Department  of  Health  and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
AFDC  PRE-ELIGIBILIW  FRAUD 
INVESTIGATIVE  UNITS  OFFICE  OF INSPECTOR  GENERAL 
The  mission of the  Office of Inspector  General  (OIG),  as mandated  by Public  Law 95-452, as 
amended,  is to protect  the  integrity  of the  Department  of Health  and Human  Sewices  (HHS) 
programs  as well as the  health  and welfare  of beneficiaries  served  by those  programs.  TM 
statutory  mission  is carried  out  through  a nationwide  network  of audits,  investigations,  and 
inspections  conducted  by three  OIG  operating  components:  the  Office of Audit  Services,  the 
Office of Investigations,  and the  Office of Evaluation  and Inspections.  The  OIG  also informs 
the  Secretary  of HHS  of program  and management  problems  and recommends  courses  to 
correct  them. 
OFFICE  OF AUDIT  SERVICES 
The  OIGS  Office of Audit  Services  (OAS)  provides  all auditing  services for HHS,  either  by 
conducting  audits with its own audit  resources  or by overseeing  audit  work done  by others. 
Audits  examine  the  performance  of HHS  programs  and/or  its grantees  and contractors  in 
carrying out  their  respective  responsibilities  and are intended  to provide  independent 
assessments  of HHS  programs  and operations  in order  to reduce  waste,  abuse,  and 
mismanagement  and to promote  economy  and efficiency throughout  the  Department. 
OFFICE  OF INVESTIGATIONS 
The OIGS  Office of Investigations  (01)  conducts  criminal,  civil, and administrative 
investigations  of allegations  of wrongdoing  in HHS  programs  or to HHS  beneficiaries  and of 
unjust  enrichment  by providers.  The  investigative  efforts  of 01  lead to criminal  convictions, 
administrative  sanctions,  or civil money  penalties.  The  01  also oversees  State  Medicaid  fraud 
control  units which investigate  and prosecute  fraud  and patient  abuse  in the  Medicaid  program. 
OFFICE  OF EVALUATION  AND INSPECTIONS 
The OIGS  Office of Evaluation  and Inspections  (OEI)  conducts  short-term  management  and 
program  evaluations  (called  inspections)  that  focus on issues of concern  to the  Department, 
the  Congress,  and the  public.  The  findings and recommendations  contained  in these  inspection 
reports  generate  rapid,  accurate,  and up-to-date  information  on the  efficiency, vulnerability, 
and effectiveness  of departmental  programs. 
OEIS Atlanta  Regional  Office prepared  this report  under  the direction  of Jesse  J. Flowers, 
Regional  Inspector  General,  and Christopher  Koehler,  Deputy  Regional  Inspector  General. 
Principal  OEI  staff included: 
Atlanta Retion  Headquarters 
Peggy Daniel,  ProjectLeader  Wm. Mark  Krushat,  SC.D.

Betty Apt,  Team Leader  Ruth  Folchman

Jackie  Andrews  Ann  OConnor

Joe  Townsel

To obtain  additional  copies  of this report,  please  call the Atlanta  Regional  Office  at (404) 331-

5022.
 EXECUTIVE  SUMMARY

PURPOSE 
To  determine  whether  or not  local pre-eligibility  fraud  investigative  units  are  effective 
in preventing  inappropriate  payments  of Aid  to Families  with Dependent  Children. 
BACKGROUND 
The  Aid  to Families  with  Dependent  Children  (AFDC)  program  provides  financial 
assistance  to  families  with  children  who  are  deprived  of support  due  to  death,  absence, 
or  disability  of at  least  one  parent.  Some  families  with  children  deprived  of  support 
due  to  unemployment  of the  principal  wage  earner  may  also  receive  AFDC  assistance. 
In  Fiscal  Year  1991,  the  AFDC  program  paid  about  $20.7  billion  in Federal  and  State 
funds  to  about  12.5  million  people.  The  Administration  for  Children  and  Families 
estimated  that  about  $1 billion  of those  funds  were  inappropriate  payments. 
To  prevent  fraud  and  alleviate  resulting  overpayments  caused  by incorrect  applicant-
provided  information,  some  State  and  local AFDC  offices  established  pre-eligibility 
fraud  investigative  units.  The  principal  objective  of pre-eligibility  fraud  investigative 
units  is to  prevent  applicants  from  fraudulently  obtaining  AFDC  benefits.  They  do  so 
by verifying  applicant-provided  information  before  AFDC  payments  are  made. 
Preventing  inappropriate  AFDC  payments  is more  effective  than  trying to recover 
payments  after  applicants  have  received  them. 
FINDINGS 
Be-eligibilityjiaud investigativue nitsqiJective/py reventinapproptiteAIIDCpayments
Thirty-nine  local  offices we sumeyed  reported  that  investigations  by pre-eligibility  fraud 
investigative  units  resulted  in savings of over  $41 million  in program  funds  in 1992. 
The  savings per  unit  ranged  from  a low of $1.20 per  dollar  of operating  costs to a high 
of $104.34.  The  costs and  savings information  provided  by the  39 selected  offices 
showed  a weighted  average  savings of about  $8.43 for every  $1.00 spent  operating  a 
unit. 
We were  unable  to  compare  the  relative  effectiveness  of pre-eligibility  fraud 
investigative  units  to  that  of AFDC  eligibility  workers.  Data  to  make  such  a 
comparison  was  not  available.  Most  local  offices  did  not  keep  records  on  application 
denial  rates.  Therefore,  we  could  not  compare  denial  rates  prior  to  establishment  of 
pre-eligibility  fraud  investigative  units  to  denial  rates  after  such  units  were  operating. 
Further,  where  denial  rates  were  available,  dollar  savings  resulting  from  denials  by 
eligibility  workers  had  not  been  computed. 
i  However,  savings resulting  from  pre-eligibility  fraud  investigative  units  are  additional 
to any that  might  result  from  eligibility worker  decisions,  and  investigative  and 
prosecution  activities  of regular  AFDC  fraud  units.  AFDC  eligibility workers  may 
cause  applicants  to withdraw  fraudulent  applications,  or the  workers  may deny  such 
applications.  To  the  extent  that  fraudulent  applications  are  withdrawn  or denied,  a 
savings to AFDC  occurs.  Every  denial  or withdrawal  caused  by pre-eligibility  fraud 
investigative  units  represent  additional  savings to that  resulting  from  eligibility workers. 
Likewise,  even when  fraud  is discovered  later  by regular  fraud  units,  erroneous 
payments  have  already  been  made.  Such payments  are  very difficult  and  certainly 
inefficient  to recover.  Therefore,  preventing  such improper  payments  before  they 
occur  is an additional  savings. 
Local  AFDC  officials we interviewed  also told  us the  presence  of pre-eligibility  fraud 
investigators  in a community  help  deter  fraud.  Applicants  may be  less likely to 
provide  false  information  if they  know investigators  will be interviewing  relatives, 
neighbors,  and  employers  to substantiate  applicant-provided  information. 
he-eligibility  fraud investigativue nitsuse basicinvestigativtee chniques
Staff  at  essentially  all of the  AFDC  offices we inspected  said they  most  often  relied  on 
basic  investigative  techniques.  These  included  (1) interviews  with relatives,  neighbors, 
landlords,  and  employers,  (2) unannounced  visits to applicants  homes,  (3) matching 
applicant-provided  financial  information  with Federal  and  State  databases,  and  (4) 
assisting  eligibility  caseworkers  interview  applicants.  None  of the  offices we inspected 
used  sophisticated  techniques  such as fingerprinting  and  electronic  surveillance. 
About  74 percent  of the  local AFDC  offices we surveyed  required  that  pre-eligibility 
fraud  investigations  be  completed  within  15 days after  cases  are  referred  by eligibility 
caseworkers.  A fast  turnaround  time  is essential  for investigation  results  to be  useful 
to eligibility  decisions.  Caseworkers  must  usually  determine  eligibility  in 30 days for 
benefit  payments  to be  made  to eligible  applicants  within  the  federally  mandated  45 
day time  limit. 
Mbstpre-e&ibilityajku d  investigativue nitsareorganizationalliyn dependentof AFDC
benejitpayrnentssections 
About  62 percent  of the  sampled  pre-eligibility  fraud  investigative  units  reported  to

