Human Service Programs: Demonstration Projects Could Identify Ways to Simplify Policies and Facilitate Technology Enhancements to Reduce Administrative Costs
Published: 2006-09-19T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The cost of administering human service programs has been a long-standing concern among policy makers interested in ensuring that federal programs are run in a cost-efficient manner so that federal funds go directly to helping vulnerable people. Little is known about how administrative costs compare among programs, or about opportunities to better manage these costs. GAO looked at (1) how administrative costs are defined and what rules govern federal and state participation in funding these costs; (2) what is known about the amounts of administrative spending and how they have changed over time; and (3) what opportunities exist at the federal level to help states balance cost savings with program effectiveness and integrity. GAO's review included seven programs: Adoption Assistance, Child Care and Development Fund (CCDF), Child Support Enforcement (CSE), food stamps, Foster Care, Temporary Assistance for Needy Families (TANF), and Unemployment Insurance (UI). To address the questions, GAO reviewed laws, analyzed spending data, and visited five states.
section_title: What GAO Found
paragraphs: The statutes and regulations for the seven programs define administrative costs differently, even though many of the same activities are performed to administer the programs. The laws for each program also include different mechanisms for state and federal participation in funding administrative costs, including matching rates, block grants, and spending caps. The seven programs combined spent $21 billion on administration, as defined in law, making up about 18 percent of total program spending in fiscal year 2004. However, amounts varied widely across the programs and states. Administrative spending varied from 2 percent in CCDF to 58 percent in Foster Care, with the exception of CSE in which all program spending is considered administrative. Between fiscal years 2000 and 2004, administrative spending increased in five of the seven programs, generally at a lower rate than total program spending. The federal government may help balance administrative cost savings with program effectiveness and integrity by simplifying policies and facilitating technology improvements. Simplifying policies--especially those related to eligibility determination processes and federal funding structures--could save resources, improve productivity, and help staff focus more time on performing essential program activities. By helping states facilitate technology enhancements across programs, the federal government can help streamline processes and potentially reduce long-term costs. Over the past 20 years, many attempts to streamline processes across programs have had limited success due, in part, to the considerable challenges that streamlining program processes entail. GAO believes one challenge in particular--the lack of information on the effect streamlining efforts might have on program and administrative costs--is thwarting progress in this area.

section_title: Letter
paragraphs: The federal government spends hundreds of billions of dollars annually on  The federal government spends hundreds of billions of dollars annually on  programs that support vulnerable people. While most of this money is  programs that support vulnerable people. While most of this money is  used for direct benefits and services, such as cash assistance or child care  used for direct benefits and services, such as cash assistance or child care  services, a portion of the money also goes toward the cost of  services, a portion of the money also goes toward the cost of  administering the programs. Spending on administration has been a long- administering the programs. Spending on administration has been a long- standing concern among policy makers interested in ensuring that federal  standing concern among policy makers interested in ensuring that federal  programs are run in a cost-efficient manner so that federal funds go  programs are run in a cost-efficient manner so that federal funds go  directly to helping vulnerable people. While each of the human service  directly to helping vulnerable people. While each of the human service  programs typically has some information available on the costs associated  programs typically has some information available on the costs associated  with administrative activities, little is known about how these  with administrative activities, little is known about how these  administrative costs compare among the programs and whether  administrative costs compare among the programs and whether  opportunities exist to better manage these costs at the federal level. The  opportunities exist to better manage these costs at the federal level. The  importance of administering federal programs in an efficient manner is  importance of administering federal programs in an efficient manner is  heightened by the fiscal challenges facing the nation and the need to  heightened by the fiscal challenges facing the nation and the need to  update the federal government’s programs and priorities to meet current  update the federal government’s programs and priorities to meet current  and future challenges.  and future challenges.
Both federal agencies and states play important roles in administering and  Both federal agencies and states play important roles in administering and  funding many of the federal programs that support vulnerable people.  funding many of the federal programs that support vulnerable people.  These programs may have different goals, but all were established to assist  These programs may have different goals, but all were established to assist  vulnerable populations, and as such, the federal and state administrators  vulnerable populations, and as such, the federal and state administrators  are tasked with the common goal of serving those eligible for program  are tasked with the common goal of serving those eligible for program  benefits and services. Likewise, federal and state administrators must  benefits and services. Likewise, federal and state administrators must  ensure that funds allocated for program benefits and services are provided  ensure that funds allocated for program benefits and services are provided  only to those who are eligible.  only to those who are eligible.
To better understand these issues, we examined: (1) how administrative  To better understand these issues, we examined: (1) how administrative  costs are defined in selected programs and what rules govern federal and  costs are defined in selected programs and what rules govern federal and  state participation in funding these costs; (2) what is known about the  state participation in funding these costs; (2) what is known about the  amounts of federal and state administrative spending for selected  amounts of federal and state administrative spending for selected  programs and how they have changed over time; and (3) what  programs and how they have changed over time; and (3) what  opportunities exist at the federal level to help states balance cost savings  with program effectiveness and integrity. As agreed with your office, we  focused our study on seven key programs: Adoption Assistance, Child  Care & Development Fund (CCDF), Child Support Enforcement (CSE), the  Food Stamp Program, Foster Care, Temporary Assistance for Needy  Families (TANF), and Unemployment Insurance (UI). These programs are  among the largest programs serving vulnerable populations and each has  annual federal outlays of over $1 billion. Each of the programs also is  funded in part through state contributions.
To address all of our research questions, we interviewed federal officials  from each of the programs and the Office of Management and Budget  (OMB), and we conducted state and local interviews in California,  Maryland, Michigan, Ohio, and South Carolina. We selected these states to  provide a range of total program spending and share of spending on  administration as well as a mixture of state and county administrative  structures, urban and rural demographics, and geographic location.  Although our selection includes a range of states, our findings are not  generalizable beyond the states included in our study. In addition, to  address our first research question, we reviewed laws and regulations on  definitions of administrative costs and federal-state participation in  funding these costs for the selected programs. We also reviewed relevant  circulars issued by the OMB. To address our second question, we analyzed  administrative spending data, as defined for financial reporting purposes  by program laws and regulations, for each program for fiscal years   2000-2004, including federal and state shares of spending. Fiscal year 2004  data were the most recent data available for all seven programs at the time  of our review. We assessed the reliability of the administrative spending  data by interviewing (1) agency officials knowledgeable about the data  and (2) state officials in the five states we visited knowledgeable about the  data as reported to the federal government. We also reviewed state single  audit reports and talked to state auditors in the states we visited to  identify any known problems with the administrative spending data or the  technology systems that store the data. Our reviews and discussions did  not identify significant problems with the data. We determined that these  data were sufficiently reliable for the purposes of this report.
To address our third question, we interviewed federal officials from each  of the programs and the OMB as well as state and local program officials  about administrative costs, options for reducing costs while preserving  services, and challenges to and consequences of these options. During the  interviews we also inquired about any interactions between our key  programs and other programs that support vulnerable people, including  Medicaid, the State Children’s Health Insurance Programs (SCHIP), the  Low-Income Home Energy Assistance Program (LIHEAP), and housing  programs. In addition, we interviewed state audit officials from the five  states about any similar work they have conducted. We also reviewed our  prior work related to this issue.
