Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

REFORMS 

INCOME AND 

ARE NEEDED IN STATE 

ELIGIBILITY VERIFICATION 

SYSTEMS 
OFFICE OF INSPECTOR GENERAL 

The mission of the Office of Inspector General (OIG), as mandated by Public Law !X452, 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 OIG’s 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 progmms 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 OIG’s Office of Investigations (01) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HI-IS programs or to HHS beneficiaries and 

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

convictions, administmtive 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 progmms. This report was 

prepared in the Dallas regional office under the direction of Ralph Tunnell, Regional 

Inspector General and Chester Slaughter, Deputy Regional Inspector General. Project 

staff include (humes lirted alphobetiudly and by region): 

DALLAS REGION HEADQUARTERS 

Leah Bostick Alan Levine 

Kevin Golladay 

Forjiather tifotmation contact: Kiwin GoR&zy at 214/767-3310 or l/8@-848-8960. 
EXECUTIVE SUMMARY 

PURPOSE 

The purpose of this study was to assess the current status of State Income Eligibility 

Verification Systems (IEVS). 

BACKGROUND 

Verifying information supplied by Aid to Families with Dependent Children (AFDC), 

Medicaid, or Food Stamp applicants and recipients with other sources through computer 

matching helps States better identify individuals not eligible for public assistance or 

receiving incorrect benefit payments. Congress enacted the Deficit Reduction Act of 1984 

which expanded matching requirements by requiring State Income and Eligibility 

Veritlcation Systems (IEVS). Under IEVS, States are required to routinely match AFDC, 

Food Stamp, and Medicaid applicant and recipient-supplied information against several 

data sources: 1) Internal Revenue Service (IRS) data on interest, dividends, and other 

types of unearned income; 2) Social Security Administmtion (SSA) data (Retirement, 

Survivors, and Disability Insurance benefits, Supplemental Security Insurance Benefits 

(SS1), and annual earnings); and 3) State quarterly wage reports and unemployment 

insurance benefits. States must complete follow up within 45 days on at least 80 percent 

of all IEVS information received on applicants and information targeted (selected) for 

review on recipients. 

This review of IEVS consisted of interviews and surveys with State officials 

knowledgeable about their State’s IEVS process. To supplement our interviews, we 

conducted onsite visits to five States and one local ofllce in each of these States. 

Additionally, we reviewed State documentation of IEVS procedures, State supplied IEVS 

statistics, and Federal IEVS regulations. 

FINDINGS 

This examination of IEVS reaffms findings from prior reviews and substantiates 

continued operational weaknesses with IEVS. The IEVS remains a controversial 

requirement for States. This controversy is especially acute because of State budgetary 

restraints, resource limitations, and program growth. 

State Implementation 

Sevend St&es are not utilizing all required IEVS sources. During 1992 and/or 1993, 12 

States did not conduct recipient matching against one or mom IEVS data sources or failed 

to follow up on resulting information. Additionally, 17 States did not match applicants 

against one or more IEVS data sources. Finally, as many as 46 States missed one or 

more monthly applicant matches with IRS. 

i 
Of 39 States responding (all states were surveyed with 39 providing follow up statistics), 

only six States report success meeting prescribed follow up timeframes. 14 States report 

not meeting follow up timeframes and 19 report not having a tracking system in place to 

know. Several States commented that workers give low priority to working IEVS match 

results and documenting actions. Worker failure to timely work IEVS match results was 

typically due to competing time pressures and a perceived lack of benefit to doing so. 

Most States could utilize IEVS sources in a more timely manner. For example, during the 

1991-92 IRS processing cycle, 19 States delayed matching recipients against IRS for 

several months after the IRS data was fust available. Additionally, only 11 States are 

actively using the Social Security Administration’s (SSA) State Veritlcation and Exchange 

System (SVES) to query SSA ffles. (An explanation of SVES is provided in Appendix 

A.) 

Cost Effectiveness 

The majority of States repoti one or more IEVS matches are not cost effective. States 

most often report the Beneficiary Earnings Exchange Record (EEER) and IRS matches as 

not cost effective. Most State conclusions about cost effectiveness are based not on costbenefit studies but on program experience or speculation. To date, little guidance has 

been provided States on how to conduct a cost-benefit analysis. 

@inevaluation of IEVS cost e~ectiveness recently completedfor the U.S. Department of 

Agriculture’s Food and Nutrition Senice (FNS), but not yet releasedformally by FNS, 

may he~ to answer the cost e~ectiveness controversyfor IEVS matches.) 

Match Data Accuracy 

While the majority of Stties (32) repoti reliabil@ and accurucy problems with the data 

Jmm one or more IEVS mtiches, no specific match was consistently perceived as a 

problem area by a mqjority of States. However, States have few or no mechanisms to 

monitor and assess problems with the accuracy of data supplied by the various IEVS data 

sources. 

Flexibility 

States want more flexibility implementing IEVS requirements. In many States, IEVS is 

not a dynamic process that can adjust for internal pressures such as changing workloads, 

staffing, and program priorities. The IEVS regulations am considered by States to be 

overly prescriptive concerning which IEVS matches to conduct, when to conduct those 

matches, and how quickly to follow up on match results. Most States (76 percent) want 

to discontinue one or more IEVS matches. Nearly all States (46) are using targeting 

strategies to limit IEVS information provided workers. 

Variations in waiver authority among progmms and application of authority fimther limit 

State flexibility and weaken coordination among Fedeml programs. 

ii 
Match Efficiency and Effectiveness 

While 37 States repoti IEVS could be made more efficient and effective, 28 States report 

they Lzck the resources to support these effotis. This efficiency and effectiveness can be 

achieved through a variety of systems changes and training initiatives. Some of these 

initiatives will require changes in IEVS regulations to allow States more flexibility. 

Additional Federal Data 

States want additional Federal data. However, States have yet to be given access to 

additional Federal data they report would be helpful (e.g., Veterans Administration 

benefits, Federal employee salaries and pensions, U.S. Savings Bond holdings, and State 

death records maintained by SSA). While we suspect access to these data sources could 

be helpful if utilized, we are reserved about requiring access when many States are failing 

to adequately utilize those data sources already required by IEVS regulations. 

RECOMMENDATIONS 

Independently verifying client circumstances through computer matching with IEVS data 

sources helps to ensure the integrity of the eligibility determination process. Although 

IEVS matching is mandated by Fedeml law and regulation, our interviews with State and 

local users indicate the practicality and cost effectiveness of IEVS under current 

regulations is uncertain. The uncertainty and resulting controversy have resulted in IEVS 

implementation and monitoring problems which need to be addressed at many levels of 

government, from Federal oversight agencies to State and local welfare offkes. 

Recommendation #1: The Administration for Children and Families (ACF) and the 

Health Care Financing Administration (HCFA) should use appropriate mechanisms to 

address IEVS issues by: 

�	 examining existing IEVS requirements in each agency, at both the central and 

regional office levels; 

�	 addressing the need for and degree of flexibility to be afforded States 

concerning IEVS; 

�	 identifying spedc areas in which coordination between oversight agencies can 

be improved, resources can be consolidated or more effectively utilized to 

monitor IEVS, and procedures can be streamlined to minhize duplication of 

effort and contradictions among Federal agencies’ IEVS policies (e.g., waiver 

approval, targeting approval); and 

�	 engaging outside, involved parties (e.g., the States, the Department of 

Agriculture, the Office of Management and Budget) to the fullest extent 

possible as IEVS issues (e.g., flexibility) and requirements are debated. 

...

111 
Recommendation #2: The ACF should continue to seek a rule change which would 

allow the AFDC program an equivalent degree of flexibility currently available to the 

Food Stamp program with regards to IEVS (e.g., waiver of 45 day follow Up 

timeframe). Since the AFDC, Food Stamp, and Medicaid pro-s are highly integrated, 

State flexibility is limited when each program is not able to allow the same degree of 

flexibility. States report it is unrealistic to implement an IEVS waiver for one progmm 

without being able to implement the same waiver for the other programs. 

Recommendation #3: The HCFA should seek regulatory changes for the Medicaid 

program which provide for IEVS flexibility equivalent to those sought by ACF for the 

AFDC program. As mentioned above, IEVS flexibility must be consistent between 

programs to be implemented effectively by States. 

Recommendation #4: The ACF and HCFA should inform State public assistance 

agencies of their willingness to work with them to strengthen automated eligibility 

verifkation activity. 

COMMENTS 

comments on the draft report received from ACF, the Assistant Secretary for Management 

and Budget (ASMB), the Assistant Secretary for Planning and Evaluation (ASPE), SSA, and 

HCFA concur with both the findings and the general thrust of our recommendations. 

However, ACF, HCFA, and ASMB disagree with the need for the departmental governing 

council recommended in the draft report and the need for addressing IEVS issues prior to 

healthcare and welfare reform. Additiondly, HCFA does not concur with the 

recommendation to seek a regulatory change to allow for IEVS flexibility consistent with that 

sought by ACF. 

The need for a governing council stemmed from our view of the complexity of the issues 

involved and the need for intemgency coordination and consensus regarding IEVS policy and 

compliance. The governing council was envisioned as a framework to promote and expedite 

leadership as broad policy (e.g., welfare reform) and technological (e.g., enhanced systems 

or new databases) changes occur. Both SSA and ASPE concurred with this recommendation. 

The ACF, HCFA, and ASMB disagreed with the governing council approach primarily 

because existing interagency coordination and communication mechanisms were believed to 

be adequate. Based on the agencies’ assurances and to provide them maximum flexibility, 

we removed the recommendation of a governing council tasked with addressing IEVS issues; 

we modifkd the recommendation to place the burden of addressing IEVS vt.dnerabilities with 

the appropriate agencies through existing communication mechanisms. 

With regard to the timing for addressing IEVS issues, the ACF, HCFA, and ASMB 

questioned the value of devoting limited staff resources to addressing IEVS at a time when 

welfare and health care programs are planning signifkant changes through reforms. While 

we recognize change will occur, we cannot in good conscience suggest that addressing IEVS 

weaknesses be postponed until reforms have run their course. Our view is based primarily 

iv 
on the Department’s role and responsibility to CUrbfraud, abuse, and progmm vulnerabilities 

and the realization that these reforms may take years to implement, with nothing to suggest 

the importance of IEVS will diminish. 

Additionally, IEVS issues should be addressed without delay because consistent requirements 

and flexibility between the major welfare programs is important to those States which are in 

the midst of systems changes or planning such changes which may be constrained by existing 

policy. While ACF agrees to seek regulatory changes to provide an equivalent degree of 

flexibility found in the Food Stamp program, HCFA’s decision not to seek similar changes 

may burden States with IEVS regulatory requirements for the Medicaid population that may 

not exist for the food stamps and AFDC populations. Since most States’ automated systems 

integrate the IEVS process for all three programs, flexibility is limited if each progmm does 

not provide for similar matching and follow up requirements. The resulting disparity 

between program requirements exempliiles Federal agencies’ failure to coordinate 

adequately. 

Our concern and purpose in recommending that HCFA pursue regulatory change was to 

ensure that ACF’s and FNS’s efforts to provide States expanded IEVS flexibility would not 

be limited by the Medicaid program’s restrictions. We do agree with HCFA’S assertion that 

many States could make better use of targeting to increase the effectiveness of IEVS 

matching while decreasing the burdens of follow up. Our belief stems from 1) States’ 

admissions that IEVS processes could be made mom efllcient and effective by better use of 

targeting and 2) initial results from FNS ‘S study of the cost effectiveness of targeting IEVS 

matches. Although we agree that targeting affords States considerable flexibility, targeting 

regulations are restrictive in several respects (e.g., targeting rules require follow up of all 

targeted match results for recipients within 45 days of the match and targeting is not allowed 

for applicant matches). While we did not directly evaluate the impact of providing States 

with added IEVS flexibility, we found States wanting more flexibility and both ACF and 

FNS supportive of policy changes to address State desires. 

We believe that HCFA needs to work with ACF and the FNS to promulgate consistent 

regulations covering IEVS matches. The decision should be based on interagency discussion 

and consensus. If the Medicaid program has limited options for flexibility comparable to the 

AFDC or Food Stamp programs, no interagency discussion and consensus is possible and 

States may be unnecessarily burdened. 

v 
TABLE OF CONTENTS 

EXECUTIVE SUMMARY


INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1


METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4


FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...6


�State Implementation. . . . . . .. O. . . . . . . . . . . . . . . . . . . . . . . . . . . ..6


� CostEff@iveness . . . .Oo...ao.+..+..+. . . . . . . . . +........ ..13


•Mat&Da~Accuracy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15


�Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...17


�Match Efficiency andEffe&veness . . . . . . . . . . . . . . . . . . . . . . . . . . ...23


� AdditionalF~e~ Da@.. . . . . . .. OO. OOOO. .O.O ., . . . 0 . . ..0....24


RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27


ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32


APPENDICES


A: SSA’S File Transfer Management System and SVES . . . . . . . . . . . . . . . . . A-1


B: IRS Benefit Cost Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..B-1


C: SSA’s Statement ofDataAccuracy Provided the Data Integrity Board. . . . . . . .C-l 

D: Agency Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..D-l 
INTRODUCTION 

PURPOSE 

The purpose of this study was to assess the current status of State Income Eligibility 

Verifkation Systems (IEVS). 

BACKGROUND 

Welfare Program Ovem”ght 

Three of the Federal government’s major welfare programs are Aid to Families with 

Dependent Children (AFDC),l Medicaid,* and Food Stamps.3 The Department of Health 

and Human Services (DHHS) oversees the AFDC and Medicaid programs, while the U.S. 

Department of Agricultme (USDA) oversees the Food Stamp program. Although DHHS and 

USDA have overall responsibility for administering the programs, States are responsible for 

determining participants’ eligibility. 

Determining eligibility and the amount of assistance for AFDC, Medicaid, and Food Stamps 

involves a myriad of eligibility factors and program-specific rules. Many different factors 

are used to determine participant eligibility, including earned income, unearned income, and 

amount of assets. Information relating to these factors must be obtained, evaluated, and 

verifkxl by the State for applicants and recipients. Manually performing these steps is a 

time-consuming, ineftlcient, and error-prone process. For these reasons, States rely heavily 

on automated systems to facilitate the eligibility and verification process. 

Federal Suppoti of Staie Automation Activities 

The Federal government plays a signitlcant role in supporting State automation activities. 

For fiscal years 1981 to 1990, DHHS and USDA estimate that they provided over $950 

million to States to develop and operate eligibility systems for AFDC, Medicaid, and Food 

Stamps.i 

While all States use automated systems of varying capacity and sophistication, most are 

developing or operating automated eligibility systems which integrate the AFDC, Me&caid, 

and Food Stamp programs. Such computer systems are able to determine eligibility for all 

three welfare progmms. This is particularly efilcient, given that many of the clients from 

one program are also clients in the other programs; the interdependence among these welfare 

programs is high:5 

� Everyone who receives AFDC is eligible for Medicaid; 

� Nine out of 10 AFDC recipients receive Food Stamps; 

� Two out of three Medicaid recipients receive Food Stamps; and 

� Three out of four Food Stamp recipients receive Medicaid. 

