IMPLEMENTATION OF THE STATE


LEGALIZATION IMPACT ASSISTANCE


GRANTS UNDER THE IMMIGRATION


REFORM AND CONTROL ACT OF 1986


STATE OF ARIZONA

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, effectiveness, and integrty of progrs in the United States Deparent of Health and Human Services (HS). It does this by developing method to detet and prevent fraud, waste, and 

abuse. Create by statute in 1976, the Inspector General keeps both the Seceta and the Congress fuly and curntly informed about programs or management problems and recommends 

corrtive action. The OIG perform its mission by conducting audits, investigations, and inspetions with approxiately 1,300 sta strategically located around the countr. 

OFFICE OF ANALYSIS AND INSPECTIONS

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 Investigations. Inspections ar conducted in accordace with professional standads developed by 

OAI. These inspections ar tyically short-term studies designed to determe program effectiveness, effciency, and vulnerabilty to frud or abuse. 

Th study was conducted to determe the effectiveness of Arona s implementation of State 

Legalzation Impact Assistace Grats funds awarded under the Imgrtion Reform and Contrl 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 

Hugh Owens, Project Leader Apryl Willams 

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


STATE OF ARIZONA

Richard P. Kusserow 

INSPECTOR GENERAL 

OAI-07-8001 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 

The SLIAG progr 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 

in progr 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 grt award process. 

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 

States on implementing the SLIAG program. 

FINDING: Since 


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 has established separte 

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 

schedules, and referrl servces; establish a level of competency for placement 

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 

of SLIAG reporting requirements. The SLIAG regulation states that progr 

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..II 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 III 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... .1111.1111.II... 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 

effectively the States implemente the State Legalzation Impact Assistace Grts (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 gudelies. The FSA also 

was intereste in identig 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 

for federaly funded public assistace progrs 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 

reimbursement for progr adstrtive and SLIAG adstrative 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 

reimburement for educational servces is an average of $500 per year per eligible legalze 

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, 

FSA real 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 grt. The nine States are Arona, Calforna, Colorado, Florida, lllinois, 

Massachusetts, New York, Texas, and Washingtn. This repon reviews Arzona 

implementation of the SLIAG progr as of August 1988. 

Pror to conducting the inspection, the OIG developed strctu discussion guides for each 

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 

currnt providers of services to accommodate the needs of the eligible legalized aliens. The 

availabilty of those services are limited to those generally available to other Arizona residents. 

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 

States on implementing the SUAG program. 

FINDING: Since 


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 

charcteristics, and data supporting their temporar residency status. 

Neverteless, there are some funds control vulnerabilties. Findings and recommendations 

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 

determned by the appropriate agency for the deparent. 

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 

by the individual agencies to account for the progr 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 

are provided to individual eligible legalized aliens. If a progr or service is considered 

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 

The progr 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 

cash balances functions are similar in al thee progr 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 

porton of the SLIAG progr. 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. 
The deparent's adult education progrs 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. 

The curculum for Adult Education Program is a sequential progr 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, 

including the abilty to speak, read, and wrte the English language; 

instrction leading to the equivalent of a certficate of grduation from a school 

providing secondar education; 

instrction for adults with limited English proficiency; 

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 

progrms and progr 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 

September 30, 1988. At the end of the progr 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 

grade level of student s curculum, student progression, and other statistical informtion. 

This information wi be reported to the SLIAG single point of contact who wil in tu 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 

alens. Requests for equipment items to be used in support of admnistrtion or ancilar 

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 

designated entities, wi 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. 

The SLIAG regulation 45 CP 402.2 states that progr income (as defined in 45 CPR 

74.42) must be excluded from SLIAG-related costs. States must calculate SLIAG-related 

costs net of progr 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, 

cash balances functions are simiar in al thee progr aras and should be referenced under 

ths section for Public Assistace. 

CROSSCUTTING ISSUES 

Arzona initially believed that the SLIAG progr 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 

July 1 , 1988, and the FY 1989 application had to be submitted no later than July 15, 1988. 
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 

The FSA and the State of Arzona both commente on the drt report. 