supervisors  that  were  organizationally  independent  of a benefit  payments  (eligibility)

section.  Local  officials  generally  advised  that  keeping  pre-eligibility  fraud  investigative

units  organizationally  independent  is beneficial  because  the  missions  of benefit

payments  workers  and  investigators  differ.  Eligibility  workers  have  a social work  ethic

of wanting  to help  people  and  may give eligibility to an applicant  even  when  there  is

doubt  about  eligibility.  Conversely,  investigators  are  interested  in preventing  fraud  and

look  for proof  of eligibility.  The  difference  in missions  can  create  a conflict  of

interest.

ii  However,  officials  from  all the  local AFDC  offices we surveyed  said pre-eligibility 
fraud  investigative  units  are  most  effective  when  physically  located  near  eligibility  staff. 
They  said  such a physical  location  helps  assure  (1) effective  communication,  (2) timely 
referrals,  (3) quick  feedback,  and  (4) accessibility  to eligibility workers  files. 
RECOMMENDATIONS 
We  could  not  reliably  project  a nationwide  savings, but  39 local  AFDC  offices  claimed 
to have  saved  on average  over  $8 for every  $1 spent  on pre-eligibility  fraud 
investigative  units.  We  recognize  that  pre-eligibility  fraud  investigative  units  might  not 
be  appropriate  in every local  office.  However,  such units  could  achieve  significant 
savings in a cost  effective  manner  in many  areas.  States  and  localities  might  well want 
to consider  the  advantages  of establishing  such units.  Therefore,  we recommend  that 
the  Administration  for  Children  and  Families  (ACF)  encourage  and  help  all States 
establish  pre+ligiiility  fraud  investigative  units.  ACF  can  do this by: 
disseminating  information  on pre-eligibility  fraud  investigative  units  to States 
F	
and  localities  without  units,  and 
offering  technical  assistance  to States  interested  in establishing  pre-eligibility 
b	
fraud  investigative  units. 
AGENCY  COMMENTS 
The  Assistant  Secretary  for Children  and  Families  commented  on the  report.  She 
noted  that  we combined  figures  from  units  reporting  only AFDC  savings and  costs 
with figures  from  units  reporting  AFDC  and  food  stamps  savings and  costs.  ACF  also 
noted  that  we did not validate  data  States  provided.  We  agree,  and  have  disclosed 
our  methodology  in our  report.  We  combined  costs  and  savings in our  calculation 
because  some  local  AFDC  offices  could  not  separate  AFDC  and  food  stamp 
operations.  However,  we reported  that  17 local AFDC  offices  that  could  separate 
AFDC  and  food  stamps  saved  almost  $9 million  in only AFDC.  Further,  savings 
reported  by the  sampled  units  represented  misspent  Federal  funds  regardless  of 
whether  the  savings came  from  the  AFDC  or food  stamp  program. 
ACF  reported  that  they make  information  available  to States  about  innovative 
programs,  and  are  developing  a catalogue  that  will make  such information  more 
usable  for States.  We  support  their  efforts,  and  believe  they  should  include 
considerable  information  on pre-eligibility  fraud  investigative  units.  We  know  States 
have  an interest  in this information  because  several  States  and  a consultant  from 
Canada  have  contacted  the  OIG  for such data  upon  hearing  about  our  inspection. 
... 
111  TABLE  OF  CONTENTS

PAGE 
EXECUTIVE  suMMARY 
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....  .s1 
FINDINGS 
Pre-eligibility  Fraud  Investigative  Units  Are  Effective  . . . . . . . . . . . . . . . . . . . .  5

Pre-eligibility  Fraud  Investigative  Units

Use  Basic  Investigative  Techniques.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...7

Most  Pre-Eligibility  Fraud  Investigative  Units

Are  Organizationally  Independent  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...10

RECOMMENDATIONS.  .  . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...13

AGENCY  COMMIWB.  . . . . . . . . . . . .  . . . . . . . . . . . . . . . . . . . . . . . . . . . ...14

APPENDICES

Sampled  LocalAFDC  Offices  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l

Methodology  for Calculating  Savings and  Computing  Cost  Benefits  . . . . . . .  B-1

