Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

AFDC PRE-ELIGIBILITY VERIFICATION 

MEASURES 

AUGUST 1993 
OFFICE OF INSPECTOR GENERAL


The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as 

amended, is to protect the integrity of the Department of Health and Human Services’ (HHS) 

programs as well as the health and welfare of beneficiaries served by those programs. This 

statutory mission is carried out through a nationwide network of audits, investigations, and 

inspections conducted by three OIG operating components: the Office of Audit Services, the 

Office of Investigations, and the Office of Evaluation and Inspections. The OIG also informs 

the Secretary of HHS of program and management problems and recommends courses to 

correct them. 

OFFICE OF AUDIT SERVICES


The OIGS Office of Audit Services (OAS) provides all auditing services for HHS, either by 

conducting audits with its own audit resources or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors in 

carrying out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations in order to reduce waste, abuse, and 

mismanagement and to promote economy and efficiency throughout the Department. 

OFFICE OF INVESTIGATIONS


The OIGS Office of Investigations (01) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 

unjust enrichment by providers. The investigative efforts of 01 lead to criminal convictions, 

administrative sanctions, or civil money penalties. The 01 also oversees State Medicaid fraud 

control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECTIONS 

The OIG’S Office of Evaluation and Inspections (OEI) conducts short-term management and 

program evaluations (called inspections) that focus on issues of concern to the Department, 

the Congress, and the public. The findings and recommendations contained in these inspection 

reports generate rapid, accurate, and up-to-date information on the efficiency, vulnerability, 

and effectiveness of departmental programs. 

OEI’S Atlanta Regional Office prepared this report under the direction of Jesse J. Flowers, 

Regional Inspector General and Christopher Koehler, Deputy Regional Inspector General. 

Principal OEI staff included: 

ATLANTA REGION HEADQUARTERS 

Peggy Daniel, Project Leader Emilie Baebel 

Betty Apt Susan HardWick 

Joe Townsel Dave Wright 

Jackie Watkins Ruth Folchman 

For additional copies of this report, please contact the Atlanta Regional Office at 404-331-

4108. 
Department of Health and Human Services 

OFFICE OF 

NSPECTOR GENERAL 

AFDC PRE-ELIGIBILITY VERIFICATION 

MEASURES 
EXECUTIVE SUMMARY


PURPOSE 

Todetermine how fraud detection measures required by the 1988 Family Support Act 

affected States’ pre-eligibility verification activities to prevent inappropriate Aid to 

Families with Dependent Children. 

BACKGROUND 

The Aid to Families with Dependent Children (AFDC) program, Title IV-A of the 

Social Security Act, provides financial assistance to families with children who are 

deprived of support due to death, absence, or disability of at least one parent. Some 

families with children deprived of support due to unemployment of the principal wage 

earner may also receive AFDC assistance. 

States must follow Title IV-A regulations for determining AFDC eligibility. 

Inappropriate AFDC payments are caused by both agency and client (applicant and 

recipient) errors. Agency errors occur when a State fails to act properly on known 

information. Client errors may result from an applicant’s or recipient’s unintentional 

misrepresentation of circumstances or intentional misrepresentation. Intentionally 

withholding or misrepresenting facts may be considered fraud. 

Section 605 of the 1988 Family Support Act required States to establish pre-eligibility 

fraud detection measures by October 1, 1989. Further, the implementing Federal 

regulations required States to annually evaluate the effectiveness of their measures 

and provide a written report of their evaluations to the Administration for Children 

and Families (ACF). The first reports were due by February 15, 1991. 

FINDINGS 

The 1988 Family Supprt Act had M& q@ct on State activitiesfor preventing 

inapproptite MDC pqments 

Only nine States changed or adopted fraud detection measures following passage of 

the Act because States believed their verification measures already in place met the 

Act’s requirements. ACF’S implementing regulations were broadly written, allowing 

States to use their existing pre-eligibility verification as fraud detection measures. 

States W not routinely use all commonly accepted pre-ehkibility verification measures 

Most States verified income and assets through computer matches and wage 

statements--one of three commonly used types of pre-eligibility verification measures. 

i 
States said they did not consistently use two other types of verification measures, thirdparty follow-up and investigative staff, because of (1) limited resources, and (2) 

concern that it would delay application processing. States must adhere to a federally 

mandated standard of promptness that requires eligible applicants receive AFDC 

payments within 45 days from the date of application. 

Some States did not evaluute pm-eligibility verification measures 

Twelve States in Federal Fiscal Year (FY) 1990 and 18 in Federal FY 1991 did not 

evaluate their pre-eligibility verification measures as required. Ten of the 12 States 

that did not perform required evaluations in FY 1990 also did not do so in FY 1991. 

