDC applications received in each quarter of

fiscal year 
1984, the latest year for which complete data 

available, is multiplied by the average monthly payment per 
family for the respective quarter. 
Average  Total Payment
Quarter  Applications  Monthly Payment  Potential 
First 
783, 928  $317  $248, 505, 176 
Second  776, 480  $324  $251, 579, 520 
Third  700, 873  $319  $223, 578, 487
Fourt 
822, 603  $326  $268, 168, 578 
Total  $991, 831, 761 
Fraud  Detection/Prevention  Rate 
This rate was determined by an analysis of the results of 
21 counties in California that had a Fraud Early Detection 
and Prevention (FRD) program in place during calendar year
1985. A rate of 5. 
33 percent was reached by dividing the
numer of denials 
and withdrawals resulting from this 
numer of 
program by the  AFDC applications received by the 
counties in 1985. A second rate of 4. 85 percent was 
determined by excluding the five counties with more than 40 
percent of their total applications being referred into the
FRD program. 
The 21 county rate would yield higher 
593. 
potential savings, totaling $899, 544, However, the 16 
county rate is preferred because the high referral rates in 
the five excluded counties are inconsistetnty w iwth othrek ceonrcept
of selective referrals based on  eligibi+i 
intuition. It is this highly selective referral process that 
offers a degree of economy and flexibility unlikely to be 
efforts. 
found in automated fraud detection/prevention 
Denials  AFDC Applications
and Withdrawals  in 21 Counties  Rate 
D-l  5, 652  divided by  106, 075  33% 
Denials  AFDC Applications 
and Withdrawals  in 16 Counties  Rate 
888  divided by  100, 693  85% 
Monthly Cost Avoidance

multiplied by the

Tfhre atotual mdont hdly epaymteent cpottenitoialn  /prevention rate.  is 
Monthly Payment  Rate  Monthly Cost
Avoidance 
$991, 831, 761  33%  $52, 864, 633 
or, using the 16 county rate

Monthly Payment  Rate  Monthly Cost
Avoidance 
$991, 831, 761  85%  $48, 103, 840 
Adjusted Monthly Cost Avoidance

figues 
Two adjustments of the monthly cost avoidance  must 
be made to reflect subsequent, legitimate eligibility by 
individuals whose initial applications are withdrawn or 
FRD program with the 
denied as well as the overlap of the 
antifraud requirements of DEFR. 
An HH-funded study of the Orange County FRD program 
revealed that 17 percent of those excluded from payment 
FRD subsequently reapplied 
as a result of  and became
eligible. 
Accordingly, the monthly cost avoidances must 
be reduced by this percentage of reapplications. 
The DEFR adjustment was derived from California' 
analysis of denials and withdrawals resulting from the
FRD program which showed that only 24. 23 percent were 
for income and assets. We have estimated that only half 
of these would be detected through automated Income and 
(IEVS), based on our 
Earnings Verification Systems 
discussions with staff involved with the FRED program and 
our finding that the active concealment of income and 
assets to avoid automated screening such as those
required by DEFR is increasing. We have, therefore,
used a 12. 2 percent reduction factor to eliminate the 
IEVS. 
overlap with 
D-2
 -----------
Factor  Reductions 
Monthly Cost Avoidance 
$48, 103, 840  17%  177, 653 
$48, 103, 840  12.  820, 565 
Total  $13, 998, 218 
Monthly Cost  Adj usted Monthly 
Avoidance  Reductions  Cost Avoidance 
$48, 103, 840  $13, 998, 218  $34, 105, 622 
Annual Cost Avoidance 
lengt 
The average  of a family' s stay op AFDC as used in the 
HHS-funded review of the Orange County program was
24 months. This 
same estimate is used here to compute the 
amount of payments that would have been made had the fraud 
stage. 
not been detected in the preeligibility 
Anual Cost 
Adjusted Monthly  Average Months
on Aid  Avoidance 
Cost Avoidance 
$34, 105, 622  $818, 534, 928 
This cost avoidance computation does not include the potential 
23 percent) of' 
savings resulting from the small percentage (0.
applications that would result in payment of a grant, but at a 
FRD program. 
lower amount than would be the case if not for the 
Similarly, it does not include the potentially significant Food 
stamp savings that would result from the FRD program. The 
California experience in the 16 counties alone resulted in annual 
savings of approximately $5. 7 million in avoided Food stamp
costs. 
D-3
 APPEIX 
"E" 
ADSTRTION 
REPONSE FROM FAMLY SUPORT 
DRA RERT OAI-04-86-00066, "STATE INTIGATION

