IMPLEMENTATION OF THE STATE

LEGALIZATION IMPACT ASSISTANCE

GRANTS UNDER THE 
IMMIGRATION

REFORM AND CONTROL ACT OF 1986

ARIZONA
STATE  OF 
OFFICE OF INSPECTOR GENERAL 
OFFICE OF ANALYSIS AND INSPECTIONS 
DECEMBER 1989  OFFICE OF INSPECTOR GENERAL

The mission of the Offce of Inspector Genera (OIG) is to promote the effciency, effective
progrs in the United States Deparent of Health and Human Ser
ness, and integrty of 
vices (HS). It does this by developing method to detet and prevent fraud, waste, and 
Seceta 
abuse. Create by statute in 1976, the Inspector General keeps both the  and the Con
gress fuly and curntly informed about programs or management problems and recommends 
corrtive action. The OIG perform its mission by conducting audits, investigations, and in
spetions with approxiately 1,300 sta strategically located around the countr. 
INSPECTIONS
OFFICE OF  ANALYSIS AND 
This report is produced by the Offce of Analysis and Inspections (OAI), one of the three 
major offces withn the OIG. The other two are the Offce of Audit and the Offce of Inves
tigations. Inspections ar conducted in accordace with professional standads developed by 
OAI. These inspections ar tyically short-term studies designed to determe program effec
tiveness, effciency, and vulnerabilty to frud or abuse. 
Th study was conducted to determe the effectiveness of Arona s implementation of State 
Imgrtion 
Legalzation Impact Assistace Grats funds awarded under the  Reform and Con
trl Act of 1986.

The report was prepar under the diction of Don McLaughlin, the Regional Inspector 
General of Region VII, Offce of Analysis and Inspections. Parcipatig in this project were 
the following people: 
Kansas City  San Francisco 
Project Leader  Apryl Willams 
Hugh Owens, 
Raymond Balandron 
James Wolf 
Headquarters  New York 
Albert J. Nace  Lucile M. Cop 
Debra Robinson 
Alicia Smith  IMPLEMENTATION OF THE STATE

LEGALIZATION IMPACT ASSISTANCE

GRANTS UNDER THE IMMIGRATION

REFORM AND CONTROL ACT OF 1986

ARIZONA
STATE  OF 
Richard P. Kusserow 
INSPECTOR GENERAL 
07-8001 
OAI- DECEMBER 1989  EXECUTIVE SUMMARY 
PURPOSE 
The purose of this inspection was to determne how effectively Arzona implemented the 
State Legalization Impact Assistance Grants (SLIAG) program, to identify potential problems 
early in the process, and to identiy goo practices which all States could share. 
BACKGROUND 
progr 
The SLIAG  was established under the Immgration Reform and Control Act (IRCA) 
of 1986 to reduce the fmancial burden of providig public assistance, public health assistance, 
and educational services to eligible legalized aliens. In Fiscal Year (FY) 1988, $928.5 milion 
progr 
in  funds were allocated to States, and funds wil contiue to be alocated through 
FY 1991. These funds also cover administrative costs for implementing SLIAG at the State 
and local levels. Payments ar made for public assistance activities generally available to all 
needy individuals and public health assistance services offered under the States' public health 
progrs. The payments also cover educational services designed to assist eligible legalized 
aliens to attain a satisfactory level of performce in school and to achieve English language 
proficiency and citizenship s  ls necessar to become permanent residents. The Family 
Support Administrtion (FSA) is responsible for admnistering the program. 
Because SLIAG was a new progr, FSA realzed that problems would surface early in its 
implementation. In addition to the normal difficulties encountered in creatig new processes 
and procedures, FSA recognized that SLIAG would have unique problems. Some of these 
issues include the diversity of programs which SLIAG encompasses, cultura and language 
barers associated with the service population, maintaning confidentiality of information, and 
the extremely short time fraes for the  process. 
grt award 
METHODOLOGY 
In response to the anticipated diffculties with implementing SLIAG, FSA requested that the 
Offce of Inspector General (GIG) conduct reviews in 10 States to determine the progress of 
States ' implementing this program. The FSA selected nine States and the Distrct of Columbia 
because of the varety of programs they offered, the number of eligible legalized aliens in the 
population, or the amount of the grant award. The nine States ar Arizona, California, 
Colorado, Florida, TIinois, Massachusetts, New York, Texas, and Washington.  Interviews based on strctured discussion guides for each major program area, as well as 
documentation furished by FSA and State and local offcials, built the base of information for 
this report. This report represents the review conducted in Arzona and reports on its 
implementing the SLIAG program as of August 1988. 
Both FSA and Arzona were committed to identifying problems and developing innovative 
and effective solutions for them. Imediately following our on-site visits, FSA was given an 
outline of the State concerns identied in this report. 
1987 FSA has held national conferences and issued information to 
FINDING: Since 

States on implementing the SLIAG program. 
The FSA held several national conferences beginning in 1987 to share 
information with States on SLIAG legislation, the implications for States, the 
application process, and the documentation of costs. 
The FSA also provided States with "Question and Answer" issuances and 
demographic data from the Immigration and Naturalization Service. 
FINDING: To faciltate implementing the SLIAG program, Arizona took steps to ensure 
that funds control mechanisms were in place. 
The State established a financial program capabilty in its computer system and 
in the Arzona Financial Information System. The Arzona Deparment of 
Administration ensured that appropriate entities had established procedures to 
identify all expenses and maintained appropriate records. 
The Arizona Deparment of Health Services used existing contracts with health 
service providers for the general population to serve eligible legalized aliens and 
to maintan records of expenditures. The deparent  separte 
has established 
accounts for each of these providers in the financial information system. 
FINDING: The Arizona Department of Education has established a pre-enrollment 
appraisal testing program 
for eligible aliens. 
Agencies receiving SLIAG funds wil administer a pre-enrollment appraisal test. 
This test assesses an eligible legalized alien s abilty to speak and understand 
English and know United States history and government. The test results wil be 
used to match the individual' s needs to program resources, instrctional 
a level of competency for placement 
schedules, and referrl servces; establish 
and assessment of progrss; and provide data on the number of individuals 
served, demographic information, and educational history.  Neverteless, there are some funds control vulnerabilties. 
FINDING: The State s plan for claiming public health assistance costs is not in 
accordance with program requirements. 
According to the SLIAG regulation, there are thre methods to claim actual 
public health assistance costs. The State s formula is based on the annual budget 
for each program approved by the U.S. Deparent of Health and Human 
Services (HS). This is not one of the methods prescribed by regulations. 
FINDING: The FSA' s definition of public assistance includes some public health activities 
which created administrative and service delivery problems for Arizona s public health 
agencies. 
FINDING: The Arizona Department of Education may be claiming nonallowable costs as 
SLIAG-related costs 
for education. 
The currculum includes instrction to improve the abilty to benefit from 
occupational training and increase opportunities for more productive 
employment. Such vocational education services ar not authorized for SLIAG 
reimbursement. 
FINDING: The State has no plans to deduct program income from SLIAG-related costs. 
Educational providers ar permtted to levy a $10 registrtion fee to cover costs 
progr 
of SLIAG reporting requirements. The SLIAG regulation states that 
income must be excluded from SLIAG-related costs. 
FINDING: The FSA application review process created a number of signifcant problems 
for Arizona. Also, the FSA' s application review process interfered with the State s ability to 
plan for services.

