text:
Authority Library
ARIza ASTATE LI RY
2 2 8
1717 W. Jefferson - P. O. Box 6123 - Phoenix, AZ 85005
Fife Symington
George Leckie
David St. John
Project SLIM
1700 W. Washington, 3rd Floor
Phoenix, Arizona 85007
Dear Mr. Leckie and Mr. S1. John:
My executive management staff have reviewed the SLIM Report of the Department of Economic
Security ( DES) and we found it laying a good foundation for the improvement in client services
and management accountability. We welcome the opportunity to build on that foundation by
presenting our comments for the final report. Our response contains an executive summary that
addresses the major themes discussed in the report and a specific assessment of the proposals
presented for implementation.
I am pleased to report that DES management experienced a collaborative relationship with the
members of the Project SLIM Team. Clesson Hill has been a strong team leader and Steve Rossi,
Gail Paren, Doug Kluender, George O'Neil, Fred Meister, and Karen Halloway worked hard to
understand the agency and to propose ways to improve it. We look forward to continuing our
working relationship.
I want to also recognize the SLIM Team for recommending the reinvestment of some of the cost
efficiencies back into the agency to improve service delivery and accountability. As you know,
however, we are concerned about the SLIM Report displaying cost avoidance as part of cost
savings. Please consider showing cost avoidance in dollars and staff as separate totals.
There are 55 recommendations contained in the Project SLIM Report. From a 1l), anagement
perspective, the implementation workplan needs a lot more analysis before it can be finalized and I
believe the SLIM Team agrees. We need to further delineate the development requirements, startup
costs, and workload priorities to refine the project timetable. This iterative process will also
enable the SLIM Team to update the cost- benefit schedule.
My most immediate problem is staff morale because many employees are fearful they will not
have their jobs, especially at the Arizona Training Program in Coolidge. We must reassure our
employees that they are our most important resource by compensating them fairly and giving them
opportunities to remain gainfully employed.
George Leckie
David St. John
Page 2
In closing, we really appreciate the SLIM Steering Committee for volunteering their
time to serve the state of Arizona. We certainly are aware of the responsibility which
the committee members have accepted and the impact that their recommendations
could attain on caring for our clients and their families.
~~~ w~~
Acting Director
DAL: llg
c: Don Reck, Chair
Project SLIM Steering Committee
Project SLIM Team
Charline Franz
June 1992
Executive Summary Part I
Automation Requirements ; Part II
Detailed Response Part III
Agency - Organization Structure Section 1
FAA Eligibility Assistance Section 2
FAA Training Section 3
Developmental Disabilities Section 4
Quality ReviewlAudit/ Investigation Section 5
Finance and Budget Functions Section 6
Other Support Functions Section 7
PART I. EXECUTIVE SUMMARY/ General Themes:
The Arizona Department of Economic Security ( DES) agrees with the goals of Project
SLIM to improve overall management structures in state government and improve
service quality through cost- effective productivity measures. DES finds these goals
compatible with the mission of this agency " to enable Arizonans to maintain or move
toward economic and social self- sufficiency through an integrated service delivery
system. "
In many cases the recommendations found in the DES Project SLIM report represent a
commitment to improvement over a significant period of time and will not, therefore,
result in an immediate savings to the state.
In some cases, the SLIM recommendations present the opportunity for policy decisions
that will affect the future of service delivery and service to clients and customers for
years to come. These are decisions that will need to be made during the planning for
implementation regarding the level of quality of service acceptable to the. people of
Arizona. At the center of this issue is the question of whether savings should be
reinvested in quality or amount of services. For example, is a seven percent error rate
in eligibility determination for Aid to Families with Dependent Children acceptable to
Arizona, given the fact that each percent in error rate equates to $ 856,255 in misspent
state dollars, or should Arizona reinvest in staff and technology to further reduce the
error rate?
On the whole, the DES management and staff found the experience with the DES
Project SLIM Team to be positive. The DES Project SLIM Team approached DES,
the state's largest and perhaps most complex organization, with a positive attitude and
maintained a courteous demeanor even during some lively debate.
The SLIM Team interviewed a large number and broad range of staff and management
in its exploration of issues and brought to the table not only a fresh perspective but also
a willingness to listen to and learn about the concerns and ideas of the employees of
Part I - Page 1
The department believes that if the Project SLIM Team had had a longer period for its
review many of the areas of concern contained within the report and the response could
undoubtedly have been resolved to both groups' mutual satisfaction.
One of the advantages of the Project SLIM process, in addition to providing for a fresh
look at the organization, was the fact that the team members were not hindered by the
history of potentially controversial issues. In a number of cases these represent major
policy issues for the State of Arizona and will require discussions and negotiations
among the Executive Branch, the Legislative Branch, local governments, advocates,
clients, families, community leaders, or other state agencies. Among such issues raised
in the DES SLIM Report are:
ClosUre of the Arizona Training Program at Coolidge ( ATPC) and the
Arizona Training Program at Tucson ( ATPT) ( pages 158 and 166).
* DES agrees from a quality of life standpoint that our clients should be
placed in the least restrictive, community based placement. This change
in placement will require significant planning and discussion as well as
Legislative approval. In addition, the state must find an alternative use
for at least the ATPC since it is a major employer in Pinal County,
ensure a smooth transition for clients and address the needs of
Centralization of responsibility for vocational rehabilitation and
employment and training programs for persons with developmental
disabilities in the DES Rehabilitation Services Administration ( page 187).
* DES agrees with the intent of this recommendation which is to ensure
that the department maximize all available federal funds. Many of the
Vocational Rehabilitation programs in the Rehabilitation Services
Administration are matched at 80% with federal funds.
* However, both the RSA and the DDD staff will need to work through a
number of issues with contract providers, clients, families and the
Part I - Page 2
federal government to ensure that current clients do not see a reduction
in service as a result of this recommendation being implemented.
* As indicated in Part III, DES does not agree with the savings projected
by SLIM.
Recommendation to review the potential for transferring fingerprinting
responsibilities for DES employees and contract providers from DES to the
DepartmentofPubncSaf~ y( page229).
* DES agrees with this recommendation in principle but will need to
discuss this with the Department of Public Safety and request a change in
statute if the recommendation proves to be cost effective.
Project SLIM appears not to have simply been looking for FTE reductions throughout
DES, but rather has, in some cases, recommended procedural changes that will allow
staff to spend more time working directly with clients and will improve the quality of
service that clients receive. For example:
Reduce Service Plan reviews for persons with developmental disabilities
from the current quarterly requirement and integrate Individual Program
Plans ( lPP) with the Service Plan to eliminate redundancy in paperwork
( page 173).
* DES agrees with this recommendation, however, the agency would
prefer to review service plans semi- annually rather than annually as
proposed by Project SLIM, because, despite the fact that many other
states perform annual review, DES believes this would represent less
than optimum care of the clients.
Eliminate monthly reporting for all Food Stamp recipients ( page 111).
* Because monthly reporting has been demonstrated by other states not to
significantly impact error rates and because eliminating this requirement
will be less intrusive on clients, DES agrees with the recommendation.
Part I - Page 3
This should also decrease the rate of growth for additional Eligibility
Interviewers in the future.
Provide applicants for Aid to Families with Dependent Children ( AFDC),
Food Stamps, General Assistance and Medical Assistance with a check list
of the necessary information and documentation needed to process their
applications prior to an interview for eligibility determination ( page 73).
* Although this will increase the workload for clerks at the front desk of
eligibility offices and require additional staff in these positions, DES
agrees with this recommendation because it will improve client services.
The DES SLIM Team also has made a number of recommendations, many of a fairly
technical nature, that should expedite work processes and decision making in the
Integrate the information systems used to store and process. information
related to eligibility for the medical, general, emergency assistance
programs with that used for the Food Stamps and AFDC cases ( page 91).
* DES has submitted an Advanced Planning Document ( APD) to the
Health Care Financing Administration ( HCFA) for approval and 50%
federal match on the automation development of MEDICS. This system
will also significantly improve the eligibility determination processes for
medical assistance for the Arizona Health Care Cost Containment
* The ability to proceed with this development depends not only on federal
approval, however, but also on state appropriation in SFY 1993.
Create a position within the Family Assistance Administration ( FAA) to
review and challenge the Office of Program Evaluation error findings ( page
Part I - Page 4
* DES is planning to implement this recommendation on July 1, 1992, as
part of the department's reorganization. The office will include audit,
risk analysis, loss control, data security, program evaluation and venture
team. It will also be responsible for tracking quality assurance functions
performed by program operations throughout the agency.
Move the SEES process forward to within 48 hours of the applicant's
interview and make other improvements in the quality assurance process
for eligibility determination ( page 197).