We issued two related reports in June and July 2006 that focused on the  administrative costs of the Adoption Assistance and Foster Care programs  (GAO-06-649, Foster Care and Adoption Assistance: Federal Oversight  Needed to Safeguard Funds and Ensure Consistent Support for States’  Administrative Costs, June 2006) and the Child Support Enforcement  program (GAO-06-491, Child Support Enforcement: More Focus on Labor  Costs and Administrative Cost Audits Could Help Reduce Federal  Expenditures, July 2006). We coordinated our data collection efforts for  all three reports. Therefore, some of the information on the Child Support  Enforcement, Adoption Assistance, and Foster Care programs in this  report is drawn from work conducted for the earlier reports. For example,  for this report, we supplemented our data collection efforts with  administrative spending data collected for the other two reports as well as  information collected from interviews conducted for the other reports. We  also coordinated efforts to assess the reliability of the administrative  spending data used in the three reports.
We conducted our work between July 2005 and August 2006 in accordance  with generally accepted government auditing standards. See appendix I for  more details on our scope and methodology.
subsections: section_title: Background
paragraphs: The federal government funds a wide array of programs intended to  provide benefits and services or both to individuals, families, and  households needing financial assistance or other social supports.  Representing a range of programs available through federal and state  partnerships, the seven programs in this review have different goals and  purposes, and, thus, provide a range of benefits and services to specific  target populations. For example, the Food Stamp Program provides  nutrition assistance to low-income individuals, while the CSE program  helps custodial parents, regardless of income, collect child support  payments from noncustodial parents. Table 1 provides a brief description  of each of the programs covered in this report.
The programs included in this review also represent a wide range of  spending, from $2.9 billion for Adoption Assistance to $37 billion for UI.  For fiscal year 2004, total spending, including administrative and all other  spending, for the seven programs was $119 billion. Additionally, each of  the seven selected programs is administered or overseen by one of three  different federal departments. Table 2 shows the agency responsible for  each program and total program expenditures for fiscal year 2004, the  most current year available.
The programs covered by this review have varying federal-state  relationships in administering and funding the programs. The level of  government with responsibility for designing the rules, services, and  processes varies by program. Some programs have federally standardized  designs while other programs provide states with flexibility to develop  their own eligibility criteria, benefit levels, and program rules. All of the  programs are funded through some form of federal-state partnership;  however, the rules governing funding responsibility vary widely by  program. Table 3 summarizes the level of government with which  responsibility for the design and funding resides for each of the seven  programs.
An individual low-income family is likely to be eligible for and participate  in several human service programs. For example, in 2001, 88 percent of  families receiving TANF also received food stamp benefits and 98 percent  received Medicaid. The programs are typically administered out of a local  assistance office that offers benefits from several programs. Depending on  the administrative structure of the local assistance office, a family or  individual might provide necessary information to only one caseworker  who determines eligibility and benefits for multiple programs, or they  might work with several caseworkers who administer benefits for  different programs.
Because eligibility determination as well as other activities are often  conducted jointly for multiple programs, some programs require states to  have a process to ensure that costs are appropriately charged to the  correct federal programs for federal reimbursement purposes. The cost  allocation process is the formal process for sharing the costs of activities  that are performed jointly for more than one program. Formal “cost  allocation plans” specify how costs for those activities are to be covered  by the various programs. For example, when a local eligibility worker  determines that an applicant is eligible for TANF, food stamp benefits, and  CCDF, the cost of her or his time is allocated across these programs in  accordance with the state’s approved cost allocation plan. These costs are  then reported as administrative or programmatic costs, depending on the  laws and regulations governing funding for each of the programs.
section_title: Although Similar Types of Administrative Activities Occur across Programs, Definitions of Administrative Costs and the Federal Funding Role Vary
paragraphs: Across the seven programs in our review, the legal definitions and the  federal funding rules for administrative costs vary. The statutes and  regulations for each program define administrative costs differently, even  though many of the same activities are performed to administer the  programs. The laws for each program also include different mechanisms  for state and federal participation in funding administrative costs,  including specific matching rates, block grants, and spending caps, which  can affect state decisions on administrative spending.
subsections: section_title: Definitions of Administrative Costs Vary across Programs
paragraphs: Although many of the programs we reviewed conduct similar activities to  administer the program, not all of the activities are defined in laws and  regulations as administrative costs for financial reporting purposes. Based  on our analysis of information collected from state and local officials, we  identified several categories of administrative activities that are common  across many of these programs. In particular, we found that the  administration of each program involves at least (1) determining who is  eligible to participate in the program or processing applications for new  participants, (2) monitoring program quality, (3) conducting general  program management and planning, (4) developing and maintaining IT  systems, and (5) training employees, either at the state or local levels. All  of the programs also issue benefits or provide services to eligible  participants, with the exception of CSE, which generally collects and  distributes payments from noncustodial parents to custodial families.  Additional activities, such as case management and outreach, are  performed in only some of the programs or some states.
However, the statutes and regulations for each program differ on which of  these activities are defined as administrative costs and which are not. For  example, the TANF regulations and CCDF statute defining administrative  costs specifically exclude costs associated with providing direct program  services, while Food Stamp statute specifically includes the costs of  providing direct program services, such as certifying applicant households  and issuing food stamp benefits, as administrative costs. In addition, some  statutes and regulations are more comprehensive in identifying which  activities or items are specifically included or excluded from the definition  of administrative costs. For example, while UI legislation allows for  amounts “necessary for the proper and efficient administration” of state  programs with few other qualifiers, the Food Stamp legislation and  regulations list dozens of specific costs, including such items as audit  services, advisory councils, building lease management, and certain  advertising costs. Appendix II identifies the activities and items that are  specifically included in the definitions of administrative costs in the  statutes and regulations for each program. Nonetheless, most of the lists  of activities in program statutes and regulations are only illustrative and  not exhaustive. Phrases such as “these activities may include but are not  limited to…” are commonplace and leave the exact definitions of  administrative costs somewhat ambiguous. Such ambiguity may lead to  inconsistent interpretation of the definitions of administrative costs. Our  prior work on administrative costs in the Adoption Assistance and Foster  Care programs found that state program officials and HHS regional offices  make different decisions as to what costs are appropriate to claim as  administrative.
The statutes and regulations defining administrative costs differ across the  programs in part because these programs have evolved separately over  time and have different missions, priorities, services, and clients. The CSE  program, in particular, differs from the other programs in our review in  that CSE does not provide public financial benefits to its participants;  rather, CSE services include collecting and distributing payments from  noncustodial parents to custodial families, other states, and federal  agencies. In addition, although the programs conduct similar activities,  differences in missions and priorities may add to differences in spending  on particular activities. For example, the Food Stamp Program’s extensive  requirements for monitoring program quality may result in more spending  on this activity than for a program with few quality control requirements.
The number of congressional committees and federal agencies involved in  developing laws and regulations for these programs has also contributed  to differences in the definitions of administrative costs and can make  coordination across programs difficult. The division of legislative and  executive responsibility allows multiple points of access for Members of  Congress, interest groups, and the affected public, but the various  legislative committees and executive agencies do not necessarily  collaborate with each other to develop consistent laws and regulations  across programs. Federal legislation for all of the programs in our review,  except the Food Stamp Program, is under the jurisdiction of the Senate  Finance Committee and the House Ways and Means Committee, although  some aspects of these programs are under the jurisdiction of other  congressional committees. Federal regulations for Adoption Assistance  and Foster Care, CCDF, CSE, and TANF are developed by various offices  within the HHS Administration for Children and Families; Food Stamp  Program regulations are developed by the U.S. Department of Agriculture  (USDA) Food and Nutrition Service; and UI regulations are developed by  the DOL Employment and Training Administration.