Delay in FSA issuing the implementing regulation resulted in the State 
inabilty to properly plan for SLIAG. 
Numerous policy misinterpretations and disagreements resulted because FSA 
did not provide definitive wrtten instrctions to assist Arizona in understanding 
SLIAG application requirements. 
The time frames were too short for submitting the initial SLIAG application 
review and comment, and revisions of the application.  Implementing SLIAG-funded programs was delayed because of a significant 
delay in notifying Arzona of the grant award. 
No formal appeals process exists if progrms or costs ar denied in the fIrst level 
review. 
As mentioned earlier, FSA and Arzona have alady initiated action on some of the 
recommendations made in this report. Steps have been taen by FSA to provide States with 
more specific, formal guidelines for identifying and documentig actual program and 
admnistrative costs. However, additional actions ar necessar in other areas on the par of 
FSA and Arzona. 
RECOMMENDATION: The FSA should ensure that costs claimed for public health 
assistance are in accordance with one of the methods indicated in the HHS regulations and 
not based on budgeted costs. 
RECOMMENDATION: The FSA should reconsider its position to classify certain public 
health services as public assistance and make appropriate adjustments to this position. 
RECOMMENDATION: The FSA should ensure that SLIAG funds are being used only for 
approved adult education activities. 
RECOMMENDATION: Arizona should ensure that program income is properly deducted 
from SUAG-related costs before reimbursement is claimed by educational providers. 
RECOMMENDATION: The FSA should make its application and grant process more 
orderly. Specifcally, FSA should 
provide definitive wrtten instrctions on the SLIAG application requirements 
and establish a dialogue with Arzona on SLIAG policy, compliance, and 
reporting issues to minimize the confusion that occurred in the initial application 
process; 
ensure that sufficient time is allotted to the application process including 
Arizona s initial application, FSA' s review and formal comment, Arizona 
consideration of FSA comments and negotiation of disputes, and its submission 
of the revised application for FSA approval; 
develop an appeals process to use if programs or costs associated with providing 
services are denied in the initial application process; and  _. . , .-
c..'  " .I': 
revise the grant award process for approved applications so that the notice of 
grant award reaches Arzona prior to the beginning of the fiscal year. 
COMMENTS 
The FSA and the State of Arzona both commented on the draft report. They generaly agreed 
with our findings and recommendations. Both indicated that steps have been taen to improve 
implementation of SLIAG. Their comments are included verbatim as appendices B and C.  ....... ... ..... ... 
............................................................ ........................................ .......................... .. ......... .......... 
TABLE OF CONTENTS 
EXECUTIVE SUMMARY

I NTRO D U CTIO N .... II.. II... II .... II.I.I II...  .... ................. D....... 

PU RPOS E ..... .... .... ....118....8... IIII.. II II.. II II.. II II.. II II.. II II.. II II.. II II.. II II.. II II.. II II.. II II.. II.. II II.. II II.. II II.. II II II IIII II.. II 1

BACK G RO UN Dil... II... II.. II II.. II II.. II II.. II II...... II II.. II II.. II II.. II II.. II II.. II II.. II II.. II II.. II II.. II II II.. II II.. II II.. II II II.. II II.. II 

ETHODO LOG Y II.. II II...... II... IIII... II  II II.. ........ II... IIII........ ... II...... II II.. II II II II IIII.. II 2

ARIZONA' S ORGANIZATIONAL STRUCTURE ...................................... 3

FINDINGS AND RECOMMENDATIONS .................................................................. 5

PU B LIC ASSISTANCE ........ ............................................ .................. ..... .... 6

PU B LIC HEAL TH ASSISTANCE................................................................ 8

ED UCA TI 0 Nil............ ........... .......11..  II. .... 1111.a 11.11... .1111.1111I.I... 1 0

CROSSCUTTI NG ISSU ES ......................... ........ ..... ..II...a. 11....11....11.8 11111111.11........ 

OIG RESPONSE TO COMMENTS ...............................11.11........11.1111.........11......110.......... 16

APPENDIX A ............................ ..............................I1... .......IIII..."...............allll..... ..... A -1

APPEN DIX B ............................................................. .... .... ............11............. ...11..... B

APPEN DIX C............... ......................  ... C -1
 INTRODUCTION

PURPOSE 
The Famy Support Admistrtion (FSA) reueste that the Offce of Inspector General 
(OIG) conduct an inspetion in nie States and the Distrct of Columbia to determe how 
Grts 
effectively the States implemente the State Legalzation Impact Assistace  (SLIAG) 
progr 
awarded under the Imgration Reform and Control Act (lCA) of 1986. The 
inspetion include reviewig mehansms in place to identi these funds and determg 
whether present or projected policies and proedures adere to FSA  FSA also 
gudelies. The 
identig 
was intereste in  potential problems early in the process and goo pratices which 
al States could shar. This report presents the results of the inspetion perting to the State 
of Arzona. 
BACKGROUND 
Under IRCA, eligible legalze alens may apply for permanent residency within a I-year 
period afer they are fIrst eligible (Le., by the 31st month after they receive temporar resident 
status). 
Ths new population will increase the demand for State public assistace and public health 
assistace servces signcantly. It wil also incras the demad for State educational 
servces as these new residents obtan English language and civic skills needed to become 
S. citizens. 
To help States defray many of the costs of providig public assistace, public health 
assistace, and educational servces to eligible legalize aliens, IRCA authorize $1 bilion 
each year from Fiscal Year (F) 1988 thugh 1991 for SLIAG grts, less an amount 
identied as the "Federa offset." With few exceptions, eligible legalize aliens ar ineligible 
progrs 
for federaly funded public assistace  such as Aid to Famlies with Dependent 
Childrn (AFC), foo staps, and Medcaid. The "Federal offset" is the estimated cost to 
the Federal Government of providig these services or benefits to those few legalizd aliens 
who ar eligible for them. In FY 1988, the law alocated $928.5 millon to States. 
To reeive SLIAG funds, States must apply to the FSA Division of State Legalization 
Assistace, which is responsible for approving applications and adnistering the program. 
The application must be approved in tota for a State to receive any SLIAG funds. The FSA 
also provides States with tehnical assistace on policy issues and on the methods used to 
determe costs and verify actual costs.  The basic reuiment for States to claim reimburement is that costs must be alowable, 
reasonable, and alocable. State public assistace and public health assistace program must 
be the same ones avaiable to.the general public. States cannot crate new program in these 
areas specifcaly for eligible legalze alens. However, States may create new or adtional 
education progrs for the eligible legalze alen population. States may also claim 
progr adstrtive  adstrative 
reimbursement for  and SLIAG  costs. 
Reimburement for public assistace and public health assistace is limite only to the amount 
of State and local funds expended for SLIAG-relate costs. The maimum SLIAG 
legalze 
reimburement for educational servces is an average of $500 per year per eligible 
alen. Determing progr adnistrtive costs should be ma in accordace with the final 
regulation at 45 CP 402.22. 
The FSA is responsible for adnistering the program Because SLIAG was a new program, 
real 
FSA  that problems would surace early in its implementation. In addition to the 
norm diculties encountered in creatig new processes and proedures, FSA recogned 
that SLIG would have unique problems. Some of these issues include the diversity of 
progrs which SLIAG encompasses, cultual and language barers associated with the 
service population, maintang confdentiality of information, and the extrmely short
fres 
for the grant award process. 
METHODOLOGY 
The FSA selected nie States and the Distrct of Columbia for the inspection because of the 
varety of program offered the number of eligible legalze alens in the population, or the 
amount of the  nine States are Arona, Calforna, Colorado, Florida, lllinois, 
grt. The 
Massachusetts, New York, Texas, and Washingtn. This repon reviews Arzona 
progr 
implementation of the SLIAG  as of August 1988. 
strctu 
, the OIG developed  discussion guides for each 
Pror to conducting the inspection
major program activity at the State and local levels. On-site discussions were held with 
offcials frm the aras of public assistace, public health, and education.  ARIZONA' S ORGANIZATIONAL STRUCTURE