1 
Futors Influencing Computer Matching 

Verifying AFDC, Medicaid, or Food Stamp applicant and recipient supplied information 

with other sources through computer matching helps States to better identify those who are 

not eligible for public assistance or who are receiving incorrect benefits. Although welfare 

agencies in a few States have conducted earnings matches and other forms of computer-aided 

matches since the early 1970s, most matching activity is relatively recent in origin, with 

rapid growth during the 1980s. 

The rise in the use of computer-aided matching is largely attributable to the growth and 

sophistication of State welfare automated computer systems. Other factors contributing to the 

use of computers to independently verify client-reported information include: 1) the 

increasing public concern with fraud and abuse in the welfare system, 2) the increasing use 

of client Social Security numbers (SSN) for use as identitlers, and 3) limited program 

resources (e.g., staff, finding). 

Early Matching Activity 

The earliest matching activity by State welfare agencies was conducted at the States’ 

initiative, without Federal enabling legislation and requirements. However, in 1977, 

Congress passed legislation mandating wage matching for the AFDC program. The 

amendment to the Social Security Act required all States to begin matching by October of 

1979, using etiher State earnings records or earnings available from the Social Security 

Administration’s (SSA) Beneficiary Earnings Exchange Record (13EER)b. The legislation 

also required States to maintain automated ffles of clients’ Social Security numbers. 

Expansion of wage matching to the Food Stamp progm.m quickly followed with passage of 

the 1981 Omnibus Reconciliation Act. 

Development of IEVS 

While wage matching progmms were helpful in preventing incorrect eligibility payments,


results from the Grace Commission showed States were not doing enough to prevent


incorrect payments. Specifkally, the Commission estimated $4.4 billion in Fedeml and State


funds were misspent annually and recommended States strengthen eligibility verification


procedures.’ As a result, Congress enacted the Deficit Reduction Act (DEFRA) of 1984


which expanded matching requirements (Social Security Act, section 1137). The DEFRA


requires States to conduct other types of matching in addition to wage matching and to use


matching in the Medicaid program, as well as in the AFDC and Food Stamp progmms.


Each State must operate an IEVS which routinely matches client-reported income information


against:


�	 Internal Revenue Service (IRS) data on interest, dividends, and other types 

of unearned income; 

�	 Social Security Administration data via the Beneficiary and Earnings Data 

Exchange (BENDEX) which contains both Retirement, Survivors, and 

2 
Disability Insurance (RSDI, Title II) benefits and earnings from the beneficiary 

earnings record fde (ERF), and the State Data Exchange (SDX) which contains 

Supplemental Security Income (SS1) benefit information; and 

� State quarterly wage reports and unemployment insurance benefits (UIB). 

Follow Up on IEVS Match Results 

States are required to follow up on all DEWSinformation related to applicants. However, the 

Omnibus Reconciliation Act of 1986 amended the Social Security Act to clarify that IEVS 

data received on recipients may be ta.rgeteds (selectively applied) to those uses which are 

likely to be most productive. Targeting was intended to increase the efllciency with which 

IEVS data are used to identify and prevent ineligibility and incorrect benefit payments. 

Follow up on IEVS information is required within 45 &Jysof matching with the IEVS 

source. However, follow up on up to 20 percent of IEVS information can be delayed 

beyond the 45 day targeting rule for the purpose of receiving verit-lcation from third party 

sources (e.g., banks). 

TYPICAL IEVS PROCESS 

The IEVS process begins when a county or local caseworker forwards information collected from 

applicantsto the State. After the information is entered into a master file, the State exchanges a 

file with the appropriate Federal or State agencies for matching. If, for example, an AFDC 

applicant earned interest in an unreported savings account, the account and interest should be 

detected when the file is matched with IRS information. This is commonly referred to as a “hit.” 

IRS will return a tape to the State, with the individual’s account number, the name and address of 

the financial institution paying the interest, and the year the income was reported. 

IEVS requires all match information returned prior to the applicant becoming a recipient to be 

resolved. For information received after the eligibility determination is made, each State can 

either investigate all computer hits or screen (target) out those hits least likely to result in a 

change in a recipient’s eligibility. The State then distributes the information (often referred to as 

“alerts”) which are targeted for review to the appropriate county or local offke for follow up. 

Caseworker follow up on the IRS example cited above would consist of 1) reviewing the 

information and comparing it with the case record, 2) contacting the applicant or recipient and/or 

other sources (e.g., banks) to verify new or previously unverified information, 3) resolving any 

significant discrepancies, 4) determining if the information affects eligibility or benefit amounts, 

and 5) noti&ing the applicant or recipient of any intended adverse action or entering in the case 

file that no further action is necessary. The Computer Matching and Privacy Protection Act of 

1988provides that any adverse action based on information received through a computer match 

can only be taken after the individual has been notified and given 30 days to respond. However, 

a shorter notification is permissible if a fair hearing agreement exists. 

3

Prior ZEVS Reviews 

Several reports have been released on the implementation of IEVS. Reports by HCFA, 

FNS, American Public Welfare Association (APWA), and others describe much of this 

activity. In 1991, we released a report, “The Income and Eligibility Veritlcation System 

(IEVS): A Time For Reform?, ” which synthesized the findings and recommendations of 

several reports examining States’ implementation of IEVS. Additionally, the synthesis was 

supplemented by discussions with Federal and State welfare officials. 

The 1991 review cited that major problems existed with States’ implementation of IEVS. 

For example, reviewed reports indicated that: 

�	 information in the Federal data bases has been inaccumte, duplicative, 

untimely, or inaccessible; 

�	 Federal requirements, in important respects, are highly prescriptive, unclear, 

or inconsistent; and 

�	 the administmtive capacity of many States to implement IEVS is limited by 

insufficient staff and inadequate computer resources. 

Site visits to three States confirmed that problems with Federal data bases, Federal 

requirements, and sufficient resources hindered State efforts to operate IEVS. We concluded 

that problems appeared substantial enough to warrant further examination of IEVS, and we 

planned to undertake further study in this area. Additionally, we suggested that the Federal 

oversight agencies consider a basic reexamination of IEVS which might address ways in 

which: 

� the Federal government could give States more flexibility in carrying out IEVS 

matches and, at the same time, hold them more accountable for results; 

� Fedem.1data bases used in IEVS matches might be made more useful; and 

� additional Federal data could be made available to States. 

METHODOLOGY 

This examination of IEVS began with a review of the legislative history of IEVS, IEVS 

regulations, and other IEVS reviews conducted by Federal and State agencies not previously 

examined. 

To determine current State IEVS practices and concerns, we next surveyed each State using 

interviews and mail surveys with the State official most knowledgeable about the State’s 

IEVS process (this person was often designated by the State as their IEVS coordinator). 

Depending on the knowledge of the State IEVS coordinator, further discussions were 

conducted with other State staff to more fully understand a State’s IEVS processes and 
experience. ~eseadditiond titemiews were t~icWywith automation systems' staff 

famihar with IEVS. 

While most States were contacted by phone or mail, five States (Arizona, Arkansas, Georgia, 

Maryland, and Tennessee) were visited for onsite interviews. Selection was purposive and 

based on a variety of factors: 

�	 Arizona was selected because of its participation as a pilot State in a targeting 

study conducted by FNS. 

�	 Tennessee was selected because it 1) had implemented SSA’S File Transfer 

Management System (FTMS) and 2) was the pilot State for the wire to wire 

data exchange and query system (WTPY), (See Appendix A for an 

explanation of FTMS and WTPY.) 

�	 Arkansas, Georgia, and Maryland were selected to get a mix of States based 

on the differing administration of welfare assistance programs. Arkansas (like 

Tennessee and Arizona) was State administered. On the other hand, Georgia 

and Maryland were county administered and State supervised. 

Within each of these five States, one county/local office in the vicinity of the State office was 

also visited to interview the office manager, a supervisor, and three eligibility workers. 

Questions to local offke staff provided a perspective on whether and how IEVS impacts the 

case worker and another viewpoint on IEVS problems. Respondents at both the local and 

State levels were asked to provide documentation of 1) any problems such as timeliness or 

accuracy problems and 2) the effects of such problems on program eligibility or payment 

determinations. 

Along with State interviews and surveys, we reviewed any available IEVS statistics provided 

by States, present State targeting procedures, and any written State IEVS program guidance 

or ~uirements for local offkes. 

Our review was conducted in accordance with the Quality Staruizrakfor Inspections issued 

by the President’s Council on Integrity and Efi3ciency. 

5

FINDINGS


This examination of IEVS reaffms findings %m prior reviews and substantiates 

continued operational weaknesses with IEVS. The IEVS remains a controversial 

requirement for States. TMs controversy is especially acute because of State budgetary 

restraints, resource limitations, and program growth. 

SeveraJ States are not utilizing all required IEVS sources. 

While nearly all States are conducting the required IEVS matches, several States are not 

fully utilizing match results or conducting matches as often as required. 

�	 Several States did not conduct recipient matching or utilize the resulting 

infomtion j?om one or more IEVS akztasources. 

During 1992 and/or 1993, we identifkd 12 States not performing recipient matching or 

follow up on one or more IEVS sources. The most often underutilized match was the 

BEER with 10 of the 12 States not matching recipients or following up on information 

obtained from BEER. Six States had not fully utilized IRS. Three States underutilized 

the State wage, and one State did not use BENDEX to obtain SSA benefit information. 

Examples of State nonmatching or failure to follow up are provided in the chart on the 

next page. 

� Several more States (17) do not match applicants 

against one or more IEVS duta sources. ~ 

States Regulations require matching applicants at the earliest 

available opportunity (e.g., IRS match is monthly).


However, as many as 17 States report not routinely matching x


applicants. Matching is either delayed until the applicant XKF


becomes a recipient or is not done. (See Figure 1.)


While a few States’ eligibility systems may not be designed to


gather information on applicants prior to an eligibility


determination, most States report they are not matching ~ Cwslfveyofstattw


applicants because of a perceived lack of benefit to doing so. Figure 1


States either consider the match to be not cost effective, or


report that matching applicants with the specified IEVS source


is not productive since resulting information from the IEVS match is not typically returned


until after the eligibility determination has been made.


6

Examples of State Nonmatching or Failure 

to Utilize IEVS Match Information 

In State A, BEER alerts are not being sent to local workers. According to one State ofllcial, 

BEER alerts would “just clutter up the alert screen” of workers. 

State B only recently entered into a requisite matching agreement with IRS effective August 

7, 1993. In prior years, this State had no agreement and, consequently, conducted no 

matches with IRS. 

During our site visit to a county offkx in State C, we found that IRS and BEER alerts had 

never been worked. The alerts were simply stored in a locked room and never reviewed. 

In State D, IEVS reports were not work~ from April 1991 to February 1993. State 

officials report this decision was because they were in the process of converting to a new 

computer system. The IEVS subsystem which will monitor IEVS matches is not expected to 

be totally fictional until January 1994. 

While State E did not discontinue the BEER match, in 1991 it stopped requiring local offices 

to clear monthly discrepancy reports/alerts. State ofllcials reported this was done because of 

results from an internaJ 1991 cost-benefit analysis on the BEER match which showed the 

State “was spending a lot of money trying to clear up discrepancies from BEER, but weren’t 

getting much in return. ” 

In State F, follow up for several matches was discontinue& For example, the State wage 

match was discontinued in 1992 because of a “reported information overload to the county 

OffIces.“ BEER was discontinued in 1990 because the information was considered to be “too 

old and unreliable” with most of the “information available somewhere else. ” Additionally, 

IRS information is not utilized. Specifically, since their Family Assistance Management 

Information System (FAMIS) was installed approximately two years ago, they no longer 

report having the ability to process and distribute IRS tapes without involving the corporation 

with whom they contract with to maintain and operate the system. Since IRS does not rdlow 

contractor access to IRS tapes, they had to stop processing or distributing the information to 

the county ofllces. State F’s approved targeting plan specifically precludes follow up on all 

BEER results. 

In State G, the BEER matches were suspended in 1991 and not resumed until 1993. State 

ofllcirds reported this resulted from 55A’s change in the record format of the BEER file. It 

took a significant amount of time for the State to make changes to its computer system to 

accommodate the new file format. Changes were not perceived as a priority. 

Starting in 1993, State H stopped distributing BEER results to staff within 45 days of the 

match. 

In State I, some local agencies “shred IEVS reports upon receipt. ” 

In State J, State ofilcials report “wage reports are probably not being worked in more than 

50 percent of the counties. ” 

7

� States are not matching w“thIRS each month. 

Statistics from IRS show that as many as 46 States missed one or more applicant matches 

with IRS during the 1992-93 processing cycle. (See Figure 2.) Data provided from IRS 

was insufficient to determine whether the match tape from the State was received late by 

IRS and processed with the next month’s run or was never submitted. 

Each Month Many States Fail To Match 

Applicants With IRS 

States Not 

Matching

50 

40 

1 

30 25 

20 19 18 18 

13 14 

lo- 10 8 

0- 1 1 1 , I 1 ,9$$ Aug Sep Ott Nov Dec Feb Mar Apr May Ju~993 

Month of Processing 

SoLKoatBaaad on Data SqWad by RS 

RS does not #)fOCeWS h JMLIiW 

Figure 2 

Regulations clearly state that the matching of applicants must be at the next available 

opportunity after an application has been fded. The next available opportunity for IRS is 

monthly except for January when IRS does not process requests. 

Of the States not matching consistently with IRS, 13 States report they do not match 

applicants with IRS. Others not consistently matching applicants report systems problems 

or other delays generating the IRS request tape as reasons for missing an applicant match. 

Some States considered failure to match an oversight problem and were not aware of the 

missed match or matches. 

Processing time-es required by Fe&ml regulations are not met in most StaJes. 

“Weare certainly not meeting the intent of the kzw concerning 

the 45 day timejiame for IEVSmatches. “ 

- A State IEVS Coordinator 

�	 Of 39 States surveyed, only six States report meeting the rule thut 80 percent of 

IEVS match results are followed up w“thin45 duys. 

Most States are not meeting the prescribed follow up timeframe for one or more IEVS 

matches or do not know. Of 39 States surveyed, only six States report that during the 

8

frost three quarters of 1993, the percentage of follow up completed within 45 days equaled 

or exceeded 80 percent. Of the remaining 33 States, 14 did not meet the 80 percent rule 

and 19 reported “Don’t Know” because the State lacks a statewide tracking system capable 

of monitoring timely completion of follow up. 

To illustrate States’ inability to complete follow up timely, of the five States in the 

southwest region (Texas, New Mexico, Arkansas, Louisiana, and Oklahoma), not one is 

able to meet the 45 day requirement for processing IEVS data as required for all recipient 

matches. Officials from these States believe timeframe requirements are “neither practical 

nor manageable. ” 

�	 Several States commented that workers give low priority to working IEVS and 

documenting results. 