ACF  Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..C-1
 INTRODUCTION

PURPOSE 
To  determine  whether  or not  local  pre-eligibility  fraud  investigative  units  are  effective 
in preventing  inappropriate  payments  of Aid to Families  with Dependent  Children. 
BACKGROUND 
Amc  l%gm?n 
The  Aid  to Families  with Dependent  Children  (AFDC)  program  provides  financial 
assistance  to families  with  children  who  are  deprived  of support  due  to  death,  absence, 
or disability  of at least  one  parent.  Some  families  with  children  deprived  of support 
due  to unemployment  of the  principal  wage  earner  may also receive  AFDC  assistance. 
The  Administration  for Children  and  Families  (ACF),  Department  of Health  and 
Human  Services  (HHS),  has Federal  responsibility  for AFDC.  The  program  is 
authorized  by title  IV-A  of the  Social  Security  Act.  States  administer  the  program 
through  local  offices--either  district,  county,  or city.  Program  costs are  shared  by 
Federal  and  State  governments.  The  Federal  government  pays 50 percent  of the 
administrative  costs  and  a percentage  of the  AFDC  payments.  The  percentage  varies 
by State  and  is determined  by a formula  using Department  of Commerce  statistics. 
Generally,  poorer  States  receive  a larger  Federal  contribution  than  affluent  States  for 
AFDC  payments.  In some  States,  counties  pay part  of the  non-Federal  portion  of 
AFDC  payments. 
In Fiscal  Year  1991, the  AFDC  program  paid  about  $20.7 billion  in Federal  and  State 
funds  to about  12.5 million  people.  The  ACF  estimated  that  about  $1 billion  of those 
funds  were  inappropriate  paymentsl. 
AFDC l%e-EligibilitFyreudInv@&ative U& 
To  receive  AFDC  benefits,  applicants  must  complete  an application.  Local 
caseworkers  then  attempt  to verify applicant-provided  information  to determine 
eligibility  and  amount  of financial  assistance.  An inappropriate  AFDC  payment  occurs 
when  an  applicant  fails to accurately  report  facts which  might  affect  the  AFDC 
payment,  and when  a State  fails to act  properly  on known  information.  Intentionally 
withholding  or misrepresenting  facts  by an applicant  may be  considered  fraud. 
lAdministration  for Children and Families, Quarterly Public Assistance  Statistics, Fiscal Year 
1991 
1
 All States  are  required  to identi~  alleged  fraud  and  develop  procedures  for referring 
these  cases  to law enforcement  officials.  In most  States,  this is accomplished  in on-
going fraud  units.  ACF  shares  the  expense  of these  activities  with  other  programs  and 
the  State.  The  AFDC  share  is subject  to the  regular  50 percent  administrative  cost 
matching  rate.  However,  to prevent  fraud  and  alleviate  resulting  overpayments  caused 
by incorrect  applicant-provided  information,  some  State  and  local  AFDC  offices 
established  pre-eligibility  fraud  investigative  units.  The  principal  objective  of pre-
eligibility  fraud  investigative  units  is to prevent  applicants  from  fraudulently  obtaining 
AFDC  benefits.  They  do so by verifying  applicant-provided  information  before  AFDC 
payments  are  made.  Preventing  inappropriate  AFDC  payments  is more  effective  than 
trying to recover  them  after  applicants  have  received  them. 
AFDC  caseworkers  refer  applications  to pre-eligibility  fraud  investigative  units  for 
investigation  when  a caseworker  suspects  an applicant  has provided  incomplete  and 
inaccurate  information  to obtain  benefits.  Investigators  then  attempt  to verify the 
applicants  financial  and  family circumstances.  They  do so by comparing  applicant-
provided  information  with information  obtained  from  (1) employers,  neighbors,  family, 
and  friends,  (2) unannounced  visits to applicants  homes  to verify residence  and 
household  composition,  and  (3) computer  matches  with State  databases,  such  as 
departments  of labor  wage  files. 
In  1987, we reported  that  pre-eligibility  fraud  investigative  units were  effective  in 
detecting  fraudulent  application  information  and  preventing  inappropriate  AFDC 
payments  in two California  counties 2.  In 1993, we reported  that  26 States,  in addition 
to California,  had  established  pre-eligibility  fraud  investigative  units3. 
SCOPE 
We  included  11 States  and  39 local welfare  offices  that  have  pre-eligibility  fraud 
investigative  units  in our  inspection.  We  focused  our  inspection  on (1) whether  or not 
pre-eligibility  fraud  investigative  units were  effective  in preventing  inappropriate 
AFDC  payments,  and  (2) how the  units were  operated. 
METHODOLOGY 
We  used  a two-stage  cluster  sampling  process  to  select  States  and  local  offices  for 
inspection.  First,  we  randomly  selected  12 States  from  the  universe  of  26 States.  Our 
universe  included  all States  that  had  pre-eligibility  fraud  investigative  units  except 
California.  Secondly,  we  selected  53 local  offices  from  the  12 States.  We  dropped 
20ffke  of Inspector General, United States Department of Health and Human Serviees. State 
Investigation of Fraud in the Aid to Families with Dependent Children (AFDC) Program.  0Al-04-86-
00066. 
30ftice of Inspector General, United States Department of Health and Human Serviees. AFDC 
Pre-Eligibi/ity Verification Measures.  OEI-O4-91-OO1OO. 
2  one  State  with four  local  offices from  our  sample  because  it no longer  had  pre-
eligibility fraud  investigative  units  as of June  1993.  This  reduced  the  sample  size to  11 
States  and  49 local  offices.  Ten  of the  49 local  offices  did not  respond  to our  survey-
therefore,  reducing  our  sample  results  to 39 local  offices.  Appendix  A shows the  local 
welfare  offices  appearing  in our  sample. 
We  excluded  California  from  our  universe  for two reasons.  First,  we had  inspected 
and  reported  on local  programs  in that  State  in  1987.  Second,  the  California  program 
is atypical  of most  other  States.  California  was the  original  pioneer  to use pre-
eligibility  fraud  investigative  units,  and  their  program  is one  of the  largest  in the 
United  States.  It is also generally  more  aggressive  than  other  States  in detecting 
fraud.  For  example,  many  California  counties  used  trained  peace  officers  rather  than 
social workers  for investigators.  As such, California  may have  more  advanced 
investigative  techniques  which could  bias  our  sample  results.  We  did, however,  inspect 
operations  of pre-eligibility  fraud  investigative  units  in five local  offices  in California. 
We  expect  to report  our  findings  in a subsequent  report. 
To obtain  information  on operations  and  results  of selected  pre-eligibility  fraud 
investigative  units, we (1) sulveyed  all selected  States  and  local  offices,  (2) reviewed 
pertinent  documentation,  and  (3) interviewed  appropriate  officials  and  staff.  To 
illustrate,  we mailed  survey questionnaires  to six States  and  29 local  offices.  Using  the 
same  survey instrument,  we obtained  information  from  the  remaining  five States  and 
10 local  offices through  personal  interviews.  Further,  we obtained  reports  and  other 
documentation  on estimates  of savings, program  evaluations,  policies,  and  procedures. 
Finally, we interviewed  staff from  the  United  Council  on Welfare  Fraud.  This 
organization  has  over  2500 agencies  and  individuals  interested  in maximizing  efforts  to 
prevent,  detect,  and  eliminate  welfare  fraud. 
To  determine  the  effectiveness  of pre-eligibility  fraud  investigative  units, we computed 
cost/benefits  for  our  selected  offices in 1992.  We based  our  cost/benefit  computation 
on costs  and  savings information  provided  by our  sample  States  and  local  AFDC 
offices.  We  did not validate  the  accuracy  of the  information  they  provided.  In 
estimating  savings, States  included  inappropriate  AFDC  payments  that  were  prevented 
due  to a pre-eligibility  fraud  investigative  unit.  States  also included  AFDC  payments 
prevented  when  applicants  withdrew  applications  after  a pre-eligibility  fraud 
investigation  was initiated. 
Eleven  counties  in two selected  States  did not  provide  specific  costs  and  savings. 
However,  the  two State  offices provided  such data  for all the  counties  in the  State  that 
had  pre-eligibility  fraud  investigative  units.  We  used  the  average  costs and  savings for 
all the  counties  to represent  costs and  savings for each  of the  11 counties  in our 
sample.  Appendix  B shows how we calculated  cost/benefit  ratios. 
3
 We were  unable  to compare  the  relative  effectiveness  of pre-eligibility  fraud 
investigative  units  to that  of AFDC  eligibility workers.  Data  to make  such  a 
comparison  was not  available.  Most  local  offices did not  keep  records  on application 
denial  rates.  Therefore,  we could  not  compare  denial  rates  prior  to establishment  of 
pre-eligibility  fraud  investigative  units  to denial  rates  after  such units  were  operating. 
Further,  where  denial  rates  were  available,  dollar  savings resulting  from  denials  by 
eligibility workers  had  not  been  computed. 
We  also  did not  compare  the  pre-eligibility  ffaud  investigative  program  of one  local 
AFDC  office  to that  of another.  The  structures  and  policies  of the  units  were 
designed  to meet  the  needs  of specific  localities.  We believed  it inappropriate  to rate 
the  units  based  on a written  survey, and  we were  unable  to visit each  location  to 
evaluate  whether  or not  the  units  met  the  needs  of specific  locations. 
This  inspection  was conducted  in accordance  with the  Quality Standards for Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
4
 FINDINGS