In Arzona, the Governor has designated the Arzona Deparment of Admnistration as the 
responsible admnistering agency for SLIAG. Under the designation, the State comptroller of 
the Arzona Deparent of Admistration is specifically authorized to apply for and accept 
SLIAG funding and to provide assurance and certfication, as required by Federal regulations, 
to the U.S. Deparment of Health and Human Services (HS). The State comptroller serves 
as the single point of contact and has overall responsibilty for the SLIAG progrm. In 
Arizona, the single point of contact is not actively involved in the day-to-day activities of 
administering SLIAG, but rather these responsibilties are assigned to the Fiscal Services Unit 
supervisor and the deputy comptroller. 
The Arizona Deparent of Admnistrtion also is the grantee agency. The agency is 
responsible for drwing down Federa funds, disbursing these funds, and reporting 
expenditures of State and local funds to FSA. Arzona wil allocate SLIAG funds in 
accordance with the published rules and regulations and in direct proportion to the 
documented expenses of each requesting entity. 
When the single point of contact draws down the money from the Federal Government, it is 
deposited into one of two funds accounts. One fund is an account solely for money going to 
reimburse county expenses. ,The second is a general fund account used to reimburse State 
expenses. 
Gn a monthly, quarerly, semiannual, or annual basis, each requesting State or local 
government entity wil provide to the single point of contact a report documenting their 
expenses for the reporting period. Based on the reported expenditures and in accordance with 
the State s allocation, funds wil be drawn and disbursed. 
In Arizona, 11 counties are parcipating in the SLIAG program, as well as 5 State agencies. 
All parcipants, whether State, local, or private, wil have to provide to the single point of 
contact a copy of their contract, if required, or any other document that is required either by 
Federal or State law in order to paricipate and receive funds under the progrm. 
Arzona s intentions ar to use existing service delivery and funding mechanisms and to use 
services to accommodate the needs of the eligible legalized aliens. The 
currnt providers of 
generally available to other Arizona residents. 
availabilty of those services are limited to those 
Paricipating service providers must be able to relate specific costs to services provided to 
individual eligible legalized aliens except where Federal regulations permit establishing costs 
on the basis of a ratio between the States ' total population and the number of aliens in the 
State. The exception primarly relates to public health services. As far as public assistance  '- '.-
and education are concerned Arzona wi reui that an eligible legalze alien identify 
himself by presentig an 1-688 (Temporar Resident Cad) or 1-688A (Employment 
Authorization Card) issued to him by the Imgration and Natualzation Service (IS). 
However, it should be note that the I-688A does not document that an alien was granted 
lawf 
status, but merely that he or she applied for such status. This card will identify the 
eligible legalize alien by an alien registrtion number.  FINDINGS AND RECOMMENDATIONS

Both FSA and Arzona were commtted to identiying problems and developing innovative 
and effective solutions for them. Immediately following our on-site visits, FSA was given an 
outle of the State concerns identied in this report 
1987 FSA has held national conferences and issued information to 
FINDING: Since 

States on implementing the SUAG program. 
The FSA held several national conferences beginning in 1987 to share 
information with States on SLIAG legislation, the implications for States, the 
application process, and the documentation of costs. 
The FSA also provided States with "Question and Answer" issuances and 
demographic data frm the INS. 
FINDING: To facilitate implementing the SUAG program, Arizona took steps to assure 
that funds control mechanisms were in place. 
The Arzona Deparent of Admnistration has established a financial program 
capabilty in its own computer system, as well as in the Arzona Financial 
Information System, which will permt reconciling the SLIAG fund. The 
counties wil receive State warants for their reimbursement requests, and the 
State agencies wil have the funds deposited diectly to their genera fund from 
which fundig was appropriated for their operation of the SLIAG program. 
Pror to initial disburement of SLIAG funds to any parcipating entity, 
on-site audit wil be performed by the Arzona Deparent of Admnistrtion 
assure that the entity had identified all expenses properly and maintained the 
appropriate records. In accordance with the single audit provisions, an annual 
audit wil be performed for following year. 
The Arizona Deparent of Health Services used existing contracts with health 
servce providers for the general population to serve eligible legalized aliens and 
to maintan records of expenditus. The deparent has established separte 
accounts for each of these providers in the financial information system.  Since SLIAG is a reimbursement grant, there should not be a situation where 
there ar any signifcant cash balances. Under the Federal guidelines, the State 
has been advised that they could retain enough funding to provide up to a 
maximum of 3 days expenditures. The State intends to requir expenditure 
documentation prior to drawing any SLIAG funds. 
FINDING: The Arizona Department of Education has established a pre-enrollment 
appraisal testing program 
for eligible aliens. 
Agencies receiving SLIAG funds wil admnister a pre-enrollment appraisal test. 
This test assesses an eligible legalized alien s abilty to speak and understand 
English and know United States history and government. Based on this 
appraisal, they wil be referred to appropriate programs and program levels. 
Supplementing the appraisal test, the pre-enrollment appraisal process wil 
provide information on students ' educational histories, salient demographic 
supporting their temporar residency status. 
charcteristics, and data 
Neverteless, there  Findings and recommendations 
are some funds control vulnerabilties. 
concerning these vulnerabilties follow under major topic areas. 
PUBLIC ASSISTANCE 
Assistance or Service Activities 
In Arzona, the admnisterig State agency for public assistance is the Arizona Deparment of 
Economic Security. At the time of the review, only three entities were going to apply for 
SLIAG public assistance fundig for services provided to eligible legalized aliens. These 
included the deparment itself and two counties. These entities do not intend to establish any 
new programs due to the availabilty of the SLIAG funding, but to use those existing 
progrs 
generaly available to the population of the State. Basically, any public assistance 
provided in Arizona with SLIAG funding wil be by contract with Marcopa and Pima 
counties. The State wil provide for services related to emergency assistance, food stamps, 
eligibilty determination, and indigent health care. 
Documentation of Eligible Legalized Alien Status 
The intake application process wil be modfied to identify the eligible legalized alien and 
veriy the registrtion number.  Program Costs 
Since only thee entities ar applyig for public assistance fundig, they wil establish their 
own proedures to determe actual case cost. They wil then be requird to submit a report to 
the single point of contact documenting their expenditues for the period for which they are 
requestig reimburement. This report wil be reviewed by the single point of contact for 
completeness and accurcy of computation. 
Administrative Costs

The Arzona Deparent of Economic Securty was developing proedures to determne diect 
admnistrative costs. The deparent was reviewing exception time reportg but was also 
considerig other options such as time sheets for processing a case. Indiect costs 
deparent. 
determned by the appropriate agency for the 
Drawdown of Funds and Cash Balances 
The drawdown of funds from the Federal Governent is performed by the Arzona 
Deparent of Admnistrtion. The Arzona s Organizational Strctue section of this report 
addresses this function. 
Interagency trsfer of funds frm the Arzona Deparent of Admnistration to the Arzona 
Deparent of Economic Securty wil be based on reimburement of expenditurs incured in 
providing servces to eligible legalzed aliens. These expenditues wil be documented and 
accounted for in accordace with Federa guidelines. 
The only reports that ar required to be fuished to the single point of contact wil be the 
Standa Form 269, a Federal expenditu report However, internal reports will be requird 
progr 
by the individual agencies to account for the  aspects of the grant, and these wil be 
included in the reuested information section. 
PUBLIC HEALTH ASSISTANCE 
Assistance or Service Activities 
In Arzona, the admisterig State agency for public health is the Arzona Deparment of 
Health Services. At the time of the review, 9 of the 11 counties were going to provide public 
health assistace services only. The reason for this is the complexity of claiming 
reimbursement of SLIAG funds for public assistance costs.  Health Related Activities

For Eligible Legalized Aliens

Furnished Directly or Indirectly by Provider

PROVIDER 
State  County 
vital records 
emergency medical services 
child day care 
emefl!encv medical. ambulance 
emerl!encv medical traininl! 
health care licensure 
AIDS epidemiolo!! 
Arzona cancer registr

bir 
defects

health Promotion and education

immunization

infectious disease epidemiology

investil!ations

sanitation

sexually trnsmitted disease control

tuberculosis control 
vector and zoonotic diseas control

chronic diseas 
children s rehabiltation services

consultation and communitv service

denta health 
State and countY nutrtion services

perinata care servces

behaviora health facilties

State laboratorv

public health nursing

family Dlanninl!

environmental health (air aualitv)

environmental health (water aualitv)

environmental health (waste)