* DES agrees with these recommendations and plans to pilot the program
in eastern Maricopa County. Additional automated systems modifications
and upgrades to training materials will be required before this can be
Shift emphasis from lengthy examinations by auditors to shorter up- front
f" 1SCa1 monitoring procedures to identify improper accounting practices and
recommend changes to limit improper or incorrect billing ( page 206).
* Although DES agrees with the intent of this recommendation, additional
discussions will be required during the implementation phase to ensure
that the department does not abandon its fiduciary responsibility for
SLIM also recognized DES' own history of self- initiated management and work flow
improvements. Some of the Team's recommendations build on these previous or
current improvements.
Reorganize the Department of Economic Security to eliminate unnecessary
management levels and to streamline reporting relationships ( page 48).
* DES had been in the process of a management review at the time that
Project SLIM was initiated in the department. The Director's Office and
the SLIM Team were able to mutually benefit from ideas shared during
this process.
Part I - Page 6
* DES proposes to redirect one of the positions recommended for
elimination by Project SLIM to reinvest in this function because it will
decrease the potential for federal sanctions due to error rates.
Disband Service Review Committees in the Division of Developmental
Disabilities and eliminate weekly Service Review Committee meetings.
DDD case managers should be given authority to approve or disapprove
services for clients assigned to their caseload ( page 180).
* DES agrees with SLIM that it is reasonable and appropriate to allow case
managers to authorize services up to a certain level clearly defined in
policy and procedure since they are most familiar with the needs of the
* This must be accompanied, however, with a quality/ utilization
management system with clearly defined prior authorization procedures,
statewide service - level guidelines and assessment tools and appropriate
automation support.
In a number of cases the Project SLIM Team addressed areas of improvement related to
accountability within the organization. DES strongly supports accountability in the
public sector and has · emphasized this issue in its strategic plan for the last few years.
BASE I training for eligibility workers should be expanded to four weeks
and incorporate instruction on all 14 chapters of the FAA policy manual as
well as material contained in the LAB program guide ( page 154).
* DES agrees with this recommendation and believes it will improve the
ability of the eligibility interviewers to more accurately perform their
Establish a Quality Review Office to provide oversight authority for all
similar evaluation units. The office will combine all existing multi- program
review units. Activities of other review units which focus on only one
program or administration will be coordinated through the new office ( page
Part I - Page 5
• Although the department has some concerns regarding certain specific
recommendations from Project SLIM that will need to be worked out
during the implementation, on the whole, the agency agrees with the
elevation of certain client service areas to a higher level in the
organization, elimination of one of the administrative support divisions,
and improved coordination of functions of a similar nature.
Although the DES realizes from its discussions with the members of the Project SLIM
Team that the contents of the report are considered to be preliminary recommendations
and that the SLIM Team expects that during the next phase the agency will need to .
evaluate these recommendations to determine if they are truly cost- beneficial, there are
several overriding issues throughout the report that will significantly impact the future
of this agency and the clients whom DES serves.
On page 41 of the DES Project SLIM report, the document states that the State of
Arizona can save $ 19.7 million as a result of implementing all of the
recommendations in the Project SLIM report. DES is concerned that the above
statement not be set in concrete because further analysis is required in terms of start- up
automation costs and other priorities facing DES.
One of the elements of unidentified additional cost relates to the numerous
recommendations from SLIM that the proposed staff reductions or reassignments can
occur only after appropriate automation support is in place.
* It appears to DES that in several instances the Project SLIM Team
calculated the cost savings of the staff reductions but did not include the
expenditures that would be necessary to develop and implement the
automation prior to these staff reductions, for example:
Implement changes in the eligibility application process for an annual
savings of $ 1,681,000 ( See Exhibit 13) ( page 74).
Part I - Page 7
* The Exhibit details the FTE savings but does not include the automation
enhancement and training, which is not a significant cost, that will need •
to occur to allow these changes to be implemented.
The SLIM report states that the " annual savings totals for this and all
associated finance recommendations do not reflect implementation costs.
Most of these costs will involve significant automation enhancements
specified in the recommendations. These enhancements range from minor
modifications of existing systems to the development of new systems" ( page
* Despite this caveat, the SLIM report identified a total of $ 111,000 state
reduction primarily due to the staffing reductions. These appear not to
be net reductions since automation costs have not been included.
* DES does not fault the Project SLIM Team for not providing the costs of
all recommended automation development because that would be
impossible to do at this time; however, DES thinks that it is critical to
point out that the " savings" of $ 19.7 million includes neither these
development costs nor the costs of hardware and software once the
programs are implemented. The MEDICS development alone, which
SLIM recommends, will cost $ 8 million during development of which $ 4
million is state cost. An additional $ 1.2 million in state dollars will be
required for facilities upgrade.
DES is also concerned that in several instances where " savings" are referenced, the
actual result of the recommendation would be to reduce paperwork obligations of direct
care staff and thus allow them to spend more time in face- to- face contact with clients.
This is particularly true with recommendations for the Division of Developmental
Disabilities ( DDD) found in Section 4 of the report. Given the strong consensus of
many that DDD case managers need to be able to spend more time in direct client
contact, DES advises against identifying any " savings" in this area. Rather the state
should consider reinvesting these funds in the Division of Developmental Disabilities
for the improvement of care for clients and automation development to improve
Part I - Page 8
The closure of the Arizona Training ProgJ1llll at Coolidge and the Arizona
Training Program at Tucson with result in a state dollar reduction of $ 4.6
million ( page 41).
* DES would want to make sure that before such " savings" were certified,
that all additional costs relating to increasing the ratio of case managers,
improving the training and working conditions of case managers,
developing and licensing new home and community based settings, and
other factors related to deinstitutionalization had been taken into
Project SLIM: recommends that the DES budget development process be
decentralized, the Budget Office be reduced in size and restructured and
that automation be enhanced to accomplish these changes. The projected
cost savings by Project SLIM is $ 47,000 state ( pages 427 and 432).
* The costs associated with automation development were not included by
Project SLIM; therefore, the long term cost benefit of this proposal
cannot be determined. The department does, however, agree in
principle with decentralizing certain budget functions and increasing
information, authority and accountability throughout the agency.
In addition to these issues relating to unidentified increased costs for automation
development, upon which a number of recommendations hinge, DES also will need to
carefully review with the Project SLIM Team the implementation schedule.
Although it is not readily apparent from Exhibits 4 and 5 on pages 41 and 42, DES
realizes that it is not the intent of Project SLIM that all activities identified to begin
implementation in " month 1" actually start in July 1992.
Therefore, even if the savings identified as " reductions" on page 41 were actual net
rather than estimates without cost of implementation included, which they are not, the
reductions identified for projects identified as taking less than 12 months would not be
realized in the first year of implementation.
Part I - Page 9
Other factors which DES and Project SLIM need to consider in developing a more
comprehensive implementation schedule include:
Many of the recommendations contained in Section 6 of the report relating
to the business and finance functions of the department are to reduce or
reallocate staff based on the assumption that automated systems will be
developed prior to these staff reductions or reallocations.
* While the department agrees in principle with many of the
recommendations, it must caution that:
-- The inefficiencies which SLIM found in these areas can be
corrected with automation development; however, it takes staff
away from their current ' duties to design and manage new
systems. Additional support through increased staff or outside
consultants will be necessary during the implementation phase in
. order to develop the automated systems recommended by SLIM.
This will initially increase rather than decrease costs for the
department. These initial increases in costs have not been
considered by SLIM in their calculation.
-- The business and finance area of the department is currently
under very tight timeframes to deliver on critical priorities
including changes to operations and the Financial Management
Control System ( FMCS). These include responses to seven
management studies being performed by the Office of the Auditor
General, completing five audits, and modifying FMCS to meet
changing Department of Administration requirements.
* Decisions will need to be made as to the order of priority for the
department and how the implementation schedule from Project
SLIM will fit into that priority. The work currently underway
can result in financial losses or sanctions from federal agencies if
not completed timely and accurately.
Part I - Page 10
DES realizes that this is Qnly the diagnostic phase; however, there are several other
implementation issues that will need to be taken into consideration. These include:
* Commitments to the Department of Administration to develop
appropriate interfaces to Arizona Financial Information System ( AFIS) II
and Human Resources Management System. These can neither be
delayed nor fully predicted as part of the implementation schedule.
* Commitments to the Department of Health Services to fully implement
the required Title XIX provisions of mental health services to the
Seriously Mentally III ( SMI). This will impact the department and some
of the client groups which it serves.