States told us they did not evaluate their pre-eligibility verification measures because 

(1) it required too much time to track the measures, and (2) ACF’S reporting 

requirements focused only on measuring effectiveness of fraud investigative units. The 

required format for reporting was not applicable to pre-eligibility measures most 

States use, such as computer matches. 

RECOMMENDATIONS 

The Family Support Act of 1988 did not achieve its intended purpose of improving 

pre-eligibility verification to detect inappropriate AFDC payments. We continue to 

believe that significant opportunities exist to reduce fraud and inappropriate payments 

through strong pre-eligibility review systems. However, under ACF’S regulations, 

States can comply with the legislative requirements without actually improving their 

pre-eligibility verification systems. We also discovered a major disconnect between 

regulations which prescribed no specific pre-eligibility verification activities and 

evaluation reporting requirements that focused only on measuring the effectiveness of 

fraud investigative units. Even more important, the current reporting requirements 

fail to provide ACF the information it needs to make management judgments about 

the effectiveness of specific pre-eligibility measures or to advise States about how to 

improve them. Therefore, we recommend that ACF: 

1.	 Revise its evaluation reporting requirements to make them applicable to all 

canmonly used types of pre-eligibility verification measures, not just fraud 

investigative units. 

2.	 Require States to periodically evaluate their pre-eligibility programs and report 

the results to ACF, and ensure that they do so. 

3.	 Conduct or sponsor its own independent evaluations of State pre-eligibility 

programs. 

4.	 Provide States with information on effective pre-eligibility verification measures, 

based on States’ evaluation reports and ACF’S own independent evaluations of 

States’ pre-eligibility programs. 

ii 
AGENCY COMMENTS


The Acting Assistant Secretary for Children and Families commented on the report.


The ACFconcurred with30f our4 recommendations. Itdidnot concur with our


recommendation to revise evaluation reporting requirements to make them applicable


to all commonly used types of pre-eligibility verification measures, rather than just to


fraud investigative units. The ACF noted in its comments that the first year


experience with the evaluations did not provide pertinent information about successful


practices States use. This is consistent with our finding that the evaluation


requirements are not applicable to commonly used types of pre-eligibility verification


measures, and the evaluations did not produce useful information for either ACF or


States.


We support ACF’S plans to use State demonstration projects to evaluate the impact of 

various verification measures. However, it will be several years before the results of 

such an evaluation are available. In the interim, we believe that ACF should collect 

data on the effectiveness of verification measures commonly used by States. Such data 

serves as performance indicators and provides important trend information to program 

managers at the Federal, State, and Local level. 

... 

111 
TABLE OF CONTENTS 

PAGE 

EXECUTIVE suMMARY 

INTRODUCHON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..o. .o””” Q”1 

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..”” ”””-””4 

Family Support Act Had Little Effect On


State Activities For Preventing Inappropriate


AFDC Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .OO. .O”””S 4


States Did Not Routinely Use All Commonly


Accepted Pre-Eligibility Verification Measures . . . . . . . . . . . . . . . . . . . . . . . . . 5


Some States Did Not Evaluate Effectiveness of


Pre-Eligibility Verification Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...8


RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11


AGENCY COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...12


APPENDICES 

A.	 Pre-Eligibility Fraud Detection Measures and 

Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..A-l 

B. Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-1


TABLES 

1. Computer Matches UsedbyStates . . . . . . . . . . . . . . . . . . . . . . . . . . . ...5


2. Third-Party Follow-Up UsedbyStates . . . . . . . . . . . . . . . . . . . . . . . . . ..6


3. Number of States Not Evaluating Verification Measures . . . . . . . . . . . . . . 8


4. Number of States Reporting Late . . . . . . . . . . . . . . . . . . . . . . . . . . . ..10

INTRODUCTION 

PURPOSE 

To determine how fraud detection measures required by the 1988 Family Support Act 

affected States pre-eligibility verification activities to prevent inappropriate Aid to 

Families with Dependent Children. 

BACKGROUND 

AFDC Bogram 

The Aid to Families with Dependent Children (AFDC) program, Title IV-A of the 

Social Security Act, provides financial assistance to families with children who are 

deprived of support due to death, absence, or disability of at least one parent. Some 

families with children deprived of support due to unemployment of the principal wage 

earner may also receive AFDC assistance. 

Within the Department of Health and Human Selvices (HHS), the Administration for 

Children and Families (ACF) has Federal responsibility for AFDC. States administer 

the AFDC program through local offices--either district, county, or city. Program costs 

are shared by Federal and State governments. The Federal government pays50 

percent of the administrative costs and a percentage of the AFDC payments. The 

percentage varies by State and is determined by a formula using Department of 

Commerce statistics. Generally, poorer States receive a larger Federal contribution 

than affluent States for AFDC payments. In some States, counties pay part of the 

non-Federal portion of AFDC payments. 