Documentation of Eligible Legalized Alien Status 
For public health services, the percentage method is used to determine the ratio of eligible 
legalized aliens to the population served. Data from the HHS ar used to determine the 
number of eligible legalized aliens and special agrcultural workers.  Program Costs 
FINDING: The State s plan for claiming public health assistance costs is not in 
accordance with prograTn requirements. 
Counties providing only public health assistance services plan to use a fonnula based on the 
annual budget for each program and compute costs for reimburement. The basis for the 
formula is stated in the HHS' rules and regulations for public health assistace. The HHS 
regulation 45 CPR 402.21 (c)(2) provides thee methodologies that can be used to claim costs 
for public health assistance. These methods are 
actual expenditures made to or on behalf of identifiable eligible legalized aliens 
who qualify for and receive such assistance and/or services; 
use of a statistically valid sampling of clients in the public health system of the 
State or local government; or 
use of the ratio of eligible legalized aliens in a service population to all members 
of the relevant service population. 
RECOMMENDATION: The FSA should ensure that costs claimedfor public health 
assistance are in accordance with one of the methods indicated in the HHS regulation.'! and 
not based on budgeted costs. 
FINDING: The FSA' s definition of public assistance includes some public health 
assistance activities which created administrative and service delivery problems for 
Arizona s public health agencies. 
Several program admnistered by the State s Deparent of Health Services ar considered 
public assistace for SLIAG reimburement purposes. The distinction is important because 
identiying a service as public assistance requires documentig costs incurrd when services 
progr 
are provided to individual eligible legalized aliens.  or service is considered 
If a 
public health assistance, the population ratio method for establishing costs can be used. 
While there is no quarel with the logic of FSA's definition of public assistance versus public 
health assistace, the distinction created serious admnistrative and programmatic diffculties 
for public health agencies. These agencies, not the public assistance agencies, must develop 
and implement new processes for identifying individual eligible legalized aliens in order to 
document costs.  Arzona noted that, initialy, FSA indicated that services considered "public health" under the 
State s public health plan would also be considered as public health assistace for SLIAG 
reimbursement. This position changed in June 1988. 
State offcials believe that the defmition of some public health assistance services as public 
assistace has limited the extent to which the eligible legalize aliens want to parcipate in 
the SLIAG program. There are thee levels of health services, primar, secondar, and 
tertar. 
Under SLIAG, the fit two levels fal under public health assistance, while the third 
comes under public assistace. Arzona does not believe it is worth changing the State 
system. Furer, they do not want to undergo an audit. 
RECOMMENDATION: The FSA should reconsider its position to classif certin public 
health assistance services as public assistance and make approprite adjustments to this 
position. 
Administrative Costs 
progr 
The  admnistrtive costs ar those costs associated with admnistering 
SLIAG-alowable activities. These costs would be determned based on the accounting 
system s identifyg diect and indiect admistrative costs allocable to SLIAG. 
Drawdown of Funds and Cash Balances 
The drwdown of funds is performed by the Arzona Deparent of Admnistration. The 
Arona s Organational Strctu section of this report addsses this function. Since the 
progr 
cash balances functions are similar in al thee  aras, please refer to the section under 
Public Assistace. 
EDUCATION 
Assistance or Service Activities 
The Arzona Deparent of Education is the admisterig State agency for the education 
progr. 
porton of the SLIAG  Educational services to eligible legalized aliens wil be 
provided to adults though local educational agencies, community colleges, qualified 
designated entities, and community-based organizations. Arzona believes that the limts on 
elementa and seconda education are too restrctive and prevent them from including 
servces to this grup of children in their SLIAG application. 
The deparent is designed to meet the needs of eligible legalized aliens whose lack of 
literacy, basic English language, and/or citizenship skills prevents them from succeeding in 
school or qualfying for their adjustment to permanent resident status and eventually U. 
citizenship.  progrs 
The deparent's adult education  includes adult basic education and English as a 
Second Language. To enroll in these progrms an eligible legalized alien must be 16 years of 
age or older and need educational assistace in speakng, readig, or wrting English below 
the eighth grade. This excludes any high school level classes or Genera Education 
Development classes. 
FINDING: The Arizona Department of Education may be claiming nonallowable costs as 
SLIAG-related costs 
for education. 
progr 
The curculum for Adult Education Program is a sequential  of instrctions 
designed to 
develop and compose communication and handle the computational skills of 
adults; 
raise substantially the general educational level of adults to make them less 
likely to be dependent on others; 
improve their abilty to benefit from some occupational training; 
expand and increase opportunities for more productive and profitable 
employment; ard

make them better able to meet their adult responsibilties as parents, citizens, and 
workers. 
The SLIAG regulation 45 CFR 402.2 defines educational activities approved for adult eligible 
legalized aliens. These activities include: 
instrction in basic skills to enable adults to function effectively in society, 
wrte the English language; 
including the abilty to speak, read, and 
instrction leading to the equivalent of a certficate of grduation from a school 
providing secondar education; 
English proficiency; 
instrction for adults with limited 
instrction in citizenship skills; and  ancilar services, such as educational counseling, transportation, and day care 
provided to individuals who receive educational services. 
Vocational education services are not authorized under the Adult Education Act and may not 
be claimed as an alowable SLIAG-related costs. 
The curculum of the State, which refers to occupational trning and increasing opportunities 
for more productive and profitable employment raises questions as to whether the State is 
fundig vocational education coures. 
RECOMMENDATION: The FSA should ensure that SLIAG funds are being used only for 
approved adult education activities. 
Agencies receiving SLIAG funds wil admnister a pre-enrollment appraisal test to assess an 
eligible legalized alien s abilty to speak and understand English and know United States 
history and government. Based on this apprasal, they wil be referrd to appropriate 
progr 
progrms and  levels. Supplementig the appraisal test, the pre-enrollment appraisal 
process wilI'proVide information on students' educational histories, salient demographic 
characteristics, and data supportng their temporar residency status. 
Documentation of Eligible Legalized Alien Status 
Providers wil indicate and document the number of eligible legalzed aliens who were 
positively identified during the fIrst three quarers of FY 1988 and wil project the number of 
eligible legalized aliens who are to be served during the last quarer of FY 1988, ending 
progr 
September 30, 1988. At the end of the  year, provIders would submit final claims for 
SLIAG reimbursable services that have been provided. 
Although some eligible legalized aliens had been served through the Arizona Adult Basic 
Education program prior to the SLIAG program, the Arzona Deparment of Education had 
not been documenting services for these individuals. While the deparment wil be identifying 
and documenting such services now, offcials did not anticipate seekig SLIAG funds 
retroactive I 
Program Costs 
As a rule, reimbursement for all educational serviCes provided wil be determined by 
multiplying the adult school rate (currntly $3.00 per student hour) by the number of hours the 
student is in class, up to a limit of $500 per student per Federal fiscal year. A higher cost per 
instrctional hour may be considered in funding projects offering educational services for 
lower functioning eligible legalized aliens. Assessment costs need to be identifed separately 
because such costs are not considered instrctional.  Complete and accurte reportng by each project is vita to the overal operation of the SLIAG 
progr. The Arzona Deparent of Education, Comprehensive Traning Unit, will design a 
project reportng formt to collect student enrllment and attendace, separation information 
s curculum, student progression, and other statistical informtion. 
grade level of student  tu 
This information wi be reported to the SLIAG single point of contact who wil in  report 
it to FSA. 
Puchasing equipment items is not encouraged as a genera rule. However, where justified 
and reasonable, all approved equipment items wil appear in the equipment category, 
regardless of unit cost, and under the assigned instrctional servce. The Arzona Deparment 
of Education has full disposition authority for al equipment purchased with SLIAG funds. If 
a project is termated the Arzona Deparent of Education reserves the right to move such 
equipment to Arzona Deparent of Education projects curently serving eligible legalized 
admnistrtion or ancilar 
alens. Requests for equipment items to be used in support of 
services are subject to approval on a case by case basis. 
Providers of adult educational servces, including school distrcts (unified school distrcts and 
high school distrcts), community colleges, community-based organizations, and qualfied 
wi 
designated entities,  receive SLIAG funds on the basis of the number of eligible legalized 
aliens aleady being served and a budget for the number estimated to be served in the future. 
FINDING: The State has no pllns to deduct program income from SLIAG-related costs. 
In Arzona, an education provider may levy a $10 registrtion fee for adults to cover reportng 
requirements under SLIAG. No other fee, includig tuition, may be charged to students 
receiving educational servces, the cost of which is reimburement though SLIAG. 
progr 
The SLIAG regulation 45 CP 402.2 states that  income (as defined in 45 CPR 
74.42) must be excluded from SLIAG-related costs. States must calculate SLIAG-related 
progr 
costs net of  income. The fee being charged by educational providers would be 
considered as program income. 
RECOMMENDATION: Arizona should ensure that program income is properly deducted 
from SUAG-rellted costs before reimbursement is cllimed by educational providers. 
Administrative Costs