* Subject to approval from the Executive and Legislative Branch, assisting
the Arizona Health Care Cost Containment System ( AHCCCS) with the
implementation of a statewide consolidation of eligibility determination
for the Medically Needy/ Medically Indigent AHCCCS program. This
recommendation was also contained in the Project SLIM report on
* Commitments to federal agencies to remam on schedule on several
critical federally approved and funded automation projects including
statewide automation of the Child Support Enforcement Program ( due
date April 1994), Performance Modifications to the Arizona Technical
Eligibility Compu~ er System ( AZTECS) system ( due date June 1993),
development and implementation of an automated collections system for
Unemployment Insurance Tax ( due date approximately August 1994),
and revamping of . the ASSISTS system for the Division of
Developmental Disabilities within the next two to three years. Even if
program staff were available for all of the system design work, there is a
limited number of resources available in the department's Office of Data
Administration to accommodate simultaneous additional systems
Finally, DES is committed to working on these issues during the implementation
planning phase with the Project SLIM staff. Other critical factors such as minimizing
Part I - Page 11
employee disruption, ensuring they are fully educated to the process and know what to
expect and having procurement code and administrative rules processes in place to
expedite changes will need to be taken into consideration.
Part I - Page 12
I Recommendation I
I- A: Agency Organization structure
2- A: Eligibility Application Processing
2- C: Agency Eligibility Error Reduction
2- D: Food stamp Monthly Reporting
2- E: FAA Policy Unit Reorganization
2- F: FAA Local Office Organization
2- G: FAA District Office organization
2- H: Review of QC Error Rates
3- A: Establishment of FAA Training Site
in Tucson
3- B: FAA Employees Who Fail BASE I Training
3- C: FAA District Training Coordinators
3- D: Enhancement of FAA BASE I Training
State $ II Requires
Reduction Automation
$ 0
0 Yes
216,000 No
83,200 No
216,400 No
251,100 No
0 No
51,800 No
0 No
104,700 No
0 No
Cost Included
- But requires
increase of$
269,000 for
4- C: Service Plan and Individual Program Plan
4- 0: Service Review Committees
4- E: Vocational Rehabilitation Services
5- A: Quality Review Organization
5- C: Contract Provider Audits
5- 0: Internal Audit Reviews
5- E: Internal Audit Reorganization
5- F: Venture Team
5- G: Reorganization of OSI
5- H: Internal Affairs Investigation
e par. r - Page 2 e
I Recommendation II RSteadtuect$ ion
Cost Included
6- A: Organizational structure - Finance
6- B: Finance Systems
6- C: Fiscal Control
6- 0: Management of Automated Systems
6- E: Claims filing
6- H: Telecommunications Bill Processing
6- 1: Warrant Handling
6- J: Encumbered Claims Processing
6- M: Client Trust Fund Accounting
6- Q: Payroll Process
6- R: Organization of Payroll & Time
Accounting Functions
6- T: Allocation of Expense Budgets
7- B: Office of Client Advocacy
7- C: DES Purchasing Authority
7- 0: Shredding Policy
7- E: Facilities Janitorial service
7- F: Consumable supplies, forms and fixed
7- G: Vehicles
7- H: Voice Telephone Services
7- 1: Purchasing functions
( 1,000)
Not quantified
Year 1 Number of Improvements: 43 $ 6,254,300 # Requiring II Cost unknown
to achieve: 16
Part II - Page 3
e e
e It
I I State $ Requires Automation
Recommendation Reduction Automation Cost Included
5- B: FAA Quality Assurance $ 0 Yes No
6- F: Travel Advances 15,000 Yes No
6- G: Travel Claims 21,000 Yes No
6- N: Organization of Accounts Payable 21,000 No N/ A
7- A: Unemployment Benefit Appeals 0 No N/ A .
Year 2 Number of Improvements: 5 $ 57,000 # Requiring Cost unknown
to achieve: 3
Part II - Page 4
e e
I Recommendation I State $
Cost Included
2- B: Medical Assistance Eligibility
Determinations $ 410,000 Yes No
4- A: Close ATPC 4,000,00P No N/ A
4- B: Close ATPT 600,000 No N/ A
6- K: DOD Bill Payment 192,000 Yes No
6- 0: Collection of Overpayments 164,000 Yes
6- P: Organization of Accounts Receivable/
Collections Functions
No II N/ A
6- 8: Budget Process 47,000 Yes No
Year 3 Number of Improvements: 7 $ 5,454,000
Part II - Page 5
# Requiring
to Achieve: 4
Cost unknown
PART ill: DETAILED RESPONSE
The Director's Office in the Arizona Department of Economic Security ( DES) has been
in the process of an organizational review for several months and has worked with the
Project SLIM Team on agency reorganization issues. DES agrees in principle with the
recommendation of Project SLIM to reorganize the department in order to improve
communications and elevate critical programs to a direct reporting relationship with the
Director's Office. DES further agrees that accountability and communication will be
enhanced by organizationally restructuring certain functions of a similar nature.
DES agrees with the SLIM recommendation to allow maximum flexibility in the
organization of the Director's Office. This recognizes that, in reality, there are
relatively few instances where policy direction and decision do not affect or are not
impacted by the administrative. operational realities of the agency, and allows the
Director · sufficient time to represent the agency and its clients and programs with the
community, local government officials, the Legislature, federal officials, business
community and media personnel.
DES agrees with expanding the number of program divisions to six and agrees with the
identification of programs to be elevated to division status. Each of these program
areas - child support enforcement, aging and adult services, and community services is
large and complex and warrants an elevated status. DES had identified these changes
as part of its own reorganization.
DES does not agree, however, with the SLIM recommendation to combine the
administrations of the Family Assistance Administration ( FAA) and Disability
Determination Services Administration ( DDSA) under a single administrator within the
new Division of Eligibility Assistance ( Division of Benefits and Medical Eligibility).
FAA performs eligibility functions related essentially to' poverty programs-- Aid to
Families with Dependent Children ( AFDC), General Assistance, Food Stamps, and
Emergency Assistance-- while DDSA, which is 100% federally funded, performs
federally required medical assessments to verify functional eligibility for social security
benefits under the federal Social Security Administration. Each of these two
operations-- FAA and DDSA-- is large, has a significant budget, reports to different
Section 1 - Page 1
federal authorities and has distinctly different and complex federal and state
Furthermore, the department is maintaining the Office of Program Evaluation ( OPE) in
the new Division of Benefits and Medical Eligibility, referred to in the SLIM document
as the Division of Eligibility Assistance, to provide for federally required reviews to
improve timeliness and accuracy and reduce errors. This should be administered
separately from the eligibility determination function to ensure appropriate checks and
balances. The result is three administrations-- FAA, OPE, DDSA-- which DES believes
is an appropriate span of control to effectively manage operations given the complexity
of each of the three functions.
DES also disagrees with the single administration approach for the new Division of
Aging and Community Services. The functions of. the Community Services
Administration ( CSA) are much broader than just the aging population. It is
responsible for the community network in Arizona relating to hunger, homelessness,
and other similar services that also serve younger individuals, children, and families.
The Aging and Adult Administration, on the other hand, works primarily with Title III
Older Americans Act and state identified activities. While it is true that older people
may need the services of CSA, not all CSA recipients will qualify for Aging and Adult
services. Each of these program areas has a significant advocacy group who will not
respond well to the apparent loss of attention and priority. In addition, Title III of the
Older Americans Act implies th~ t the state's Aging and Adult Program be a single
designated administration within the state. Also, the complex specialized functions
would be very difficult to spread across units.
DES supports the Project SLIM recommendations to:
Create Child Support Enforcement as a separate division.
Abolish the Division of Management Review.
Move Internal Affairs, Affirmative Action, Appeals/ Appeals Board and
Legal Services to the Director's Office.
Relocate the Research Administration.
Relocate the Office of Special Investigations
Establish a single, central administration for evaluation, management
review, audit, and quality assurance functions. This administration will
include Internal Audit, Data Security, Risk Analysis, Loss Control,
Evaluation, and the Venture Team.
Section 1 - Page 2
FAA ELIGffiILITY ASSISTANCE
A. Elieibility Application Processine
The Project ~ LIM Team spent considerable time researching, observing, and assessing
the department's eligibility determination processes for cash and medical assistance
programs. This is undoubtedly one of DESI more complex areas of work and is
regulated by a myriad of federal regulations. It also represents the area of greatest state
and federal expenditure, considering both staff resource costs and benefitslservices
through both DES and the Arizona Health Care Cost Containment System
Administration ( AHCCCSA).
Due to the high cost of this area of work and the direct impact Family Assistance
Administration ( FAA) processes have on clients through the timely and accurate
determinations for eligibility, DES has over the last few years engaged in its own
reviews to improve work effectiveness and efficiency:
• SLIM mentions the Local Office Procedure ( LOP) review completed in
1988. Prior to LOP, the AFDC error rate was 14%. Today, du~
largely to LOP, the AFDC error rate is 7.1 %. Timeliness has improved
in AFDC and food stamps from an all- time low of 55% in 1981 to 98%
- 99% today. For every percent improvement in error rate in AFDC the
state avoids an erroneous cost of $ 856,255.