WI 
OF FRUD IN TH AID TO FAMLI  DEPEEN

CHLDRE (AF) PROG"
 . .... .. .. 
..-  - ...... .,. .... . .
.If

'\\E  l 0,. n  Ll:\ ci HUMAN 3  ifViCE.  anll.y 5upporl.AdlT,"l  tratlon 
Memora-ndum 
A'J 
1 4 19S7 
Date:

istrator 
Adm in 
From:

Family Support Administration 
OIG Draft Report-- State Investigation of Fraud in the AFDC

Sublec:t:  program 
Richard P. Kusserow 
To:  General 
Inspec tor 
report-
We agree wholeheartedly with the basic thrust of tbis 
that we can and mu t work vigorously to reduce fraud in the AFDC 
program. Not only do we have an obligation to do so as stewards 
of the public trust, but also we have an obligat5on to do so

baecnaudse  pfrauudn piresvehntmione isn mto.r e cost effective than prosecution

We are committed to working vigorously to attack fraud, wherever
found.  like 
However, to make the report more m aningful, I would 
the 
to bring to your attention some observations on the data in 
data. 
report and the conclusions based on these 
Extent of Current Fraud

hout 
The report makes clear that fraud has been defined throu 
most of the findin s afnadc rtsec.o mmendations to include unintentional 
mlsrepresentation of  This definition was selected because 
definitions of fraud often vary from State to State and within a
State in different situations" 
However, even though the report ' s

definition of fraud is made  still have reservations

to whether it is an appropriclaear, te onwee  . Unintentional client error 
, but in 
is a problem for which we must seek: solutions  many ways

it is a different problem than intentional misrepresentation and

approaches. Furthermore, we are

may respond to different 
concerned that using this broad definition of fraud--a definition

which certainly is broader than that generally used by the public

or, by lawmakers,:-may r 3ult in readers ' misunderstand ing the

findings of the report. 

fraud as " 
A second area of concerlln a insd  tphreo jreecptoerdt  s estimate' of 
billion dollar problem savings of 5800 million

from fraud prevention activi ties. We agree that form SSA-4110

information is not a perfect measure of the extent of fraud-

lar 
e part because States exercise their discretion in usin

varyin  definitions of what constitutes fraud and, accordin

the report , States may be lax in filling out the requested

information. We currently are working with States to improvp. the

ieve

accuracy and usefulness of the form 4110. However , we bel 
-. e..  - J  ' 1_.

E-l  -- 2

form 4110 and

that the report vastly overstates the problems  I S concern 
understates the level of OFA  for uniform reporting.
are 
cot'vinced that th  estimates derived from the information 
included on these forms is the best available estimate of fraud

(using generally accepted definitions of the term). 
We are unable to accept the report s estimate of a billion 
ntary finding that
dollars a year in fraud , and the complem 
savings of $800 million a year could be achieved. 
We would note 
that the interviews from which these estimates apparentlv were

derived do not appear to have been part of a statistically valid

sample or survey. We would further note that the -individuals who

provided this informa tion appear in many instances to be the same

individuals who provide information on the form 4110. Fit'ally.
we would note that neither quality control case audi ts , nor other
research 
, would s  igh for all client error
pport figures that 
whether fraudulently intended or not. 
Pre-eligibility Fraud Prevention