The following are typical responses from State and local welfare officials concerning 

workloads and the priority workers or State oversight agencies place on IEVS follow up: 

“We can barely issue benefits in a timely manner, let alone do things like 

IEVS matches which are real nice but impractical. “ 

“A lot of IEVS follow up fin ‘t getting done because 99 out of lCW times 

the worker already knows the information. We are just spinning our 

wheels. “ 

“There is just so much workers have to check, and they alreudy don ‘t 

huve the time to do their al.zily work as it is. “ 

“lhere m“ght be something worthwhilejiom the BEER match, but given 

the high caselbazk and low priority of BEER alerts, these alerts just 

clutter up the worker’s alert screens. R 

“It’s a joke here because of the caseload%. We are going to have to hire 

alert workers on top of eligibility workers just to keep the alerts anywhere 

close to current. “ 

According to one State’s IEVS coordinator, State IEVS follow up statistics emphasize the 

lack of priority workers place on completing IEVS alerts. Due to staff shortages, workers 

have a considerable amount of work to complete regarding eligibility determinations and 

recertifkat.ions of recipients. As a result, IEVS is very low on their list of duties, and 

workers are simply too busy to provide more than a “quick and dirty” review of IEVS 

information. 

This sentiment was echoed by another State’s XEVScoordinator who reported that because 

of the 45 day follow up timeframe, workers are “pencil whipping their IEVS nxponses to 

get them back to the State agency more quickly. 

In a county welfare office we visited, one of the suggestions from a county Food Stamp 

Management Evaluation report (dated April 1992) was that processing of IEVS and claims 

9 
--

should not be done unless or until all on-going changes which would affect eligibility or 

benefits are completed. Officials believed placing IEVS lowest on a worker’s list of 

priorities would “work to assure correct benefits to clients and prevent quality control 

errors. ” However, officials recognized that a “backlog of IEVS reports would be 

created. ” 

o	 i%e adequacy of a worker’s resolution or documentation of alert resolution is 

suspect or nonexistent in many States. 

Virtually all (12 of 15) of the local welfare office workers interviewed stated they lacked 

enough time to do more than a cursory review and resolution of IEVS information. 

According to State officials from the southwest region, stringent timeframes for follow up 

negatively impact the quality of review done by workers. Officials report that in a “futile 

attempt to meet follow up timeframes, eligibility staff fmd themselves in the dilemma of 

performing a quality analysis of the match data versus performing a cursory assessment of 

the data to meet a monitored timeframe. ” 

A lack of training and management controls over workers can result in resolutions being 

conducted in a cursory fashion, ultimately resulting in incorrect statistics. In one State, 

workers are “pencil whipping” IEVS responses. According to State officials, this “only 

serves to force the recording of many responses as ‘current benefits correct, referred for 

investigation,’ a coding which also showed no savings. ” The consequence of such coding 

is to “seriously under-report effectiveness and savings” due to IEVS. 

While most States (39) require workers to speci@ how information received from a match 

is resolved, 8 do not require documentation of resolution. The four remaining States 

failed to respond to our question. It should be noted that, in some cases, States may only 

require workers to specify the outcome of selected matches. 

In addition to impacting the quality of follow up review conducted by workers, work 

pressures negatively impact the accuracy and completeness of tracking reports. 

Considering it “unfortunate,” one State’s officials reported experiencing workloads which 

“prevented the accurate completion” of tracking reports. As a consequence, the State 

discontinued use of its State-wide tracking reports on alerts. Tracking of completed 

resolution activities is now a fimction of the local offices. Ofiicials readily admit that 

without an adequate tracking system, management is unable to properly assess the 

adequacy of follow up or to maintain statistics needed to assess the costs and benefits of 

matches. They stated counties “do the follow up reports when they have the time and, in 

some cases, counties may never have the time We know that!” 

Another State provides an example of flawed IEVS ‘S savings reports. According to State 

officials, savings calculations are considered “an inappropriate measure of the savings that 

have resulted from IEVS, as workers often fail to complete, or to accurately complete the 

savings calculation screen” of its IEVS alert resolution computer system. Officials 

consider this a “training issue” and plan to address the problem in the “near fhture. ” 

10

Most States couili utiliz IEVS sources in a more timely manner. 

Several State respondents express~ concern with their State’s inability to meet timeframe 

requirements for all matches. In an effort to be more timely in making match data 

available to workers, most States (43) provide online access to data resulting from one or 

more IEVS matches. However, States are not always timely in accessing the data source. 

�	 During the 1991-92 IRS processing cycle, 19 States delayed matching recipients 

against IRSfor several months afier the IRS alztawasjirst avm”lable. 

Many States fail to access IRS information when it is first available. Specillcally, many 

States matching their recipient population once a year delay matching with IRS beyond the 

months when the data fnst becomes available (July)and the month when the IRS fde of 

unearned income is typically 99 percent complete (September).9 (See Figure 3.) 

Many States Delay Annual Recipient Matches With iRS 

States States 

lo- 1990 Tax Year 1991 Tax Year 10

9. C#a Fkst Available l)ata First Available 9 

8- 8 

7. � Best tjm8tomafchwlfh/RS """'" "`""y """""""""""""`"""""""""""'`"``"``"`""""""-"""`"" 7 

6- 6 

5. 5 

4- 4 

3. 3 

2- . 2 

1. 1 

0 

JUL AUG SEP OCT NOV DEC FEB MAR APR MAY JUN Jt,JL AIJG SEP OCT NOV DEC FEB MAR APR MAY JUN -

1991 Month State Submitted Recipients for Annual Match 1993 

sOUfCtI’ Oats supplled by IRS, tex years 1990 and 1991. NO IRS matching In January. St8tea not conducting 

annual raclplant matches or Sta tee submitting all recipients every month are not lnoluded. Although July 

Is when new tax year data Is first avsllable, we did not Ilst It as the a best time to match because of IRS 

concerns. IRS recognlzea the potential for start up ~roblems durlrsg the flrat month of provldlng new data. 

J 

Figure 3 

� Most States are rwtfilly utilizing SSA’s File TransferManagement System. 

While most States have implemented SSA’s wire-to-wire File Transfer Management 

System (FTMS), its usage by States is still limited. (See Appendix A for a description of 

the FTMS.) For example, the State Verit%ation and Exchange System’s (SVES) wire 

third party query (WTPY) is presently used routinely by only 11 States. Additionally, 

many States-us~g the FTMS ‘still continue to use ta&s ‘for s~me fde transfers. Part of the 

delay in States using the query option resulted from delays by SSA (i.e., SSA did not add 

States to WTPY for much of 1993 while it implemented SVES). However, the most 

signifkant delay reported by StateS is the result of a lack of systems resourees and the low 

priority placed on WTPY development. Of 12 States contacted and actively using FTMS, 

seven reported resouree limitations and the low priority placed on WTPY development 

accounted for delays implementing WTPY. Other State reasons varied. One State was 

11

still experiencing problems with FTMS and did not want to develop WTPY until problems 

were resolved with SSA. Another State was waiting for documentation about WTPY from 

SSA and the names of contact personnel concerning WTPY before doing anything to 

implement WTPY. Remaining States reported they did not know why WTPY had not 

been implemented. 

The FTMS and SVES systems represent an effort by SSA to improve the timeliness md 

efficiency of data exchange with States. By using the FTMS to exchange fdes with SSA, 

States eliminate many of the hassles of sending and receiving tapes. Although use of 

SVES to query BENDEX, SDX, or BEER results in the normal output from those 

exchanges to the State and the output ffles retain their independent nature, the delays 

caused by waiting for tapes will not exist. Files will be sent by SSA as they are created. 

With FTMS, if fdes are damaged or not received, it is a simple matter to ask SSA to 

resubmit the appropriate fdes. States often have tight timeframes during which to process 

data. Thus, the reliability of FTMS ensures processing is not missed because of a lost or 

delayed SSA tape. 

Additionally, with use of SVES to query SSA, a State can accomplish any or all of the 

following queries with a single input: 1) SSN verifkation, 2) WTPY query, 3) BENDEX 

accretion/deletion, 4) SDX welfare number transactions, 5) SDX Interim Assistance 

Reimbursement (IAR) transactions, and 6) BEER requests. One big advantage of the new 

SVES query process is an improved method of SSN veritlcation. In the past (or by not 

using SVES), the method of locating or veri@ng a person’s record varied from exchange 

to exchange (e.g., BENDEX, SDX, or Enumeration Verillcation System (EVS)). While a 

person’s record might be verifkd through one exchange, it might not be verii%d through 

another. Each exchange has slightly different verifhtion procahues. 

With SVES, the veritlcation process has been standardized and improved. The SSN 

veritlcation process of SVES differs from other exchange veri.tlcation procedures by: 

1.	 utilizing all of the SSA databases (NuMIDENT, Master Beneficiary Record 

(MBR), and Supplemental Security Record (SSR)) to determine identity, 

thereby, permitting a positive verifkation against any of the three databases; 

2.	 allowing for surname differences between State input data and SSA data 

when fnst name and date of birth agree. This primarily affects records for 

females where maiden and married names diffeq and 

3.	 searching for a “better” number when the State input data does not agree 

with SSA records. 

Through this verifkation process, any transaction for a verified SSN will be accepted by 

the independent exchange (BENDEX, SDX) without the need for further verifkation. 

Because of the improved verifkation process, SSA estimates SVES will return 

approximately 12 percent more verified social security numbers (SSNS) than the current 

Enumeration Verifkation System (EVS). 

12

l%e majority of States report one or more IEVS matches are not cost effective. 

Although IEVS has been operating in each State for many years, the cost effectiveness of 

IEVS is still an issue. While six States report all IEVS matches are cost effective, the 

majority of States (35) report one or more IEVS matches are not cost effeetive. 10 

� Most States believe the BEER and IRS mutches are not cost eflective. 

A majority of States (29) report that, overall, IEVS is a cost effective program.


However, with regard to specific matches, the applicant and recipient BEER and IRS


matches are typically perceived as not cost effective. State conclusions of cost


effectiveness are typicaUy based not on cost-benefit studies, but on program experience


and perception. Only 20 States’ conclusions were based partially or wholly on some type


of cost effectiveness study. Further, only 11 of these States evaluated one or more


matches using protectable sampling techniques.


Figure 4 presents State perceptions of the cost effectiveness of various IEVS matches.


States’ responses concerning perceived cost effectiveness of the IEVS matches did not


include deterrence as a factor in the indicated conclusions.


State Perceptions of IEVS Cost Effectiveness 

Percentot APPLICAiUl_ @ECIPKhfTlUlATCt+l$K3 (IVH3ALL 

states i?y MA7CMNG 

Match 

lN=51~ YES NO DK/NA YES NO DK/NA YES NO DKINA 

AU 41% 25% 33?40 59% 20°A 22% 57% 2070 24°h 

MATCHES 

WE 73% 10% 18% 82% 10% 8% 75% 12% 14% 

SW 71% 6% 24% 82% 6% 12% 76% 6°h 18% 

BENEFITS: 

STATE 61% 20’%0 20% 80% 14°h 6% 75% 140~ 12?40 

WAGE 

SSA 59% 16°h 25% 78% 12“h 10% 67% 16% 18% 

BENEFITS 

m I 33% 39% 27 y“ 41% 47 Yo 12% 39% 41 y“ 20% 

BEER 33”h 16% 63% 22% 18% 57% 25 yO 

DK=Don’t Khow NA=Not matching Source: St@ Survey Responses 

Figure 4 

13

The Computer Matching and Privacy Protection Act of 1988, enacted to regulate computer 

matching with Federal agencies, requires participating agencies to provide cost and benefit 

figures when matching agreements are renewed. Affected IBVS matches are the 

BENDEX (SSA benefits and earnings), SDX (SS1 benefits), and IRS matches. Thus far, 

States have submitted cost and benefit statements for the last two matching agreements 

signed. Appendix B shows data submitted by States for the IRS agreement covering 

release of 1990 tax year data. Based on the figures provided, cost and benefit numbers 

for 22 States show the IRS match to be cost effective, 17 show the match was not cost 

effective, and 12 show either no data or incomplete data. 

� A recent evaluation conductedfor the Food and Nutrition Service (FNS), but not 

yet released by FNS, may help to answer the cost e~ectiveness controversyfor 

IEVS matches. 

According to FNS ofilcials, a contractor to FNS has completed (June 1993) an extensive 

evaluation of IEVS cost effectiveness using various targeting methodologies.ll However, 

the results of this study have not, yet, been formally released by FNS. Two States 

participated in the study (Arizona and Michigan). The matches studied in Arizona were 

the recipient match with State wage, BEER, and IRS. In Michigan, the matches studied 

were for applicant matching with State wage, UI, SSA benefits and earnings, SS1 benefits, 

and IRS. AU matches were targeted except Michigan’s state wage match. 

Arizona and Michigan participated in this evaluation, in part, to prove their contention 

that IEVS matching is not cost effective for certain matches. Each State reported having 

conducted studies in the past which supported their contention. The study conducted by 

Arizona was far less rigorous and Michigan’s study relied on different assumptions, than 

those used for the FNS targeting study. Michigan’s study uses a higher estimate of the 

time to complete follow up by workers (34 minutes) and a lower estimated time span until 

inappropriate payments or eligibility is typically detected. Because FNS has not yet 

released its cost effectiveness study, we were unable to assess the validity of FNS’s use of 

lower estimates than used by Michigan. 

� Little guidunce has been provided States on how to conduct a cost-bengjit analysis 

for IEVS matching. 

According to a recently released U.S. General Accounting Office (GAO) review of


computer matching agreements and the quality of the cost-benefit analyses provided with


the matching agrwments, the quality of analyses is “poor.” The GAO points out that little


guidance has been provided States on how the costs and benefits of matching should be


determined. 12 The GAO notes SSA’S cost and benefit worksheet13 as a notable


exception and recommends that the Director of the Offke of Management and Budget


(OMB) 1) expedite the publication of minimum standard criteria for cost-benefit analyses,


and 2) direct agencies to establish procedures to track costs concurrently and measure


costs and benefits retrospectively to determine whether estimated benefits are actually


achieved. GAO stated, in their report, that OMB “generally agreed with the


recommendations and indicated guidance on conducting cost-benefit analysis would be forthcoming. ”


14

The major@ of States (32) repoti Ma reliability and accunzcy pmbkms with one or 

more IEVS matches; however, no specific match was consz”stentlyperceived as a problem 

area. 

During a recent 12 month period (April 1992 to May 1993), a majority (32) of States 

report having experienced data reliability or accuracy problems which undermined the 

usefidness of one or more IEVS matches. However, none of the individual matches were 

consistently reported to be a problem by a majority of States. (See Figure 5.) 

No IEVS Match is Consistently Perceived by States As Having


Significant Data Reliability or Accuracy Problems


States


50 

40 

30 

20 

10 

0 IRS State SSA BEER (JIB Ssl 

Wage Benefits Benefits 

IEVS MATCH 

Source:Based onOIGSu+’eyofStates

I
 —.I!lgure 5 

Follow up discussions with States indicate the number of States reporting problems may 

be inflated. For example, some States referenced problems related only to the age of the 

data. As one State respondent said, “the data is simply too old to be reliable.” Data 

sources which accumulate data over time, through various reporting mechanisms (e.g., 

IRS), will always provide dated information. There is little argument that the older the 

data, the less value the data has as a reflection of a client’s present economic situation. 