Although States must follow Title IV-A regulations for determining AFDC eligibility, 

administrative procedures vary from State to State. Generally, the regulations require 

that applicants complete an application, and caseworkers verify information on the 

application to determine eligibility and amount of financial assistance. Caseworkers do 

this by (1) thoroughly interviewing applicants, (2) examining documents, such as birth 

certificates and social security cards, (3) checking third-party sources, such as talking to 

neighbors about an applicant’s household composition, and (4) running computer 

matches with State departments of labor to document wages and unemployment 

benefits. Title IV-A regulations require that recipients report any event that might 

affect AFDC payments, such as marriage or change in income. 

1

Lwpppriate AFDC Payments 

Inappropriate AFDC payments are caused by both agency and client (AFDC applicant 

and recipient) errors. Agency errors occur when a State fails to act properly on 

known information. Client errors occur when an applicant or recipient fails to 

accurately report facts which might affect AFDC payments. 

Client errors may result from an applicant’s or recipient’s unintentional 

misrepresentation of circumstances or intentional misrepresentation. Intentionally 

withholding or misrepresenting facts may be considered fraud. 

Because of concern over inappropriate payments, ACF requires States to operate a 

quality control (QC) program. Using Federal guidelines, State reviewers examine a 

statistically valid sample of cases to determine accuracy of payments and eligibility 

decisions. Federal QC reviewers assess the correctness of State findings by reexamining a sub-sample of the State sample. Differences between the State and 

Federal findings are then reconciled to produce an official State error rate. States use 

QC reviewsto determine the cause of errors and design corrective action plans. 

Potential for Preventing Inappropriate PaymenB 

In November 1987, we reported on States’ investigation of fraud in the AFDC 

program. We found that States expend considerable effort and resources to detect 

overpayments and prosecute suspected fraud. However, we also found that front-end 

verification activities to prevent inappropriate payments prior to establishing eligibility 

are more effective than attempts to recover overpayments. We, therefore, 

recommended that ACF, formerly the Family Support Administration, revise 

regulations to require States to implement a pre-eligibility fraud detection and 

prevention program as a condition of State plan approval. 

Congress included the recommendation in Section 605 of the 1988 Family Support 

Act, Public Law 100-485. This Act amended the Social Security Act to require States 

to establish pre-eligibility fraud detection measures by October 1, 1989. 

Evaluation of Pre-Eli’’lility Verification Measures’ Effectiveness 

ACF Federal regulations require AFDC State agencies to evaluate the effectiveness of 

their pre-eligibility fraud detection verification measures each Federal fiscal year. 

Written copies of the evaluation reports must be submitted to ACF regional offices by 

February 15 of the following Federal fiscal year. The first reports were due February 

15, 1991. 

For each pre-eligibility verification measure contained in a State plan, the evaluation 

has to contain at a minimum the 

1) number of suspected fraud cases identified, 

2 
2) number of identified fraud cases that are investigated, 

3)	 number of the investigated fraud cases that are found to be ineligible, and the 

number to be eligible for a reduced grant amount, and 

4)	 total projected monthly dollar savings resulting from reduced grants and cases 

found to be ineligible. 

Additionally, the evaluation report has to contain a brief narrative assessment of the 

relative effectiveness of each pre-eligibility verification measure used by a State. The 

assessment is to be based on the numbers reported in items 1-4 above. States can 

also use other evaluation methods to support their assessments. Appendix A contains 

the June 12, 1990 evaluation reporting requirements ACF issued to States. 

SCOPE AND METHODODGY 

We surveyed all 50 States and the District of Columbial to identi~ pre-eligibility 

verification measures used to prevent inappropriate AFDC payments. We did not 

separate State pre-eligibility verification measures to distinguish those used to detect 

unintentional or intentional (fraud) misrepresentation of applicant eligibility 

information. States generally do not distinguish the measures by type of 

misrepresentation because an effective measure will detect either type (unintentional 

and intentional). 

We mailed a standardized questionnaire to all 51 States on July 15, 1992. A total of 

50 States returned completed questionnaires by December 10, 1992. As needed, we 

conducted telephone interviews with State AFDC staff to obtain clarification of and 

elaboration on their responses to the mailed questionnaire. 

We interviewed staff from ACF and the American Public Welfare Association 

(APWA)--an advocacy organization of which all State welfare agencies are members. 

This inspection was conducted in accordance with the Quality Standards for Inspections 

issued by the President’s Council on Integrity and Efficiency. 

lFor convenience in summarizing survey results, we considered the District of 

Columbia as a 51st State. 