PRM3LIGIBILITY  FRAUD  INVESTIGATIVE  UNITS  EFFECTIVELY  PREVENT 
INAPPROPRIATE  AFDC  PAYMENTS 
All  State  and  local  AFDC  officials we sampled  said that  pre-eligibility  fraud 
investigative  units  are  effective  in preventing  inappropriate  AFDC  payments.  The 
units  disclose  discrepancies  in applicant-provided  information  that  result  in a reduction 
or denial  of AFDC  assistance.  Eligibility workers  may not  have  the  time  or inclination 
to challenge  and verify  all suspicious  applicant-provided  information.  Pre-eligibility 
fraud  investigative  units  can validate  applicant-provided  information  before  eligibility  is 
approved.  Also, the  presence  of fraud  investigative  units  in a community  has  a 
deterrent  effect  on fraudulent  claims  for AFDC  assistance. 
Preventing  inappropriate  AFDC  payments  is easier  than  trying  to recover  them  after 
an AFDC  recipient  has  received  and  used  them.  The  procedures  required  to 
document  fraud  are  lengthy,  and  recovering  inappropriate  welfare  payments  is very 
difficult.  Pre-eligibility  fraud  investigative  units  detect  potential  fraud  before  welfare 
payments  begin.  Therefore,  the  need  to recover  inappropriate  payments  is eliminated. 
OnAveragqfie-El&ibilityFreudInvestigativeUhiksSavedOver8 llmes lheirCos& 
The  39 local  AFDC  offices  responding  to our  survey estimated  that  their  pre-eligibility

fraud  investigative  units  prevented  about  $45 million  in inappropriate  welfare

assistance  during  1992.  The  $45 million  included  inappropriate  AFDC  payments,  food

stamps,  and  general  assistance  payments  in 22 of the  39 offices.  In the  other  17

offices,  the  savings represented  only AFDC  funds.  The  operating  costs for the  39

units  during  1992 was about  $3.7 million.  Therefore,  savings attributable  to the  pre-

eligibility  fraud  investigative  units  of the  39 offices were  about  $41.3 million  (prevented

inappropriate  assistance  minus  operating  costs).

The  savings per  pre-eligibility  fraud  investigative  unit  ranged  from  a low of $1.20 per

dollar  of operating  costs to a high of $104.34.  As the  chart  on the  next  page  shows,

about  56 percent  of the  39 units  saved  between  $1 and  $9 for each  dollar  of operating

costs.  About  eight  percent  of the  units  saved  over  $50 per  dollar  of operating  costs.

The  costs and  savings information  provided  by the  39 selected  offices  showed  a

weighted  average  savings of about  $8.43 for every  $1.00 spent  on a pre-eligibility  fraud

investigative  unit.

5
 ESTIMATED  SAVINGS  PER  DOLLAR  OF  OPERATING  COSTS 
Number of Fraud Units 
25, 
I 22  I
.. 
L
3 
2  7 
I
o 
u .  .  m
$1-$9  $10-$19  $20-$29  $30-$39  $40-$49  $50+ 
DollSaarv
 ings

Only  17 of the  39 local  offices  could  provide  data  that  showed  AFDC  savings 
separately.  In  1992, the  pre-eligibility  fraud  investigative  units  of those  17 offices 
produced  savings to the  AFDC  program  of about  $8.9 million  after  deducting 
operating  expenses. 
The  officials we interviewed  said that  pre-eligibility  fraud  investigative  units  frequently 
identify  discrepancies  in applications  for AFDC.  Once  identified,  the  discrepancies 
either  limit the  amount  of AFDC  assistance,  or disquali&  an applicant  for  assistance. 
The  officials  identified  the  following  most  commonly  found  discrepancies. 
Applicants  underreport  their  income  so that  expenses  exceed  income. 
 
Applicants  incorrectly  report  their  household  composition.  They  may  show that 
	
a parent  is absent  when  in fact the  parent  is residing  in the  household  with 
their  children.  Likewise,  they  may report  children  in the  home  who  are  not 
actually  residing  there. 
Applicants  may report  incorrect  addresses.  They  may report  living at one 
	
address  when  they  actually  reside  in another  county  or State  and  receive  AFDC 
benefits  there. 
Applicants  may underreport  their  property  and  assets. 
 