However, this does not mean the data is necessarily inaccurate and unreliable. 

The most often encountered problem with IEVS matches is matching with the wrong 

person’s record. 14 This occurs most often with matches relying on reporting from third 

ptiy SOU~S (e.g., banks, employem). Typically, an employer has submitted the income 

of a worker under the wrong SSN. The source of the error can be due to the worker 

giving the wrong SSN, the employer incorrectly recording the SSN given by the worker, 

or the agency inputing the received wage ~rt’s SSN incorrectly. 

15

States have few or no mechanisms to monitor and assess problems with the accumcy of 

&la supplied by the various IEVS &da sources. 

While many States report experiencing problems with various IEVS matches, no State has


monitored, studied, or quantified the types or extent of problems. Claims of data source


problems continue to be based on anecdotal cases.


Since the majority of States are not experiencing consistent problems with any one match,


it could be argued that problems, if they exist, are not systematic or signifkant.


However, it is also possible that workers and match coordinators have simply accepted


certain problems as a part of the matching process or receive so few IEVS alerts that the


scope of data accuracy problems is not recognized. As one eligibility worker stated, “I


see reports so infrequently that I just can’t remember if a problem is significant. I knOW


they happen, but how often I can’t say. ”


State L’s experience provides one indication of why States need to actively monitor


problems with the accuracy of match information. State L implemented IEVS in 1986.


Yet, ever since then, the incorrect BBNDEX amount was being calculated for clients with


the resultant problem of generating incorrect alerts on all BENDBX matches. Only


recently was it discovered that a design flaw in the State’s computer system caused the


errors, not the source information provided in the match. A BENDEX amount was


inadvertently shown with the decimal place moved one position to the right. Thus, a


BBNDEX amount for $100 would appear as $1000.


The IRS Unearned Income and SSA Wage dkta systems were not &signed to meet the 

timeliness requirements of entitlement pmgmrns. 

Virtually all States report the IRS and BEER matches are not timely for use in the 

eligibility determination process. As seveml respondents stated, “the information is just 

too old” by the time workers get it. Unfortunately, no other more current data source is 

available for IRS information. While State quarterly wage data matches provide a more 

current source of State wages, BEER is the only source of earnings from out-of-state 

employers, self-employment, agricultural jobs, and Federal employees. 

The IRS maintains computerized fdes of information on unearned income paid LO 

taxpayers. Payers of this income (e.g., banks) are required to report the payments by 

filing annual information returns. The IRS information has timeliness limitations which 

are not likely to be overcome without signifkant changes to current IRS reporting and 

processing procedures (e.g., running matches more often than the current monthly process 

or requiring earlier reporting). Typically, IRS does not receive unearned income reports 

for a tax year before the end of February of the following year. Thus, this information 

may be anywhere from 2 to 14 months old when reported. Moreover, IRS processing 

does not result in a relatively complete master ffle until September following the tax year 

for which the information returns are applicable. In other words, by the time the master 

fde is complete, the unearned income information has aged an additional seven months. 

16

Obviously, IRS’ system for collecting and processing unearned income was not designed 

to meet the timeliness requirements of entitlement progm.ms. 

The SSA maintains centralized ffles of wages, self-employment earnings, and pension 

payment data. Employers annually report wages directly to SSA, while self-employed 

individuals report their earning to IRS, which provides the data to SSA. The SSA’s 

earnings data are comprehensive in that they include virtually all employees, the military, 

Federal civilian employees, and the self-employed. Since employers and self-employed 

individuals are required to report earnings information only annually, the data suffers from 

the same timeliness problems as the IRS data. 

In many Stties, IEVS is not a dynamic process thti cam be tijusted for internal 

pressures such as chan~”ng workloads, staffing, and program priorities. 

“One of the things we as a system have to constantly balance is the 

workload, which is increasing for our staff, and the ability to do all the 

IEVS matches, whtkh may be good in and of thenwelves. Somebody has 

to make decisiom on importance and priority. These shl~ over time. It’s 

not a one-timz questwn with only oneset of answers. lke IEVSis a 

dynamic decision process. “ 

- A StateIEVS Coordinator 

Welfare agencies are victims of demographics and the economy with levels of service


varying from place to place and often shrinking with down turns in the economy. 15 The


GAO report entitled “Some Jurisdictions Confronted by Short- and Long-Term


Problems” lb discusses how State and local government spending and revenue pressures


between 1985 and 1991 forced many government entities to control program growth, cut


services, and raise revenues.


Because of the fiscal constraints, State and local budgets have tightened, hiring freezes


have occurred, and layoffs have sometimes been necessary. Consequently, welfare


progmms are typically understaffed. In many States, the number of eligibility workers


has not increased to keep pace with the burgeoning caseloads. The ratio of cases to


workers can be several hundred to one with typical caseloads ranging from a low of 123


AFDC cases in California per worker to as many as 509 cases for a typical West Virginia


worker.


The follow up process to reconcile data received from an IEVS match takes worker time.


With higher caseloads for a worker comes the potential for higher numbers of IEVS


discrepancy alerts to work. Since IBVS regulations do not allow more than 20 percent of


IEVS follow up to exceed the 45 day completion timefmme, States unable to process


IEVS alerts timely must do one or more of the following: 1) hire more staff to handle the


increased workload of follow up, 2) reduce the number of alerts workers have to


17

complete, or 3) improve the efficiency of alert resolution through systems or procedural 

changes. 

� Most Stales employ targeting smategies to limit IEVS alerts to workers. 

Recognizing the impact of follow up on workers, nearly all States have implemented 

targeting strategies to limit the generation of alerts to those most likely to impact the 

eligibility status or benefit amount. In many cases, targeting schemes function more to 

limit the follow up workload of workers than to focus review on those most likely to 

affect the case. Federal agencies approve targeting plans submitted by States with limited 

justification provided by States. In a few cases, States have been allowed to not follow Up 

on any information provided by an IEVS source (e.g., Montana’s approved targeting plan 

for the BEER match specifically precludes follow up of any BEER match information.) 

According to State responses, most States have implemented a targeting strategy for at 

least one IEVS source with most States targeting the BEER, IRS, and State wage 

databases. Five States reported they do not target any IEVS match. 

The types and extent of targeting strategies implemented by the States vary. Typically, 

the strategies involve one or more of the following: 

1.	 Use of Discrepancy Thresholds. Individuals or cases are selected for 

review if a difference exists between information (e.g., dollar amount of 

resource) provided by the client and the income information reported on the 

external source database. 

2.	 Use of Tolemnce Z7zreshoZds. TM strategy looks to see if the reported 

amount on the external database exceeds a specifki threshold or limit (e.g., 

all earned income greater than $500 for a given time period). 

3.	 EXclusion of Dupli~”ve Information from Follow up. If a certain type of 

information duplicates information from another data source already 

matched against, the information is dropped. 

4.	 Exclusion of Repetitive Infonu@”on fmm Follow up. If information has 

already been reported, this strategy would limit further reports to the 

worker from this source (e.g., wage from this employer is not reported to 

the worker beyond the fust alert and in subsequent quarters). 

5.	 Exclusion of Cetiain Infonna%ionBased on the Chanzcteriti”cs of the 

Individual Mdched. Examples of this type of targeting include following 

up on information only if the person is active when the information 

becomes available or if the person is between a certain age (e.g., not less 

than 18 and a student or over 65). 

18

If a State targets information items, a targeting plan for each data source must be 

submitted to the appropriate regional office of HCFA, ACF, and FNS. Justii3cations are 

to be based on the experience of the program in following Up on specific categories of 

information. Additionally, States are allowed to use other sources of data as alternatives 

to the IEVS data if the State demonstrates that the alternative source is as timely, 

complete, and useful for verifying eligibility and benefit amounts as the required source. 

While greater levels of automation and targeting can help to keep the IEVS alerts more 

manageable, follow up timeframe requirements may limit the ability of the worker to 

adjust for peak workload periods throughout the year. The IEVS regulations only allow 

workers to exceed the 45 day follow up timeframe for 20 percent of alerts and only for 

the explicit purpose of receiving verification from third party sources. Such pnXSUreS 

have negative consequences on a worker’s view of IEVS matching according to the 

Southwest IEVS Task Force. 17 Task force members believe IEVS “breaks the spirit of 

many with its impossible disposal timeframes and nonproductive outcomes. ” 

To address timeframe concerns, many States want the timing of IEVS reports to be 

flexible so that varying methods of match follow up cart be employed, depending on the 

staff resources available. For example, some would use this flexibility to delay reports 

from various IEVS sources so they can be compiled into a single document which could 

be viewed and resolved at redetermination. 

States want mom j%?xibility implementing IEVS requirements. 

After many years of experience operating I Most States Want More Flexibility 

IEVS, 

about the 

States 

need 

are 

for 

virtually 

more flexibility 

unanimous 

in ,,, How Often to Conduct Matches 

IEVS regulations. Recipient targeting is What Matches to ti~t , , , 

not considered by States to offer enough Targeting Flexibility 

flexibility. As figure 6 shows, States want Follow-up Timeframes 

other ; : ; ,.. the 

conduct, 

flexibility 

when 

to 

to 

choose 

conduct 

the 

those 

matches 

matches, 

they 020408080100% 

E

Percent of States 

the targeting methodology to use, and the ~ 1S93 O@ SuveyofStetes 

follow up timefmmes to meet. Figure 6 

Additionally, several States want some


relief from IRS security and contldentiality safeguards for match information and


flexibility during one-time events such as times of national disaster (e.g., hurricanes,


floods) or implementation of new computer systems.


States want flexibility from the current IEVS regulations for many reasons. The most


often mentioned reasons are because information from certain matches is considered to be


rarely usefid and some matches are not cost effective to follow up. Other reasons cited by


States (particularly for the BEER and IRS matches) am that match results are not returned


timely by the match source, match results reflect aged information, and workers do not


have the time to work IEVS information because of high workloads.


19

---------------- ----------- -- --

Most States want to discontinue one or more IEVS matches. 

Most States (76 percent) would discontinue routine use of one or more IEVS matches if 

IEVS matching were at the State’s discretion. States are unconvinced that all required 

IEVS matches are beneficial. 

As figure 7 shows, States would most like to discontinue the BEER and IRS match for 

appli&s and/or recipients. 

Most States Would Like To Discontinue 

the BEER and IRS Match 

States


100yaw. . . .. ......... ... .. ......” ............................ ... ...


-“”iii...(j-j 

60 

50 

40 -“””--”””-”--”””””””””””””””””’”””””””””””” 

30 

2(’) 1..... ... .... ...... ... ..... .... ........ . r 

10 

State Ssl SSA IRS SSA 

Wage Benefits Benefits Unearned Wages 

Income (BEER) 

Source:1993OIGSurveyofStates


Figure 7 

The IEVS was initiated, in part, because of the Grace Commission’s conclusion that the 

Federal and State governments had made several billion dollars in inappropriate payments 

in 1982 for assistance programs such as AFDC and Food Stamps. In establishing IBVS, 

the Congress intended that IEVS should augment existing State verifkation activities. 

However, some States (e.g., Texas, Arkansas, Louisiana, New Mexico, and Oklahoma) 

question the validity of the Grace Commission’s conclusions and the true impact IEVS has 

had on reducing inappropriate payments. 

Based on what representatives from the Southwest region’s I13VSTask Force consider 

were false assumptions made by the Grace Commission, “State agencies have b=n paying 

the price” since IEVS implementation by having to conduct IEVS matches they perceive 

m not cost effective or must be conducted in a manner which is too prescriptive. 

Variations in waiver authority among progmms and application of autho~ jixtiher 

limd State flexibility and weaken cooniindon among Fedeml pmgmzns. 

While it is clear that States want flexibility, neither the AFDC nor the Medicaid programs 

are able to provide much of this flexibility except under very restrictive conditions. For 

20 
example, the AFDC program can only grant a waiver for demonstration projects or as 

speciilcally defined in IEVS regulations (e.g., targeting approval, alternate IEVS sources). 

Since demonstmtion projects require a rigorous evaluation, few States elect to seek 

demonstration project waivers. Unlike AFDC and Medicaid, the Food Stamp program 

has the broad administmtive authority to grant waivers of regulations if the actions are 

expected to result in a more efficient and effective administmtion of the program (7 CFR 

272. 3(c)(l) (ii)) and if doing so would not be in direct conflict with the law. 

Because of the differences in waiver authority between the three programs, States 

experience different treatment by Federal oversight agencies. For example, a State may 

receive a waiver from the Food Stamp program extending the 45 day follow up timeframe 

for IEVS matches. Yet, this same State may not receive the same waiver from the AFDC 

program. This inhibits State flexibility because State programs are typically integrated by 

process or system. Consequently, treating Food Stamp recipients differently from AFDC 

recipients would be difficult. 

Alabama’s experience serves to illustrate the impact of waiver approval authority 

differences on a State’s flexibility, Alabama received a waiver for the Food Stamps 

program to not match certain categories of ap@cants and recipients (household members 

above and below certain ages were not to be matched); it did not receive AFDC approval 

for the same request. The AFDC program could not approve the waiver request because 

it lacked the authority to waive the IEVS regulatory requirement that all applicants and 

recipients must be matched with prescribed data sources. Alabama ofilcia.ls reported they 

were unaware that the AFDC program did not have the same waiver authority as the Food 

Stamp program. Because it was unrealistic to differentiate between AFDC and Food 

Stamps clients, Alabama did not exercise the Food Stamps waiver. This lack of consistent 

authority not only inhibited Alabama’s flexibility to achieve a perceived cost-efilcient 

match, it also reinforced the State’s belief that Federal agencies do not adequately 

coordinate with each other. 

Further, even with waiver availability for Food Stamps, responses suggest that not all 

States are aware certain IEVS regulatory requirements can be waived. To date, few States 

have sought waivers from the Food Stamp program. The only Food Stamp program 

IEVS-related administrative waivers granted, thus far, are for the following six States to 

extend the 45 day time limit for d or part of IEVS follow up actions: 

Arkansas - waiver expired September 1992


Texas - expi.mxlMay 1993


New Mexico - expired April 1993


Ohio - expires April 1994


Virginia - expires June 1995


Louisiana - effective October 1, 1993


(Several of these States did not utilize the waiverfiom FNS to extend the 45 allyfollow up 

for the Food Stamp program, because no waiver was receivedfor the Al?DCprogram). 

21

Another means of providing flexibility to a State’s IEVS is also permissible under current 

IEVS regulations; two States have approval allowing usage of alternate sources of IEVS 

information: 

California - expires L~tober 1994 

Georgia - expires December 1995 

California’s waiver allows matching with its Franchise Tax Board’s (IWB) interest and 

dividend fde rather than the routine IRS match. California does match with IRS once a 

year to supplement the FTB match. Approved for the Food Stamp program, Georgia’s 

waiver allows use of its “Clearinghouse” to access State wage, unemployment insumnce 

benefits, and SS1. The Clearinghouse provides online access to the worker. Provisions of 

the waiver require workers to access this information at certflcation, recertiilcation, and 

when changes are made to the case. 