regulations be revised to require that
The reports recommend that 
States implement a pre-eligibility fraud detection and prevention 
program similar to the Orange Coun ty, Cal iforn ia program as a
condition of State Plan approval. 
We would caution against 
widespread mandatory adoption of such a program based only on the
findings of this demonstration. 
The savings reported for the 
Orange County program may not or cannot be extrapolated safely 
general. 
the AFDC program in 
Specifically, the Orange County demonstration used a pre/post 
results, to a prior
design which compared the demonstration 
situation where very little was done at intake to detect and
investigate possible overpayments. 
For other jurisdictions. the 
AFDC savings achieved under a program like this one would depend
upon the nature and extent of verification procedures existing 
model. 
prior to implementation of the Orange County  For example
States already using other follow-up verification practice  could 
all, i 
expect to experience lower savings, or no savings at  r the
study  implemented. II" fact, 
s procedures were  it is concei'\rable 
that regulations such as those proposed by the report could 
require a jurisdiction to eliminate or dilute a proven pre
eligibili ty verification 
tute
program in order to insti 
potentially less effective activitie 
which would be required. 
Impact of Quality Control and Federal Leadership

The report contends tha t It 
tates could face increased sane t ions 
(disallowances for excess erroneous spending) if such (fraud)
detection efforts added to the error rate.  We disagree with 
E-2
 3 -

thi  ion because the State  s error rate is hased on the 
conte( 
accuracy ot H sample ot actual cases reviewed by Quality Control

the State J. evel wi th Federal re-revi ew of a 
rev iewers at 
subsample. Any error, whether resulting from fraud or any other 
cause, that is corrected before the review month would not be 
counted in the State s error rate. On the other hand, if the 
error is not discovered until the State or Federal quality 
included 
control reviewer examines the case , the error would be 
in the State s error rate. Thus , aggressive fraud p evention and 
detection .  found 
increases the likelihood that an error will be 
the 
before a caRe becomes part of a quali ty control sample, when 
reviewer is' likely to find any previously undetect;ed errors 

While we appreciate the report ' s acknowled  ing many FSA/OFA 
activities to combat fraud, we believe other sections of the
report may lead the reader to underestimate the exte'nt of our 
agency  s work in this field. In fact, we have been active on, and 
supportive of. the Uni ted Coun  il on Welfare Fraud. We have usp.d 
technology transfer funds to pay for State-to-State vis its 
fraud personnel as well ase necxptesn.s es of State fraud personnel 
attending training confe  FSA/OFA also has been a leader 
in the field of computerizing the eligibility verification

process (FAMIS) to eliminate errors and has compi led and made

available, to States ' informatioT' on "best practices" in fraud

gressive error

prevention and detection. Furthermore. our a 
detection and corrective action activities address ooth client

and agency errors.

done. I  into 
Certainly. we believe more needs to be  will look 
. the feasibility of implementing the report s recommendation 
fraud eff9rts 
consolidate and increase the visibility of our anti-
in a specific component. The question I will be examining 
whether such a move is an efficient use of resources and 
consistent with our overall program objectives. We will continue 
to work for smooth implementation of the Income Eligibility 
the 
Verification System (IEVS), which accomplishes the goals of 
report 
s recommendation for centralized information access. 
also will continue to provide such assistance as we can to States 
in their efforts to control fraud, as the report recommends, and 
to increase ;udicial and public awareness of the significance of 
it. As . for the report ' 
AFDC fraud and steps taken to combat 
recommendation to develop an improved fraud reporting mechanism 
I agree in principle . but, as the report itself indicates. there 
barriers to such a system.  the 
We will continue 
are cons iderable 
efforts described above to improve the timeliness and usefulness 
of the Form 4110, which is des igned to serve that purpose. 
E-3
 .# ,
Finally, one of my absolute highest priorities as Administratcr 
efficiency. I consider fra 
of FSA is improved administrative 
prevention and detection to be an important part of that goa1", so

I can assure you that FSA will be ever vigilant in our efforts to

control this problem which thre tens the very integrity of the

program. 
Stanton 
E-4