3 
FINDINGS


THE 1988 FAMILY SUPPORT ACT HAD LITTLE EFFIKX ON STATE


ACrMTIES FOR PREVENTIN G INAPPROPRIATE AFDC PAYMENTS


The 1988 Family Support Act required States to have “appropriate measures to detect


fraudulent applications for aid to families with dependent children prior to the


establishment of such aid.” However, most States made essentially no changes to their


existing eligibility and fraud detection techniques following the Act.


Prior to passage of the Act, States generally conducted computer matches and


followed up with third parties as needed to verify conditions of eligibility. For


example, States conducted computer matches with Department of Labor and other


State and Federal databases. When applicant-provided information was questionable,


States followed up with third parties, such as employers. Also, 26 States used pre-


eligibility investigative staff to conduct home visits to explore cases with questionable


information.


After passage of the Act, only nine States changed or adopted pre-eligibility


verification measures. Six of the nine States that adopted new measures added


computer matches with additional agencies, two added pre-eligibility investigative units,


and one added a profile of error prone cases based on quality control data. Before


the Act, 38 States conducted computer matches with IRS. The same 38 States


conducted computer matches after passage of the Act.


The States made little changes to their pre-eligibility verification measures because


States already had measures in place which they believed met the requirements of the


Act. The implementing regulations were broadly written, allowing States to use a


range of fraud detection measures that could be tailored to their own needs and


circumstances. ACF’S regulations did not require a particular program, but gave


examples of what many States were already doing. Such examples included, but were


not limited to, automated data matches to establish the accuracy of statements on


applications, use of error prone profiles, home visits or third-party contacts, credit


bureau inquiries, and training on investigative interviewing techniques. The wording in


the regulations was widely interpreted by States as allowing them to continue as in the


past without changing any procedures or techniques. To satisfy the requirements of


the regulations, States now just label pre-eligibility verification as “fraud detection


measures.” One State agency program official made the following statement.


The regulations do not require or mandate an early fraud [detection] 

program at all, but rather require a mere description of existing 

measures used to verify eligibility and to report annually to DHHS on 

their effectiveness. In effect, they [the regulations] mandate a study and 

an annual report, rather than a program. 

4

STATES DID NOT ROUTINELY USE ALL COMMONLY ACCEPTED PREELIGIBILITY VERIFICATION MEASURES 

Collectively, States used three different types of pre-eligibility verification measures to 

prevent inappropriate AFDC payments. The measures were (1) computer matches 

with Federal and State databases to verify income and assets, (2) follow-up with third 

parties, such as employers, neighbors, and landlords, to verify income, residence, and 

household composition, and (3) investigative staff to conduct field visits to verify 

conditions of eligibility. 

Most States verified income and assets through computer matches and wage 

statements. They verified other conditions of eligibility, such as household 

composition and identity, by examining birth certificates and social security cards. 

States did little follow-up through contacts with third parties and home visits to veri~ 

applicant-provided eligibility information. 

Comyx.u& Matches Vi Ihcome and AsseB 

States used computer matches to verify an applicant’s income and assets. The 

computer matches included the Income and Eligibility Verification System (IEVS). 

The IEVS, mandated by Congress in the Deficit Reduction Act of 1984, was a 

computer matching system that included matches with Federal and State databases 

and other public assistance files. For example, computer matches with Social Security 

Administration wage records and State employment agencies verified and detected 

reported and unreported income. Motor vehicle and credit bureau matches verified 

and detected applicants’ assets. Internal Revenue Service matches detected unearned 

income, such as interest and dividends. Table 1 shows computer matches States 

commonly used to verify income and assets. States used one or more of the eight 

types of computer matches. Four States used all eight of the computer matches. 

TABLE 1 

COMPUTER MA’17HES USED BY STATES 

STATES STATES THAT 

COMPUTER MA’lrHEs THAT USED USED ON-LINE 

(’To verifyincome and assets) MEASURE MATCHING 

II UNEMPLOYMENT COMPENSATION * I 47 138 

11 STATE VEIERANS ADMINETRATION 19 /1 

II BENDEX(So&l security benefitsand earnings)* I 43 125 

II STATE EMPLOYMENT AGENCY * I 42 I 33 

II INTERNAL REVENUE SERVICE* I 19 

5

lkhi-P@y Cbntacts Vini!fiConditiims of El&i.bility,But Are Rarely Used 

States rarely verified applicant-provided information with third parties. Nine States or 

less routinely followed up using third parties to verify applicant-provided information 

to prevent inappropriate AFDC payments. Most States conducted third-party 

verification of eligibility conditions on an “as-needed” basis. “As-needed” means States 

conducted follow-up activities only when information on an application was clearly 

questionable. Follow-up with third parties usually involved (1) caseworkers asking an 

applicant to bring in written documentation, such as a statement from a landlord 

verifying residence, (2) caseworkers contacting a third party by phone or mail to verify 

conditions of eligibility, and (3) investigative staff making home visits to 

resolve inconsistent applicant information. Table 2 shows the extent that the 50 States 

responding to our survey conducted follow-up with third parties. 