The  savings resulting  from  pre-eligibility  fraud  investigative  units  are  additional  to any 
that  might  result  from  eligibility worker  decisions,  and  investigative  and  prosecution 
activities  of regular  AFDC  fraud  units.  AFDC  eligibility workers  may cause  applicants 
to withdraw  fraudulent  applications,  or the workers  may deny  such  applications.  To 
the  extent  that  fraudulent  applications  are withdrawn  or denied  a savings to AFDC 
occurs.  Every  denial  or withdrawal  caused  by pre-eligibility  fraud  investigative  units 
6  represent  additional  savings to that  resulting  from  eligibility workers.  Likewise,  even 
when  fraud  is discovered  later  by regular  fraud  units,  erroneous  payments  have  already 
been  made.  Such payments  are  very difficult  and  certainly  inefilcient  to recover. 
Therefore,  preventing  such improper  payments  before  they  occur  is an additional 
savings. 
I?e-E@ibility FreudInvestigativeU.  HelpDeterFreud
Local  AFDC  officials we interviewed  told  us the  presence  of pre-eligibility  fraud 
investigative  units  in a community  helps  deter  fraud  in three  ways. 
First,  the  presence  of fraud  investigators  in a community  may make  people  more 
reluctant  to provide  false  information  to acquire  AFDC  eligibility.  The  investigative 
process  of interviewing  relatives,  friends,  neighbors,  employers,  landlords,  and  others  in 
a community  causes  AFDC  applicants  to think  that  their  applications  will be 
investigated.  As a result,  they  are  less likely to submit  false  information. 
Second,  the  presence  of an investigator  in a community  allows easy access  for people 
to provide  information  on defrauders.  To illustrate,  a friend  or neighbor  who is 
temporarily  angry with  a defrauder  may provide  information  to an investigator  who is 
readily  available  in the  community.  However,  such associates  are  less likely to actively 
seek  out  a welfare  office  to inform  on a defrauder--particularly  after  their  anger  has 
subsided.  Likewise,  neighbors,  friends,  and  relatives  may know  of welfare  fraud  and 
resent  it, but  they  are  not  likely to go to a welfare  office  to inform  on a defrauder. 
Often,  however,  they will divulge  information  to an investigator  who  is readily  available 
in the  community. 
Third,  through  continuous  presence  in a community,  an investigator  may develop 
networks  of people  who  can provide  information  on fraudulent  activities.  To  illustrate, 
investigators  in one  county  told  us they  have  established  networks  of snitches akin  to 
those  used  in police  work.  Through  such networks,  investigators  discover  locations  of 
mail-drops  used  to falsely establish  a residency.  Likewise,  they  discover  residences 
where  groups  of defrauders  live and  assist  each  other  in deceit  and  cover-up.  Such 
information  typically  leads  to closing on-going  AFDC  grants  and  preventing  new 
improper  AFDC  grants. 
PRE-ELIGIBIIIIY  FRAUD  INVESTIGATIVE  UNITS  USE  BASIC 
INVESTIGATIVE  TECHNIQUES 
Most CommonlyUsedInvestigativeTechn@es
Pre-eligibility  fraud  investigative  units  used  basic  investigative  techniques  to  prevent 
inappropriate  AFDC  payments  and  deter  fraud.  Staff  at  essentially  all  of  the  AFDC 
7
 offices we inspected  said they most  often  relied  on the  following  techniques. 
Collateral  intetiews  with relatives,  friends,  neighbors,  landlords,  employers,  and 
	
others 
Personal  visits to an AFDC  applicants  home 
 
Surveillance  of an AFDC  applicants  home 
 
Matching  financial  and  personal  information  provided  by applicants  with 
	
Federal  and  State  computer  databases 
Assisting  eligibility  caseworkers  interview  applicants 
 
None  of the  offices we inspected  used  sophisticated  techniques  such  as fingerprinting, 
searching  criminal  information  files, and  electronic  surveillance. 
Eligibility  caseworkers  refer  applicants  for investigation  when  they  have  reason  to 
suspect  fraud.  The  specific  investigative  technique  used  depends  largely  on the 
particular  questions  eligibility workers  have  about  an applicants  application.  For 
example,  if an applicant  says she is not working  but  the  eligibility  caseworker  suspects 
that  the  applicant  is working,  the  investigator  would  likely interview  the  applicants 
neighbors  and  household  members.  In such instances,  investigators  might  also  cross 
match  applicant-provided  information  with Federal  or State  wage  records. 
Likewise,  investigators  may assist eligibility  caseworkers  in interviewing  applicants  who 
are  suspected  of providing  incorrect  information.  Some  eligibility  caseworkers  told  us 
that  investigators  often  help  prevent  fraud  by assisting  them  in interviewing  applicants. 
To illustrate,  eligibility  workers  often  do not  have  time,  and  may not  have  an 
inclination,  to challenge  and veri~  applicant-provided  information.  As a result, 
applicants  may take  a chance  and  provide  false  information  to  an eligibility worker. 
However,  eligibility workers  who  are  suspicious  about  applicant-provided  information 
may ask an investigator  to assist in jointly  interviewing  the  applicant.  In such 
instances,  applicants  who intended  to falsify their  application  are  reluctant  to do so. 
Because  of an investigators  presence  in an interview,  such  applicants  often  correct 
information  they  previously  provided  or withdraw  an incorrect  application. 
AFDC  O@es  Requirellmely tie-eligibilityFraudInvestigations
The  AFDC  offices we surveyed  had  local  policies  specifying  the  length  of time  for 
conducting  a pre-eligibility  fraud  investigation.  As illustrated  by the  table  on the  next 
page,  about  51 percent  of the  local  AFDC  offices we surveyed  required  that  pre-
eligibility  fraud  investigations  be  completed  within  5 days after  a case  is referred. 
About  74 percent  of the  offices required  that  cases be  investigated  within  15 days after 
referral.  Only about  5 percent  of our  sampled  39 offices  allowed  more  than  30 days 
for conducting  a pre-eligibility  fraud  investigation. 
8  LOCAL  AFDC  OFFICE POLICY  ON TIMEIJNESS 
OF  PRIM3LIGIBILJTY  FRAUD  INVESTIGATIONS 
*@q&  *::: 
:y  MA,.   ixl$@iw  ,.
Within  5 days  20 
6-10days  4 
11-15  days  5 
16-20  days  o 
21-30  days  8 
More  than  30 days  2 
r
II 
TOTAL  I  39  II 
A fast  turnaround  time  on cases  referred  for pre-eligibility  fraud  investigation  is 
essential.  Caseworkers  must  determine  eligibility in sufficient  time  for benefit 
payments  to be  made  within  a federally  mandated  45 day time  limit.  Therefore,  if 
investigation  results  are  to be  useful  to eligibility  decisions,  they  must  be  completed  in 
time  for eligibility workers  to correct  erroneous  information  and  process  an application 
for payment.  Most  eligibility workers  told  us they  need  to finalize  the  eligibility 
decision  within  30 days in order  to meet  the  45 day time  limit. 
InvestigatorAre UsedForBoth~e-eligibilityandOn-goingxU?DCCases
Most  pre-eligibility  fraud  investigative  units  investigate  both  pre-eligibility  applications 
and  potential  fraud  in on-going  AFDC  grants.  Investigators  in 27 of the  39 (about  69 
percent)  AFDC  offices we surveyed  said they  do both  pre-eligibility  and  on-going 
investigations.  Investigators  in 23 of the  27 offices  establish  both  the  existence  and 
extent  of fraud.  Investigators  in 4 of the  27 offices  only establish  the  existence  of 
fraud.  Thereafter,  the  four  units  refer  cases  to a separate  unit  to document  the  extent 
of fraud.  Investigators  in the  remaining  12 AFDC  offices  (31 percent)  we surveyed 
said they  investigate  only pre-eligibility  AFDC  applicants. 
A potential  benefit  of having  investigators  do both  pre-eligibility  and  on-going  fraud 
cases  is that  techniques  learned  for on-going  fraud  investigations  can be  used  for pre-
eligibility  fraud  investigations.  However,  some  officials  said requiring  investigators  to 
work  both  pre-eligibility  and  on-going  fraud  cases  is ineffective. 
Investigators  who  do on-going  fraud  investigations  in addition  to pre-eligibility  may 
find that  on-going  fraud  cases  require  so much  time,  they  do not  have  sufficient  time 
to conduct  thorough  pre-eligibility  fraud  investigations.  In most  of the  AFDC  offices 
where  investigators  w-ork both  pre-eligibility  and  on-going  cases,  investigators  must 
take  whatever  action  is needed  to prosecute  fraud  cases.  For  example,  they  document 
9
 fraudulent  actions  by AFDC  recipients,  determine  overpayment  amounts,  and  may