• In 1989, DES reduced the size of the combined multiple program
application form from 32 pages to 11 pages thus improving both the
applicant and worker processing time.
• In 1991, DES initiated development of the Arizona Technical Eligibility
Computer System ( AZTECS) Performance Modification system which
will improve automation by speeding up overall computer processing
• In October 1992, DES will begin MEDICS, which will create an
automated eligibility determination for the Medical Assistance Only
Section 2 - Page 1
( MAO) applicants for AHCCCSA. This, however, is dependent upon
federal approval and a $ 1.6 million appropriation from the Arizona State
Legislature for SFY 1993 for system development and facilities upgrade
to support the new Central Processing Unit ( CPU) and Direct Access
Storage Device ( DASD) necessary to operate the system.
• Project SLIM makes reference to a pilot inquiry process initiated in
April 1992 to electronically access other automated systems. This
process, called PASS, will be implemented statewide if determined
Project SLIM is correct that the eligibility determination process could be expedited if
Eligibility Interviewers ( EIs) entered information directly into the computer system.
SLIM also observed, but did not comment on the need' to improve the computer
response time which is critical to support eligibility determination activity.
DEs has struggled for years with timely funding for increased capacity for its
mainframe system to which AZTECS is linked. Historically, additional CPU and
DASD have been acquired through the Advanced Planning Document ( APD) process
which requires prior federal approval from DES' cognizant federal agencies for each
step of a new development process including planning new development, Requests for
Proposal ( RFPs), contracts for development assistance, contracts for hardware and
software and end- line user equipment for staff. Although federal policy states that
approvals will occur within 30 days, they never have -- typically a federal approval
takes four to eight months, with six months being average for each step in the process.
Once approved, however, some development efforts receive enhanced federal match of
Waiting for federal approval and attempting to coordinate federal approval with the
state appropriation process, required for the matching funds, results in excessive delays
and renders department management incapable of responding appropriately to the
strains that caseload growth or labor saving enhancements place on the mainframe
The additional requirement to also seek approvals from the Arizona Department of
Administration further adds to the delays.
Section 2 - Page 2
During the period of July 1989 to September 1991 the DES mainframe ran at an
average of 90% of total capacity with peak demands commonly reaching 100%,
unheard of by industry standards-- resulting in slow end- user response time. DES
should plan for new CPU expansions when the system is operating at approximately
70% and should install CPU expansion capacity when the system is running at an
average of 80 to 85%•
DES suggests that Project SLIM recommend a revolving fund be established to allow
DES timely access to funds for mainframe expansion. Such a fund could be
replenished with federal funds when federal approvals are received.
Given the above caveat, DES concurs with the recommendation to enter applicant
information directly into the computer when feasible; however, it should be noted the
system will require enhancements to provide a truly interactive interview environment.
This will require funds for additional development.
In addition, the workbook cannot be eliminated. When AZTECS was first
implemented, the application was 32 pages long and was in alignment with the
AZTECS screens. This lengthy application was determined to be a barrier to program
participation. The result was to divide the application into an application form and
agency workbook. The information in AZTECS is insufficient to meet federal
documentation standards without use of the workbook.
DES concurs with the recommendation to have Front Desk Clerks provide applicants
with a check list of necessary information needed to process applications prior to the
interview; however, it should be noted additional staff will be needed at the front desk
to avoid long lines of applicants in the lobby. The department suggests this
recommendation be expanded to indicate that savings from other areas be used to fund
sufficient front desk staff.
DES also agrees that FAX machines would expedite the eligibility process, but the
SLIM report lacks the cost of start up which includes equipment ( FAX), systems
enhancements, and revisions to procedural handbooks and training materials.
Section 2 - Page 3
DES agrees with the remainder of the SLIM recommendations regarding the issues of
scheduling and use of EI time. DES looks forward to' working through the feasibility
of these recommendations with SLIM during the implementation phase. Even with
these improvements, however, DES continues to believe that:
• Staffing levels will need to increase due to increasing caseloads. Since
1989, caseloads in AFDC, Food Stamps and MAO have increased
almost 100%. Although DES has managed to significantly reduce error
rates and increase timeliness during this period, eventually the
department will reach a point of diminishing returns. DES would like to
work with SLIM on issues related to caseload ratios and caseload
• Given the linguistic plurality of Arizona, the Department of
Administration ( DOA) Personnel System should recognize and provide a
pay differential for bilingual staff in certain state service positions such
as eligibility interviewing. These staff could then be scheduled better to
improve the office work flow. DES has requested this consideration
from the DOA but has received a negative response.
• SLIM supports DES- FAA in the development and expansion of
informational video or front- end kiosk systems in local offices to explain
benefits and programs to applicants. This development will further freeup
staff from redundant informational activities.
B. Medical Assistance EIi& ibility Determinations
DES thinks it makes good management sense to adopt the SLIM recommendation to
pursue federal approval to implement the MEDICS project. MEDICS will automate a
high volume, labor intensive eligibility process that is currently an inefficient manual
operation. DES has requested that the Arizona State Legislature add $ 1.6 million to
the SFY 1993 appropriation for state match and facilities upgrade for MEDICS. DES
has submitted its APD to the federal Health Care Financing Administration ( HCFA).
A 50% federal match for development will be available upon federal approval. The
APD and development require approval from and coordination with AHCCCSA as the
state cognizant agency with HCFA.
Section 2 - Page 4
DES is also submitting the attached revised Exhibit 16 to SLIM to update the APD
information based on the new submittal ( see last page of this section). Lack of
sufficient state funds and federal approval in previous years resulted in DES moving the
initiation date from January 1991 to October 1992.
DES further suggests that the state may want to consider consolidating all AHCCCSA
acute care eligibility in the Department of Economic Security. Currently, Arizona's
fifteen counties process eligibility for the state- funded ~ edically Needy/ Medically
Indigent ( MN/ MI) program. DES understands that the AHCCCSA Project SLIM
Team made such a recommendation.
C. A& ency Eli& ibility Error Reductions
DES agrees with the Project SLIM recommendations and, as cited in the previous
section on " Eligibility Application Processing," has aggressively pursued error rate
DES must again state, however, that ultimately an increase in FTE is required to ensure
sufficient staff resources to implement these recommendations. In SFY 1992, DES
will expend $ 750, OOO( T) [$ 253,500( S); $ 253,500( F); $ 243,000( 0)] in overtime
payments to staff to attempt to keep up with timely processing of applications. Since
. overtime pay is largely time and a half according to the Federal Fair Labor Standards
Act ( FLSA) and State Personnel Rules, DES believes this expenditure IS a cost
inefficiency that could be better applied to dollars for increased FTE.
There is a delicate balance between timeliness and error rate. Eligibility Interviewers
emphasize timeliness, at management direction, to avoid court ordered penalties.
Without sufficient staffing, this creates a Catch- 22 for the agency which is not reflected
in the Project SLIM report.
Additional Comments: SLIM states on page 104 that no information is available to
determine if AFDC ineligibles would be eligible for other medical assistance programs
offered by AHCCCS. This is not information that would be known to DES but may be
available from AHCCCS Quality Control staff.
Section 2 - Page 5
The information on page 104 relating to the DES error rate does not fully demonstrate
the magnitude of the caseload and staffing impacts. Since 1988, the DES error rate for
AFDC has improved 5 to 7% while caseload/ applications have increased 155% and
staffing EI only increased about 50%. By also avoiding being held in contempt of
court on timeliness issues, DES estimates that the improvements mentioned here and in
the previous section have avoided costs to the state of $ 5 million to $ 10 million.
D. Food Stamps Monthly Reportine
DES agrees with the recommendation to eliminate monthly reporting in all food stamp
cases and pursue the Kentucky model within three years on AFDC reporting.
The description of the benefits to be achieved, however, indicate a savings of 54
Eligibility Interviewers ( EIs) and postage and forms. It should be noted that clients
will continue to be required to report changes when they occur. Clients must be
provided a non- MR change report and postage paid envelope. When the client returns
the report, the agency must supply the client a new one for future reporting. The
SLIM report does not address this cost; therefore, the suggested savings will not be
totally realized. DES agrees that future need for additional EIs may be reduced by
adjustment to the workload standards used in developing budget requests.
The implementation lacks the cost of start up which includes client education and
revisions to policy manuals, procedural handbooks, and training materials. These
issues will need to be addressed with Project SLIM during implementation.
E. Family Assistance Administration Policy Unit Reoreanization
The DES disagrees with most of the recommendations in this section and believes that
there may have been a miscommunication between SLIM and DES staff.