Given States’ desires for increased flexibility, it is likely that a lack of awareness of the 

waiver process and the lack of authority of the AFDC and Medicaid progmms to grant 

administrative waivers have caused some States not to seek waivers for the Food Stamp 

program. As States become more aware of the Food Stamp pmgmm’s IEVS waiver 

authority and if AFDC and Medicaid obtain the authority to waive IEVS regulations, more 

States may seek waivers. 

We note that ACF has proposed two rule changes which, if accepted, will allow for more 

IEVS flexibility in the AFDC program. One rule proposes to modify the IEVS 

regulations to allow States the opportunity to present a plan for opting out of ineffective 

IEVS requirements. This rule change would permit a State to request a waiver of any one 

or more of the requirements for IEVS matching if the State is able to explain why the 

information from an IEVS match is not useful or cost effective in determining eligibility 

or payment for either applicants or recipients. The waiver request must include a plan 

which clearly demonstrates that an alternative to IEVS exists which would achieve the 

same or better results (“either in whole or in part”) as the IEVS pmgmm. The plan must 

also include a cost-benefit analysis or a request to use cost-beneficial alternative 

procedures, such as improved automation techniques and other practices, which would 

achieve similar results at lower costs. 

This rule overlaps policy proposed in another, broader rule allowing AFDC administrative 

waivers. The former rule was submitted for approval by ACF in case the AFDC 

Administrative Waiver regulation was delayed. Although both rules were proposed on 

May 21, 1992 for the Department’s clearance, neither have been acted upon. According 

to ACF oftlcials, the destiny of the rules is intertwined with welfare reform; thus, a 

timeframe for acceptance of the rule changes is unclear. 

The HCFA has not proposed any rule changes which mirror ACF’S proposed rule 

changes. According to HCFA oftlcials, HCFA is waiting for the outcome of ACF’S 

proposal before taking action. 

22

While most States can make their IEVS processes more efficient and effective, many 

report they lack the resources and management commitment to do so. 

“You have to understandourIEVS system. While certain things 

were visualized to work, they may never have gotten done. If 

they ran into a problem, it never got jixed. It’s like we just 

threw up our hunak, and it skays broken. “ 

- A State IEVS Coordinator 

Virtually all State IEVS coordinators (37) report IEVS could be made more efficient and 

effective in their State. However, most coordinators (28 of 37 responding) report a lack 

of data processing resources (e.g., systems programmers) to support many of these 

efforts. As one respondent stated, our “hearts are in the right place, but not our pocket 

books. ” Another stated, “because of the time spent making systems changes to adhere to 

new or changed Federal mandates, we have difficulty finding the resources to make 

systems changes that would help workers with IEVS. ” 

Several States remarked that IEVS was implemented with haste, which resulted in system 

weaknesses. One State’s computer programmer reported that IEVS was implemented 

under such time pressures that the State had to acquire the appropriate software from 

another State in order to meet the IEVS implementation deadlines. The result was an 

IEVS system which is “poorly documented, “ “riddled with inefficiency, ” and one which 

“has never worked the way it was supposed to. ” As an example, a ffle is created as 

program clients are added to eligibility roles; however, the program to remove them once 

participation has ceased does not operate. ‘I’M leaves many inactive clients on the fde 

which results in a degradation in the system’s performance and needlessly takes up 

valuable disk space storing old client information. Given the time and resources, this 

programmer would like to see the IEVS system redone. This same sentiment was 

reported by a programmer in another State. However, in his State, management 

supported efforts to modify or remove known deficiencies in its IEVS system. 

In addition to targeting, States can do more to reduce the volume of inconsequential alerts 

to workers. One way of doing this is to use computer systems to falter out information 

which has already been reported to the worker or which the worker should already be 

aware. As many as 19 States report they do not do enough in this area. SpecifkaUy, 

they do not maintain a historical IEVS database of information already sent to workers in 

order to check all new alerts to ensure that duplicative information is not sent to the 

worker. 

Ohio presents a good example of a State creatively using its computer system to limit 

production of alerts caused by inconsequential data. Speci.fkally, falters have been applied 

to keep bad match information from generating alerts to workers. A bad match is defined 

as invalid information attributed to the client’s SSN. This is the frost falter Ohio applies to 

any match. For all sources, if the worker has pnwiously determined and reported that 

23 
information from an employer or account is a bad match, the system will not send new 

data from the same employer or account as an alert. For technical reasons, however, this 

new data is available when accessed directly through the data exchange. 

Another way to make IEVS more efficient is to resolve information using a computer, 

rather than requiring a worker to resolve it. Specifka.lly, data which does not rquire 

independent vedlcation can be directly applied to a client’s record and a recalculation of 

benefits made without ever having to involve the worker. Presently, 34 States = 

automatically updating case records based on BENDEX (SSA benefits and Cost of Living 

Allowance (COLA)) and the data from SDX (SS1 benefits). Remaining States could 

reduce the workload of workers by implementing the necessary systems changes to 

automatically update client eligibility fdes with BENDEX and SDX data. 

The Computer Matching and Privacy Act permits agencies to directly apply information 

developed from a computer match (without independently verifying the resulting data’s 

accuracy) if the Data Integrity Board (DIB) for the Federal agency providing the data 

finds a high degree of conildence that the information provided to the recipient agency 

(e.g., States) is accurate. Such a ruling was made by the DHHS Data Integrity Board in 

1990 and 1991 certifying that SDX and BENDEX data is accurate. Thus, States are not 

required to independently verify data provided by SSA concerning the identification of 

individuals and the amount of benefits SSA pays. The DIE decision was based on an 

accuracy certifkation provided by SSA. (See Appendix C.) 

States have yet to be ~“ven access to adiiitional Fe&ml &a they repoti would be 

helpful. 

In our 1991 report, “The Income and Eligibility Verifkation System (IEVS): A Time for 

Reform?, ” we suggested additional Federal data could be made available to States such as 

Veteran’s Administration (VA) data, Federd employee salary and pensions, U.S. Savings 

Bonds, and State death records maintained by SSA. We made this suggestion based on 

State input that other Federal data could be useful in their eligibility determination 

processes. 

To date, no additional Federal data sources have been provided States. While we suspect 

access to these data sources could be helpful if utilized, we am reserved about requiring 

access when many States are failing to adequately utilize those data sources already 

required by IEVS regulations. 

Veterans Administration Benefits 

Some progress is being made in assessing the utility of providing States with greater 

access to VA data. Specifkally, ACF has been studying this issue. In 1991, ACF 

conducted a preliminary match using Tennessee’s and South Dakota’s welfare rolls and 

matched them against VA benefit data. The results were encouraging but limited because 

24 
the data could not be provided to States for follow Up and a determination of the impact 

on client eligibility. This was because the match was conducted for statistical purposes 

only, as provided for under the Computer Matching and Privacy Act. To allow States to 

follow up on the results of the match, the Computer Matching and Privacy Act requires a 

signed matching agreement between the involved agencies. It took over a year, but the 

requisite agreement was finally approved allowing ACF’S match using State and VA data. 

The VA provided ACF with a fde of its current VA active beneficiary records as of 

August 1993. At the same time, the States of New York, South Dakota, and Tennessee 

provided ACF with fdes of their current public welfare clients for this same time period. 

The match was completed and the results provided each of these States. Presently, these 

States are reviewing the information to determine the impact of the VA information on 

client benefits or eligibility. 

If the results show that access to the VA data would be helpful to States, ACF officials 

report they will likely seek legislation to require VA to process requests for information 

from States. 

Federal En@ovee Salary and Pensions 

Although the annual BEER record maintains wage and pension data for Federal 

employees, more current data on Federal employees and retirees is available. The USDA 

OIG in 1991 conducted a review by matching Federal employee records with Food Stamp 

recipient records in 15 States. 18 Based on the findings, the USDA OIG recommended 

that FNS determine which Federal information sources would be the most effective and 

efllcient for verif@g Fedeml employee and retiree income. The OIG suggested one 

alternative to BEER was data on Federal employees maintained by the Defense Manpower 

Data Center (DMDC). This organization receives income data on both active 

(semiannually) and retired (annually) Federal employees and military personnel for 

purposes of identifying Federal personnel who owe delinquent debts to the U.S. 

Government as required by the Deficit Reduction Act of 1982. 

The FNS Administrator agreed to examine the sources available and identify those most 

efilcient and effective for verifying Federal income and committed to work with DHHS in 

this pursuit. However, we were unable to determine if any action by FNS has taken place 

thus far. 

Asked about the utility of expanding State access to Federal employee data, ACF ofilcials 

expressed a desire to do a pdimimry statistical match as was done with VA data to 

determine if Federal employee salary and pension data looks promising and worthy of 

further evaluation. To date, no fm commitments have been made by ACF to test the 

utility of such data. 

25

U.S. Savinm Bonds 

While IEVS regulations require that the income veritlcation process include comparisons 

with income data from IRS and SSA, information available from these agencies does not 

include the value of U. S. savings bond holdings. Information available through IRS and 

SSA includes only data on the interest earned on redeemed savings bonds and on bonds 

paying periodic interest. Information on U.S. savings bond holdings is only maintained 

by the Department of the Treasury and is not currently available to the States. 

Without savings bond data fdes, States cannot determine whether applicants for public 

assistance progmms have unreported savings bond holdings. In 1989, GAO released a 

report entitled “Some Recipients Neglect to Report U.S. Savings Bond Holdings. ” The 

GAO conducted work in Massachusetts and showed the potential exists for individuals 

with extensive bond holdings to improperly establish Medicaid eligibility. Further, in the 

course of this and previous IEVS reviews, States expressed an interest in having access to 

this data. The Texas State Medicaid Director went as far as to send a letter to HCFA’s 

Medicaid Bureau urging that access be granted. In response to Texas’s letter, the regional 

Medicaid office reported that a proposal was submitted by the Medkaid Bureau for 

inclusion in HCFA’S legislative package for fiscal year @Y) 1992. The proposal was 

approved by the Department and was slated for inclusion in the Administration’s FY 1992 

technical amendments package. However, according to HCFA oftlcials, the proposal was 

never acted upon and was not reintroduced at a later date. 

State Death Records via BENDEX 

Although SSA maintains information reported by States on the death of individuals, this 

information is not presently shared with other States because many State contracts with 

SSA19do not allow SSA to redisclose death information to other States. Anticipating a 

reversal of this situation, the SSA has tidy built into its SVES query, a module which 

would provide death information on individuals States submit for verifkation. However, 

death information will continue to be suppressed until barriers (State redisclosure 

restrictions) are removed. 

The necessary authority to allow SSA to redisclose death data from States is contained in 

Section 5201 of the President’s Government Reform and Savings Act of 1993. It was 

introduced as H.R. 3400 in the House of Representatives and speci.fles that the Secretary 

may redisclose death data provided to the Secretary by the States or any subdivision 

thereof to any Federal agency or any agency of a State or political subdivision in 

accordance with the Social Security Act. 

Two reports completed by GAO and our Office of Audit Services support the utility of 

providing death data to States.20 

26

RECOMMENDATIONS 

Independently verifying client circumstances through computer matching with IEVS data 

sources helps to ensure the integrity of the eligibility determination process. Although 

IEVS matching is mandated by Federal law and regulation, our interviews with State and 

local users indicate the pmcticality and cost effectiveness of IEVS under current 

regulations is uncertain. The uncertainty and resulting controversy have resulted in IEVS 

implementation and monitoring problems which need to be addressed at many levels of 

government, from Federal oversight agencies to State and local welfare ofilces. 

This report reflects many of the problems which exist with IEVS (constraints on State IEVS 

flexibility and lack of coordination between oversight agencies to set consistent policy). The 

solutions to these and other IEVS-related problems are not as easily identifkd nor resolved 

because of 

1) the complexity of the issues; 

2)	 the involvement and interdependence of so many different Federal and State 

agencies and programs; 

3) the fiscal pressures and resource limitations impacting States; and 

4) the uncertainty and impact of welfare reform initiatives. 

As a consequence, it is important that Federal and State agencies assess the current status 

of IEVS and define the policy and operational changes needed to accomplish congressional 

intent. Critical to the deliberation process is the need for consensus and the full 

participation of both Federal and State agencies. Toward this end, we recommend the 

following: 

Recommendation #1: The Administration for Children and Families (ACF) and the 

Health Care Financing Administration (HCFA) should use appropriate mechanisms to 

address IEVS issues by: 

�	 examining existing IEVS requirements in each agency, at both the central 

and regional offke levels; 

�	 addressing the need for and deg~ of flexibility to be afforded States 

concerning IEVS; 

�	 identifying spedlc areas in which coordination between oversight agencies 

can be improved, resources can be consolidated or more effectively utilized 

to monitor IEVS, and procedures can be streamlined to minimize 

duplication of effort and contradictions among Federal agencies’ IEVS 

policies (e.g., waiver approval, targeting approval); and 

27 
�	 engaging outside, involved parties (e.g., the States, the Department of 

Agriculture, the OffIce of Management and Budget) to the fullest extent 

possible as IEVS issues (e.g., flexibility) and requirements are debated. 

Additions to HCFA’S and ACF’s deliberations should include, but is not limited to: 

1)	 Deftig, clarifying, and communicating to States the extent of flexibility 

afforded by regulations. Without knowledge of the available options, States 

are unable to fully consider alternatives to improve the efficiency and 

effectiveness of their IEVS processes. A determination of the appmPriate 

level of flexibility should reflect consideration of the results from FNS’s 

IEVS cost effectiveness study. 

2)	 Requiring States to monitor IEVS activity and submit periodic reports 

summarizing IEVS match activity, benefits, and success meeting Federally 

defined performance. 

3)	 Requiring States to match all recipients with IRS by September of each year 

and to ensure applicants are matched monthly. 

4)	 Reviewing the intent of targeting and determining whether a minimum level 

of follow-up is required. If so, what is that level? Should applicant 

targeting be allowed? 

5)	 Coordinating with Data Integrity Boards to monitor and influence computer 

matching for eligibility verifkation puqxxes. 

6)	 Establishing performance indicators to be used by Federal oversight 

agencies to assess State compliance with IEVS requirements and the 

effectiveness of IEVS matching. 

7) Developing a standard IEVS waiverhargeting approval process. 

8)	 Coordinating the establishment of a timeframe and action plan for assessing 

the utility of providing States with access to other Federal data sources. If 

the assessment shows promise, coordinate agency pursuit of legislative 

changes to allow State access. 

9)	 Acting as a forum or clearinghouse to gather and disseminate IEVS 

experience and best practices to the States. 

10)	 Encouraging States to periodically reexamine IEVS processes to ensure they 

are running as effectively and efficiently as possible. From our interviews, 

it was clear that real worker commitment to resolve IEVS matches within 

prescribed guidelines is more likely when the State’s IEVS system is 

perceived as accurate, reliable, and easy to use. The goal for any Stite is 

28 
todo everything possible, within budget limitations, toensurethequtity 

and effectiveness of its IEVS and the acceptance of its users. Towmd this 

end, there are many aspects of IEVS States should be encouraged to review. 