Federal and state officials we interviewed disagreed on whether it was  problematic to have different definitions of administrative costs across  programs. According to officials from the OMB, whose role is to improve  administrative management of federal programs, differences in legal  definitions of administrative costs across programs are not a barrier to  program management. OMB officials stated that it is important to accept  that programs are different and that it may not be possible to compare  costs across programs. A number of state budget officials responsible for  financial reporting, however, described how the variation in definitions of  administrative costs creates difficulties. For example, one budget official  stated that it can be difficult to develop coding for accounting and  budgeting that can be used across programs and, as a result, it can be  difficult to monitor costs accurately. A budget official in another state  argued, similarly, that having consistent definitions of administrative costs  and consistent caps on administrative spending would help to simplify the  process for allocating costs across programs and, therefore, might reduce  costs. On the other hand, state officials responsible for developing  program policies and overseeing local implementation of the programs  reported fewer difficulties with the differences in administrative cost  definitions. Several of these officials reported that they pay little attention  to which aspects of their jobs are defined as administrative activities and  which are not.
section_title: Federal and State Participation in Funding Administrative Costs Is Governed by Matching Rates, Block Grants, and Spending Caps
paragraphs: Federal and state participation in funding the administrative costs of  human service programs is governed by federal laws that establish  matching rates, block grants, spending caps, and other funding  mechanisms. These funding mechanisms, described below, play an  important role in managing the federal government’s risk and can affect  states’ spending behavior by producing financial incentives and funding  restrictions.
Matching rates—In programs funded through federal matching  rates, the federal government covers a portion of states’ spending  on program administration. For example, if a program has a   50-percent matching rate, the federal government is obligated to  reimburse states for 50 percent of their spending on administration,  as defined in law. Funding of Foster Care, Adoption Assistance,  CSE, the Food Stamp Program, and a portion of CCDF include  matching rates.
Block grants—Block grants provide states with a statutorily fixed  amount of funding. TANF and a portion of CCDF are funded  through block grants. The TANF block grant does not change when  caseloads change, nor is it adjusted for inflation. In both TANF and  CCDF, states are required to spend a certain amount of their own  funds to be eligible to receive the full amount of federal funds.
Spending caps—Spending caps limit the amount or percent of state  or federal funds that can be spent for particular purposes. For  example, the TANF statute prohibits states from spending more  than 15 percent of federal funds received on administrative costs,  while the CCDF statute prohibits states from spending more than   5 percent of aggregate program funds on administrative costs.
Other funding rules—The legislation governing the funding of  administrative costs for the UI program gives responsibility for  administrative funding to the federal government. DOL uses  information gathered from the states to determine how much of the  available funds each state will receive. While states are not required  to spend their own funds on administrative costs, over 40 states  chose to provide additional state funds to cover some  administrative costs of the UI program in 2004.
Table 4 summarizes the rules governing state and federal funding of  administrative costs. The table identifies for each program the federal  funding mechanism and any federal matching rates, caps on administrative  expenditures, and other rules regarding funding of administrative costs.
section_title: Administrative Funding Mechanisms Can Affect State Spending
paragraphs: Administrative funding mechanisms can create financial incentives that  affect state spending behavior; however, state responses to these  incentives vary, according to the federal and state officials we interviewed.  In some cases, matching rates can encourage states to spend more money  on a program because for each dollar of its own resources the state  invests, the state receives additional federal funding for the program. For  example, the grants manager in one of the states we visited said that the  federal matching rate gives the state an incentive to maintain its funding  and to provide more services. In other cases, however, state officials  reported that they limit their use of federal matching funds because they  have limited state resources to invest in the program. For example, a  budget official in one of the states we visited reported that when a new  expenditure could be charged to either the Food Stamp Program, which  has a matching rate, or the TANF block grant, the state or county might  decide to use the TANF funds to avoid the need for the state to provide  additional funding to meet its share of the matching funds. However, block  grants also create general incentives for states to meet demand for  services with limited spending because the federal funding amount is  fixed. CCDF officials in Michigan stated that because they receive a fixed  amount of funding, running the program efficiently is always in the front of  their minds.
Spending caps on the percentage of a block grant that can be spent on  administrative costs are, by definition, designed to limit spending.  However, officials in four of the five states we visited said that the CCDF  and TANF caps on administrative spending were not a major factor in  their administrative spending decisions. TANF administrative spending in  the states we visited was well below the 15-percent cap. Nationally, state  spending on administration was 7.7 percent for TANF and 2.3 percent for  CCDF in fiscal year 2004. Some CCDF officials reported that their  administrative spending decisions were influenced more by state limits on  administrative spending than by the federal spending cap. For example,  the California Department of Education estimates that for fiscal year   2006-2007, only 1 percent of program funds will be available for program  administration due to current state budget constraints. This amount is well  below the federal 5-percent cap, because, according to CCDF program  officials in California, the state legislature wanted to put every possible  dollar into additional child care vouchers.
In addition, the funding allocation method for the UI program is designed  to encourage states to administer their programs efficiently. Total funding  appropriated for the UI program is less than the amount the states report  needing to administer their UI programs. To promote efficiency, DOL  reduces the requests of states with higher costs for certain “controllable”  aspects of the budget by greater percentages than lower cost states. For  example, the longer it takes a state to process claims, the greater its  reduction in the allocation process. Federal UI officials we interviewed  argued that this process provides states with an incentive to increase  efficiency. However, some state officials argued that the funding process  creates disincentives for states to improve efficiency and reduce  administrative spending. For example, they argued that if they invest in  technologies that improve their efficiency in administering the program,  they do not get to keep the savings they gain. Rather, spending less in one  year could result in less federal funding the next year.
While funding mechanisms can create incentives for states to limit  administrative spending, officials in each of the states we visited cautioned  that if administrative spending is reduced too far, it can negatively affect  client services. Several officials described how reduced administrative  spending due to state budget cuts had already affected the quality of their  services. For example, state human service officials in Maryland stated  that a hiring freeze has resulted in a slower rate of application processing  and an increase in Food Stamp administrative errors, such as eligible  applicants being denied benefits. Local human service officials in Michigan  reported that budget cuts had resulted in increased office waiting times for  applicants and the elimination of services such as home visits and  prevention services.
section_title: Administrative Spending Varied across Programs but Generally Increased at a Lower Rate Than Total Spending
paragraphs: Administrative spending for the seven programs combined, as defined for  financial reporting purposes by program statutes and regulations, made up  about 18 percent of total program spending in fiscal year 2004. However,  amounts varied widely across the programs and states. Between fiscal  years 2000 and 2004, administrative spending increased in five of the seven  programs, but generally increased at a lower rate than total program  spending. Officials in the five states we visited reported that staff and  technology made up a large portion of the administrative spending in their  programs.
subsections: section_title: In 2004, Administrative Spending for the Selected Programs Combined Was about 18 Percent of Total Program Spending, but Spending Varied Greatly across Programs and States
paragraphs: In fiscal year 2004, administrative spending, as defined for financial  reporting purposes by program statutes and regulations, amounted to  about 18 percent—or $21 billion—of the $119 billion in total program  spending for the seven programs combined; however, there were large  differences in the amounts spent by programs and states. As shown in  figure 1, the amount spent on administration varied widely among the  seven programs, ranging from $200 million in CCDF to $5.2 billion in the  Food Stamp Program and $5.3 billion in CSE. As a percentage of total  program spending, administrative spending ranged from 2 percent in  CCDF to 58 percent in the Foster Care program, with the exception of CSE  in which all program spending is considered administrative. While  administrative spending amounts varied significantly across the seven  programs, this variation does not necessarily indicate that certain  programs are more efficiently administered. Instead, differences in  spending largely reflect the differences in how each program’s laws and  regulations define what counts as an administrative cost. As a result,  comparing spending across programs is not a useful means for  determining efficiency.