The Family Assistance Administration interfaces with three separate federal agencies
each of whom has its own set of regulations. This, not the DES Policy Units, may
result in inconsistencies. Federal agencies will, on occasion, issue retroactive policy
and all medical assistance policy material must be approved by AHCCCS prior to
issuance to field staff. Again, this, not the DES Policy Units, results in retroactive
policy changes which may be viewed from a field perspective as " untimely." Field staff
Section 2 - Page 6
are not always aware of the complexities of the federal/ state relationship and may,
therefore, have inadvertently misled Project SLIM.
The findings suggest that review of the other unit's work results in inefficient use of
staff resources, yet without this review inconsistent policy clarifications will increase.
Even if the policy units were combined, the highly specialized nature of the
information would require differentiation of functi~ on and therefore the units would still
be required to review each other's work to ensure consistency where possible.
The SLIM recommendation to eliminate the two Grade 21 positions and reclassify two
existing Policy Specialists to Social Service Administrators with the added
responsibility of supervision could result in the delay of issuance of policy material and
decreased quality. DES would prefer to reevaluate this recommendation after MEDICS
DES would like to reemphasize its recommendation, which SLIM has identified on
page 118, that to improve service to customers in field offices and improve accuracy
and timeliness by EIs, funds be appropriated to place policy material on- line and
eliminate the dependency on Forms Management and the Print Shop which now require
two months lead time for issuance of material. This will expedite policy change
transmittals to the field, reduce workload on the DES Division of Business and
Finance, and reduce paper processing to FAA field offices.
DES does not agree with SLIM that this should wait until MEDICS is completed on
April 1, 1995. AFDC/ Food Stamp on- line policy is not dependent on MEDICS; only
MAO is.
The Management Evaluation ( ME) process is required under Food and Nutrition
Service ( FNS) regulations. FAA is responsible for overseeing and implementing FNS
regulations. ME must take its direction from the FAA Administrator who sets the
priorities for this unit. DES does not agree with the recommendation to transfer this
function to the Quality Review Office, but would prefer to include their activities in the
overall Quality Review Accountability Annual Report.
Section 2 - Page 7
F. FAA Local Office Organization
DES agrees with the recommendations to realign staffing in Family Assistance
Administration ( FAA) local offices:
If Assistant Local Office Managers are eliminated, appropriate funding
should be identified to reduce and maintain the size of a local office
structure to no more than six units and appropriate Quality Assurance
Specialists should be authorized to ensure continual quality monitoring
and training ( refer to SLIM recommendation entitled, " FAA Quality
Assurance"). There are currently five local offices which exceed six
units. A single unit of Eligibility Interviewers is responsible for $ 3- 4
million in AFDC, food stamps and AHCCCS benefits per year. DES
believes that large offices put too many public dollars at risk. Properly
staffed management ratios is a must.
The inconsistencies in structure will continue unless the same
recommendation applied to Casa Grande is implemented in four
additional offices. These offices are Avondale, Flagstaff, Yuma, and
Coolidge. The recommendation should be to employ an Administrative
Support Supervisor in each of these offices.
These modifications are necessary to ensure quality and accuracy. The savings from
SLIM's proposed staff reductions will, therefore, not be as great but this change will
have long- term benefit.
G. FAA District Office Organization
Although DES agrees with SLIM's recommendation to eliminate District Training
Coordinators and Quality Assurance Supervisors, the department believes that SLIM
has incorrectly concluded that these changes will eliminate the need for Assistant
District Managers ( ADM) and District Program Specialists ( DPS). If the ADM and
DPS were also eliminated, Program Managers would have to assume added
responsibilities for:
Section 2 - Page 8
• Development. and implementation of quality enhancement plans.
• System hardware troubleshooting.
• EEO complaints.
• Client complaints.
• Participation in community activities.
• Coordination of client services among various program divisions within
state and county agencies.
• Planning, monitoring, managing and directing one of state government's
largest organizations.
To perform such functions without adequate staff support will impede, not improve,
management and communication. The current function of the Program Manager is to
manage day to day operations, implement corrective action plans, improve client access
to service, and respond to the community and advocates on behalf of staff in the
Reduction in support should not occur just as DES is taking on additional eligibility
functions. DES agrees that this be reconsidered after MEDICS is on- line and other
eligibility changes have occurred.
H. Review of OC Error Rates
DES agrees with the recommendation to hire one ( 1) FTE to be dedicated to ensuring
error rates determined by quality control staff are, in fact, errors. DES proposes to
redirect one of the positions recommended for elimination by Project SLIM to
accomplish this.
Section 2 - Page 9
Revised EXHmIT 16
The Medical Eligibility Determination and
Information Control System
Purpose : To provide automated Medical Eligibility Determination of Department of
Economic Security clients seeking medical assistance from the Arizona Health Care
Cost Containment System ( AHCCCS).
System Development : The Arizona Department of Economic Security, in cooperation
with the Arizona Health Care Cost Containment System. The Advance Planning
Document ( APD) describes a Modified Approach to System Transfer, as the plan for
Project Schedule :
Phase I
Phase II
- Systems Requirements Definition and External Design. Six months;
October 1992 - March 1993.
- Software Development, Testing, Documentation, Pilot System. Twelve
months; April 1993 - March 1994.
User Training, Implementation, Conversion. Twelve months;
April 1994 - March 1995.
Post Development - Depreciation on EDP Equipment will be distributed over a 60
month period, with the final payments made in March 1998. These costs are included
in the APD budget request.
Project Budeet : The estimated total cost is $ 7,526,975, assuming a 50/ 50 FFP rate.
Details as follows:
Cost Category Total HCFA FFP State Cost
Development! $ 4,857,993 $ 2,428,996 $ 2,428,996
EDP Equipment $ 2,227,169 $ 1,113,584 $ 1,113,584
Interest on
EDP Equipment $ 441,813 $ 0 $ 441,813
Budget Estimates Revised May 1992.
Section 2 - Page 10
A. Establishment of FAA Trainine Site in Tucson
DES agrees to the SLIM recommendation to locate another Family Assistance
Administration ( FAA) BASE Training program in Tucson to reduce travel costs for
employees travelling to Phoenix.
B. FAA Employees Who Fail BASE I Trainine
DES agrees with the recommendation to restrict external hires to persons scoring 85 or
above on the State Personnel Screening and Certification process; however, this should
not apply to promotional hiring lists so as not to discourage career development for
clerical staff already working for the agency.
The department agrees that if an Eligibility Interviewer ( EI) on promotional probation
fails BASE I, the employee be reverted to his former classification, not terminated.
It should be noted that only applicants for EI positions in Districts I and II are scored
based on written and oral examinations.
C. FAA District Trainine Coordinators
DES agrees with the SLIM recommendation to abolish seven ( 7) of the District
Training Coordinator positions and use funds from the remaining two ( 2) Training
Coordinator positions to provide supervisory training in the Family Assistance
D. Enhancement of FAA BASE I Trainine
DES agrees with SLIM's recommendation to expand BASE I training from three weeks
to four weeks, incorporate instruction on all 14 chapters of the FAA Policy Manual and
include material in the Life After BASE ( LAB) program guide.
Section 3 - Page 1
DEVELOPMrnNTALD~ ABaITns
A. Closure of the Arizona Traininl Pr0lram at Coolidle
From a professional program service standpoint, the department agrees that the 181
persons currently residing at the Arizona Training Program at Coolidge ( ATPC) could
reside in community settings.
SLIM's recommendation is consistent with DES policy to place people in the least
restrictive appropriate setting possible. In general, clients residing at the ATPC are
long- term residents with an average age of 40 years and functional levels arid f! 1edical
conditions comparable to persons with developmental disabilities residing in home and
community based settings. Given that, however, the ATPC is " home" for 181 people
who rely on the permanency of this institution. It is therefore critical to begin careful
planning early to ensure a smooth transition for these people.
The advent of Title XIX Long Term Care in Arizona in 1988 has highlighted the
administrative difficulties and financial drain of attempting to maintain federal
certification for the larger and older institutions such as the ATPC. It has certainly not
been the intent of either DES or the state to develop a " dual system" of care which the
SLIM report has identified.
The ATPC is a major employer in the Coolidge/ Randolph area of Pinal County. Of the
486 permanent staff members employed at ATPC, 286 live in Coolidge. Closure of the
ATPC would create an adverse economic impact on that community as it is not
reasonable to assume that all 286 persons could find employment with vendors or
otherwise be absorbed into the local labor market. This is a factor not just for the
ATPC employees but also the merchants and city government of the area. DES and the
state must engage in thorough planning and ensure that consideration be given to the
ATPC staff who may require assistance with employment.
Coolidge and the surrounding communities should not be expected to absorb 181 new
clients with developmental disabilities in group homes in such a small residential area.