prepare  cases  for legal  prosecution.  This  is a very time-consuming  process,  and  many

AFDC  officials  stated  that  their  investigators  time  could  be  used  more  effectively  on

pre-eligibility  fraud  investigations.  This  isthereason  that  four  of thelocal~C

oftlces  that  investigate  both  pre-eligibility  and  on-going  cases  refer  fraud  cases  to a

separate  unit  for the  fraud  work-up.  Pre-eligibility  fraud  investigations  are  generally

perceived  to be  more  effective  than  fraud  investigations  of on-going  cases  because  it is

easier  to stop  a fraudulent  payment  before  it occurs  than  it is to recover

overpayments.

MOST  PRE-ELIGIBIIJTY  FRAUD  INVESTIGATIVE  UNITS  ARE

ORGANIZATIONALLY  INDEPENDENT  OF AFDC  BENEFIT  PAYMENT

SECTIONS

About  62 percent  (24 of 39) of the  pre-eligibility  fraud  investigative  units  we surveyed

reported  to supervisors  that  were  independent  of a benefit  payments  section4.  The

remaining  15 units  (38 percent)  reported  to supervisors  that  were  organizationally  a

part  of a benefit  payments  section.

The  organizational  location  of pre-eligibility  fraud  investigative  units  varied

considerably  among  the  39 local  offices we surveyed.  As shown by the  chart  on the

following  page,  15 (or  about  38 percent)  of the  independent  local  pre-eligibility  fraud

investigative  units  reported  directly  to the welfare  agency  director.  At one  local  office,

the  pre-eligibility  fraud  investigative  unit  reported  to the  welfare  agency  director

through  the  staff  attorney.  The  pre-eligibility  fraud  investigative  unit  of another  local

office  reported  to the  county  welfare  director  through  the  administrative  office.

Another  7 (about  18 percent)  of the  organizationally  independent  units  reported  to a

State  AFDC  agency.  None  of the  local  offices we surveyed  had  organizationally

placed  the  pre-eligibility  fraud  investigative  unit within  Social  Services.

4Benefit payment sections generally determine eligibility for AFDC, food stamps, and Medicaid 
assistance. 
10  ORGANIZATIONAL  I.X)CATION  OF 
PIUM3LIGIBILJTY  FvRAUD  INVESTIGATIVE  UNITS

STlflE

AFDCAGENCY

(7UNITS]

GiiiGl 
lJuEJ.\
\\ 
COUNTY 
WELFAREDIR

FRAUD  \\  SlXFF 
INVESTIGATION  AT10RNEY 
(I3  UNITS)  [1 UNIT) 
BENEFIT  ADMINISTRATION
 SOCIAL

PAYMENTSSE
 C.
 SERVICES

(1U5N
 ITS)  [1UNIT)
 [0UNITS)

We  did not  survey local  AFDC  officials to determine  whether  or not  organizational 
independence  from  benefit  payment  sections  is more  or less beneficial  for pre-
eligibility  fraud  investigative  units.  Therefore,  the  advantages  and  disadvantages  of 
different  organizational  alignments  are  not  clear.  However,  several  local  AFDC 
officials  provided  anecdotal  information  on the  benefits  of organizational  placement  of 
pre-eligibility  fraud  investigative  units. 
_  of watih~~  Ihdependknt~e-eliility  FraudInvestigate  U& 
Some  local  officials  told  us that  keeping  pre-eligibility  fraud  investigative  units 
organizationally  independent  of benefit  payment  sections  is beneficial.  Their  general 
argument  for organization  independence  focused  largely  on a difference  in missions  of 
benefit  payment  sections  and  investigators.  They  explained  that  benefit  payment 
eligibility workers  are  interested  in processing  applications  and  benefit  payments 
quickly.  They  said most  eligibility workers  have  a social work  ethic  of wanting  to help 
people.  Therefore,  their  focus is to get  assistance  in the  hands  of people  who  need  it. 
Because  of this orientation,  eligibility workers  may give eligibility  to an applicant  even 
when  there  is doubt  about  eligibility. 
Conversely,  investigators  are  interested  in catching  fraud.  The  objective  of 
investigators  is to prevent  fraud  and  give AFDC  assistance  only to those  who  can 
prove  they  qualify.  In instances  where  doubt  exists, they  look  for proof,  using  such 
techniques  as unannounced  home  visits, surveillance,  collateral  interviews,  and  cross 
matching  of government  data  records. 
11
 According  to one  county  manager,  the  difference  in missions  of benefit  payment 
sections  and  investigators  creates  a conflict  of interest.  Benefit  payment  section  staff 
sometimes  object  to investigator  mission  and  techniques  and  attempt  to influence  the 
results.  To  illustrate,  one  investigator  advised  us of an instance  where  his supervisor 
told  him to back off when  he interviewed  an applicants  neighbors  to obtain  reliable 
eligibility  information  on earnings  and  family.  The  county  manager  said the  pre-
eligibility  fraud  investigative  unit  needs  to be a neutral  activity. 
Two local welfare  offices we surveyed  recently  reorganized  to remove  their 
investigative  staff from  the  benefit  payment  sections.  They  said the  pre-eligibility 
fraud  investigative  units  are  more  effective  when  organizationally  located  outside  of 
the  benefit  payment  section. 
_  of Phytial Localbn of I?e-eligibi.lilFyreudInves.@ations 
Some  local  staffs  told  us that  organizing  pre-eligibility  fraud  investigative  units  as part 
of benefit  payment  sections  is beneficial.  However,  they  did not  provide  us with  any 
illustrations  of the  benefits.  Advantages  they  cited  related  to physical  location  rather 
than  organizational  location. 
Officials  from  all the  local  AFDC  offices we surveyed  said investigative  units  are  most 
effective  when  physically  located  near  the  benefit  payment  eligibility  staffs.  They  said 
such a physical  location  helps  assure 
effective  communication  between  investigators  and  eligibility workers, 
 
  timely  referrals  of cases  from  eligibility  worker  to  investigator, 
speedy  resolution  of cases, 
 
feedback  on cases,  and 
 
accessibility  to  eligibility workers  case  files. 
 