TABLE 2 

THIRD-PARTY FOLLOW-UP USED BY STATES 

STATES THAT	

ROUTINELY STATES THAT USED	

mLLow-uP WITH THmD PARTIES usED FOLLOW-UP lxx.Low-uP 

(To veri@ conditions of eligibility) TECHNIQUES ‘As-NEEDED” 

HOME VISllll 2 34 

EMPLOYERS 8 36 

NEIGHBORS 6 36 

\ LANDLORDS 19 I 35 

Follow-up with third parties on a routine basis was usually conducted at the time of 

application or at semi-annual reviews. One State said they conducted third-party 

activities monthly. 

Specialized Investigative StafiAre PaWrly Effective 

Twenty-eight States had specialized investigative staff in selected counties to


investigate applicant-provided information that appeared questionable. Specialized


investigative staff made field visits to third parties, such as neighbors and landlords, to


verify questionable applicant-provided information. For example, investigative staffs


were used to confirm whether an absent parent was living in a home with children for


whom AFDC had been requested. Two of the 28 States said they added pre-eligibility


investigative staff after passage of the Act. States with investigative staff had slightly


more (about 3 percent) applications withdrawn or denied than States without


investigative units. This suggests that field work done by investigative staffs resulted in


better detection of fraudulent information reported by applicants.


The 28 States with county investigative staff included those that we had examined in


our original study in 1987. The investigators continue to be effective in detecting


fraudulent application information. Program staff associated with them said the units


6 

II 
are effective partly because they can make unannounced home visits. Also, they said 

the effectiveness of the investigative units is evidenced by a quick turnaround on 

referrals--usually within one week. The effectiveness of the investigative units is 

further indicated by the number of counties in one State that has formed such units. 

Since 1987, the number of counties in that State increased from 23 to 46. 

Reasom S@e.s Did Not Routinely Use All Commonly Acceptid he-eligibility V&rijication 

Measures 

States said they did not routinely use third-party follow-up and investigative staff for 

pre-eligibility verification because of (1) limited resources and (2) compliance with a 

45-day processing standard for AFDC payments. 

State agency program officials said limited resources, such as State budget cuts, 

prevent staff from verifying much of the applicant-provided information that could 

affect their AFDC eligibility. State agency program officials said State budget cuts 

have caused staff shortages, thereby increasing eligibility workers’ caseloads. To 

illustrate, one county AFDC program official reported an AFDC caseload increase of 

40 percent, while the AFDC staff decreased by 10 percent. Further, APWA figures 

show an average national AFDC caseload growth of 29.1 percent for the period July 

1989 through August 1992. The growth in AFDC cases for individual States ranged 

from 2.2 percent to over 100 percent during that period. 

State AFDC program officials also said they did not routinely use measures such as 

third-party follow-up because they could not allow pre-eligibility verification to delay 

application processing. States must adhere to a federally mandated standard of 

promptness. This standard requires that applicants must receive AFDC payments 

within 45 days from the date of application. In most instances, disposition of an 

application must be processed within 30 days to allow time for printing and mailing 

checks. 

Compliance with the 45-day standard places a certain amount of pressure on States 

and counties to accept applicant-provided information without verification. To 

illustrate, at least two States have been sued due to untimely processing of AFDC 

applications. In one of the two States, a court order required that counties accept an 

applicant’s written statement regarding a number of eligibility factors. In this State, 

fiscal penalties were tied to a county’s average processing time and percentage of 

applications processed within the time standard. In the other State, a new policy was 

initiated on “minimal verification” at intake. This State now only verifies social 

security numbers, earned income, and pregnancy. 

7

� 

SOME STATES DID NOT EVALUATE PRIMLIGIBILITY VERIFICATION 

MEASURES 

The ACF implementing regulations for the Family Support Act require States to 

annually evaluate the effectiveness of their pre-eligibility verification measures. 

However, about one-fourth of the States did not evaluate their pre-eligibility 

verifications in Federal Fiscal Year (FY) 1990 and about one-third did not evaluate in 

Federal FY 1991. Table 3 shows the number of States not evaluating their measures 

in each year. 

TABLE 3 

THE NUMBER OF STATES NOT EVALUATING 

VERIFICATION MEASURES EACH YEAR 

STATES NOT 

PERFORMING ANNUAL 

FEDERAL FISCALYEAR EVALUATIONS 

1990 12 

1991 18 

Ten of the 12 States that did not perform required evaluations in FY 1990 also did not 

do so in FY 1991. 