Each of the seven programs in our review is funded through a combination  of federal and state contributions. For the seven programs combined,  federal funds made up roughly 60 percent—or $13 billion—of the   $21 billion spent on administration in fiscal year 2004. Federal spending  accounted for roughly half or more of the total amount spent to administer  each of the seven programs. Figure 2 shows the federal and state shares of  administrative spending for each program. These shares are largely  representative of the different funding requirements set in law for each  program, as described earlier in the report. For example, the federal  government matches state administrative spending at specified rates in  four of the seven programs. The federal match rate set out by law for  administrative spending in the CSE program is 66 percent, while the match  rate for the Adoption Assistance, Food Stamp, and Foster Care programs  is 50 percent. (See table 4, for a description of the matching rates and  other funding rules that govern state and federal spending in each  program.)
As with spending across programs, in fiscal year 2004, the combined  federal and state amount spent on administration also varied greatly by  state within programs, as shown in figure 3. In some programs, this  variation is considerable. For example, in the Foster Care program, the  percentage of total program spending on administration in fiscal year 2004  ranged from 21 percent to 86 percent. Such variation may suggest some  opportunities for improved administrative efficiencies in some states;  however, other factors also may account for the wide ranges in the  percent spent on administration. Specifically, in the Foster Care and  Adoption Assistance programs, our prior work cited differences in states’  claiming practices as well as differences in oversight among HHS regional  offices that may contribute to differences in state administrative  spending. In addition, federal officials we interviewed said that, given  high fixed costs, a small state might expend a higher percentage of its total  program budget on administration than a larger state that serves more  people with the same fixed costs. Our recent work on administrative costs  in CSE suggests that states’ structures for administering their support  programs may also contribute to the cost of running the programs.  Specifically, we reported that from fiscal year 2000 to fiscal year 2004, the  median net federal expenditure for CSE agencies with state-operated  programs decreased about 4 percent while the median net federal  expenditure for county-operated programs increased about 11 percent.   A few officials we interviewed said that states with county-administered  programs required more administrative spending due to the duplication of  effort at the county and state levels. However, in Ohio—a state with a  county-administered structure—officials reported that while the county- administered system may contribute to some inefficiencies, moving to a  state-administered system would require the state to equalize pay scales  and building costs around the state, which would likely increase  administrative spending.
section_title: In Recent Years, Administrative Spending Has Risen in Most of the Selected Programs, but at a Lower Rate Than Total Program Spending
paragraphs: From fiscal years 2000 to 2004, administrative spending increased in most  of the seven programs covered in this review, but at a lower rate than total  program spending. As shown in figure 4, from fiscal years 2000 to 2004,  combined federal and state administrative spending rose in five of the  seven programs: Adoption Assistance, CSE, Food Stamp, Foster Care, and  UI. In the remaining two programs, CCDF and TANF, administrative  spending declined. CCDF administrative spending hovered just above   $200 million, declining slightly, while TANF administrative spending  declined by $300 million over the 5 years.
In each of the five programs in which administrative spending rose, it  increased by between about 17 and 19 percent over the 5 years.  Administrative spending declined by 3 percent in CCDF and by 12 percent  in TANF. Figure 5 shows the percent change in administrative spending  during this time period for each of the seven programs. Over the same  period, the rate of price inflation was 9 percent. Therefore, as illustrated  in the figure, in the five programs in which administrative spending  increased between fiscal years 2000 and 2004, the increase was much  smaller when adjusted for inflation, shrinking to an increase of less than  10 percent in each program.
In the five states we visited, officials reported that staff salaries and  benefits were among the largest costs associated with running their  programs. According to DOL’s wage index, average salaries and benefits  for state and local government workers increased by 16 percent between  2000 and 2004. The percent change in administrative spending for the  majority of the programs in this review was slightly higher than this  average, ranging between about 17 percent and 19 percent, as previously  stated. In two of the programs, CCDF and TANF, the percent change fell  below this average. While administrative spending may include several  other types of spending beyond staff salaries and benefits, such as  overhead and IT, rising salaries and benefits may explain some of the  increase in spending among the programs in this review.
Although administrative spending increased between fiscal years 2000 and  2004 in the Adoption Assistance, Food Stamp, and UI programs, it  increased at a lower rate than total program spending. As a result, in these  three programs, as well as CCDF and TANF, administrative spending  declined compared to total program spending between fiscal years 2000  and 2004, as shown in figure 6, indicating that the amount spent on direct  benefits and services was rising faster than the amount spent on  administering these benefits and services. Administrative spending  increased compared to total program spending in one program,   Foster Care.
section_title: In the Five States We Visited, Many Program Officials Told Us That They Spend a Large Portion of Their Administrative Dollars on Staff Costs and Technology
paragraphs: Officials in the five states we visited reported that staff and IT account for  substantial portions of the spending related to operating their programs. In  all five states we visited, officials reported that spending on staff, including  salaries and benefits, was among the largest costs associated with running  their programs, in part because certain program rules are complicated,  requiring a considerable amount of staff time. To the extent that these  costs are included in programs’ definitions of administrative costs, this  will affect the programs’ reported administrative spending. As we have  reported in our prior work, eligibility determination activities make up a  substantial portion of administrative spending for some programs. Policy  experts and researchers have found that the complexity and variations in  eligibility rules have increased substantially the staff resources needed to  determine eligibility and benefit levels and thereby increased the costs of  administering programs. Some of the officials in the states we visited said  that multiple or outdated IT systems also require a great deal of staff time.  For example, front-line staff and officials we interviewed reported that in  order to determine eligibility, staff must manually work outside the  computer systems to work around problems in the systems. In addition,  county officials we interviewed in one state said that the same client  information must be entered into three separate systems.
While outdated IT systems increase the staff resources needed at the local  level, officials in four of the five states we visited reported that developing  and maintaining IT systems also require a significant amount of  administrative dollars. For example, in California, county officials we  interviewed reported that two new case management systems have been  expensive to develop and implement. They said that initial system  problems and training for staff to learn the new systems added to the  costs. However, officials in a few states said they believed that their new  systems will eventually reduce administrative effort and they expected  administrative costs to decrease as a result.
section_title: The Federal Government May Help Balance Administrative Cost Savings with Program Effectiveness and Integrity by Simplifying Policies and Facilitating Technology Enhancements
paragraphs: The federal government, including both Congress and the executive  agencies, may help balance long-term administrative cost savings with  program effectiveness and integrity by simplifying policies and facilitating  technology improvements. Simplifying policies—especially those related  to eligibility determination processes and federal funding structures— could save resources, improve productivity, and help staff focus more time  on performing essential program activities, such as providing quality  services and accurate benefits to recipients. In addition, by helping states  facilitate technology enhancements across programs, the federal  government can help streamline processes and potentially reduce long- term costs. Together, simplified policies and improved technology could  streamline administrative processes and potentially reduce administrative  costs. We acknowledge that all levels of government have attempted to  streamline processes across human service programs for the past 20 years.  However, many of these efforts have had limited success due, in part, to  the considerable challenges that streamlining program processes entail,  such as the challenge of achieving consensus among the numerous  congressional committees and federal agencies involved in shaping human  service program policies, and a lack of information on how program  changes would affect particular populations. We believe one challenge in  particular—the lack of information on the effect streamlining efforts might  have on program and administrative costs—is thwarting progress in this  area.