All provider costs budgeted and expended under admnistrtion are limited to 10 percent of 
the project reimburement ceilng. Indict costs are budgeted only under admnistrtion and 
may not excee 8 percent of the project total; these costs ar to be included within the 10 
percent limtation.
 Drawdown of Funds and Cash Balances 
The drwdown of funds is performed by the Arzona Deparent of Admnistration. The 
Arzona s Organational Strctur section of this report addsses this function. Likewise, 
progr 
thee 
cash balances functions are simiar in al  aras and should be referenced under 
ths section for Public Assistace. 
CROSSCUTTING ISSUES 
progr 
Arzona initially believed that the SLIAG  was to be implemented easily, without 
extensive new processes or program, so that the services could be provided in a tiely 
manner using the existing public assistace and public health assistace program. It did not 
happen ths way. The State indicated it was experiencing far more diffculties than they 
originally expected. As a result, it has experienced a lack of interest by counties in 
parcipatig in the SLIAG program. At the tie of the review, only 2 of 11 counties were 
parcipatig in both the public assistance and public health assistance progrs. The 
remag 
nine counties only parcipate in the public health assistace program. 
FINDING: The FSA application reviw process created a number of signifcant problems 
for Ariona. Also, the FSA's applicatin review process interfered with the State s abilty to 
plan for services. 
Delay in FSA issuing the implementing regulation resulted in the State 
inabilty to properly plan for SLIAG. 
Numerous policy misinterpretations and disagreements resulted because FSA 
did not provide defmitive wrtten instrctions to assist Arzona in understanding 
SLIAG application requirements. 
The time frames were too shott for submitting the initial SLIAG application 
review and comment, and revisions of the application. 
Implementing SLIAG-funded programs was delayed because of a significant 
delay in notifying Arzona of the 
grt awar. 
No formal appeals process exists if progrms or costs ar denied in the fIrst level 
review. 
Accordig to fmal regulations published Marh 10, 1988, States had to submit the FY 1988 
application no later than May 16, 1988. Revisions to the application had to be submitted by 
, 1988, and the FY 1989 application had to be submitted no later than July 15, 1988. 
July 1 Due largely to these short time frames, FSA provided no formal feedback on revisions 
necessar in Arzona s FY 1988 application. The information was trsmitted by telephone or 
in meetings. The time frames to make necessar revisions did not accommodate the 
organizational strctu or the need to communicate with or seek approval from the program 
components impacted by revisions requested by FSA. Although some changes had a major 
effect on programs and grant amounts, the single point of contact received no official rationale 
from FSA for requestig these changes. 
RECOMMENDATION: The FSA should make its application and grant process more 
orderly. Specifcally, FSA should 
provide definitive wrtten instrctions on the SLIAG application requirements 
and establish a dialogue with Arzona on SLIAG policy, compliance, and 
reportng issues to minimize the confusion that occured in the initial application 
process; 
ensure that sufficient time is allotted to the application process including 
Arzona s initial application, FSA' s review and formal comment, Arizona 
consideration of FSA comments and negotiation of disputes, and its submission 
of the revised application for FSA approval; 
develop an appeals process to use if programs or costs associated with providing 
services are denied in the initial application process; and 
revise the grant award process for approved applications so that the notice of 
grant award reaches Arzona prior to the beginning of the fiscal year.  OIG RESPONSE TO COMMENTS 
drt 
The FSA and the State of Arzona both commente on the  report. 
The FSA 
agr 
The FSA has generaly  with the OIG report fidigs and reommendations. The FSA 
has taen a number of steps to improve implementation of the SLIG progr includig 
claryig program policies and proedurs. In the report the State had severa concerns about 
adstrtion 
the FSA  of the program We have moded cert aspects of the report based 
on the commnts reeived from FSA. 
The FSA questioned the statement that the new population would significantly increase public 
assistace and public health assistace servces. Early estiates indicated that large numbers 
recogn 
of alens would qualy to access the SLIAG program. The report  that information 
obtaed durg the review determed that substatial incrases in workload and 
expenditus could occur in these aras as well as in education. However, we understad from 
' offcials that demand for servces nationaly is faling behind 
recent discussions with States
earlier projections. 
The FSA's defition of public assistace include some public health activities which crated 
adstrative and servce delivery problems for Arzona s public health agencies. The OIG 
recommende that FSA reonsider this position. 
priary 
The FSA replied that they se ths  as an issue of cost identication and that they wil 
ar 
work with the States to develop methods of documentig costs which  consistent with 
FSA' s responsibilties as stewars of public funds. We believe that FSA's actions to identify 
alternative methods is responsive to our concerns. 
We continue to believe that a strct interpretation which permts public health costs to be 
claime only for speifc eligible legalze alens is burdensome to the States and, in many 
cases, would  revisions to the States' system or statutory requirments. 
reuire considerable 
agr 
However, we do  that FSA's use of alternative systems, such as the Cost Documentation 
System and a revised population ratio method system which reflects usage, would be a 
positive effort to enhance cost effectiveness without reuirg States to develop new systems 
or make considerable revisions to present systems. The population ratio method could be 
revised to consider not only eligible legalize aliens in the servce population, but use of those 
services by the eligible legalize alien population based on information alady obtaned from 
progr 
experience. Where appropriate, other alternatives might be used which would 
adess 
produce a more effcient system for the States and  congrssional intent that the States 
would not be required to establish new or elaborate systems.  progr 
We report that no formal appeals ' proess exists if  costs ar denied in the fIrst level 
review. We agree with FSA' s statement that the Grant Appeals Board does have jursdiction 
over mattrs for witholdig and repayment of SLIAG fuds. However, it was the States 
concern that an effective appeals mechansm be in plac for issues involving program or 
costs at the fIrst level of FSA' s review in the application proess. 
clar cert 
The FSA mad numrous comments to  mattrs of fact, policy, or procedur. 
We have included these comments verbati in Appendi B. 
Stae of Arizona 
The 
agr 
The State has generay  with the OIG report fidigs and reommendations. Their 
comments ar include verbati in Appendi C. The comments have clared several of the 
State s proesses, organzational strctu, and concerns noted at the time of the OIG on-site 
review. 
ma 
Recognition is  of the State s concern regarding classification of some public health 
assistace activities as public assistace. Reference should be mae to our comments above 
concerng ths issue as adssed to FSA.  APPENDIX A

GOOD PRACTICES
 . ,.  ' ' ' :
shar. 
A number of practices have been identified that other States could 
Pror to any disburement of SLIAG funds to parcipating entity, an on-site audit wil be 
performed by the Arzona Deparent of Admnistrtion to assure that the entity had iden
tified all expenses properly and maintaned the appropriate records. For the following 
years, in accordace with the single audit provisions, an annual audit will be performed. 
The Arzona Deparent of Health Services used existig contracts with health service 
providers for the genera population to serve eligible legalize aliens and to maintan re
cords of expenditus. The deparent has established separte accounts for each of 
these providers in the financial informtion system. 
The State intends to require expenditue documentation prior to drawing any funds. As 
such, the only tie any fundig balance should exist would be while the State s claim for 
payments is being processed. 
Agencies receiving SLIAG funds wil adnister a pre-enrollment appraisal test. This 
test assesses an eligible legalizd alien s abilty to speak and understad English and 
know United States history and government. Based on this appraisal, they wil be re 
progrs  progr 
ferred to appropriate  and  levels. Supplementing the appraisal test, the 
pre-enrollment appraisal proess wil provide informtion on students' educational histo
ries, salient demographic characteristics, and data supportng their temporar residency 
status.  APPENDIX B

FAMIL Y SUPPORT ADMINISTRATION'S COMMENTS
 ''' ,. 
i E DEPARTMENT OF HEALTH &. HUMAN SERVICES	 Family Su  ort Administration 
Memorandum 
. August 25, 1989 
Date: 
From:  Acting Assistant Secretary

for Family Support

Subject:	 OIG Draft Report: Implementation of the State Legalization 
Impact Assistance Grants Under the Immigration Reform and 
Control Act of 1986 - State of Arizona (OAI-07-88-00441) 
To: 
Richard 
P. Kusserow

General

Inspec tor 
Attached are the Family Support Administration comments on

technical in 
the above report. Hany of our comments are 
nature due to the complexity ,of the legislation and the 
fact that the SLIAG program was very new at the time of the

rev iew. 
We appreciate the assistance and cooperation we have

received from you in response to our req est to conduct this

program. 
round of reviews of the SLIAG  The reports we 
received are very useful to us in understanding how States 
program. 
are implementing the 
Attachment  ,.. 