Reasons for Not Evahatihg 

States told us they did not evaluate their pre-eligibility verification measures because it 

required too much time to track the measures. To illustrate the time required, three 

State agency program officials furnished the following comments. 

The evaluation would require (1) a case-record-by-case record review of the 

number of AFDC rejections, (2) a determination as to whether or not a 

rejection was a result of deliberate applicant misrepresentation, and (3) a 

determination of which verification measure listed in the State Plan was 

responsible for detecting any applicant misrepresentation. 

�	 The evaluation would be extremely labor intensive and of questionable quality, 

due to the manual process that would be required and the judgmental nature of 

information to be collected. Each case technician would be required to keep 

track of whether he or she required an applicant to provide additional 

documentation, whether or not the additional documentation supported the 

applicant’s previous statements or documentation, and the fiscal impact of using 

the correct information. 

�	 The evaluation would be extremely counterproductive because the time 

involved in developing, making entries into, and maintaining such a reporting 

8

system would decrease the resources available for pre-eligibility fraud detection 

measures. 

Also, some State agency program officials said they did not evaluate measures because 

ACF’S reporting requirements focused only on measuring effectiveness of fraud 

investigative units. The required format for reporting was not applicable to preeligibility measures most States use, such as computer matches. Appendix A contains 

the evaluation reporting requirements. 

Twenty-two of the 50 States responding to our survey did not have fraud investigative 

units, and, therefore, were not able to use the mandated format. About half of the 

State agency officials without fraud investigative units said no mechanisms are in place 

to collect the data required by the regulations. Creating a mechanism to do so would 

increase both costs and workloads disproportionately to any benefits that might be 

gained from evaluating the measures. 

Finally, one State agency program official said, “In short, the reporting of the activity is 

in danger of becoming more important than the desired results.” 

m@Y coWOl Reviews Serve as Rmy for Evaluations 

States without fraud investigative units have sought other ways to evaluate their 

measures. For example, States use quality control (QC) error rates to satisfi the 

evaluation reporting requirements. Three State agency program officials made the 

following comments about using QC data. 

�	 “We have a built-in evaluation in the QC process and this evaluation is more 

significant than the currently mandated annual report.” 

�	 “QC data proves that workers are utilizing the State’s pre-eligibility fraud 

detection measures and those measures are effective.” 

� “We have chosen to evaluate pre-eligibility fraud detection measures examining 

QC sample data for evidence that the current measures are not working and to 

identify areas where additional measures might be cost effective. Because [an] 

annual QC sample is a reasonably valid random sample of the caseload, the 

results of the evaluation should be generally reflective of the caseload as a 

whole.” 

States l%oviding Lute Evaluation Reports 

The ACF regulations for implementing the Family Support Act also require States to 

submit a written report to ACF regional offices by February 15 of the following 

Federal fiscal year, and to submit any appropriate amendments to their State plans. 

However, only 38 States in FY 1990 and 32 in FY 1991 submitted a written report. 

9

The States that did perform required evaluations frequently submitted the written 

reports late, i.e., after February 15. For example, 20 of the 38 States (about 53 

percent) who submitted reports in 1990 were late. In 1991, 15 of 32 States (about 47 

percent) submitted reports late. Table 4 shows the number of States submitting 

reports late. 

TABLE 4 

THE NUMBER OF STATES REPORTING LATE 

r 1 

MON’IH(S) LATE STATES IN STATES IN 

FY 1990 N 1991 

Less than 1 month 8 5 

I I 

1-2 months 6 5 

I I 

3-4 months 1 0 

I I 

5-6 months 4 4 

I 1 

7-8 months 1111 

‘1’OTAL 120 I 15 

10

RECOMMENDATIONS


The Family Support Act of 1988 did not achieve its intended purpose of improving 

pre-eligibility verification to detect inappropriate AFDC payments. We continue to 

believe that significant opportunities exist to reduce fraud and inappropriate payments 

through strong pre-eligibility review systems. However, under ACF’S regulations, 

States can comply with the legislative requirements without actually improving their 

pre-eligibility verification systems. 

We also discovered a major disconnect between regulations which prescribed no 

specific pre-eligibility verification activities and evaluation reporting requirements that 

focused only on measuring the effectiveness of fraud investigative units. Even more 

important, the current reporting requirements fail to provide ACF the information it 

needs to make management judgments about the effectiveness of specific pre-eligibility 

measures or to advise States about how to improve them. Therefore, we recommend 

that ACF: 

1.	 Revise its evaluation reporting requirements to make them applicable to all 

commonly used types of pre-eligikil.ity verification measures, not just fraud 

investigative units. This will eliminate a technical problem that has made it 

difficult or unnecessary for States to report annually on pre-eligibility systems 

such as improved computer matching protocols. 