Examples include: 

�	 Where electronic interfaces are used, the system should ensure they 

are user friendly and understandable. Some areas to consider 

include the: 

ease of navigating alert/IEVS information screens,


clarity of alert,


clarity of error messages,


inclusion of sufficient information on data exchange screens


to avoid (to the greatest extent possible) workers having to


review case records or other reports to resolve an alert, and


adequacy of help screens.


�	 Policy, performance, training, and management feedback areas 

including: 

cla.riilcation of policies and performance indicators (e.g.,


expectations for matching, reporting of systems problems).


routine notilcation of field offkdusers of the results of their


efforts (matches resolved, dollar savings identifkxi,


percentage done within 45 days, etc.), and


IEVS training initiatives (extent of IEVS training and


frequency of updates).


� Systems enhancements including: 

use of automatic updating of eligibility files from external


data sources,


better use of targeting,


use of falters (to remove bad data, duplicated data, redundant


data, etc.),


use of priorities in the preparation of alerts for follow up,


inclusion of system generated notices to clients,


automatic system generation of IEVS information


automatically based on a scheduled client visit, and


use of SSA’S File Transfer Management System (FTMS) and


State Verifkation Exchange System (SVES).


Recommendation #2: The ACF should continue to seek a rule change which would 

allow the AFDC program an equivalent degree of flexibility currently available to the 

Food Stamp program with regards to IEVS (e.g., waiver of 45 day follow up 

timeframe). Since the AFDC, Food Stamp, and Medicaid programs are highly 

29 

— 
integrated, State flexibility is limited when each program is not able to allow the same 

degree of flexibility. States report it is unrealistic to implement an IEVS waiver for one 

program without being able to implement the same waiver for the other programs. 

Recommendation #3: The HCFA should seek regulatory changes for the Medicaid 

programwhich provide for IEVS flexibility equivalent to those sought by ACF for the 

AFDC program. As mentioned above, IEVS flexibility must be consistent between 

programs to be implemented effectively by States. 

Recommendation #4: The ACF and HCFA should inform State public assistance 

agencies of their willingness to work with them to strengthen automated eligibility 

verifkation activity. 

COMMENTS 

Comments on the draft report received from ACF, the Assistant Secretary for 

Management and Budget (ASMB), the Assistant Secretary for Planning and Evaluation 

(ASPE), SSA, and HCFA concur with both the findings and the general thrust of our 

recommendations. However, ACF, HCFA, and ASMB disagree with the need for the 

departmental governing council recommended in the draft report and the need for 

addressing IEVS issues prior to healthcare and welfare reform. Additionally, HCFA does 

not concur with the recommendation to seek a regulatory change to allow for IEVS 

flexibility consistent with that sought by ACF. 

The need for a governing council stemmed from our view of the complexity of the issues 

involved and the need for interzigency coordination and consensus regarding IEVS policy 

and compliance. The governing council was envisioned as a framework to promote and 

expedite leadership as broad policy (e.g., welfare reform) and technological 

(e.g., enhanced systems or new databases)zl changes occur. Both SSA and ASPE 

concurred with this nxommendation. 

The ACF, HCFA, and ASMB disagreed with the governing council approach primarily 

because existing interagency coordination and communication mechanisms were believed 

to be adequate. Based on the agencies’ assurances and to provide them maximum 

flexibility, we removed the recommendation of a governing council tasked with addressing 

IEVS issues; we modi.tied the recommendation to place the burden of addressing IEVS 

vulnerabilities with the appropriate agencies through existing communication mechanisms. 

With regard to the timing for addressing IEVS issues, the ACF, HCFA, and ASMB 

questioned the value of devoting limited staff resources to addressing IEVS at a time when 

welfare and health care programs are planning signifkant changes through reforms. 

While we recognize change will occur, we cannot in good conscience suggest that 

addressing IEVS weaknesses be postponed until reforms have run their course. Our view 

is based primarily on the Department’s role and responsibility to curb fraud, abuse, and 

program vulnerabilities and the realization that these reforms may take years to 

30 
implement, with nothing to suggest the importance of IEVS will diminish. In fact, IEVS 

activity may become even more critical. According to the President’s welfare reform 

propos~, eligibility vetilcation will take on a greater role since “computer matching of 

records and sharing of data among State programs and at a national level would be 

increased. ” 

Additionally, IEVS issues should be addressed without delay because consistent 

requirements and flexibility between the major welfare programs is important to those 

States which are in the midst of systems changes or planning such changes which may be 

constrained by existing policy. While ACF agrees to seek regulatory changes to provide 

an equivalent degree of flexibility found in the Food Stamp program, HCFA’s decision 

not to seek similar changes may burden States with IEVS regulatory requirements for the 

Medicaid population that may not exist for the food stamps and AFDC populations. Since 

most States’ automated systems integrate the IEVS process for all three programs, 

flexibility is limited if each progmm does not provide for similar matching and follow up 

requirements. The resulting disparity between program requirements exemplMes Federal 

agencies’ failure to coordinate adequately. 

Our concern and purpose in recommending that HCFA pursue regulatory change was to 

ensure that ACF’s and FNS’s efforts to provide States expanded IEVS flexibility would 

not be limited by the Medicaid program’s restrictions. We do agree with HCFA’s 

assertion that many States could make better use of targeting to increase the effectiveness 

of IEVS matching while decreasing the burdens of follow up. Our belief stems from 1) 

States’ admissions that IEVS processes could be made more efficient and effective by 

better use of targeting and 2) results from FNS’S study of the cost effectiveness of 

targeting IEVS matches. Although we agree that targeting affords States considerable 

flexibility, targeting regulations are restrictive in several respects (e.g., targeting rules 

require follow up of all targeted match results for recipients within 45 days of the match 

and targeting is not allowed for applicant matches). While we did not directly evaluate 

the impact of providing States with added IEVS flexibility, we found States wanting more 

flexibility and both ACF and FNS supportive of policy changes to address State desires. 

We believe that HCFA needs to work with ACF and the FNS to promulgate consistent 

regulations covering IEVS matches. The decision should be based on interagency 

discussion and consensus. If the Medicaid program has limited options for flexibility 

comparable to the AFDC or Food Stamp programs, no interagency discussion and 

consensus is possible and States may be unnecessarily burdened. 

The full text of agencies’ responses are in Appendix D. 

31

ENDNOTES


1. The AFDC progmm began in 1935 under Title IV of the Social Security Act as a 

way to assist orphans and widows with small children. Today, operating under 

broad guidelines from the Administration for Children and Families (ACI?), the 

program provides cash assistance to families with dependent children. The AFDC 

prog~ is funded jointly by the Federal and State governments through a 

matching formula that varies according to each State’s px capita income. In fiscd 

year 1992, progmm expenditures reached almost $22 billion, an increase of more 

than 70 percent from 1982. During this time, more than 13.6 million people 

participated - almost 25 percent more than in 1989. 

2.	 Enacted in 1965 as Title XIX of the Social Security Act, Medicaid is a Fedemlly 

aided, State-administered medical assistance program. Within a broad legal 

framework, each State designs and administers its own Medicaid program and sets 

eligibility standards and coverage policies. Medicaid essentiy =vices four 

populations: low-income families that lack health insurance, elderly people who 

need help with medical care, disabled elderly individuals who need long-term care, 

and nonelderly disabled individuals who need critical and long-term care. At the 

Federal level, the progmrn is administered by the Health Care Financing 

Administration (HCFA), which is part of the Department of Health and Human 

Services. Since 1982 Medicaid expenditures have grown nearly four-fold to total 

an estimated $120 billion in 1992. Participation in the Medicaid Progmrn has 

grown by over 40 percent since 1982 to reach 30 million recipients in fiscal year 

1992. 

3.	 The Food Stamp program exists to ensure that Americans have the means to 

purchase nutritionally sound diets. The program is administered by the Food and 

Nutrition Service (FNS) of the Department of Agricultme, FNS is responsible for 

giving direction to States through regulations that define eligibility nqdrements, 

benefit levels, and administrative rules. The program has financial, work related, 

and categorical tests for eligibility. The Federal government provides full funding 

for Food Stamp benefits, and the cost of administering the program is shared 

equally between the States and the Federal Government. Since 1982, Fede~ 

expenditures for the Food Stamp program have increased by more than 100 percent 

from $10.2 billion in 1982 to over $22 billion in 1992. Since 1989, participation 

has grown by an average of 2.2 million individuals annually, and in fiscal year 

1992, benefits were dMributed to more than 25 million individuals. 

4.	 According to the Government Accounting Offke (GAO) as reported in a 1992 

report entitled “Ineffective Federal Oversight Permits Costly Automated System 

Problems,” GAO/IMTEC-92-29, May 1992. 

32

5.	 “Time for a Change: Remaking the Nation’s Welfare System. ” Report of the WelfUe 

Simplifkation and Coordination Advisory Committee, June 1993. 

6. BENDEX is an automated data exchange system. Through it, the SSA provides State 

public welfare agencies with benefits and earnings information concerning applicants 

for or recipients of needs-based programs, mainly AFDC, Medicaid, and Food 

Stamps. Established in 1968, BBNDBX was intended to reduce State reliance on the 

manual system then being used to obtain information through the SSA district ofllces. 

At that time, the system had grown to the point where on an annual basis it was 

producing about 1,600,000 requests for information via SSA 1610 forms. The new 

automated approach was expected to be more economical and accurate. 

Through BENDEX, States make monthly or semimonthly requests for benefits 

information from SSA and, via computer tape or electronic exchange (wire-to-w&), 

receive it on a semimonthly basis within 2 to 4 we&s. The benefits information 

made available is drawn from SSA’s Master Beneficiary Record (MBR). For SSA 

Retirement, Survivors, and Disability Insurance (RSDI) beneficiaries, the benefits 

information indicates their SSA claim number and Social Security number, name, date 

of birth, payment status, and monthly benefit amount. It also indicatm whether or not 

an individual is eligible for benefits under the Medicare, Supplemental Security 

Income (SSI), Black Lung, and/or Railroad Retirement programs. However, in these 

instances, it does not provide the benefit amount. 

SSA maintains a control record of all the individual BENDEX submissions 

(accretions) made by the States and informs them of any changes affecting a 

beneficiary’s payment status, entitlement date, monthly benefit amount, State or 

county location, or Medicare coverage. Information on such changes is automatically 

incorporated with other BENDEX data being sent to the States. 

BENDEX also serves as a mechanism for States to acquire yearly earnings data from 

SSA’S Ea.mings Refenmce File @RF). Received through the IRS, BEER provides all 

reported earned income for individuals and indicates the name and address of their 

employers. 

7.	 President’s Private Sector Survey on Cost Control, Task Force Report on Low 

Income Standards and Benefits, dated May 6, 1983. 

8.	 The Food and Nutrition Service (FNS) of USDA published targeting regulations for 

the Food Stamps program in February 1988; the Administmt.ion for Children and 

Families (ACF) of DHHS published targeting regulations for the AFDC program in 

December 1988 (Federal Register, volume 53, No. 250); and Health Care Financing 

Administration (HCFA) of DHHS published regulations for the Medicaid program in 

March 1989 (Federal Register, volume 54, No. 40). 

9. Although July is the fust month when previous tax year data is available, there are 

limitations. According to IRS, the tax year data available in July is only about 60 

percent complete; August is about 80 percent; and not until September is the fde 

33 
10. 

11. 

12. 

13. 

14. 

15. 

16. 

17. 

18. 

typically 99 percent complete. As a consequence, States have to balance the


advantage (timeliness) of matching in July against the disadvantages of matching in


September (may miss unearned income not available in July).


The remaining 10 States were uncertain about the cost effectiveness of one or more


matches.


Prepared and conducted for FNS by Mathematical Policy Research, Inc. (MPR) under


contract No. FNS 53-3198-8-95, Task Order 7. FNS contracted with MPR to


estimate the cost effectiveness of conducting IEVS matches using a targeting strategy


compared to the situation in which the match is not conducted at all. All but one of


the IEVS matches in the demonstration used a targeting strategy.


COMPUTER MATCHING: Quality of Decisions and Supporting Analyses Little


Affected by 1988 Act, October 1993. GAO/PEMD-94-2.


“Guide for Cost/Benefit Analysis of SSA Computer Matches. ” Prepared by the


Operations Research and Match Evaluation Staff of the OffIce of Program and


Integrity Reviews, released March 1990.


Two reports released by the OIG discuss problems with the accumcy of SSNS in


welfare programs and organizations (public and private). The report entitled, “Extent


of Social Security Number Discrepancies” (OAI-06-89-01 120) was releiised in 1990


and found sign&ant SSN discrepancies in the ffles of public and private


organizations (e.g., banks, prisons). The other report entitled, “Effect of Unverified


Social Security Numbers on Public Assistance Programs” (OAI-09-86-00068) revealed


weaknesses in the SSN verifkation process administered by SSA. Based in part on


findings from this inspection, the SSA has made signifkant improvements in the SSA


verifkation process through implementation of SVES.


Rising costs and enrollment are severely straining Medicaid, the largest government


program financing health care for the poor. During most of the 1980s, Medicaid


costs grew up to 10 percent a year and, in 1989, began to rise even more mpidly. In


Fiscal Year 1992, Federal and State spending on Medicaid totaled $120 billion - a 29


percent incnase over the previous year’s total. In addition, the number of


beneficiaries fkom 1991 to 1992 increased an estimated 10 percent to about 30


million.


Some Jurisdictions Confronted by Short- and Long-Term Problems (GAO/T-HRD-94-


1).


Representatives from the five States in the southwest region (Texas, Oklahoma,


Arkansas, Louisiana, and New Mexico) met in 1992 to discuss IEVS concerns. The


group prepared an issue paper which they submitted to Federal program ofllcials.


Audit Report No. 27006-1-Te prepared by the USDA Offke of Inspector General,


March 1991.


34

19. Section 205(r) of the Social Security Act established a program in 1984, under which 

States voluntarily contract with SSA to furnish death certificate information 

periodically at reasonable costs. SSA shares this information with other Federal and 

State agencies administering Federally fimded benefits. Similar SSA-State agreements 

allow SSA to provide information for use in State funded progmms. Some State 

contracts will allow SSA to redisclose death information only with the written consent 

of the State. In an attempt to discourage such restrictions, OBRA 1993 amended the 

Internal Revenue Code to deny access to Federal tax returns or tax return information 

to States that continue their restrictions, effective 1994. (States may restrict 

redisclosure to Federal agencies only.) 

The proposed NPR legislation would require States to send death information to SSA 

and for SSA to make it available to other Federal and State agencies. SSA would 

make its technical expertise available at reasonable cost to other agencies paying 

Federal and Federally-assisted benefits so they can prevent erroneous payments. 

20.	 GAO’s Report was entitled “States Need Social Security’s Death Data to Avoid 

Payment Error or Freud” (GAO/HRD-91-73, April 1991). The OIG Audit Services 

report was issued in 1992 and entitled “The Social Security Administration Needs to 

Improve Procedures in Its Death Match Operations” (A-13-90-00046). 