The FSA 

The FSA has generaly agr 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 

the FSA adstrtion 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 

of alens would qualy to access the SLIAG program. The report recogn 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 

recent discussions with States' offcials that demand for servces nationaly is faling behind 

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. 

The FSA replied that they se ths priary as an issue of cost identication and that they wil 

work with the States to develop methods of documentig costs which ar 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 reuire considerable revisions to the States' system or statutory requirments. 

However, we do agr 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 

produce a more effcient system for the States and adess congrssional intent that the States 

would not be required to establish new or elaborate systems. 
We report that no formal appeals ' proess exists if progr 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. 

The FSA mad numrous comments to clar cert mattrs of fact, policy, or procedur. 

We have included these comments verbati in Appendi B. 

The Stae of Arizona 

The State has generay agr 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. 

Recognition is ma 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

,

A number of practices have been identified that other States could shar. 

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 identified 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 records 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 

ferred to appropriate progrs and progr levels. Supplementing the appraisal test, the 

pre-enrollment appraisal proess wil provide informtion on students ' educational histories, 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 

Date: . August 25, 1989 

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


Inspec tor General


Attached are the Family Support Administration comments on


the above report. Hany of our comments are technical in 

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


round of reviews of the SLIAG program. The reports we 

received are very useful to us in understanding how States 

are implementing the program. 

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 

and public health assistance services. 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 

for public health assistance or public assistance services. 

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 

incurred in administering the SLIAG grant itself), like )sts 

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 

(Employment Authorization Card). The report should make clear 

that the I-688A does not document that an alien was granted


lawful status , merely that he or. she applied for status. Use 

SLIAG funds for public assistance and educational service is


limited to costs associated with aliens. who have been granted 

lawful resident status and, therefore, are "eligible legalized aliens. The effective date of this status is the date the 

application was filed with INS. 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 

clear how Arizona I s plans relate to the statutory definition of . public assistance. 

Page 6 (Administrative Costs) -- The draft report says that the 

Department of Economic Security was developing procedures to 

determine direct administrative costs, and lIindirect 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 

SLIAG and which are acceptable 
 a Driori are specified in the 

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 

to provide public health assistance services only. 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 

regard to " eligible legalized alien" status. 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 

accounting system I s identifying direct and indirect 

administrative costs allocable to SLIAG. The report should 

make clear that, as discussed above, the regulation sets 

standards for determining program administrative costs. 

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 

that are attributable to elig ble legalized aliens. 

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:


Comment: 

Finding: 

Comment: 

since 1987, FSA has held national conferences and 

issued information to states on implementing the SLIAG 

program. 

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 

states in implementation. In October 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. 

The State' s plan for claiming public health assistance 

costs is not in accordance with program requirements. 

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 

ratio method is not consistent with Federal regulation. 

We require that costs be determined based on net state 

or local government cost. 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. The final report should clarify this point. 

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 

and public health assistance 
 re based directly on


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 FSA- to be public assistance. 

IRCA defines programs of public health assistance as

programs which "provide public health services, 

including immunizations for immunizable diseases, 

testing and treatment for tuberculosis and sexual1ytransmitted 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 

public health assistance as, among other things, 

programs or activities that " are provided for the primary purpose of protecting' the health of the general public" (45 CFR 402. 2). 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 

programs that provide treatment to needy individuals. 

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 

for any program for which there is an emcirical basis


to indicate that doing so would not overstate costs. 

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 

substantial staff resources to developing a syste that 

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 

allows states to establish costs for FY 1988 as 
 1 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. 

The draft report says on page 8 that, init i 

indicated that services considered public h 
Finding: 

. Comment: 

the " State' 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.


The Arizona Department of Education may be claiming


nonallowable costs as SLIAG-related costs for


education. 

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 

instruction designed to 
 prepare an individual for vocational or job training programs, to provide an 

individual with the English language or basic


education skills needed to qualify for better jobs , or

Finding: 

Comment: 

to enable an individual to meet their responsibilities 

as parents, citizens, and workers is allowable. 