2.	 Require States to periodically evaluate their pre-eligibility programs and report 

the results to ACF, and ensure that they do so. The simple annual reporting 

requirement now in effect does not provide the kind of information needed to 

determine which pre-eligibility verification techniques work best, and which are 

cost effective. More insightful evaluations are needed. The ACF needs to 

provide guidance to the States as to what kind of evaluative information should 

be supplied, and how often, and should assess the quality and appropriateness 

of the evaluation methodologies used. 

3.	 Conduct or sponsor its own independent evaluations of State pre-eligibility 

programs. Such studies should use methodologies of sufficient rigor as to allow 

identification of approaches and techniques that are most effective in reducing 

fraud before applicants are approved for receiving benefits. 

4.	 Provide States with information on effective pre-eligibility verification measures, 

based on States’ evaluation reports and ACF’S own independent evaluations of 

States’ pre-eligibility programs. States must use the most effective ways to 

prevent inappropriate payments in the AFDC program. With the new 

administration streamlining welfare policy by focusing on work requirements 

and limiting benefit periods, attention to eligibility will be increasingly 

important. 
AGENCY COMMENTS


We circulated the draft report for comment to the Acting Assistant Secretary for 

Children and Families (ACF), the Assistant Secretary for Management and Budget 

(ASMB), and the Acting Assistant Secretary for Planning and Evaluation (ASPE). 

Appendix B shows the full text of the comments provided by ACF. ASMB and ASPE 

did not comment on the report. 

The ACF concurred with 3 of our 4 recommendations. It did not concur with our 

recommendation to revise evaluation reporting requirements to make them applicable 

to all commonly used types of pre-eligibility verification measures, rather than just to 

fraud investigative units. The ACF noted in its comments that the first year 

experience with the evaluations did not provide pertinent information about successful 

practices States use. This is consistent with our finding that the evaluation 

requirements are not applicable to commonly used types of pre-eligibility verification 

measures, and the evaluations did not produce useful information for either ACF or 

States. 

We support ACF’S plans to use State demonstration projects to evaluate the impact of 

various verification methods. However, it will be several years before the results of 

such an evaluation are available. In the interim, we believe that ACF should collect 

data on the effectiveness of verification measures commonly used by States. Such data 

serves as performance indicators and provides important trend information to program 

managers at the Federal, State, and Local level. 

12

PRIZ-ELIGIBILITYFRAUD DET’IWHON MEASURES AND REPORTING 

REQUIREMENTS 

A-1 
---

� 

... . 

with 

I 

I

i---- flEGF ...---~: -“” ‘ 

TU . 

� STATE ADMINIS~~E AND OTEER INTEREST= 

ORGANIZA~ONS AND AGZNCI= 

SUE3ECT � Pre-Eligibility Fraud Dete-ian 

Measures and Reportfig RequL-ements 

RELATED


REFERENCES . ~ . 45 CFR 235.3-11

BACKGROUND .

. On Aprii 20, 1989 an Inter& Final 

Rule was published in the FED= REGIS=


that provided for (1) the estili~mt of


pre-eligibility fraud detection measures, and


(2) an annual evaluation of the effectiwess


of the pre-eligtiilitY fraud detection


process.


REPORTING


~NsTRU~IQNS : In accordance with 45 CFR 235.111 (c), the 

State agency is required ea make a writt= 

evaluation for each Federal fiscal year of 

“de effectiveness of its v=eification 

measures and submit a copy of the evaluation 

to the FSA Regional Office by February L5 “af 

the following Federal fiscal year. The firs=


ot these reports (the one for FY L990) * due


in the FSA Region2& Office by F*~ L5J 

199L.


The repo* must cantain ab a.dnimUIU th= 

fallowing ixzfo-tion for eack af * peLigibilitY verifi=tiom meas~ oanx~ 

in the State plan: 

(1) The n-er of suspe-= fraud case 

identified. 
, . 

- . . . .. ---..> -— -—’-- “ 

-, 

z


(4) The total praj ected ~on~ dollar


amouna resulting f~om reduced grants and


cases found ta be ineligible.


In addition, the repart mus& cantain a hrie~ 

narrative assessment of the relative 

effactiveness of each of the pre-eligib ility 

verification measures contained in the Sta=e 

plan. This assessment should be based on ‘&e


&zmbers reported above. Collateral


information and other evaluation methods


be used, but are nok required.


ATTACHMENT : Final Rule


October 1, 1989


INQUIRIES TO : Regional Administrators, FSA


4’Zason Turner


Directar


Office af FadLy Assistance

APPENDIX B 

AGENCY COMMENTS 

B-1 
.