In addition, medical resources may not be adequate in the Coolidge area to handle
intensive medical needs of some of these individuals. Therefore, careful planning on
Section 4 - Page 1
the part of the state will be required to develop residential settings compatible with
clients' and families' needs. The planning must further consider ways to minimize the
disruption and psychological impact on individuals who have been at ATPC for 10- 20
In addition, alternative use planning for the ATPC must be based on a broad coalition
of interests that include several Pinal County communities and elected officials.
Economic development should be part of the state's plan related to closure of the
DES must also point out that the savings projected by Project SLIM for closure of the
ATPC may need to be refined to account for such issues " as . changing staff ratios
required by many · clients moving to the community, start up costs for vendor and state
operated facilities, recruitment and licerisure of additional adult developmental homes.
DES believes that some of the savings in the transition years would be absorbed by
such costs and therefore the real benefit will be post- transition cost avoidance. The
department cannot verify these cost figures and therefore would need to readdress them
during the planning phase.
Finally, approval of the Legislature is required to close the ATPC. The Legislature
would probably want to first see a fully developed economic plan that is acceptable to
the City of Coolidge as well as a plan for the clients and involvement of families in the
closure proce~ s.
B. Closure of Arizona Trainine Proeram at. Tucson
The same concerns and issues as previously discussed regarding the closure of the
ATPC apply to the SLIM recommendation to close the Arizona Training Program at
Tucson ( ATPT). Again, DES does support the recommendation but significant
planning with clients, vendors, families, and the local government is required for the
transition to occur. DES is also concerned that the " savings" are overstated and will
need to rework these assumptions during the planning phase.
Section 4 - Page 2
C. Service Plans and Individual Proeram Plans for Developmentally Disabled
The department agrees with the intent of the recommendation from Project SLIM that
updating service plans every 90 days is not the most efficient use of case manager time.
DES does not agree, however, that an annual review is sufficient and proposes instead
a semi- annual update. The service plan review is an integral part of case management
responsibility to ensure that services being provided are appropriate and that regular
contact with clients is maintained. Approval from AHCCCS will be required and a
demonstration waiver update will need to be submitted. DES also agrees to integrate
the Individual Program Plans ( IPP) with the information in the service plan. The
department further proposes to phase in this change with case managers in order to
allow the department time to validate that clients are receiving appropriate services.
It is inaccurate to state there will be " savings" in dollars since what is being reflected in
the recommendation is a refocusing of a finite number of hours available to existing
numbers of case managers to do those tasks they are currently unable to do. The
department believes that any savings in hours realized from changing the Service Plan
and IPP requirements should be reinvested- back into existing case managers to spend
more time with clients thereby resulting in a more accurate assessment of needs and
services provided. If this were done, there would be no " savings" in case manager
positions or dollars.
D. Service Review Committees
DES agrees with SLIM that it is reasonable and appropriate to allow case managers to
authorize services up to a certain level clearly defined in policy and procedure since
they are most familiar with the needs of the client. However, this must be
accompanied by a quality assurance/ utilization review ( QA/ UR) management system
with clearly defined prior authorization procedures. The costs of a QA/ UR system
have not been included in the SLIM benefit analysis.
DES also believes that in implementing these recommendations SLIM should consider
the department's need to:
Section 4 - Page 3
• Develop and finalize statewide service level guidelines and assessment
• Retrofit the computer system to track service authorization, deny
unauthorized claims and produce utilization reports which can be
integrated with budget accounts.
• Develop a system to focus resources on those clients with specialized or
high acuity needs ( e. g., R. N. medical case management).
In addition, if Service Review committees are disbanded, additional review
requirements currently exist both in Arizona Long Term Care System ( ALTCS) rule
( R9- 28- 511. C.) and in the ALTCS Program Management Manual ( 323.2). To fully
comply with the intent of the recommendation would require additional rule changes
and the approval of the AHCCCSA.
E. Vocational Rehabilitation Services for the Developmentally Disabled
Although DES agrees with the SLIM recommendation to mainstream vocational
rehabilitation services for persons with developmental disabilities, it is unrealistic to
project a $ 4,417,800 savings for this proposal without further investigating the number
of individuals who would qualify for the state/ federal Vocational Rehabilitation
Program. If this total amount is reduced from the budget and the projected savings are
not realized, then the department would not have the funding to continue services for
the current clients.
DES estimates at least a six month planning phase prior to implementation. It would
be important to ensure adequate time is taken to transition the individuals so as not to
create any hardship for these clients or their families .
. DES will ensure that Rehabilitation Services Administration ( RSA) and the Division of
Developmental Disabilities work jointly to plan the transition. During this time, RSA
will review individuals who would qualify for the state/ federal Vocational
Rehabilitation funding and those who will require continued support with state funding.
This will allow a clear projection of any savings which can be realized without
jeopardizing services for individuals with developmental disabilities.
Section 4 - Page 4
A. Quality Review Oreanization
The department agrees with the recommendation of Project SLIM to consolidate multiprogram
accountability functions in a new Office of Quality Review and is planning
this as part of the reorganization effective July 1, 1992. This office will be located in
the Division of Administrative Services and will include the following units:
Internal Audit
Risk Analysis
Loss Control
Data Security
Venture Team
Program Evaluation
The other units identified on page 193 of the SLIM report will remain in their present
location in the organization because they are single purpose reviews only, but they will
receive oversight from the Office of Quality Review.
B. FAA Quality Assurance
The DES agrees with the SLIM recommendations regarding improvements to the FAA
Quality Assurance process.
Federal regulations provide specific time frames for determining eligibility but do not
require an agency to deem an applicant eligible if the time frame is not met. Project
SLIM should be aware that emphasis on timelines is driven by the McCowen vs DES
court suit settlement which requires the department to presume eligibility for the food
stamp program if food stamp determinations are not made according to federal
regulation time frames.
The recommendations to have Quality Assurance ( QA) Specialists report to Local
Office Managers and to redefine the role of these staff cannot be fully implemented
since all offices do not have appropriate QA Specialists. DES suggests this
Section 5 - Page 1
recommendation be expanded to indicate that savings from other areas be used to fund
sufficient QA Specialists.
The implementation lacks the cost of start up which includes systems modifications and
revisions to procedural handbooks and training materials. This will need to be further
discussed with Project SLIM during implementation.
C. Contract Provider Audits
Although DES agrees with the intent of Project SLIM's recommendation to prevent
contract problems through monitoring, DES is not certain that the calculation used by
the SLIM Team of three days per monitoring activity would be long enough to achieve
. the projected savings. DES would like to further discuss the implementation strategies
and staffing methodologies with the Project SLIM staff.
D. Internal Audit Reviews
The department concurs with the recommendations of Project SLIM to move audit
disposition coordination activities to Internal Audit in the Office of Quality Review and
to request a desk audit of the Division of Business and Finance Administrative
Assistant III who is currently responsible for monitoring the funding and corrective
actions associated with the DES Single Audit conducted by the Auditor General's
The department will also need to reevaluate the new workload imposed on the Chief
Auditor during implementation to determine if additional support will be required.
E. Internal Audit Reorganization
Project SLIM proposes to reduce the number of audit supervisors and increase the
number of auditors in the department so that DES can perform more audits and reduce
administrative costs.
The 41% " management cost" identified by SLIM is somewhat misleading because it
includes the five audit supervisor positions, which are all " working" supervisors who
perform audits.
Section 5 - Page 2
Although DES agrees with the need for an improved career ladder, both of the grade
21 positions recommended by SLIM would require the creation, through the
Department of Administration ( DOA), of an entirely new " auditor" service grade that
does not presently exist. DES, therefore, proposes that those two positions be grade 22
audit managers, such as exist presently in the Department of Transportation internal
audit structure, and already exist in the DOA classification structure.
DES is concerned that with the emphasis on accountability, increasing audit capabilities
will require additional discussions with Project SLIM during implementation.
F. Venture Team
DES Management has found the Venture Team concept a useful tool in internal
management review. Upon implementation of the program, DES provided a full
briefing of the agency functions to the Venture Team Board members and
recommended a number of areas for the Board's consideration.
When the DES Venture Team process was initiated, the Business and Finance section
of the agency was receiving the most criticism of any area of the department-- both
from within the agency and from the Legislature, providers, vendors and other persons
doing business with DES. That criticism has abated-- in no small part due to a number
of improvements that the agency has made.
Even though the areas studied were not those of major expenditures, Venture Team
nonetheless paid for itself and identified over a quarter of a million dollars in cost
avoidance. DES believes this is significant.
The Venture Team staff review their work with managers of areas under study and
senior management for accuracy of content and interpretation. No report is approved
and finalized by the Board until management has signed off on its accuracy. In
addition, the Venture Team staff produce a tracking report so that action plans and
implementation steps can be monitored by the Director's Office. To date, all
recommendations by the Venture Team are scheduled for implementation unless DES
has been unable to identify resources.