subsections: section_title: Simplifying Federal Policies May Save Administrative Costs by Reducing Cumbersome and Duplicative Work
paragraphs: Our current and previous reviews indicate that simplifying policies— especially those related to eligibility determination processes and federal  funding structures—could potentially save resources, improve  productivity, and help staff focus more time on performing essential  program activities, such as providing quality services and accurate benefits  to recipients. Simplifying policies is particularly important for those  programs that are administered jointly at the local level. In many localities,  single offices administer TANF, food stamp benefits, CCDF, Medicaid, and  SCHIP, and make referrals to or have some interaction with CSE,  Adoption Assistance, Foster Care, UI, LIHEAP, and housing programs.  Even though the programs are administered jointly, each has its own  funding structure and eligibility rules, which can be cumbersome and  require duplicative effort from staff. For example, when a family applies  for TANF and food stamp benefits, the caseworker applies different rules  and tests to determine who is eligible for benefits from either or both  programs. This determination can be complicated as most programs have  different definitions of who is a part of an eligible unit. In the Food Stamp  Program, an eligible unit, or household, generally consists of all the  persons who purchase food and prepare meals together. In TANF, the  eligible unit (which states define in accordance with certain federal  requirements) often includes only dependent children, their siblings, and  the parents or other caretaker relatives. Consequently, a family member  may be eligible for benefits in one program and ineligible for benefits in  another program. To ensure that time is divided among and allocated to  the correct programs, most of the local staff we spoke with track the  amount of time they spend working on different programs and report this  information to financial managers. Local financial managers then  determine what portion of staff’s time is defined as administrative costs in  each of the programs and charge the programs appropriately. Our current  and previous reviews show that these involved procedures stem, in part,  from programs having different target populations, different federal  funding silos, and different statutory and regulatory requirements.  Excessive time spent working through complex procedures can consume  resources and diminish staff’s ability to focus on other activities that  preserve program effectiveness and integrity. Many of the state and local  officials we visited emphasized that one of the best ways to balance cost  savings with program integrity and effectiveness is to simplify program  eligibility determination processes and funding structures across  programs:  Simplify Eligibility Determination Processes: According to state and  local officials, the complexity and variation in financial eligibility rules  have contributed to the time-consuming and duplicative administrative  processes. The administrative processes can be particularly time  consuming when caseworkers determine eligibility for more than one  program at a time, a common practice when applicants may be eligible for  multiple programs. The issues raised during our site visits echo what we  reported to Congress in 2001. In that report, we identified federal statutes  and regulations as a source of some of this variation, although states do  have considerable flexibility, especially in programs such as TANF, in  setting eligibility rules. Some states have taken advantage of recent  changes and additional flexibility granted by the federal government to  simplify eligibility determination processes across programs. For example,  states may automatically extend eligibility to food stamp applicants based  on their participation in the TANF cash assistance program—a provision  referred to as “categorical eligibility.” Another way states have simplified  eligibility processes is by aligning program rules. For example, officials in  Maryland told us that they took advantage of the flexibility offered by the  Farm Security and Rural Investment Act of 2002 (the “Farm Bill”) and  matched the Food Stamp Program rules for counting income and assets to  TANF and Medicaid rules. This allows them, for example, to determine the  value of a car the same way across programs. Maryland officials believe  that this change has helped them to provide benefits and services more  quickly and accurately. While some states have taken advantage of such  flexibility, others have not. In a 2004 report on state implementation of the  Farm Bill’s options, we concluded that although federal law and program  rules allowed states to align food stamp reporting rules with those of other  assistance programs, state officials in most states had not made the broad  changes that would result in greater consistency among programs. State  decisions to increase program alignment may have been hindered by  concerns regarding the cost of programming changes into state computers  and the concern that benefit costs may increase. On the other hand,  savings could result from reducing the administrative burden on  caseworkers. Ultimately, it is not clear whether costs would rise or savings  would be realized.
Simplify Funding Structures: Because the programs are financially  supported through different federal funding streams and mechanisms,  state officials argue that serving the needs of families comprehensively  and efficiently is difficult. Similar to the variation in eligibility rules,  program administrators face an array of different funding sources  associated with different federal programs, each with its own financial  reporting requirements, time frames, and other rules. Often, to meet  individuals or families’ needs, states fund a range of services drawn from  multiple programs and funding sources. For example, to provide child care  subsidies, some states use funding from both TANF and CCDF to assist  families, but very different rules apply to reporting requirements and  funding restrictions, complicating program administration. Many believe  that being able to draw funds from more than one federal assistance  program, simplifying the administrative requirements for managing those  funds, consolidating small grants, or standardizing administrative spending  caps across programs would ease states’ administrative workload and  reduce administrative spending. To experiment with simplifying funding  structures, Ohio’s child welfare department officials told us they received  a waiver in 1997 to implement a flexible-funding demonstration project.  Participating counties received a monthly allotment to fund any child  services free of any eligibility and allocation restrictions. According to  Ohio state officials, during the first 6 years of the demonstration, 11 of the   14 counties operated below the average costs, resulting in a total savings  of $33 million.
The need for simplifying program policies, including both those related to  simplifying eligibility determination processes and funding structures, has  been voiced recurrently for the past several decades. Stretching as far  back as the 1960s, studies and reports have called for changes to human  service programs, and we issued several reports during the 1980s that  focused on welfare simplification. In the early 1990s, a national  commission as well as a congressionally created advisory commission  suggested ways to simplify policies and procedures, including steps such  as developing a common framework for streamlining eligibility  requirements, formulating standard definitions, and easing administrative  and documentation requirements. To address these issues, Congress has  acted in the past to simplify the federal grant system. For example, the  Omnibus Budget Reconciliation Act of 1981 consolidated a number of  human service programs into several block grants that allowed for greater  state and local autonomy and flexibility in designing strategies to address  federal objectives. More recently, in 1996 Congress replaced the previous  welfare program with the TANF block grant and consolidated several child  care programs into one program, providing states with additional  flexibility to design and operate programs. In addition, numerous pilot  and demonstration projects have given particular states and localities  flexibility to test approaches to integrating and coordinating services  across a range of human service programs. While the need for  simplification of program policies has been widely acknowledged, there  has also been a general recognition that achieving substantial  improvements in this area is exceptionally difficult. For example,  implementing systematic changes to the federal rules for human service  programs can be challenging because of differences among federal  program goals and purposes and because jurisdiction for these programs  is spread among numerous congressional committees and federal  agencies.