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.


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 

before we can calculate States I allocations. 

The draft report says that "numerous policy
 misinterpretations nd disagreements resulted because 

FSA did not provide definitive written instructions to 

assist Arizona in understanding SLIAG application

requirements. Had there been more time, we would have 

communicated more extensively in writing. 

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 categori€s.


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 SLIAGrelated 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


responsibility in administering SLIAG funds. 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


publ ic funds. 

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 : 

The FSA grant process should be made more orderly. 

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 

have extended the dead I ine 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 misunderstanding, we have advised states that we will communicate 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 

standards we will apply. 

The draft report on page 14 recommends that we " revise 

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 

expect to run the formula in January 1990. However, 

states have told us that, because they have FY 1988 and 

FY 1989 funding that they can carry over into FY 1990, 

the delay will not be a problem for them. 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


with providing services are denied in the initial 

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


withholding of funds. Normal channels within the 

Department are open to states that disagree with
 v iew. decisions made during the course of application 

APPENDIX C


STATE OF ARIZONA'S COMMENTS 
)//

ROSE MOFFORD GOVERNOR 

CATHERINE R. EDEN DIRECTOR 

ARIZONA DEPARTMENT OF ADMINISTRATION 

September 20, 1989 

STATE CAPITOL. 1700 WEST WASHINGTON , ROOM 290 

PHOENIX, ARIZONA 85007 

Don McLaugh in, Regiona Inspector General 

Office of Inspector Genera 

Federal Office Bui ding 601 E. 12th Street, Room 284B 

Kansas City, Missouri 64106 

Dear Mr. McLaughlin: 

Enclosed p ease find Arizona comments on the draft report entitled ft Implementation of the State Legalization Impact Assistance Grants Under the Immigration Reform and Control Act 

of 1986 - State of Arizona. 


Our review consists of updated informa ion well


corrections to some discrepancies in your report.

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


Comments on the Office of Inspector General Report: Implementation of the State Legalization Impact Assistance 

Grants-Arizona 

Page ii


Second Finding: The Arizona Department of Health Services did not set up new contracts with providers to provide services to Eligible Legalized Aliens. These contracts have existed for 

years and are for the purpose of providing health services to 

the general population. 

Page iii 

First Finding: The method referred to was used for SLIAG 

applications in fiscal years 87, 88, and 89. Actual costs are 

used for claiming reimbursements and end- of-year reports. 

Second Finding: The FSA' s defini tion did cause 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: Arizona is not using SLIAG funds to provide vocational training to E. L. A. ' s. The State Department of Education is providing ESL/Civics classes which help to better integrate the E. L. A. ' s into our society and make them more 

productive in the workplace, as well as 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 Assistant now serves as the Single Point of Contact, and has overall responsibility for the SLIAG program. The day-to-day activi ties of administering SLIAG are assigned to the Special Projects Unit. 

Third Paragraph: There are two funds used for accounting for 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 

Last Paragraph: See comment under Page ii. 
Page 5


Paragraph under W Assistance or Service Activities


-Public Assistance is, and always has been, provided by all fifteen counties as well as the state. No specific contracts exist with Maricopa and Pima counties solely for the purpose of providing Public Assistance to E. L. A. ' s. Public Assistance is 

generally available to the entire population. -In Arizona, the administering state agencies for public assistance includes not only ' the Department of Economic Security, but also the Arizona Health Care Cost Containment 

System (AHCCCS) and the Department of Health Services. -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 Paragragh: The statement Arizona does not believe it is worth changing the State system is misleading. Arizona does not want to produce any additional administrative burden in 

documenting expenses allowed under SLIAG. 

The last sentence states that w Further, they do not want to undergo an audit. W This is 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 

First Finding: See comment under page iii, third finding. 

Page 12 

First Finding: See comment under page iii, fourth finding. 

Page 15 

#2: See comment under page ii