12
 RECOMMENDATIONS

The  States  we surveyed  showed  a savings-to-costs  ratio  of over  $8 to $1 from  use  of 
pre-eligibility  fraud  investigative  units.  We did not  project  a nationwide  savings 
because  of extreme  variations  in State  AFDC  organizations,  and  a lack  of sufficient 
data  to make  a statistically  valid  estimate.  Nevertheless,  savings by our  sample  States 
indicate  significant  potential  for nationwide  savings if all States  used  such units.  In 
addition  to potential  savings, State  officials  said  the  presence  of pre-eligibility  fraud 
investigative  units  in a community  helps  to deter  fraud. 
While  our  inspection  focused  primarily  on AFDC,  the  pre-eligibility  fraud  investigative 
units  also produced  savings in food  stamps,  general  welfare  assistance,  and  potentially 
in Medicaid. 
We  recognize  that  pre-eligibility  fraud  investigative  units  might  not  be  appropriate  in 
every  local  AFDC  office,  such  as in rural  communities.  However,  the  AFDC  offices 
we inspected  provide  sufficient  indication  that  significant  savings can be  achieved  in a 
cost effective  manner  in many  locations.  State  and  local governments  might  well wish 
to experiment  with pre-eligibility  fraud  investigative  units.  In fact,  some  States  are 
interested  in forming  such  units.  For  example,  one  State  that  currently  does  not  have 
a pre-eligibility  fraud  investigative  unit  learned  of our  study and  contacted  us to  obtain 
information  on the  benefits  of such units.  Therefore,  we believe 
ACF  should  actively  promote  the  establishment  of pre-eligibility  fkaud investigative 
units  in those  States  without  such units. 
ACF  can  assist States  in developing  pre-eligibility  fraud  investigative  units  by 
disseminating  information  on pre-eligibility  fraud  investigative  units  to States 
b	
and  localities  without  such units,  and 
offering  technical  assistance  to States  interested  in establishing  pre-eligibility 
b	
fraud  investigative  units. 
Such activities  are  compatible  with  objectives  of the  Administrations  proposed  Work 
and  Responsibility  Act  of 1994.  The  objective  of improving  government  assistance 
calls for  a central  Federal  role  for interstate  coordination  of welfare  program  integrity. 
The  Federal  coordination  activities  should  focus on detection  and  prevention  of fraud 
in income  support  programs  and  assuring  welfare  payment  accuracy. 
13
 AGENCY  COMMENTS

The  Assistant  Secretary  for Children  and  Families  commented  on the  report.  She 
noted  that  we combined  figures  from  units  reporting  only AFDC  savings and  costs 
with figures  from  units  reporting  AFDC  and  food  stamps  savings and  costs.  ACF  also 
noted  that  we did not validate  data  States  provided.  We  agree,  and  have  disclosed 
our  methodology  in our  report.  We  combined  costs and  savings in our  calculation 
because  some  local  AFDC  offices  could  not  separate  AFDC  and  food  stamp 
operations.  However,  we reported  that  17 local  AFDC  offices  that  could  separate 
AFDC  and  foodstamps  saved  almost  $9 million  in only AFDC.  Further,  savings 
reported  by the  sampled  units  represented  misspent  Federal  funds  regardless  of 
whether  the  savings came  from  the  AFDC  or food  stamp  program. 
ACF  reported  that  they  make  information  available  to States  about  innovative 
programs,  and  are  developing  a catalogue  that  will make  such  information  more 
usable  for States.  We  support  their  efforts,  and  believe  they  should  include 
considerable  information  on pre-eligibility  fraud  investigative  units.  We  know  States 
have  an interest  in this information  because  several  States  and  a consultant  from 
Canada  have  contacted  the  OIG  for such data  upon  hearing  about  our  inspection. 
Appendix  C shows the  full text  of the  comments  provided  by ACF. 
14
 APPENDIX  A

SAMPLED  LOCAL  AFDC  OFFICES 
ANCHORAGE  ANCHORAGE 
PULASKI  (NORTH)  NORTH  IXITLE  ROCK 
PULASKI  (SOUTH)  \IXIIZEROCK 
I
SEBASTIAN  sMrrH 
Fr. 
IAR  II 
WASHINGTON  I FAYETIEVILLE 
UNION  ) EL  DORADO 
HINDs  JACKSON  MS 
HARRISON  GULFPORT  MS 
I I  II 
MERCER  TRENTON  NJ 
I I  II 
BURLINGTON  MT.  HOLLY  NJ 
ICAMDEN  I  II 
CAMDEN  NJ 
I  II 
PASSAIC  I PATIERSON  NJ 
SUFFOLK  I HAUPPAUGE  INY  II 
ERIE

HERKIMER
 HERKIMER 
ROCKLAND
 POMONA 
WESTCHESTER
 WHITE  PLAINS 
HAMILTON
 CINCINNATI  OH 
PIKE
 WAVERLY  OH 
BUTLER
 HAMILTON  OH 
I
ROSS
 CHnLocoTHE 
I  II 
PHILADELPHIA
 I PHILADELPHIA  PA 
I 
ALLEGHENY  (SOUTH)
 I PHTSBURGH  PA  II 
ALLEGHENY  (EAST)
 P1ITSBURGH  PA 
BUCKS
 BRISTOL  PA 
A-1
 j	 SIOUX  FALLS