An additional challenge to systematic policy simplification efforts is the  lack of information on the costs and effects of these efforts. Lack of  information on the potential cost to the federal government of  streamlining policies has been a limiting factor in moving forward in this  area. In our 2001 report, we concluded that determining eligibility across  human service programs is cumbersome and can be simplified; however,  we said that additional information is needed about the effects these  simplification efforts would have on both program and administrative  costs. Similarly, a Congressional Research Service review of pilot and  demonstration projects on service integration strategies—one way to  simplify policies—found that there was little information on the cost- effectiveness of these strategies. Information is also lacking on the  potential effects that streamlining policies would have on various  populations. Streamlining policies could expand client access and increase  caseloads, but it could also limit access for particular populations,  depending on which policies were adopted. In addition, no definitive  information exists to demonstrate the type and extent of changes that  might result in reduced administrative costs or to demonstrate how  strategies might work differently in different communities. To help  address this issue, we asked Congress in our 2001 report to consider  authorizing state and local demonstration projects designed to simplify  policies. Recent legislative proposals in both the House and the Senate  have sought to increase states’ abilities to waive federal program rules to  address program simplification issues, although some provisions have  been criticized by policy makers and others for allowing states too much  latitude to set aside federal rules considered important to protecting  program integrity and services to people in need. One legislative proposal,  included as part of broader welfare legislation, passed in the House but  has not been enacted into law.
section_title: Facilitating Technology Enhancements across Programs May Save Administrative Costs by Creating More Efficient Processes
paragraphs: Our previous and current work indicates that the federal government can  help streamline processes and potentially reduce long-term costs by  facilitating technology enhancements across programs. Technology plays a  central role in the management of human service programs and keeping up  with technological advancements offers opportunities for improving the  administration of human services. Recognizing the importance of  automated systems in state-administered federal human service programs,  for more than 2 decades, Congress has provided varying levels of federal  funding to encourage states to implement certain systems to improve the  efficiency of some programs. The federal agencies have also played a role  in helping states implement IT systems to streamline their processes. For  example, agencies responsible for child welfare, CSE, and the Food Stamp  Program must review and approve states’ IT planning documents before  federal technology funds are passed down to states. In contrast, no  specific federal regulations guide states’ use of federal TANF or CCDF  funds for IT systems. DOL provides some technical assistance to states  under the UI program.
With congressional and federal support, states have increasingly relied on  technology to streamline their program processes. Having modern systems  that support multiple human service programs is important for  streamlining eligibility processes and providing timely and accurate  services. For example, the counties we visited in California developed a  single IT system, known as CalWIN. This system—like others around the  country—replaced several separate IT systems and automated the  eligibility determination processes across multiple and complex programs,  such as TANF, the Food Stamp Program, and Medicaid. According to some  officials, while the new system has experienced some problems, it has  already improved program integrity and is intended to reduce  administrative costs. Additionally, many believe that sharing data across  programs and agencies can further streamline processes. Data-sharing  arrangements allow programs to share client information that they  otherwise would each collect and verify separately, thus reducing  duplicative effort, saving money, and improving integrity. For example, by  receiving verified electronic data from SSA, state human service offices  are able to determine SSI recipients’ eligibility for food stamp benefits  without having to separately collect and verify applicant information.  According to South Carolina officials we interviewed, this arrangement  saves administrative dollars and reduces duplicative effort across  programs.
While most agree that IT can help streamline processes, our previous and  current work shows that technology projects are difficult, and many fall  short of expectations, creating additional work for staff or compromising  program integrity. Although many states’ computer systems for TANF, the  Food Stamp Program, and Medicaid are already integrated, we found that  states are often using IT systems that are outdated, error-prone, and do not  effectively share information with additional human service programs.  This compounds the challenges in updating technology in a human  services environment that increasingly requires coordination across  programs. For example, the Michigan Department of Human Services is in  the process of implementing a new integrated IT system that is intended to  replace the three systems that staff currently use to process eligibility for  several programs. Michigan officials explained that the third system was  initially intended to replace the other two systems. However, due to  political and financial reasons and a lack of commitment, only the first  phase of the project was implemented. As a result, the system failed to  replace the other systems and created an additional step in the enrollment  process. The ability to share data across programs also may be limited by  laws that have been established to protect individuals’ privacy. For  example, while state CSE programs sometimes utilize information from  other federal programs, they are often prohibited by law from sharing  information about their own clients. Michigan CSE officials noted that the  CSE program must protect its clients’ information because it handles  money from private citizens rather than providing government benefits.  Another concern regarding efforts to further enhance technology is that  there is limited information available on the cost-effectiveness of some of  these systems. Finally, our previous collaborative work with other  organizations highlighted challenges related to obtaining federal funding  for information systems. To the extent that state IT systems support more  than one human services program, state cost allocation plans for systems  development and acquisition projects must be approved by each federal  agency expected to provide funding, in addition to the regular approval  process.
To address concerns about IT systems funding and to identify other ways  that the federal government may facilitate states’ technology  improvements, we recommended in April 2000 that a multiagency federal  working group be created. In response to this recommendation as well as  state complaints about the approval process, agencies within HHS and  USDA convened a working group to improve the federal approval process.  This group made some progress in identifying needed changes to the  federal process. However, after about a year of work, the progress stalled,  due to changes in leadership at the agencies involved and a lack of  consensus among the federal partners about the direction to take in  improving the federal process. This helps to highlight the challenges  involved in identifying and reaching agreement on needed improvements  to existing processes, particularly when multiple programs and agencies  are involved. More information on specific barriers that states face when  attempting to make technology improvements when federal funds are  involved could help facilitate progress in this area.
Progress on technology improvements could be further facilitated through  greater collaboration across program agencies and levels of government.  At the time of our visit, officials in Ohio said that in their efforts to replace  their outdated IT system for TANF and the Food Stamp Program, they  would have appreciated more information about what other states were  doing to implement more efficient and economical IT systems. Officials  stated that while they had talked to other states about their experiences  developing IT systems, more comprehensive information on best practices  would save states time and money. Some agencies are successfully  collaborating and sharing best practices. For example, counties that we  visited in California successfully shared technology information that  helped to save resources. Officials in San Mateo County, California,  reported that by automating the case management process for the  Medicaid and Food Stamp programs through call centers, they avoided  spending additional dollars on personnel costs associated with rising case  levels. According to county officials, this strategy has helped them reduce  staff’s workload, avoid increased administrative costs, and increase  integrity across programs. Officials in nearby Santa Cruz County reported  that they adopted this strategy after learning of its effectiveness in San  Mateo County. Michigan UI officials reported that DOL has a strong  partnership with state UI agencies. DOL sponsors a central online forum  for sharing technology information. Michigan UI officials noted that this  effort provides a forum for exchanging ideas and learning from the  mistakes of others. DOL’s initiative has helped states develop call centers  and developed sample computer programming code for Internet claims  systems, which it shared with states. Further sharing of technology  strategies like these across programs, states, and agencies potentially  could yield more cost savings elsewhere.
section_title: Conclusion
paragraphs: To use taxpayer dollars responsibly, federal programs must be  administered in a cost-efficient manner. Administrative costs are an  important component of the total cost of providing supports to vulnerable  people. This report shows slow but steady increases in administrative  spending among many of the human service programs included in this  review, although administrative spending increased at a lower rate than  total program spending. Spending data cannot be compared across  programs due to programmatic differences, and little information is  available regarding what level of administrative spending for human  service programs is appropriate. Even so, there are opportunities available  to the federal government to assist state and local governments in better  identifying and implementing cost-saving initiatives that also ensure  accurate and timely provision of benefits and services. However, minimal  information is available on which opportunities are most effective and  what any actual cost savings might be.
The costs associated with running human service programs have been a  long-standing concern for policy makers interested in maximizing the  dollars that go directly to helping vulnerable people. While all levels of  government have made efforts to reduce the time and money required to  run these programs, it is unclear the extent to which these efforts have  actually reduced costs. This is especially true with efforts to streamline  processes across programs by simplifying program rules and facilitating  technology enhancements. Simplifying policies across programs may  increase or decrease the number of eligible individuals, which in turn may  affect program costs. Technology enhancements likely come with start-up  costs and may initially create additional work for staff. Because of the  complexities of such strategies for streamlining processes, there are no  easy solutions for reducing administrative costs. However, it is  appropriate to move forward to test the cost-effectiveness of various  strategies. Only then can more systematic approaches be taken to  maximize the dollars that are spent to run human service programs.