:: .
' .
OIG DRAFT REPORT:

Implementation of the state Legalization Impact Assistance

Grants 
Under the Immigration Reform and Control Act of 1986 

state of Arizona

The Family support Administration I s comments are divided into
three sections: 
Comments on background information and other 
narrative material that does not relate directly to the draft
report I s findings, comments on the findings, and responses to the 
draft report I s recommendations. 
Narrative: 
Page 1 (Background) -- The draft report says, "This new

population will increase the demand for state public assistance

and public health assistance services significantly.  The draft

report isn't clear whose conclusion this is or upon what data and

analysis the conclusion is based. The final report should

clarify these points.

In the course of implementing SLIAG, we have discovered that 
neither state and local public health programs nor, with few 
exceptions, public assistance programs, inquire about legal 
status. This suggests that at least some aliens were using 
these services before legalization and .that newly legalized
aliens do not represent a "
new population" for public assistance 
services. 
and public health assistance  Preliminary cost data 
from states suggests that newly legalized aliens are accessing 
public assistance services at rates far lower than the general
. population. 
There are indications that a backlog of publ 
health needs existed and was identified during the medical 
examinations required of all applicants for legalizations. 
However, there is no data to suggest that, other than this 
temporary bulge in demand for public health services, newly 
legalized aliens will generate a significant increase in de and 
services. 
for public health assistance or public assistance 
Page 2 (Background) -- The draft report says, "states must 
develop a method acceptable to FSA for determining
administrative costs. 
We note that several methods for 
determining the share of administrative costs in ongoing 
programs that are allocable to SLIAG and which are accept 1: . ' 
Driori  are specified in the regulation at 45 CFR 402. 22 (b:. rhe 
process of determining SLIAG administrative costs 
(those  )sts 
incurred in administering the SLIAG grant itself), like 
associated with administering HHS grants, is governed ty 
Parts 74 and 92 and relevant OMB circulars. 
Pages 3-4 (Arizona I s Organizational structure) -- The

report says that, for public assistance and education

services, the state will require that eligible legalL'
 be identified. 
by an I-688 (Temporary Resident Card) or an I-688A 
Card). 
(Employment Authorization  The report should make clear 
that the I-688A does not document that an alien was granted

or. she applied for 
lawful status, merely that he  status. Use 
SLIAG funds for public assistance and educational service is

limited to costs associated with aliens. who have been granted 
and, therefore, are "
lawful resident status  eligible legalized
aliens. 
The effective date of this status is the date the 
INS. 
application was filed with  This means that, as a practical 
matter, the cost of public assistance and educational services

provided to individuals while their applications were pending

with INS are allowable if the applications were approved, but not

if they were denied.

Public Assistance:

Page 5 (Assistance or Service Activities) -- The draft report 
states that government entities seeking SLIAG funds for public 
assistance "do not intend to establish any new programs due to 
the availability of the SLIAG funding, but to use, with necessary 
modifications, what they have available now. II It is important to 
note that all programs of public assistance must meet three
cri teria. 
First they must be generally available to the 
population of the State. Secondly, they must be means-tested. 
Lastly, they must provide for the subsistence or health of the 
individual. The requirement that the programs be generally 
available would preclude the State from developing any programs
for "
eligible legalized aliens"  It is not clear what is meant 
by II necessary modifications. II The final report should make 
I s 
clear how Arizona  plans relate to the statutory definition of
. public assistance. 
(Administrative 
Page 6  Costs) -- The draft report says that the 
Department of Economic Security was developing procedures to 
costs, and lIindirect 
determine direct administrative  costs are 
determined by the appropriate agency for the department. 
note that several methods for determining the share of 
administrative costs in ongoing programs that are allocable to 
a Driori are specified in the 
SLIAG and which are acceptable 

regulation at 45 CFR 402. 22 (b). The process of determining SLIAG
administrative costs 
(those costs incurred in administering the 
SLIAG grant itself), like all costs associated with 
administering HHS grants, is governed by 45 CFR Parts 74 and 92 
and relevant OMB circulars. The final report should make that
point clear. 
public Health Assistance

Page 6 (Assistance or Service Activities) -- The draft report 
says, "At the time of the review, 9 of the 11 counties were going 
only. 
to provide public health assistance services  The reason 
for this is the complexity of claiming reimbursement of SLIAG  funds for public assistance costs. 
The final report should make 
clear that the availability of services to eligible legalized 
aliens is not an issue for public assistance or public health
assistance programs. In both of. these categories, 
use of SLIAG 
funds is limited to programs that are generally available to the
population. 
Thus, all services for which SLIAG reimbursement 
could be claimed are available to the general population without 
eligible legalized alien" status. 
regard to " Because of 
differences in the way the terms "public assistance" and "public
health assistance" are defined in IRCA, there are differences in
required cost documentation. 
(This issue is discussed in more 
detail below.  However, we have made available to states a
numer of 
ways to determine allowable costs in public assistance 
programs that do not require setting up complex administrative 
structures or checking immigration status of program 
participants. The final report should make these points. 
Page 9 (Administrative Costs) -- The draft report says that 
program administrative costs "would be determined based on the 
I s 
accounting system  identifying direct and indirect 
administrative costs allocable to SLIAG.  The report should 
make clear that, as discussed above, the regulation sets 
costs. 
standards for determining program administrative 
Generally, the first step in calculating SLIAG-related program 
administrative costs is to determine total program 
administrative costs, and then to determine the proportion of 
these costs attributable to SLIAG by using one of the two 
methods specified in the regulation or another method that 
charges to SLIAG the proportion of program administrative costs 
ble legalized aliens. 
that are attributable to elig 
Crosscuttinq Issues 
Page 13 -- The draft report says that "Arizona initially 
believed that the SLIAG program was to be implemented
easily. . . so that the services could be provided in a timely 
manner to the eligible legalized aliens.  The final report 
should make clear that the availability of public assistance and 
public health assistance services to newly legalized aliens is 
not an issue. Only the cost of providing to this population 
those pUblic assistance and public health assistance services 
that are generally availabl  to the population may be charged to
SLIAG. 
Thus, no costs associated with public assistance or 
public health assistance activities directed specifically to 
eligible legalized aliens may be charged to SLIAG.  Findinqs:

Finding:

since 
1987, FSA has held national conferences and 
issued information to states on implementing the SLIAG 
program. 
Comment: 
since the OIG' s onsite visits in August 1988, we have 
continued to provide assistance to states. We have 
conducted several more workshops and meetings to assist 
October 
states in implementation. In  1988, we issued a 
compendium incorporating the extensive formal guidance 
previously provided to states on methods of cost 
documentation. We also have provided assistance to 
individual States in the form of correspondence, 
telephone consultation, and onsite technical 
assistance. We are in the process of conducting 
initial program reviews of the major States, including 
Arizona, which we visited in June 1989. We request 
that the final report reflect this continuing dialogue
with states. 
Finding: 
The State' 
s plan for claiming public health assistance 
requirements. 
costs is not in accordance with program 
Comment: 
While it is not clear what is meant by the explanation 
for this finding, the draft report appears to say that 
using the annual budget for a program in the population 
regulation. 
ratio method is not consistent with Federal 
We require that costs be determined based on net state 
cost. 
or local government  In the population ratio 
method, this cost is multiplied by the ratio of 
eligible legalized aliens in the program' s service 
population to all members of the service population.
The " annual budget" for a program may or may not be the 
net State or local government cost. The final report 
should make clear how the population ratio works and 
that net state and local government costs must be used 
in making calculations under that method or any other
method.  Finding:

The FSA' s definition of public assistance includes 
some public health activities which creates

administrative and service delivery problems for

Arizona' s pub1 ic health agencies. 
Comment: 
We question how the def nitions of public health and

public assistance create service delivery problems for

Arizona public health agencies. By statute and

regulation, all programs or activities under both

categories must be generally available. In practice,

this means that SLIAG funds are available only to

reimburse costs in ongoing, generally available

programs. In 
most programs, immigration status is not 
a condition of eligibility. If the alien is eligible

for services, he or she would receive those services

regardless of whether they were reimbursed under

SLIAG.  point. 
The final report should clarify this 
Page 8 of the draft report notes that "there is no

quarrel with the logic of FSA' s definition of public

assistance versus public health assistance, 
" but does 
not explain that logic or why the OIG recommends that 
FSA reverse its logic. The final report should explain 
that the regulatory definitions of public assistance 
re based directly on

and public health assistance 

section 204 of the Immigration Reform and Control Act

of 1986 (IRCA), which created SLIAG.