Section 5 ~ Page 3
DES agrees that the Venture Team should also explore programmatic areas of the
agency but wishes to point out that: e
• Project SLIM has just completed a review of eligibility determination
functions ( FAA) and the Division of Developmental Disabilities ( DOD).
• The Auditor General, as part of the DES Sunset Review, is reviewing
DOD and Child Support Enforcement ( CSEA).
• The Legislature recently completed a review of Child Welfare ( Child
Protective Services), DOD, and CSEA.
DES agrees with the recommendation to move the Venture Team unit to the Office of
Quality Review and is doing so as part of the department's reorganization. DES is
unclear though why SLIM recommends reducing the size of the Venture Team Board to
three members. There are currently, by statute, five private sector business members
appointed by the Governor and five public sector managers appointed by the DES
G. Reoaanization of OSI
The DES agrees with certain recommendations relating to the reorganization of the
Office of Special Investigations ( OSI) and, additionally, offers some alternatives that
the department believes will further enhance the operations.
The department agrees with the SLIM recommendation to one ( 1) Administrative
Support Supervisor in Tucson and one clerical position. There is a seasonal clerical
position ( Grade 8) in the Tucson office. This clerical position should be converted to a
permanent Grade 11 Information Processing Specialist ( IPS) II. This position will be
responsible for fingerprint services, reception duties, and support to the other clerical
positions. In the first quarter of this year, OSI Tucson attempted to operate without
this position and without the Administrative Support Supervisor I. The result was that
the hours of fingerprinting available to the public were cut by fifty percent.
Complaints were received from the public, the provider community, and other program
divisions of DES. Errors increased, backlogs developed, and investigators had to cover
phones and assist with printing, which is not a good use of their time or qualifications.
Using a seasonal clerical is inefficient, because staff do not remain long in these types
of positions and the agency must repeatedly train new employees.
Section 5 - Page 4
DES agrees that the Program and Project Specialist position should be abolished;
however, DES maintains that given that Fraud Operations will have clerical staffing, it
may be appropriate to consolidate and abolish one Administrative Support Supervisor II
as recommended.
DES agrees that one IPS II position should be added to the Tucson office, that one
vacant Investigations Supervisor I should be filled, that one Investigator II position
should be added to the Forgery Unit, that the administrative unit should be reorganized,
and that three clerical positions should be reassigned to the Phoenix Fraud Unit.
Computer access has been a problem since the inception of the automated fraud
tracking system. There has never been sufficient terminals availability. Recently, OSI
has been able to obtain enough terminals to equip all management, supervisory, and
clerical staff. Terminals are strategically placed in key metropolitan offices for field
investigators. The completion of the original plan of an interactive computer system is
DES agrees with SLIM's recommendation that Field Operation cases be opened by
investigators and their reports completed without typing. This recommendation is
currently being implemented by DES as an integral part of the Field Operations
conversion based on the pilot project. Conversion should be completed by July 15.
Concerning SLIM's recommendation relating to OSI communications, OSI has been
working on an effective method of communicating results to those with a need to know.
Consideration must be given to the confidentiality of the client and the mission of DES.
DES wants to be certain that the appropriate message is sent to all. The Phoenix Fraud
supervisors are working on this plan and will add Project SLIM's suggestions of
involving the Public Information Officer and the program divisions into the project.
This should be completed and operating by no later than July 1, 1992.
With regard to SLIM's concern about the design of the reception work area, this has
always been problematic. The tasks involved include assisting with the completion of
fingerprint forms, coordination with the Fingerprint Team, managing the phones and
messages for the entire Phoenix staff, access control to conference rooms and for those
who are in the office for interviews and interrogations.
Section 5 - Page 5
The Administrative Services Manager will review the current tasks and incorporate
changes as possible to assure that this position is effective.
Additional Comments:
Copy Equipment
The report notes that OSI has inadequate copiers. No recommendation is noted
however. Based on SLIM's analysis, it is recommended that OSI copiers be replaced.
Unfortunately, given the limited appropriation for replacement equipment, DES may
not be able to make this a priority.
Fingerprint Unit
Two years ago OSI was under severe criticism from a variety of sources. In the last
two years department policies and Administrative Rules have been drafted, and
coordination among other state departments, including the Department of Public Safety
( DPS), has been achieved. Backlogs and error rates have been eliminated through
these efforts and internal organizational changes.
Page 223, Paragraph 5 states that OSI takes fingerprints of certain agency programs
and providers. It should be more accurately stated that fingerprinting is mandated by
statute upon which rule and policy are based. OSI fingerprints employees and
providers of the Division of Social Services, the Division of Family Support, DOD, the
Division of Business and Finance as well as prospective guardians, foster care, adoptive
parents and certified personnel and care providers.
DES would suggest that Project SLIM be cautious in looking for savings in the
fingerprint area. Changes may be appropriate but backlogs and error rates need to be
closely controlled as inaccuracy could lead to severe liability issues.
H. Internal Affairs Investieations Supervisor
DES agrees with Project SLIM's recommendation to eliminate the position of
Investigations Supervisor.
Section 5 - Page 6
A. OrKanizational Structure - Finance Operations
The department generally concurs with Project SLIM's recommendations relating to
finance operations to group similar functions, remove excess organizational layers,
raise grade levels of certain accounting related positions and eliminate unnecessary
processing steps and inefficiencies.
The DES is not, however, in agreement that all of the reductions in staff levels could
be achieved. While the true staffing needs of the DES Division of Business and
Finance ( OBF) cannot be known until all automation enhancements and revised
procediJres are in place, it does appear that the proposed organizational structure is very
tight. This structure may provide for day- to- day business activities, but DES does not
believe there is sufficient flexibility to perform tasks outside of the normal daily
Numerous recommendations that Project SLIM made require modifications to the
Financial Management Control System ( FMCS), the agency's central automated
accounting system. The department's own agenda for FMCS to comply with federal
and state requirements still exists. All enhancements to FMCS will require a
substantial investment by the user. These activities do not appear to be contemplated in
the proposed organizational structure. DES does not believe that the proposed
reduction in staffing will provide adequate support for ongoing FMCS development.
The department has made several recommendations where the proposed organizational
structures presently do not appear adequate.
The proposed organizational structure for the Office of Accou! lting ( Exhibit 54) is
adequate in many respects, assuming proper automation is in place. However, in the
Cost Allocation Unit, the department believes one ( 1) additional FTE, grade 15, would
be necessary to appropriately complete reconciliation activities. Also, DES believes the
General Accounting Unit would need two ( 2) additional grade 17 positions to
adequately perform analysis for management and special projects. Finally, the Funds
Section 6 - Page 1
Control Unit will need two ( 2) additional grade 11 positions for client trust fund
accounting and documentation control.
The Accounts Payable Unit ( Exhibit 55) would be reduced from fifty- four ( 54) FTEs to
ten ( 10) FTEs under the Project SLIM proposal. While the proper automation could
reduce workloads dramatically in the Accounts Payable Unit, DES does not agree that
the department can appropriately process and file invoices with ten ( 10) FTEs. The
DES believes that two ( 2) additional grade 11 positions would be necessary for claims
payment and report distribution.
The proposed Office of Collections ( Exhibit 56) does not have sufficient collectors.
Even if other implementation efforts to shift functions to other divisions or collection
agencies are successful, four ( 4) additional collectors would be necessary.
The proposed Office of Payroll ( Exhibit 57) does not appear to have sufficient
accounting technicians to adequately process payroll and control time sheets. Three ( 3)
additional account technicians would be necessary.
The proposed organizational struc~ ure for the Office of Contracts, Equipment and
Purchasing does not provide sufficient staff. The SLIM report recommends reducing
warehouse and fixed asset support by fourteen ( 14) FTEs. Please refer to the
department's response to Section 7- F for concerns.
The proposed organizational structure for the Office of Business Systems recommends
elimination of three ( 3) grade 19 positions. These positions are necessary to continue
performing department- wide training.
B. Financial Systems
The Department of Administration ( DOA) maintains statewide accounting information
through the use of the Arizona Financial Information System ( AFIS). DES
implemented the Financial Management Control System ( FMCS) in 1988 to meet the
unique needs of DES' multiple federal, state and other fund revenues.
The DES has addressed the most significant issues associated with the implementation
of FMCS through an internal Project Control Management process which was not in
Section 6 - Page 2
place during initial development. Staff have been designing an automated
reconciliation process between AFIS and FMCS for the past ten months. This process
is anticipated to be completed before the end of fiscal year 1992.
DES agrees with Project SLIM's recommendation to develop a master plan for
financial information systems.
To provide accountability at a level of detail necessary to meet the department's many
reporting requirements, an intricate accounting structure is a necessity. Detail must be
at a sufficient level to meet the diverse requirements of the Department of
Administration, Joint Legislative Budget Committee, Office of Strategic Planning and
Budget, federal agencies, auditors, and department management.