Our previous work recommended that Congress consider authorizing state  and local demonstration projects designed to simplify and coordinate  eligibility determination. Maintaining the status quo of stovepiped program  rules and policies related to eligibility determination and other processes  will continue to result in program rules that are complex and vary across  programs and processes that are duplicative and cumbersome to  administer. Providing states with demonstration opportunities would  allow them to challenge the current stovepipes and open the door to new  cost-efficient approaches for administering human service programs.  Demonstration projects would allow for testing and evaluating new  approaches that aim to balance cost savings with program effectiveness  and integrity. The information from these evaluations would help the  federal government determine which strategies are most effective without  investing the time and resources in unproven strategies. Congress can  allow for such approaches to thrive by not only giving states opportunities  to test these approaches but by following up to identify and implement  successful strategies. While it may be difficult to fully determine the extent  to which observed changes are the result of the demonstration projects,  such projects would be useful to identify lessons learned. Members of  Congress have identified the usefulness of demonstration projects, and  both the House and Senate have considered proposals to authorize such  demonstration projects, although legislation has not been enacted.  Therefore, continued efforts are needed to move forward.
section_title: Matter for Congressional Consideration
paragraphs: As suggested in our prior work (GAO-02-58), we continue to believe that  Congress should consider authorizing state and local demonstration  projects designed to streamline and coordinate eligibility determination  and other processes for federal human service programs. Such projects  would provide states and localities with opportunities to test the cost- effectiveness of changes designed to simplify or align program rules,  expand data sharing across agencies, or enhance information technology  systems to facilitate eligibility determinations and other processes.
Once authorized, states and localities or both could submit proposals for  demonstration projects and relevant federal agencies working in a  coordinated manner could review them, suggest modifications as needed,  and make final approval decisions. Federal agencies should consider  certain criteria for the demonstration projects, including oversight and  internal controls to help ensure that effectiveness and integrity are  preserved and vulnerable populations are protected. Demonstration  projects would include waivers of federal statutes and regulations as  needed and deemed appropriate. While our review covered seven federal  support programs, we are not suggesting that the demonstration projects  must include all of these programs or exclude others. States should be  given the opportunity to try various approaches aimed at streamlining  processes that consider all feasible programs.
Projects must be given sufficient time to be fully implemented and must  include an evaluation component. Cost neutrality of both administrative  and program costs would be most desirable for federal approval of these  projects. However, projects should not be rejected solely because they are  unable to guarantee cost neutrality over the short run. It would be  expected that, over a period of time, state and federal efforts to streamline  processes would create administrative cost savings that could help offset  any increased program costs. Evaluations of the projects should include  an analysis of whether administrative cost savings were indeed achieved in  the long-run, which specific laws or regulations were waived to facilitate  the project, and whether the effectiveness and integrity of program  services were maintained. To enhance the information from each of the  projects, Congress should consider authorizing a capping report that  would compile information from each the individual demonstration  projects and identify lessons learned.
section_title: Agency Comments
paragraphs: We shared a draft of this report with HHS, USDA, and DOL for comment.  HHS agreed with the report’s emphasis on the need for cost-effective  administration of federal programs and noted that HHS has taken steps to  increase cost-effectiveness in a number of the programs it oversees. HHS  also provided a number of specific examples of Child Care Bureau efforts.  HHS’s written comments appear in appendix III.
In their comments, officials from the USDA Food and Nutrition Service  suggested that, in order to acknowledge the complexity of the Food Stamp  Program, we add more detailed information to the report on several  topics, including: differences in administrative cost definitions, how  programmatic requirements may affect costs, state by state cost  comparisons, program level impact analyses on past proposed changes to  eligibility rules, and strategies for facilitating technology. We added more  information where appropriate, although our focus in this report remains  on a national perspective across programs rather than in-depth, program  specific or state-level analyses. In addition, the officials questioned the use  of the GDP to adjust for inflation and stated that staff salaries and benefits  constitute a large proportion of total costs. As we state in the report, we  used nominal dollars to discuss historical administrative spending. In  addition to nominal dollars, we used GDP to discuss the percent change in  spending over time. Recognizing that staff salaries and benefits make up a  large portion of spending, we also used DOL’s Employment Cost Index to  discuss how average salaries and benefits for state and local government  workers changed over time.
DOL, as well as HHS, provided technical comments, which we  incorporated in the report where appropriate. None of the agencies  commented directly on the matter for congressional consideration.
As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of the report until 30 days after its  issue date. At that time, we will send copies of this report to the  Secretaries of the Departments of Agriculture, Health and Human  Services, and Labor; relevant congressional committees; and others who  are interested. Copies will be made available to others upon request, and  this report will also be available on GAO’s Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  on (202) 512-7215. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  Additional GAO contacts and acknowledgments are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: We designed our study to provide information on (1) how administrative  costs are defined in selected programs and what rules govern federal and  state participation in funding these costs; (2) what is known about the  amounts of federal and state administrative spending for selected  programs and how they have changed over time; and (3) what  opportunities exist at the federal level to help states balance cost savings  with program effectiveness and integrity. To obtain information on these  issues, we compiled expenditure data for each of the programs covered in  this review, conducted state and local site visits, interviewed federal  program officials, and reviewed relevant laws, regulations, and reports. We  focused our study on seven key programs: Adoption Assistance, Child  Care & Development Fund (CCDF), Child Support Enforcement (CSE), the  Food Stamp Program, Foster Care, Temporary Assistance for Needy  Families (TANF), and Unemployment Insurance (UI).
We issued two related reports in June and July 2006 that focused on the  administrative costs of the Adoption Assistance and Foster Care programs  (GAO-06-649, Foster Care and Adoption Assistance: Federal Oversight  Needed to Safeguard Funds and Ensure Consistent Support for States’  Administrative Costs, June 2006) and the Child Support Enforcement  program (GAO-06-491, Child Support Enforcement: More Focus on Labor  Costs and Administrative Cost Audits Could Help Reduce Federal  Expenditures, July 2006). We coordinated our data collection efforts for  all three reports, so some of the information on the CSE, Adoption  Assistance, and Foster Care programs in this report is drawn from work  conducted for the earlier reports. For example, for this report, we  supplemented our data collection efforts with spending data collected for  the other two reports as well as information collected from interviews  conducted for the other reports. We also coordinated efforts to assess the  reliability of the administrative spending data used in the three reports.
We conducted our work between July 2005 and August 2006 in accordance  with generally accepted government auditing standards.
subsections: section_title: Analyses of Program Spending Data
paragraphs: We obtained spending data for each of the seven programs from the  departments of Agriculture, Health and Human Services, and Labor. We  analyzed administrative spending data for each program, as defined for  financial reporting purposes by program laws and regulations, for fiscal  years 2000-2004, including federal and state shares of spending. Fiscal year  2004 data were the most current data available at the time of our review.  We also analyzed 2004 state spending data to learn about the variations in  spending across states. We assessed the reliability of the administrative  spending data by interviewing (1) agency officials knowledgeable about  the data and (2) state officials in the five states we visited knowledgeable  about the data as reported to the federal government. We also reviewed  state single audit reports and talked to state auditors in the five states we  visited to identify any known problems with the administrative spending  data or the systems that store the data. Our reviews and discussions did  not identify significant problems with the data. We determined that these  data were sufficiently reliable for the purposes of this report.