Programs of public assistance are defined as programs
that "
provide for cash, medical or other
assistance. .  desiqned to meet the basic subsistence or
hea1th needs of individuals 
" (section 204 (j) (2) (A) 
emphasis added). Consistent with IRCA' s explicit 
inclusion of medical assistance under the public 
assistance category, state or locally funded programs 
that provide medical treatment to needy individuals are
considered by  be public assistance. 
FSA- to 
IRCA defines programs of public health assistance as
programs which "provide public health services, 
diseases, 
including immunizations for immunizable 
testing and treatment for tuberculosis and sexual1y
transmitted diseases, and family planning services"
(section 204(j) (3) (A)). 
These statutory definitions 
and the legislative history indicate that Congress 
intended to allow certain traditional public health 
functions under the public health assistance category  :.:.
..  \ -
and' medical assistance to the needy under the public
assistance category. 
In implementing SLIAG, we have
followed that statutory framework. 
We have defined 
things, 
public health assistance as, among other 
programs or activities that "are provided for the
primary purpose of protecting' 
2).  the health of the general
public" 
(45 CFR 402.  The scope of programs included 
in that regulatory definition of public health 
assistance goes far beyond the specific activities 
listed in the IRCA. 
The public assistance/public health assistance 
categorization issue is primarily one of cost 
documentation requirements, not the allowability of 
costs associated with any particular health program. 
Without the distinction between categories, Arizona 
would likely use the population ratio method to 
establish costs for all programs run by the Department 
of Health Servi.ces. Implicit in this method is the 
assumption that eligible legalized aliens will access 
programs in the same frequency and at the same cost as
the general population. 
We do not believe this 
assumption to be appropriate for medical assistance 
individuals. 
programs that provide treatment to needy 
To the contrary, the information that we have to date 
indicates that allowing use of the population ratio 
method for these programs generally would overstate
costs, dramatically in some cases. 
However, we would 
be willing to allow use of the population ratio method 
emcirical basis

for any program for which there is an  costs. 
to indicate that doing so would not overstate 
FSA realizes that many public assistance and public 
health programs do not routinely collect information on 
immigration status but has found many do collect social
security numbers. 
That is why we funded and devoted 
that 
substantial staff resources to developing a syste 
matches the social security numbers of program
participants with those of newly legalized al 
iens . 
This system gives states information on the nu

bc 
newly legalized aliens participating in a progr3  1nd
the cost of services to them. 
It is now avaiL  ' and 
1 as 
allows states to establish costs for FY 1988 as 

current and future years. 
We also have sent S 
SLIAG Single Points of Contact suggestions for .' 
possible methods for establishing costs. None  ese 
alternative methods requires setting up new 
administrative mechanisms or checking status 
program participants. 
that, 
init i 
The draft report says on page 8 
indicated that services considered public h  State' 
the "  s public health plan would also be considered 
as public health assistance for SLIAG reimbursement. 
This position changed in June 1988.  It is not clear
precisely to what this" 
statement refers. However, any
statement that may have been made about classification 
of programs and activities would have been predicated 
on the statutory definitions of public assistance and
public health assistance. 
On page 9, the draft report says, "state officials

believe that the definition of some public health

assistance services as public assistance has limited

the extent to which the eligible legalized aliens want

to participate in the SLIAG program.  It is not clear

to what this refers, but it appears that the statement

is based on the mistaken assumption that checking

immigration status of program participants is the only

way to document cost. As noted above, states have

several options for establishing public assistance

costs that do not require checking immigration status

of participants.

The draft report on page 9 also says Arizona agencies
"do not want to undergo an audit. 
SLIAG is covered by
the Single Audit Act. Whether SLIAG transactions are 
selected for audit or not is not related to the 
category of services or the method the state uses to 
establ ish costs. 
We will continue to work closely with Arizona to

develop methodologies to document costs for all

programs in its approved applications.

Finding: 
The Arizona Department of Education may be claiming

nonallowable costs as SLIAG-related costs for

education. 
. Comment: 
The draft report says, correctly, that SLIAG funds may 
not be used for vocational education services. 
However, the list of goals of Arizona' s program of
educational services for the newly legalized 
population appears to be consistent with the 
regulation and the Adult Education Act. The cost of 
providing basic education or English language 
prepare an individual for
instruction designed to 

vocational or job training programs, to provide an 
individual with the English language or basic

education skills needed to qualify for better jobs
, or
 to enable an individual to meet their responsibilities 
allowable. 
as parents, citizens, and workers is 
Finding: 
The FSA application review process created a number of

significant problems for Arizona. 
Also, the FSA' 
application review process interfered with the State'

ability to plan for services.

Comment: 
The draft report says that the time period for 
sUbmission, review, revision and approval of the 
initial application was too short. We agree that it 
would have been preferable to have had a longer period 
of time between the publication of the final regulation 
and the deadline for submission and approval of FY 1988 
and FY 1989 applications. However, the final report 
should note that, because of the way IRCA set up the 
allocation formula, one maj or reason for the compressed 
timeframe was that we could not award funds to any 
state until all States' applications had been
approved. In 
order for us to run the allocation 
formula, which IRCA requires to include estimates of 
costs, we must hav  approved estimates for all states 
I allocations. 
can calculate States 
before we 
The draft report says that "numerous policy

nd disagreements resulted because 
misinterpretations 
FSA did not provide definitive written instructions to 
assist Arizona in understanding SLIAG application
requirements. 
Had there been more time, we would have 
writing. 
communicated more extensively in 
The report says no formal appeals process exists if

programs or costs are denied. The Grant Appeals Board

has jurisdiction over issues related to the withholding

and repayment of funds. For other matters, the state

may follow normal procedures for disagreeing with an

agency finding. 
The draft report on page 13-14, says that the single 
point of contact "received no official rationale from 
FSA for requesting... changes" in the application. The 
final report should note that FSA informed Arizona that 
the activities in question did not meet the statutory 
and regulatory criteria for public health assistance. 
In addition, guidance on allowable activities issued 
to states on June 17 , 1988 described in great deta 
i 1 
the kinds of activities which met the criteria for 
public health assistance and those that met the 
B --
 criteria for public assistance and how to distinguish

between the two categoris.

Recommendations: 
Four of the draft report' s recommendations propose action on the

part of 
FSA: 
Recommendation : 
The FSA should ensure that costs claimed 
for publ 

heal th assistance are in accordance with one of the

methods indicated in the HHS regulations and not based

on budgeted costs. 
Response: 
The regulation not only specifies three ways in which

public health assistance costs may be determined, but

also provides for use of another reliable method

subject to Federal review. 
Whether it is appropriate
to use "budgeted costs" is not related to the method

chosen. The total cost that should be used in the

population ratio method, to' determine average costs,
for any purpose is net state and local government cost. 
The "budgeted cost" may or may not constitute SLIAG-
related cost as defined in the regulations at 45 CFR
402. 
We review every aspect of costs submitted by states to

ensure that costs claimed are allowable and allocable

to SLIAG.