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. dr,rtui~ ML.I L ok tit wi ii & HL 31%,N SERL ICES . J ;

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%+%g m ~ 

t %bm f 

mm /

DIG--@ ADMINISTRATION FOR CHILDREN AND FAMILiI 

~ S)l&~ Office of the AssistantSecretary,Suite600 

D1&bl ~ 370 L’Enfant Promenade, S.W. 

J@4isP Washington, D.C.20447 

@/lG . ~Em =. = -71 DATE : by 26, 1993, 

-slim % -> m -J 

r> m 

-:.- ~;,m ~ TO: Bryan B. Mitchell ‘A .:? c+ ~ Principal Dep	 N ‘i -. m 

a ‘-~-A--. 

FROM: Laurence J. Lo - - .:(~,~ 

Acting Assis -. ,,> u 

for Children and Families ?.pR ?A=> 

Z 

SUBJECT : Comments on the OIG Draft Report Entitled ‘AFDC PreEligibility Verification Measures,lS OEI-O4-9I-OO1OO 

We have reviewed the subject report and offer the following 

comments with regard to the recommendations. We also have some 

technical comments and suggestions for your consideration in 

preparing the final report. 

1.	 That ACF revise its evaluation reporting requirements to 

make them applicable to all commonly used types of preeligibility verification measures~ not just fraud 

investigative units. 

ACF co mment 

We do not concur, because the first year~s experience did not 

provide pertinent information regarding successful practices. AS


an alternative to revising our reporting requirements, we are


examining replacing the reporting requirements with state


demonstration projects that will include rigorous evaluation


designs to assure that valid conclusions can be made on the


effectiveness of pre-eligibility fraud detection measures.


. OIG Rec~endatlm 

2.	 That ACF require States to periodically evaluate their pre­


.digibilitygmqrams and repo~ the resullw.~o ACF.,-d .,,,

,
 -.
 @XWXY3-’thLUt
hey do ~0- -.


ACF co~ent


We cmcur. It is our practice to provide feedback to States. 

However, the first year’s experience did not provide pertinent


and useful informatim. As mentioned in eur =omments to


recommendation 1, we are considering carefully designed State 

demonstration projects that will provide productive information,


and at the same time, be less burdensome on the States.


--.—” 
.

. ...

., . 

Page 2 - Bryan B. Mitchell . . 

OIG Recommendatio~


3.	 That ACF conduct or sponsor its own independent evaluations “ 

of State pre-eligibility programs. 

w F Comment


We concur. 

OIG Recommendation 

4.	 That ACF provide States with information on effective


pre-eligibility verification measures, based on States’


evaluation reports and ACFIS own independent evaluations of 

States! pre-eligibility programs. 

ACF CoIIUUent

We concur, however, the information obtained from the first 

year’s experience did not provide pertinent and useful 

information regarding effective practices on pre-eligibility 

verification measures. As indicated in our comments to 

recommendation 1, we are considering carefully designed State


demonstration projects that will enable us to provide States with


information on effective measures.


Tec hn ical Comments 

1.


. A.. 

-.< 

2.


First full paragraph under ‘9RECOMXBNDATIONS,~’ page ii. The 

third sentence of this paragraph states: ‘However, ~d= 

ACFQS regulations, States can comply with the legislative 

requirements without actually improving their preeligibility verification systems.m This is incorrect. The 

regulations at 45 CFR 235.111(c) require State agencies to 

subnti’t appropriate plan amendments to the ACF Regional 

Office based on the findings ef the annual evaluation. The 

clear regulatory expectation is that if the annual 

evaluation shows that certain measures are ineffective in 

preventing fraud, the State agency will take corrective


action to remedy the deficiency.


,.- .:! :...,’.,.,
 .,,..
... . . .


.Y~fiZ-:q~&aph under -~==~= ~9e 40 ~e”+cond .:.


‘andtiird sentences sta~ thatz ‘The implementing


regulations were broadly written, allowing States to use a


range of fraud detection measures that could be tailored to


their own needs and circumstances. ACFfs regulations did


not require a particular ~rogram, but gave examples of what


many States were already doing.” These statements neglect


to point out that the statutory language of section


402(a) (45) of the Social Security Act is imprecise and only


calls for States to implement ‘appropriate measures*’to


... —-——. ... . . 
. 

Page 3- Bryan B. Mitchell


detect fraudulent applications. The examples included in


oux regulations at 45 CFR 235.ill(b) (2) were rell~le


measures that a number of States found effective m


identifying ineligible applications. Specifying ~datoq ‘


measures in these regulations was inappropriate since there


Wmagic bulletsw with respect to techni~es or


~oc~dures for detecting fraudulent applications. We


suggest that you revise this paragraph to include the


aforementioned points. 

If you have any Cpestions about our comments or if we can be of 

further assistance, please do not hesitate to call. 

..”. . . . . ., 

,.. . ...