PENNINGTON  RAPID  CITY  SD

NEWPORT  NEWS  NEWPORT  NEWS  VA

BRUNSWICK  LAWRENCEVILI.J3  VA

CHARM)TIE  ~TIE  COURTHOUSE  VA

II I I  II

HALIFAX  HALE-AX  VA 
IIYORK  \ YoRKTowN

I MADISON

II I I  II

SHEBOYGAN  SHEBOYGAN  w-I 
KENOSHA  I KENOSHA  bvrll

I  II

ST. CROIX  I NEW  RICHMOND  WI 
I I  II

RICHLAND  RICHLAND  CENTER  WI 
A-2  APPENDIX  B

METHOIXXX)GY  FOR  CAU!ULATING  SAVINGS 
AND  COMPUTING  COST  BENEFITS 
To  determine  effectiveness  of pre-eligibility  fraud  investigative  units,  we compared 
their  operating  costs to the  program  savings resulting  from  their  investigations.  We 
used  costs and  savings figures  provided  by local  and  State  agencies.  We  did not 
validate  the  accuracy  of the  information  they  reported. 
Generally,  selected  local  and  State  AFDC  offices  considered  a savings to be  the 
difference  between  the  benefits,  if any, an applicant  received  after  an investigation  and 
what  the  applicant  would  have  received  without  an investigation.  The  difference 
typically  represents  a one  month  savings.  However,  most  AFDC  recipients  receive 
benefits  for more  than  one  month.  Therefore,  to project  the  savings, local  offices 
typically  multiply  the  one  month  savings by the  number  of months  that  AFDC 
recipients  usually  remain  on their  rolls. 
To  illustrate,  in  1992  one  local  office  pre-eligibility  fraud  investigative  unit  prevented 
$S9,000 in erroneous  benefits  from  being  paid.  The  investigators  found  111 applicants 
had  provided  incorrect  information.  Once  the  correct  information  was found,  the 
potential  benefits  for the  111 applicants  were  either  reduced  or denied.  To  determine 
the  potential  savings of the  investigative  unit  for the  111 applicants,  the  local  office 
multiplied  the  $59,000 by 12 months.  The  12 months  was based  on State  records 
which  showed  that  most  AFDC  recipients  in that  State  typically  receive  benefits  for at 
least  12 months.  Therefore,  the  estimated  savings was $708,000--the  $59,000 monthly 
savings x 12 months  average  benefit  period.  -
To  compute  costs/benefits  of pre-eligibility  fraud  investigative  units,  we did the 
following  analyses. 
Firs~ we determined  the  monthly  savings.  In instances  where  an AFDC  office  had 
projected  its savings to several  months,  we reduced  the  estimate  to one  month  by 
dividing  the  reported  savings by the  number  of months  used  in the  projection.  For 
example,  if a local  office  reported  12 months  savings  of $708,000,  we  divided  by  12 to 
get  a one  month  savings  of $59,000. 
$780,000112  =  $59,000 Monthly  Savings 
B-1
 Sea@  we projected  the  monthly  savings over  a six month  period.  We  used  six 
months  for our  projection  because  AFDC  cases  are  usually  reviewed  every  six months 
to reestablish  eligibility.  Therefore,  if a fraudulent  application  had  been  approved,  it 
is possible  that  the  error  would  have  been  identified  and  corrected  during  the  six 
month  review. 
$59,000 x 6 =  $354,000 l+ojected  Savings 
Finally,  we computed  cost/benefit  ratios.  We  divided  projected  savings by operating 
costs.  The  cost/benefit  ratio  shows potential  savings for  every  dollar  spent  on pre-
eligibility  fraud  investigative  units.  Since  most  operating  costs such  as salaries,  space, 
and  equipment  are  fixed, we used  annual  cost figures  provided  by local  agencies.  We 
realize  this procedure  may understate  the  actual  expected  savings, however  we 
believed  a more  conservative  estimate  of savings was appropriate. 
$354,000 / $50,000  =  $7.08 Costlbenejit  Ratio 
Our  example  shows that  the  pre-eligibility  fraud  investigative  unit  saved  $7.08 in 
program  funds  for every  $1.00 of operating  costs. 
B-2
 APPENDIX  C 
ACF COMMENTS 
c-1  Page 2 - June  Gibbs Brown 
The OIG is aware  of ACF  Regional  office workplan  items  to 
conduct  and  provide  follow-up  review  of State  overpayments, 
fraud,  and  other  early  fraud  detection  program  activities. 
We appreciate  the  opportunity  to review  and  comment  on  this  draft 
report .  If you  have  any  comments  or wish  to discuss  this 
response  further,  please  contact  Robert  Laue  (401-5040) or Robert 
Shelbourne  (401-5150).  ,; 
 d 1.:+, 
O+ 4%  
:  DEPARTMENT  OF  HEALTH  & HUMAN  SERVICES 
;
* 
8  
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+.e,.,o
ADMINISTRATION  FOR  CHILDREN  AND  FAMILIES 
Office  of the  Assistant  Secreta~Suite  60~ 
370  LEnfant  Promenade,  S.W.  SAIG 
Washington,  D.C.20447 
PIXG   
DATE :  January  11, 1995 
TO:
 June Gibbs Brown  E1~.~[ 
Inspector General 
M(3-CFAA _ 
fiYG-MP
FROM :  Mary Jo Bane 
Assistant  Secretar>y7 - s~  cYGc/IG
for Children  & Families  XSEC 
DATESENT&
SUBJECT :  OIG Draft Report:  AFDC Pre-Eligibility  Fraud 
Investigative  Units,  OEI-O4-91-OO1O1 
We have reviewed the OIG draft report on AFDC Pre-Eligibility 
Fraud Investigative  Units and provide  the following comments: 
It appears that the data used to develop the weighted 
average  ($8.00 savings for $1.00 of cost) comes from a mix 
of data - separated AFDC costs from other program  costs, as 
well as non-separated  costs that include Medicaid and Food 
Stamps.  With  the exception of personal statements by 
State/local  staff as to the effectiveness  of pre-eligibility 
fraud investigative  units, the draft report is vague 
regarding  specific  data sources.  Also, data accuracy was 
not validated. 
The report recommends  that ACF actively promote the 
establishment  of pre-eligibility  fraud investigative units 
by disseminating  information about the units and offering 
technical assistance  to States interested in establishing 
such units.  Though not specific to pre-eligibility  fraud 
investigative  units, ACF has made and continues to make such 
information  available  to the States.  One example is an 
issuance of an Information Memorandum  regarding Minnesotas 
llFrau~prevention  Programl  demonstrating  effective methods 
for cutting red-tape and empowering employees to obtain 
results.  In addition, ACF is in the process of developing  a 
system we refer to as SWAP  (Sharing Workable Achievements 
and Practices)  to provide States with an up-to-date,  easy-
to-use, catalogue  of information  that will enable States to 
develop  contacts with other State agencies who have 
undertaken  innovative program  improvements and/or 
procedures.  These would not be the usual  best practices.  
The SWAP system will include operational processes  States 
have implemented  that hd~c~- d,o,llarsavings, as well as 
add to the effectiv%%ie%%~~ -~~ 61program administration. 
005  v  ZI IMM!