Recommendation: 
The FSA should reconsider its position to classify

certain public heal th assistance services as publ
assistance and make appropriate adjustments to this

position . 
Response: 
As discussed above, the primary issue relating to the

definitions of public assistance and public health

assistance is one of cost documentation. 
states would 
like to use the population ratio method for all

programs run by their health departments. The f i 
na 1 
report should clarify whether the OIG is recomme jing
that we allow use of the population ratio in prc
 where, as discussed above , its use would likely

overstate actual costs. 
We believe that using the population method for all

programs run by State health departments would be

inconsistent with our responsibility to exercise fiscal

funds. 
responsibility in administering SLIAG  However, 
we recognize that some states may encounter

difficulties in establishing actual costs, especially

where ELAs are a small percentage of a State I s 
population or for programs that few ELAs access. We

will continue to work with states to ensure that a

method is available to allow them to establish actual

costs for each program in their approved applications

consistent with our responsibilities as stewards of

funds. 
publ ic 
Recommendation: 
The FSA should ensure that SLIAG funds are being used

only for approved adult education activities.

Comment: 
We review closely the description of programs or 

activities included in states '.. SLIAG applications and 
obtain more information if there is any doubt about

whether costs associated with a program or activity are

allowable. 
Checking to see that all programs or 
activities for which SLIAG funds are being claimed fall

within the scope of one of the categories of services

as defined by IRCA and the SLIAG regulation, is a part

of all of our program reviews.

Recommendation : 
orderly. 
The FSA grant process should be made more 
Response: 
Some of the specific recommendations refer to the
application process. 
We agree that the application 
process should be conducted in a more orderly fashion 
than was the case for the initial submissions. As the 
draft report indicates, the timeframes for the FY 1988 
and FY 1989 application processes were necessarily
short. 
In effect, the States and FSA had to complete 
two application processes in less than a year. We 
not expect similar problems for the FY 1990 and FY 1991 
application processes.  . "
To ensure that states have adequate time to prepare 
their FY 1990 applications based on empirical data, we 
I ine 
have extended the dead  from July 15 to October 
Addi tionally, we have encouraged states to submit as 
early as possible any new program descriptions, 
questions or iss es, and have' advised them that they 
may submit all or portions of their applications at any
time. 
In order to reduce the possibility of misunder
standing, we have advised states that we will communi
cate all substantive questions and concerns on their FY 
1990 applications in writing, as was done for states
end-of-year reports. We issued extensive written 
guidance on the FY 1990 application process and the 
apply. 
standards we will 
revise 
The draft report on page 14 recommends that we "
the grant award process for approved applications so 
that notice of grant award reaches Arizona prior to the 
beginning of the fiscal year.  Under the regulation,
that is not possible. 
For FY 1990, the deadline for 
submitting applications is October 1, 1989, and

applications must be approvable by December 15, 1989.

While we cannot run the allocation formula or award

grants until all states I applications are approved, we 
1990. 
expect to run the formula in January  However, 
states have told us that, because they have FY 1988 and 
1990, 
FY 1989 funding that they can carry over into FY 
them. 
the delay will not be a problem for  For FY 1991, 
the deadline for filing applications is July 15, 1990, 
and applications must be approvable by October 1, 1990. 
We expect to run the allocation formula and prepare 
grant awards early in FY 1991. 
The draft report also recommends that we develop an

appeals process to use if programs or costs associated

initial 
with providing services are denied in the 
application process. 
We do not believe such a process 
is necessary. The Department I s Grant Appeals Boa rd has 
jurisdiction over cases involving the repayment or

funds. 
withholding of  Normal channels within the 
Department are open to states that disagree with

v iew.
decisions made during the course of application 
 APPENDIX C

ARIZONA'S COMMENTS 
STATE  OF  )//

ROSE MOFFORD  CATHERINE R. EDEN 
GOVERNOR  DIRECTOR 
ARIZONA DEPARTMENT OF ADMINISTRATION 
STATE CAPITOL. 1700 WEST WASHINGTON , ROOM 290 
PHOENIX, ARIZONA 85007 
September 20,  1989 
Don McLaugh in, Regiona  Inspector  General 
Office of Inspector Genera 
ding
Federal Office Bui 
601 
E. 12th Street, Room 284B 
Kansas City, Missouri 64106 
Dear 
Mr. McLaughlin: 
on 
eEnnctliotsleedd p  ease find Arizona  thceom Smtaentets  Legtahleiz dartaioftn  report
ft Implementation of  Impact
Assistance Grants Under the 
Immigration Reform and Control Act 
of 1986 - State of Arizona. 

of 
Our 
review consists  updated informa  ion  well

report.
corrections to some discrepancies in your 
If 
you should  have  any further questions please contact me at 
(602) 542-5405.

!relY, 
iU?? 
Wendy H. Hammon

Single Point of Contact

Enclosure  STATE OF ARIZONA

CIommpmleenmtse notna ttiheo nO foffi cteh oef  SIntsapteect Lore gGeanleizraalti oRne pIomrpt:act  Assistance 
Grants-Arizona 
Page ii

didS necootn d Finding: The Arizona Department of Health Services
to  set up new contracts with providers to provide services
Eligible 
years and arLeeg faolirz ed Aliens. These contracts have existed for 
the purpose of providing health services to 
the general population. 
Page iii 
First Finding: 
The 
fiscal yemaetrhso d8 7r,e ferred to was used for SLIAG 
applications in  88, and 89. Actual costs are 
used for claiming reimbursements and end-of-year reports. 
Second Finding: The  did cause 
FSA' s  defini tion  some
administrative problems relating 
to reimbursement. It did not,
however, cause service delivery 
problems since the programs
existed prior to the implementation of SLIAG. 
Third Finding: 
Atroiz ona is not using SLIAG funds to provide
The State 
vocational training  E. L. A. ' s.  Department of
providing 
Eindutecgatraioten  tihse   EinSLto/C ivics  csloacsiseesty w haincdh  help to better
E. tLh. Ae.  ' s  our  as  as make them more 
well 
productive in  workplace,  meet the INS 
requirements for citizenship. 
Fourth Finding: 
The State Department of Education assures 
that all reimbursements are net of any fees received. 
Page 3 
First Paragraph: 
The State Accounting Administrator
Special 
has  Assistant now serves as the Single Point of Contact, and
overall orfes ponsibility for the SLIAG program. The day-to-day
activi ties  administering SLIAG are 
assigned to the Special
Projects Unit. 
Third Paragraph: There 
for  are two funds used for accounting
SLIAG finances. One fund is used to reimburse county
expenses. The other is used to reimburse state expenses. 
Fifth 
Paragraph:  In Arizona, . 
13 counties now participate in 
the SLIAG program. 
Page 4 
ii. 
Last Paragraph:  See comment under Page  Page 5

Paragraph under WAssistance or Service Activities

-Public  and always has 
Assistancae si s,  as  been, provided by all
fifteen counties  well 
the state. No specific contracts
exist with 
Maricopa and Pima counties solely for the purpose of
providing Public  Public Assistance is 
Assistance to E. L. A. ' s. 
g-eInner alAlyr izavoanilaa,b tlhe eto a tdhmei neinsttierrei pnog psutlaattioen .agencies for public
assistance includes  ' the 
not only  Department of Economic
Security, but also the Arizona Health 
Care Cost Containment 
Services.
System (AHCCCS) and the Department of Health 
-No modifications have been made to any public assistance 
programs.
Prima  county should read Pima county. 
Page 6 
First Paragraph: 
Nine entities have currently applied for 
public assistance funding in Arizona. 
Last Paragraph: All 
15 counties in Arizona provide Public 
Heal th and Public ' Assistance services to the general population. 
However, 8 of the 13 participating counties are going to provide 
public health assistance services only. 
Page 7 
First Finding:  See comment under Page iii, First Finding. 
Page 9 
First 
is  Paragragh: The statement  Arizona does not believe it
worth changing the State 
system  is misleading. Arizona
does 
not want to produce any additional administrative burden in 
documenting expenses allowed under SLIAG. 
Further, 
The lasta nse ntenceW s Ttahtises i st hat w they do not want to
undergo  audit. 
an untrue statement which was never
used by 
the State of Arizona. The state realizes that under the
Single Audit Act, a 
grant recipient is subject to audit on an
annual basis. 
Page 10 
iii, 
First Finding: See comment under page  third finding. 
Page 12 
finding. 
First Finding: See comment under page iii, fourth 
Page 15 
#2:  See comment under page ii