21.	 The president’s welfare reform proposal contains a provision setting up several new 

databases. One of these databases is composed of employment information from 

required employer reporting of new hires. Such a database may drastically alter the 

importance of the State wage and BEER matches. 

Unrelated to welfare reform, SSA is proposing a Simpli&.d Wage Reporting System 

(STAWRS) which could impact IEVS. The proposed STAWRS would provide both 

State and Federal agencies with a single repository of timely and accurate 

wage/income information. Also, it would include data on Federal employees and 

reflect the most current death information. 

35

APPENDIX A 

SSA’S Ftie Transfer Management System and SVES 

Over the years, SSA has made efforts to modernize the process of exchanging information 

with States. Historically, the only method for a State to exchange files with SSA was through 

the sending and receiving of tapes by mail. Recognizing the possibility of using modems and 

phone lines (wire-to-wire) to pass data to and from SSA, SSA instituted in 1974 (in 6 States) 

the use of the Batch Data Transmission System (BDTS) which used Programmable Magnetic 

Tape Transfer Terminals (PMTTs). The PMTT was a piece of computer equipment which 

facilitated transfer of files. When a State had a file to transfer, the State would produce a tape 

and, rather than send the tape in the mail, would load the tape on the PMTT and transmit the 

files over phone lines. In 1982, the number of States using PMTTs was increased to 10. By 

1990, 15 States were using PMTTs. 

Instituted by SSA in 1989, the Wire Third Party Query (WTPY) system provided the same 

kind of information as the third party query (TPQY) requested from local SSA field offices, 

except the request went directly to SSA centrally using a tape to tape transfer or a computer to 

computer transfer. WTPY usually returns Old Age Survivors and Disability Insurance (RSDI) 

and the Supplemental Security Income (SS1) information back to the State in 24 to 48 hours 

through a batch process. This is a significant improvement over TPQY response time which 

can be from one to several weeks depending on SSA field office workload. Tennessee and 

California were the first States to use WTPY. WTPY was a system intended to lessen use of 

the manual TPQY process. Draft guidelines on WTPY were issued by SSA in 1989. 

In May of 1990, the PMTTs were discontinued and replaced with modems and a data transfer 

software product called National Data Mover. PMTTs were replaced because they were not 

adequate to meet the anticipated data exchange needs of SSA (e.g., expected data transfer 

traffic to be caused by use of WTPY by all States). SSA refers to the new system of data 

transfer as the File Transfer Management System (FTMS). SSA began purchasing and 

providing the necessary equipment and software, along with dedicated phone lines, to all 

States as funding allowed. The first twelve States to receive the FTMS were Arizona, 

California, Florida, Louisiana, Nebraska, New Mexico, New York, North Carolina, 

Pennsylvania, Tennessee, Texas, and Wisconsin. 

In an effort to address State concerns that inconsistent responses are sometimes provided 

depending on what exchange process and data base is queried, SSA has developed and 

implemented the State Verification and Exchange System (SVES). WTPY was a precursor of 

SVES and became an integral part of the new transfer system. Prior to October 1993, if a 

State wanted BENDEX information, a special file had to be prepared. If the State wanted a 

WTPY response, a special file had to be created. SVES lessens the workload of producing 

multiple files by allowing the State to send only one tile to get information from all of the 

various exchanges. All that is required is a code or codes indicating which exchange(s) is to 

be accessed for each individual record. These codes can vary by record. By using SVES, a 

State can accomplish any or all of the following queries with a single input: 1) SSN 

verification, 2) WTPY query, 3) BENDEX accretion/deletion, 4) SDX welfare number 

transactions, 5) SDX Interim Assistance Reimbursement (JAR) transactions, and 6) BEER 

requests. 

A -1

..........

p%%%%%%%~%m ....... .

---

APPENDIX B 

IRS BENEFIT COS I ANALYSIS 

07/01 /90 - 06/30/91 

FOR MATCH AGREEMENTS 07/01 /91 - 06/30/92 

cOST 

COSTS BENEFIT 

SAVINGS 

AL $237,523 $58,199 $179,3% 

$22,928 $175,976 ($103,048~ 

AK 

$13,859 $97,371 ($83,512) 

AZ 

$7,219 $98,781 ($91,562~ 

AR 

$206,132 $2s9,494 ($53,362) . . ...... $~o,057 ~~#~##~~#~~165,513- co 

# ~6M,112 ,4,,,,,,, $ ....... ~~ ,.:,,,.,,,,,.,,..,.,,, . . .

$458,599 

GA $32,078 $230,838 

HI $37,565 $9,085


ID $51,88 4 $167,03
 6


IL $2,724,91 2 $915,00
 2


IN $822,26 2 $1,148,13
 1


IA $963,4 20 $46,6
 68

KS $632,3 57 $7,5
 51


34 $382,3
 KY $35,4 18


$716,3	 52 $115,3
 77


$211,
 850


.$l,w~,lll I ,p*, , .!a,.r/- 1

B=--’

($198,760) 

$28,480


($115,15
 2)


$1,809,91
 0


COST EFFECTIVE ($32-’’,86
 9) z


$916,7. ’52 E NOT COST EFFECTIVE

$624,8 06
 ~ NO DATA or

($346,8
 84) INCOMPLETE DATA

$600,9
 75


($145,
 866)


.-,.


$226,300


($6,962)


$32,302


$2,230,732


$11,316,000 

$55,732 

$137,086 

$119,396


$184,586


$216,20
 0


($44,96
 8)


($117,77
 4)


($14,317) 

($965,736) 

$163,4
 12

$51,480 

($53,224) 

$223,482 

$489,882 

$49,290 

$16,010,196 

SOURCEIRS 

v-.
-,---


L.. $12,147


NH $35,877


NJ $3,154,083


NY $13,071,000 

NC $98,883 

ND $155,643 

OH $426,889


OK $249,337


OR $276,450


RI $32,83
 2


Sc $5,84
 4 

SD $3,283 

TN $2,193,980 

TX $450,572


VT $84,1
 30 

v A $4,000 

w A $650,544 

W $639,162 

WY $90,609 

$31,710,406 

$23,700


$19,109


$3,575


$923,351


$1,755,000 

$43,151 

$18,557 

$307,493 

$64,751 

$60,150 

$77,80
 0 

$123,61
 8


$17,60
 0 

$3,159,716 

$287,1
 60


$32,650 

$57,224 

$427,062 

$149,280 

$41,319 

$15,700,210 

B-1


II 
APPENDIX C 

SSA’S Statement of Data Accuracy Provided the DHHS Data 

Integrity Board for Its Ruling 

Statement
 oftheAccuracyofSDX/BENDEX Files


Eachyearinmid-November, theSocial Security Administration (SSA)provides
computer


files toState agencies thatindicateheamountofthecostofliving allowances
 (COLA) for


Title IIbeneficiaries andTitle XVI recipients. States usethisinformation toadjust
the


paymentsofindividuals intheAFDC, Medicaid,
andfoodstampsprograms.TheseCOLA


files
 thatSSA provides to States are covered under the SDX/BENDEX computer matching 

act agreement that was approved by the HHS Data Integrity Board and was effective on 

January 1, 1990. 

OMB issued temporary guidance on evaluating the reliability of data provided to States for 

COLA determinations. The following provides the pertinent information that OMB 

suggested would be needed for the Board’s analysis. 

o	 Descriptions of the SDX and BENDEX files follow. They describe how SSA 

acquires and maintains the data in these files, along with a description of the COLA 

files. The information provided to the States in the COLA files is limited to 

identification of the individual recipient and the amount of benefits SSA pays. 

o	 Therehave been no audits or risk assessments of the COLA files. However, in 

recent testimony to Congressional staff SSA stated that the BENDEX files are 

accurate. 

o	 No material weaknesses havebeenidentified ineither theSDX/BENDEX systems or


theCOLA files. 

o The computerprogramsusedtoperformtheCOLA adjustments arehighly
reliable.


Theseprogramshavebeenoperational foranumberofyearsanddo notrequire
an


annualchangetothecomputerlogic.The onlychangerequired
 isa changetothe


paymentamountandthisisvalidated bothmanually andby an automated
validation


process.


o The SSA Personnel Security programiseffective. Employeeaccess
isrestricted


through theuseofPersonal Identification Numberstoonlythosefiles
 neededby


employees toperformtheir jobduties. An auditrail systemmaintains
 information


aboutemployees who haveaccessed
files.


o The SSA Security PlanisinplaceforSSA Systems.The associated security
 riskis


low. As stated above,employeeaccess todataisrestricted. The possibility
 ofnon­


employeeaccess isremote.Physical access tothebuilding housingthecentral
 data


processing facility forSSA isalsorestricted. Employeeswithaccess tothis
building


arerestricted tocertain
 areas.


c-1 
o	 It is SSA management’s position thatboththeSDX andBENDEX COLA files reflect


ahighdegreeofdataintegrity andaredelivered totheStates ina timelymanner.


SSA estimates thatbothCOLA files areinexcess
of99 percent accurate. Most of 

the inaccuracy is related to the differences in timing between when the COLA tapes 

are produced and when the January payment tapes are sent to the Treasury 

Department. States are informed of subsequentpayment changes by later 

SDX/BENDEXfiles. 

Following is additional information about the SDX and BENDEX systems and the COLA 

files that are produced. 

BENDEX 

The Beneficiary and Earnings Data Exchange (BENDEX)file is extracted from SSA’Smaster 

beneficiary record (MBR). The MBR data base is the source for determining Title II benefit 

payments to which individuals are entitled. Information to establish entitlement is received 

directly by field ofllces from the claimant or his or her authorized representative and verified 

with documentary evidence. 

The data base is maintained through beneficiary reporting and numerous postentitlement 

operations such as earnings and student enforcement, death match and accountability reviews. 

These operations are an additional measure for monitoring continuing beneficiary entitlement. 

Debit and credit actions are maintained in the data base to update the records. 

The BENDEX computer system operates without personal intervention. BENDEX 

information is released to States in response to requests by the State agencies for information 

on individuals who are receiving payments under the AFDC, Medicaid, food stamps, or 

other State administered programs. Personal identifying information is submitted by States, 

and SSA employs a matching criteria which must be met before data are released. States are 

required to disclose the information only to those with a need to know. 

Regular BENDEX files are released twice a month to States; any changes occurring are 

reported automatically in the next monthly BENDEX run. The BENDEX files are either 

electronically transmitted or sent via an express mail carrier. 

The cost-of-livingadjustmentfile is electronically produced by SSA in mid-November each 

year. This file provides the amount of increase to be paid on January 3 to Title 11 , beneficiaries who are also receiving payments under a State administered program. 

In 1990, the COLA fde was provided to States on November 19. With the manual and 

systems checks built into the BENDEX system, SSA believes the COLA fde to be highly 

accurate. 

c-2 
The State Data Exchange (SDX) data that are sent to the States are extracted from the 

Supplemental Security Record (SSR) data base. The information on the SSR data base is 

manually input by SSA’S district oftlces with managerial/supervisory checks. Before data are 

input to the SSR, the district of!lces are required to verify and maintain the verification (e.g., 

marriage/birth certificates, pay stubs, etc.) in the claimant’s folder that is retained in the 

servicing district ol%ce. A periodic reverification (the frequency depends on the particular 

case) of the information on the SSR data base is required. This requires direct contact with 

the Supplemental Security Income claimant. 

Once the district oftlce transmits the data to the central SSR data base, there is an extensive 

computer edit process that verifies the accuracy and integrity of the input. Various input 

fields are cross-checkedwith each other to ensure consistencyof the data, Shouidthe input 

fail the edit process, the case is referred back to the district ofilce for correction. 

Whenever a change in computer program logic is made to the SSR or to the SDX, a 

validation plan must accompany the change. This plan ensures that any changes are 

thoroughly validated before the change is actually made to the “live” computer system. 

Changes tothecomputerprogramlogic forboththeSSR andtheSDX areprohibited
 shortly

before thecostofliving change, thereby, addingassurance totheintegrity
 ofthecostof


living
 process.


The cost of living change does not involve a change to the computer logic. It basically 

involves a change to the money amount. Even though this change is not as extensive as a 

change in the logic, it is validated both manually and by an automated validation process 

before the change is made to the “live” system. 

The SDX cost-of-living adjustment file is electronically produced by SSA in mid-November 

each year. This file provides the amount of increase to be paid on December 31 to Title 

XVI recipients who are also receiving payments under AFDC, Medicaid, or food stamps. In 

1990, the SDX COLA file is to be provided to States on November 27. SSA believes this 

file to be highly accurate. 

Prior to the cost of living process, each SSA regional ofilce is alerted to the cost of living 

schedule and, in turn, alerts the States. This is to detect any non-receipt problem at the 

earliest possible date. 

c-3 
APPENDIX D


TO:	 June Gibbs DLUWII 

Inspector General 

SUBJECT :	 OIG Draft Report: “Reforms Are Needed In State Income 

apnd Eligibility Verification Systems, “ OEI-06-92-0008Q 

FROM : *&e&


Assistant Secretary 

for Children and Families 

We have reviewed the subject draft and consider the Income


Eligibility verification System (IEVS) process de*riPtion to be


a comprehensive presentation which captures the essence of the


issues States have regarding use of the system in their efforts


to address income and verification activities for the entitlement


programs. As the OIG Study points out, there are operational 

weaknesses in the IEVS. Similarly, the study correctly 

identifies several of the major problems confronting the States 

in their administration of welfare programs such as fiscal


pressures, resource limitations, and the complexity of the =Y


policy issues that prevail in the States. Additio-llY~ states


are contending with the impact of welfare reform initiatives. We 

will continue to assist States as they Confxmnt the IEVS issues 

highlighted in the study and emphasize the importance of the 

required matches (or alternative matches approved under the 

regulatory waiver authority) . Furthermore, we will maintain our


hteragenCy working relationship with the Food and Nutrition


Se-ice (FNS).


In response to OIG recommendations 1, 2, and 4 (we have not 

addressed recommendation 3 which pertains to HCFA) we offer the 

following comuents: 

~ATIOXW #1: The Assistant Secretary for Management and


Budget (Mm) should establish, with the Administration for


Children and Families (ACF), the Health Care Fi~nC~n9


Mm.inistration (HCFA), and the Social Security Administration, a


departmental IBVS Governing Council.


ACF RBSPONS~: We do not concur. We believe 

agencies, including FNS, should address IEVS 

existing interagency coorciination mechanisms 

the creation of a Department level council. 

recommendation considers welfare reform and 

the relevant Federal 

issues through rather than through 

Although the 

acknowledges that 

changesi will be occurring, we believe that it is premature to 

D-1

Page 2 - June Gibbs Brown


devote substantial resources to tackle IEVS issues while myriad


welfare reform options are being evaluated. We need not place


additional burdens upon States or the affected Federal agencies


during this period of transition to a new system.


RECOMMENDATION #2: ACF should continue to seek a rule change 

which would allow the AFDC program an equivalent degree of 

flexibility currently available to the Food Stamp program with 

regards to IEVS (e.g., waiver of 45 day follow up timeframe) . 

ACF RESPONSE: We concur and will pursue options to accomplish


this change. An equal degree of flexibility will enable the


States to coordinate data exchange activities for all programs in


a consistent fashion.