section_title: Visits to State Agencies and County Offices
paragraphs: We visited state agencies and county offices in five states—California,  Maryland, Michigan, Ohio, and South Carolina. The counties we visited  were: San Mateo and Santa Cruz Counties in California, Wicomico County  in Maryland, Wayne County in Michigan, Butler and Licking Counties in  Ohio, and Newberry County in South Carolina. We selected the states to  provide a range of total program spending and share of spending on  administration, as well as a mixture of state and county administrative  structures, urban and rural demographics, and geography. Although our  selection includes a range of states, our findings are not generalizable  beyond the states included in our study. In each of the five states, we  visited at least one county office to talk to county program officials and  local staff. We developed a questionnaire to capture the types of  administrative activities that occur in each program at the state and local  levels. We asked the state and local program officials we visited to fill out  the questionnaire, and we analyzed the results to learn how administrative  activities compared across the programs. We interviewed state and local  program officials and staff about administrative activities, costs, options  for reducing costs while preserving services and challenges to and  consequences of these options. During the interviews, we also inquired  about any interactions between our key programs and other programs that  support vulnerable people, including Medicaid, the State Children’s Health  Insurance programs (SCHIP), the Low-Income Home Energy Assistance  Program (LIHEAP), and housing programs.
section_title: Interviews of Federal Officials, State Auditors, and Experts
paragraphs: We interviewed federal program officials at the departments of  Agriculture, Health and Human Services, and Labor and the Office of  Management and Budget about administrative costs, options for reducing  costs while preserving services and challenges to and consequences of  these options. In addition, we conducted phone interviews with state audit  officials from the five states about any similar work they have conducted.  We also discussed our objectives with representatives from the American  Public Human Services Association, Center for Law and Social Policy, and  National Governors Association. These discussions covered each of the  objectives and the participants shared their views and insights.
section_title: Reviews of Laws, Regulations, and Reports
paragraphs: We reviewed laws and regulations on definitions of administrative costs  and federal/state participation in funding these costs for the selected  programs. We also reviewed relevant circulars issued by the Office of  Management and Budget. We obtained and reviewed A-133 state single  audit reports for the states we visited. In addition, we reviewed documents  and reports prepared by the Center for Law and Social Policy,  Congressional Research Service, and other research organizations as well  as several prior GAO reports.
section_title: Appendix II: Administrative Cost Activities Recognized by Program Statutes and Regulations
paragraphs: Adoption Assistance and Foster Care    All expenditures of a state to plan,  design, develop, install and operate the  statewide automated child welfare  information system (without regard to  whether the system may be used with  respect to foster or adoptive children  other than those on behalf of whom  foster care maintenance or adoption  assistance payments may be made)
Implementing and operating the  immigration status verification system  related to the tracking and monitoring of  TANF requirements (e.g., for a  personnel and payroll system for state  staff)
The cost of mailing unemployment  coordination of programs, including  contract costs and all indirect or  overhead costs  compensation statements, even if  information about the earned income  credit is mailed along with it (except that a  portion of the mailing costs may be  counted as a non-administrative cost if  the inclusion of materials related to the  tax credit increases the postage required  to mail the information)
Costs for the goods and services  required for administration of the  program such as the costs for supplies,  equipment, travel, postage, utilities, and  rental of office space and maintenance  of office space, provided that such costs  are not excluded as a direct  administrative cost for providing  program services    Salaries and benefits of staff performing  administrative and coordination  functions (but not salaries and benefits  for program staff)
section_title: Appendix III: Comments from the Department of Health and Human Services
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Acknowledgments
paragraphs: The following staff members made major contributions to the report:  Heather McCallum Hahn (Assistant Director), Cady S. Panetta   (Analyst-in-Charge), David Bellis, William Colvin, Cheri Harrington,   Gale Harris, Sheila McCoy, Luann Moy, and Tovah Rom.
section_title: Related GAO Products
paragraphs: Child Support Enforcement: More Focus on Labor Costs and  Administrative Cost Audits Could Help Reduce Federal Expenditures.  GAO-06-491. Washington, D.C.: July 6, 2006.
Foster Care and Adoption Assistance: Federal Oversight Needed to  Safeguard Funds and Ensure Consistent Support for States’  Administrative Costs. GAO-06-649. Washington, D.C.: June 15, 2006.
Means-Tested Programs: Information on Program Access Can Be an  Important Management Tool. GAO-05-221. Washington, D.C.: March 11,  2005.
Food Stamp Program: Farm Bill Options Ease Administrative Burden,  but Opportunities Exist to Streamline Participant Reporting Rules  among Programs. GAO-04-916. Washington, D.C.: September 16, 2004.
TANF and Child Care Programs: HHS Lacks Adequate Information to  Assess Risk and Assist States in Managing Improper Payments.   GAO-04-723. Washington, D.C.: June 18, 2004.
Food Stamp Program: Steps Have Been Taken to Increase Participation  of Working Families, but Better Tracking of Efforts Is Needed.   GAO-04-346. Washington, D.C.: March 5, 2004.
Human Services: Federal Approval and Funding Processes for States’  Information Systems. GAO-02-347T. Washington, D.C.: July 9, 2002.
Welfare Reform: States Provide TANF-Funded Work Support Services to  Many Low-Income Families Who Do Not Receive Cash Assistance.   GAO-02-615T. Washington, D.C.: April 10, 2002.
Food Stamp Program: States’ Use of Options and Waivers to Improve  Program Administration and Promote Access. GAO-02-409. Washington,  D.C.: February 22, 2002.
Human Services Integration: Results of a GAO Cosponsored Conference  on Modernizing Information Systems. GAO-02-121. Washington, D.C.:  January 31, 2002.
Means-Tested Programs: Determining Financial Eligibility Is  Cumbersome and Can Be Simplified. GAO-02-58. Washington, D.C.:  November 2, 2001.
Food Stamp Program: Program Integrity and Participation Challenges.  GAO-01-881T. Washington, D.C.: June 27, 2001.
Food Stamp Program: States Seek to Reduce Payment Errors and  Program Complexity. GAO-01-272. Washington, D.C.: January 19, 2001.
Benefit and Loan Programs: Improved Data Sharing Could Enhance  Program Integrity. GAO/HEHS-00-119. Washington, D.C.: September 13,  2000.
Welfare Reform: Improving State Automated Systems Requires  Coordinated Federal Effort. GAO/HEHS-00-48. Washington, D.C.: April 27,  2000.
Food Stamp Program: States Face Reduced Federal Reimbursements for  Administrative Costs. GAO/RCED/AIMD-99-231. Washington D.C.: July  23, 1999.
Food Stamp Program: Various Factors Have Led to Declining  Participation. RCED-99-185. Washington, D.C.: July 2, 1999.
Welfare Reform: Few States Are Likely to Use the Simplified Food Stamp  Program. GAO/RCED-99-43. Washington, D.C.: January 29, 1999.
Welfare Programs: Opportunities to Consolidate and Increase Program  Efficiencies. GAO/HEHS-95-139. Washington, D.C.: May 31, 1995.
Means-Tested Programs: An Overview, Problems, and Issues.   GAO/T-HEHS-95-76. Washington, D.C.: February 7, 1995.
Welfare Simplification: States’ Views on Coordinating Services for Low- Income Families. GAO/HRD-87-110FS. Washington, D.C.: July 29, 1987.
Welfare Simplification: Thirty-Two States’ Views on Coordinating  Services for Low-Income Families. GAO/HRD-87-6FS. Washington, D.C.:  October 30, 1986.
Welfare Simplification: Projects to Coordinate Services for Low-Income  Families. GAO/HRD-86-124FS. Washington, D.C.: August 29, 1986.
Needs-Based Programs: Eligibility and Benefit Factors.   GAO/HRD-86-107FS. Washington, D.C.: July 9, 1986.