R.EC~ATION #4: ACF and HCFA should inform State public


assistance agencies of their willingness to work with them to


strengthen automated eligibility verification activity.


ACF RESPONSE: We concur. Staff from ACF, HCFA, and FNS have


worked with States in the past on IEVS issues and will continue


to do so in the future.


We appreciate the opportunity to review and comment on the draft


report. If you have any questions or wish to discuss these


conments further, please contact Robert Laue on (202)401-5040.


D-2

DEPARTMENT OF HEALTH & HUMAN SERVICES JiLe d me Seaeku# I I


MEMORANDUM TO THE INSPECTOR GENERAL


From :	 Kenneth S. Apfel &
 Assistant Secretary for Management and Budget


Subject:	 OIG Draft Report: Reforms Are Needed in State Income 

and Eligibility Verification Systems--OEI-06-92-OO080--

Comments 

In response to your request for comments we have reviewed the


draft inspection report, Reforms Are Needed in State Income and


Eligibility Verification Systems (IEVS).


We concur with the report’s second and third recommendations,


that ACF and HCFA should seek regulatory changes to provide IEVS


for the AFDC and Medicaid programs, a degree of flexibility which


is equivalent to that currently available to the Food Stamps


program. This flexibility will allow these programs to decide


which matches to run, as well as the timing on when to conduct


the matches. Our understanding is that ACF has already begun the


process of drafting such regulations for the AFDC program.


We also agree with the report’s final recommendation, that ACF


and HCFA should inform State public assistance agencies of their


willingness to work with them to strengthen automated eligibility


verification activity.


However, we are troubled by the report~s focus given the change


that is transpiring in the context of welfare reform. Rather


than serving as a forum for discussing old paradigms, this report


could be far more useful if it sought to direct attention towards


new opportunities and solutions to problems of eligibility


verification.


Rather than simply accepting as valid all of the existing data


matches, and suggesting that States should simply better use


existing matches, the report could recommend using States as


laboratories, by having States request and participate in


demonstrations to evaluate:


�	 whether IEVS should remain the preferred approach, or 

whether other approaches exist to better accomplish the same 

goals, especially in the context of proposed welfare reform 

changes; 

�	 under IEVS, what matches are or aren’t effective, and why 

some States, like Califomia.i.fipd matches like IRS and BEER 

effective when the majorlcy vi-~iates rate them as 

ineffective; and,


D-3

As 

�	 whether statistical techniques could be used to improve the 

utility of data from matches that States now find 

ineffective. 

What is also needed but not provided by the report, is empirical


evidence about the cost effectiveness of the different IEVS


matches. We understand that this was what ACF had in mind when


they originally requestea that OIG examine IEVS. Such data,


which may need to be the subject of a subsequent study, would


allow an evaluation in terms of dollars and outcomes, to


determine whether we should propose legislation to no longer


require those matches found to be ineffective. Unfortunately,


the current report only provides State perceptions of IEVS cost


effectiveness, making objective decisions difficult.


Lastly, we would like to state our opposition to the report’s .


initial recommendation, that the Assistant Secretary for


Management and Budget (ASMB) should establish, with ACF, HCFA,


and SSA, a departmental IEVS Governing Council. Creation of such


a council:


�	 Does not address the kev issue for States. Specifically, 

the States (and the Department) would like to increase 

States’ flexibility to match against those data bases which 

produce maximum results (and not to have to match against 

data bases viewed as producing little or no result), and to 

tailor the verification process to account for variability 

in workload. All that is needed to address this issue, as 

noted above, is to change existing regulations; 

�	 Is unnecessary and the Council would lack the authoritv to 

reuu ire the OPDIV’S to actuallv do anvthinq. The Federal 

programs affected by IEVS already communicate with each 

other. Creation of a governing council may or may not 

increase such communication, but unless ASMB is vested with


authority to require the OPDIV’S to adopt certain pOliCieS,


which is not the case under the recommendation, the Council


is unlikely to be any more or less effective than are


existing communication channels; and,


�	 ~dvenvisioned lavers w o are alr 

part of the debate on issues in this area. We expect that 

in the near.future the Social Security Administration will 

become an independent agency, which would leave only ACF and 

HCFA on the Council. In addition, the Council does not 

include as members other key players, such as the Department 

of Agriculture. 

In addition, IEVS is also under study as part of welfare reform.


Until the Administration’s package is finalized, any


recommendation for a governing council would be premature., For


this and the reasons above, we believe that creation of yet


another coordinating body, to guide IEVS policy, should not be


pursued.


D-4

On a technical note, we suggest dropping from the first


recommendation the bullet which suggests the Governing Council


should take a proactive role by acting in an advisory capacity to


the welfare reform task force concerning eligibility verification


issues. As the task force is nearing the end of its mission to


draft a welfare reform package, this role will shortly be


overtaken by events.


D-5

Date 

From 

Subject 

To 

.17.%&q 

BruceC. Vlade


Administrator


Office of Inspector General (OIG) Draft Report “Reforms Are Needed in State 

Income and Eligibility Verification Systems,” OEI-M-92-00080 

June Gibbs Brown 

Inspector General 

We reviewed the abc)ve-referenced rept in which OIG found continued Income ant 

Eligibility Verification Systems (JEWS) operational weaknesses whichdirectlyimpact 

the degree to which states are pe~mming da~ ma~hes and the utili~ of IW@ed 

IEVS SOUr@s. 

We agree with rmmmendations 1 and 4, defer ~mment to the Administration for 

Children and Families regarding recommendation 2, and nonconcur with 

recommendation 3. 

Our detaikd eanrnents on the reprt’s findings and recommendations are attached 

for your consideration. Thank you for the opportunity to review and comment on 

this draft report Please contact us if you would like to discuss our eanments. 

Attachments 

D-6 
Office of Insuector General (OIG) Draft Rewm 

“ReformsAre Ye.ededin State Income 

and Eli~ibilitvVerificationSvstems” 

(OEI-06-92-00080) 

OIG Recommendation 1 

The Assistant Seaetmy for Management and Budget (ASMJ3) should establish, with the 

Administration for Children and Families (ACF), the Health Care Financ~g 

Administration (HCFA), and the socia] security Administration, a departmental Income 

and Eligibility Verification Systems (IEVS) Governing Council. 

HCFA Rewmnse 

HCFA SUppOrtSthe recommendation mat we ‘take a proa~e role in streamlhing the 

welfare eligibility determination pr~ by offering to act in an advisory capai5ty to the 

welfare reform task force concerning eligibility verification issues.” However, we “donot 

concur with the need for a new mncd. We beheve tie issues concerning IEVS can be 

reaokd by working with the existing IEVS interagency work group which ACF 

coordinates. 

‘While this report reaffirms findings from prior OIG and HCFA review we believe 

many of the current problems with State IEVS have ~]ated because of serious State 

budgetrestraints resourcelimitations andprogram growth. We believe thatestablishing 

a full-fledged council would further strain States’ resmurcq especially with the ongo~g 

effort dedicated to heakh care refo~. ne report affirms our concerns regarding the 

strain on limited State resou~. For e~ple, it includes a quote from a State worker 

=Ying,“We can barely issue benefits in a t,imelYmanner, let alone do things like IEVS 

match+ whichare real nice but impractical.n 

QIG Recommendation 2 

ACF should continue to seek a ~le change which wou]d wow the Ad to Families with 

Dependent Children (AFDC) program an equivalent degree of flexibility currendy 

available to the Food Stamp program with regards to IEVS (e.g., waiver of 45-*% 

followuptimeframe). 

WF A Resuonse 

HCFA defers comment to ACF, the action agency for this recommendation. 

D-7

OIG Recommendation 3 

HCFA should seek regulato~ changes for the Medicaid program whichprovidefor 

IEVS flexibilityequivalent to those sought by ACF for the AFDC program. 

HCFA Response 

We do not concur. In 1989, we amended the IEVS regulations and provided the States 

more flexibility through targeting (or selective use of data). We continue to believe that 

these regulations provide sufficient flexibility for States to make IEVS cost-effective. 

States are authorized to sekxt the most useful IEVS data sources and only follow up on 

those match results that have proven to be effective. 

We reconsidered revising the regulations to provide States further flexibility and 

discussed it with the interagency work group. We considered permitting a waiver of the 

Beneficiary Earnings Exchange Rewrd match. We decided not to pursue this change 

because we believe that many of the State/Federal ~nclusions of cost-effectivi%ness were 

based on program experience and perception rather than cost-benefit studies. We 

waited for the results of a Food and Nutrition SeMce (FNS) study of targeting 

methodologies before making a decision. The FNS study found that IEVS is wsteffective if States target the uses of the data appropriately. We also believe that we 

should defer initiatives for new regulation changes at this time because of the current 

discussionof health care reform. Decisions on health care reform may fundamentiw 

changeMedicaid’s role in IEVS. 

We believe that we should wntinue to work with States to implement targeting strategies 

that make IEVS less resource intensive. With the proper strategy, States can use the 

program in a cost-effective manner. We”will be flexiile in approving State targeting 

plans. 

91G Recommendation 4 

ACF and HCFA should inform State public assistance agencies of their willingness to 

work with them to strengthen automated eligibility verification activity. 

HCF A resoonse 

We wncur. We will send a wpy of this report to our regional offices (ROS) and ask 

them to share it with the IEVS coordinators in each State. Our RO staffs have made 

themselves available to work with the States on “automation” issues and eligibility 

verification in the past and will continue these efforts. Further, our Central Office staff 

in the Division of Payment System& Medicaid Bureau, works closely with the States to 

improve State use of automated eligibility systems. nere is also a Systems Technical 

Advisory Group devoted to automationissues. 

D-8

Date: 

From: 

subjeCt: 

To: 

I


MAY27 1~ 

Shirley S. Chater 

Commissioner of Social+b~om. we ~eeded 

Office of Inspector General Draft Report, 

In State Income and Eligibility Verification Systems” 

(OEI-06-92-00080) --INFO~TION 

June Gibbs Brown 

Inspector General 

If we can be


Attached is Our response to the SUbje::o:POrtof further assistance, please let us .


Attachment:


SSA Response


D-9 
1? ~
 AL SECURI E OFFICE OF 

PEC!TOR GENERAL DRAFT REPORT. nREFORXS ARE NEEDED IN STATE 

~ 0EI-06-92-OO080 

We appreciate the efforts of the Office of Inspector General


(OIG) in assessing the current status of State Income and 

Eligibility Verification Systems (IEvS)- We concur with the four 

recommendations for the assessment and improvement of IEVS. The 

findings and conclusions in the report substantially mirror the 

Social Security Administration’s (SSA) experience in dealing with 

States’ users of IEVS. The following comments offer some 

suggestions for improving the focus of the report.


We believe that the outcome ox the Wage Reporting Simplification 

Project, specifically the proposed Simplified Tax and Wage

Reporting System (STAWRS), could have a significant impaCt On 

IEVS and suggest that the final OIG report reflect this point.


The report indicates that many States are not taking advantage of 

various Federal and State data sources (computer matching 

opportunities) because they believe it is not cost-effective to 

do SO. Some States claim that the IEVS process provides 

inaccurate or untimely data, does not include certain Federal 

data, and lacks the flexibility necessary to effectively and 

efficiently implement IEVS requirements. It should be noted that 

the proposed STAWRS would provide both State and Federal agencies 

with a single repository of timely and accurate wage/income 

information. It would also include data on Federal employees and 

reflect the most current death informational By maintaining this 

information in one place, State and Federal agencies could avoid


having to perform multiple computer matches that are costly and


time-consuming.


In addition, STAWRS is expected to provide users with Social


Security number (SSN) verification services (validation of name


and SSN combinations) which is expected to result in improved


record keeping. In short, we believe that STAWRS could help


alleviate many of the IEVS problems cited in the report.


There seems to be an inconsistency in the situation described


with respect to State use of IEVS data, and the suggestion that


more data from additional sources should be made available to 

States. If the States are unable to use the data they are given 

now, it seems anomalous to suggest that they be given even more 

data. We believe this apparent discrepancy needs to be further 

clarified. 

‘km? State5 do not permit SSAto redi sclose the death data they give SSA to other States. me 

Inteml Revewe Cedewas animdedby the LlsrsibusBudgetReconciliation Act of 1993. P.L. 103-66. to preclude 

disclosureof Federal tax data to States that restrict redl sclosure of their death data to otherfederal 

agencies. Hwever. the law does not require States to authorize redlsclosure by SSAto other States. A 

pendingbill. H.R. 3400. if enacted, wuld remedy this. 

D-10

L 

OIG Recommendation


The Assistant Secretary for Management and Budget (ASMB) should


establish, with the Administration for Children and Families


(ACF) , the Health Care Financing Administration (HCFA), and SSA,


a departmental IEVS Governing Council.


SSA Comment


We concur. The problems delineated in the report are well known


to SSA’S match coordinators. In our efforts to comply with the


Deficit Reduction Act of 1984 and the Computer Matching Act of


1988, we work closely with the States to maintain matching


agreements and operations, as prescribed by each Act. For


example, we recently sent a third annual request to all SSA


Regional Commissioners for updated cost/benefit data and analyses 

from States on matching programs subject to IEVS regulations. We 

also raised issues about State priorities and resources and the 

need to be proactive in seeking solutions to under-utilization of 

computer matching at the State level. A helping hand to the


States at the staff level, however, has had limited effect.


Accordingly, we believe the establishment of an IEVS Governing


Council is an essential first step to focus attention on State


solutions.


SSA took this top-down approach to the organization and


management of its own automated data exchange and matching


activities in 1984. Some results include the current SSA Cost


Benefit Guide and relative state-of-the-art systems technologies


and methodologies for planning, implementing and evaluating IEVS


type matches. ,IJnderthe aegis of the Governing Counsel, SSA’S


experience could be replicated in the States. SSA can share its


methodol~qies for developing a standard IEVS waiver/targeting


approval process with the Governing Counsel, including computer


screening techniques and related systems enhancements.


We believe SSA should have primary responsibility for providing


necessary security consultation to the Governing Council. SSA


already has the major security responsibility in this area, and


as such, possesses the experience necessary to ensure that IEVS


security requirements are not made more complicated, but rather


consolidated and simplified.


OIG Recommendation


ACF should continue to seek a rule change which would allow the 

Aid to Families with Dependent Children (AFDC) pro9ram an 

equivalent degree of flexibility currently available to the Food 

Stamp program with regards to IEVS (e.g., waiver of 4S day follow 

up timeframe) . 

I 

D-n 

— 
Infom 

3


~sA cO-ent 

we cOnc~r” 

for the Medicaid ‘r~~~~~t by


OIG Reco~ndatioS to those
 evivalent


HCFA should seek regulatory flexibility
 changes


which provide for lEVS


I ACF for the AFDC program.


sSA Co-ent 

we concur. 

agencies of


Public assistance

OIG Reco~endation
 automated


ACF and HCFA should to work with.
 ‘tat~hem to strengthen


their willinmess
 eligibi.~ityverification actlvlty­


~e cOncur” 

~-12


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