C. FIScal Control
DES agrees with the recommendation to eliminate the grade 21 position assuming the
implementation of additional system edits, and with the recommendation to simplify the
coding structure. The coding structure of FMCS was developed based on diverse and
complex reporting requirements to numerous internal and external management and
governmental entities. An agency as large and diverse as DES must be accountable to
numerous levels of oversight. The coding structure must be used to track grant activity
and help ensure program compliance.
The FMCS does include a module for on- line approval of financial transactions which
has not been activated. System edits could be enhanced; however, with the complexity
of the FMCS accounting code structure, complete edit control of account code
combinations would be difficult to achieve. This automation enhancement would be
very expensive to implement.
D. Management of Automated Systems
The staff person in the Cost Allocation Unit actually schedules the various FMCS
jobstreams-- from its daily batch processing to its annual archiving. The staff person
assists in the distribution of FMCS reports, but is not involved in the maintenance of
FMCS accounting reports. DES believes that transfer of this position/ function to the
FMCS Systems unit is appropriate.
Section 6 - Page 3
The department supports the overall recommendation. However, the statement that " the
FMCS system is near completion, and project management needs are expected to
decrease" is not correct. The department has identified over 13,835 hours of
programming enhancements and modifications required of FMCS. This does not include
the automation of the three- way match among the vendor invoice, the receiving
document, and the purchase order prior to payment nor does it include
automation/ integration of the accounts receivable and collections function or any other
automation necessary to implement Project SLIM recommendations.
In addition, major enhancements to the Department of Administration ( DOA) computer
systems, both the Uniform Statewide Accounting System ( USAS) and the Human
Resources Management System ( HRMS), are expected ' over the next several years.
~ -
Project management will remain an integral function within the FMCS Systems Unit for
several years to come, in part to meet changing DOA requirements. Until FMCS is
truly in " maintenance mode" and all interface programming complete and documented, a
reduction to project management staff would be detrimental to its success.
The FMCS training unit provides general training to persons outside the Division of
Business and Finance ( DBF) who are dependent upon FMCS information. In addition,
the unit provides specialized training whenever major enhancements/ interfaces are
implemented. General training averages 20 students per month ( 170 student- hours per
month). Specialized training, last provided for the Federal/ State/ Other split process,
accounted" for an additional 333 students and 1,067 student- hours. Special and general
training should remain within the FMCS Systems Unit to avoid duplication of effort and
ensure knowledgeable, quality training from the FMCS experts. Individual offices have
provided and will continue to provide their unique procedural training, but the FMCS
Systems Unit should continue to support special and general training requirements.
The reduction of positions is supported by the department but cannot be accomplished
without a corresponding increase in automation, further stabilization of the FMCS
application, and completion of all DOA interfaces and enhancements. These are
expected to be fulfilled in three to five years ( shorter if additional funding can compress
the time frame). Therefore, reduction of positions would occur over the next three to
five years-- identified in the staff redeployment plan. This would agree with Project
SLIM's recommendation of " a phased approach."
Section 6 - Page 4
Office of Accountine - General Comments:
While the department conceptually agrees with all but a few of the proposed
recommendations regarding the Office of Accounting, a number of concerns must be
addressed and resolved prior to implementation of these recommendations.
1. Expectations related to the period of time, number of resources and available
funding devoted to the implementation of these recommendations must be
a. Current staffing levels accompanied with workloads using current
procedures will not be sufficient to design system modifications, develop
new automated systems, define and document new position descriptions,
develop necessary written procedures, and train staff to adhere to new
b. If attrition is one of the methods used to reduce staff positions, current
workload processing would suffer dramatically and further impede the
implementation. In addition, limitations placed on the current level of
transaction processing as a result of a decreased work force could cause
a downward spiral in the department's commitment to accountability.
This could result in additional corrective action plans and disallowed
costs from federal agencies, continued disclaimers of opinion on the
department's financial statements and single audits, and a general sense
of lack of credibility in the department.
c. The modifications to the current FMCS system and the development of
new systems for the Office of Accounting recommendations are farreaching.
Systems development and changes of this nature are extremely
time consuming for system design staff, programmers and users. The
cost of these endeavors should be quantified with the necessary staff
input as well as hardware and software requirements taken into account.
The DES believes that funding should be identified to provide consultants
coupled with DES staff to implement the necessary changes described above. In
Section 6 - Page 5
addition, consideration should be given to the workload impact of redeploying
staff to an implementation task force.
2. Modifications to the proposed organizational structure and specific
recommendations must be made if necessary changes to systems, legislation and
internal and external procedures cannot be accomplished.
Many of the proposed recommendations require significant modifications to
long- standing operating procedures and' statutes. In addition, system
modifications often appear relatively easy on the surface, but once specific
design begins, the scope of the tasks is larger than originally anticipated. If
these changes are not realized in time frames specified by an implementation
plan or not at all, the appropriate changes must be made to the recommendations
to allow current activities to ' continue uninterrupted.
3. The proposed organizational structure does not appear to take into account
duties other than daily activities in running the accounting of the department.
Almost daily, the department is faced with requests for information, recreation
of old accounting information ( internally and through formal correspondence)
and other non- routine requests that need immediate attention. The department
believes these factors have not been considered in the proposed staffing level.
4. SLIM proposes decentralizing much of the responsibility for department
accountability. Consequently, the department believes changes have to be made
to ensure compliance with the appropriate Arizona Revised Statutes, federal
regulations and accounting guidelines.
E. Accounts Payable Unit; Claims Filine
The department agrees with Project SLIM that the elimination of duplicate filing of
claims would reduce the need for filing staff. One important obstacle stands in the way
of eliminating the need for alphabetical filing. The department establishes blanket
encumbrances using a miscellaneous vendor code ( i. e., MSDDD) to allow non- l099
providers and vendors to be paid from one encumbrance rather than setting up
thousands of individual encumbrances. The miscellaneous vendor code was created to
Section 6 - Page 6
DES agrees that the FMCS system should be modified to allow for reconciliation of
advances in a simplified manner. An additional recommendation could be that DOA
allow the department to record travel advances as a claim receivable ( an asset account)
as opposed to an expenditure. This would allow the department to offset the asset
account when a claim is submitted rather than reversing one expenditure and then
recording another at the time a claim is received. Implementation of this suggestion
would require a change in DOA procedures and some modifications to the FMCS
G. Accounts Payable Unit; Travel Claims
The department agrees with the recommendations associated with reducing the number
of steps involved in processing travel claims and eliminating duplicate forms and
Simplification of the travel claim process is necessary to reduce the length of time to
process the claim. One individual could be responsible for auditing the form, entering
the claim and forwarding for filing; however, it is crucial that the randomly selected
spot reviews be conducted on a regular basis to ensure that guidelines are being
followed, audits are complete, and the lack of segregation has not created errors or
Further, with regard to out- of- state travel, DES agrees that the appropriate
Administrator/ Chief should be given final authority when approving ou~- of- state travel
and responsibility for ensuring that budget and cash are available to fund the travel
expenses. The discontinuation of separate DOA and DES forms would be possible if
one form could be developed to meet both agencies' needs.
The department agrees that the use of DES vehicles for state travel would reduce the
number of travel claims submitted for mileage; however, there is an insufficient
number of state vehicles to accommodate all needs.
DES agrees that all blank claim forms should be uniquely numbered prior to
distribution to employees. This problem resulted from the restricted number of fields
available to the department on AFIS to record claim numbers. In the past having only
6 characters greatly restricted the amount of numbering combinations possible without
Section 6 - Page 8
alleviate the burden of establishing individual vendor codes and encumbrances for
transactions that need not be tracked at a low'level of detail.
The use of a miscellaneous vendor code does not create a separate vendor file in the
FMCS, and consequently, payments made to individual vendors cannot be identified
through the input of a name or vendor code in the FMCS system. A modification to
the FMCS system would have to occur before this situation can be corrected.
F. Accounts Payable Unit; Travel Advances
The department agrees that the issuance of travel credit cards to appropriately identified
employees would help alleviate the need for travel advance processing; however, a
large number of advances are processed for new employee training. As the Office of
Accounting has tried to maintain some controls over the risk of employees possessing
cards, the cards are offered only to permanent status employees, thereby disqualifying
virtually all new employees from eligibility to receive a travel credit card.
The department agrees that block purchases of lodging, meals and other common
expenses should be mandatory. This could, with the proper Department of
Administration ( DOA) and DES procedural changes, significantly reduce the number of
travel advances and claims processed.
The department agrees that the establishment of an in- house " travel desk" would help to
coordinate travel activities. Currently, each individual traveller is responsible fo~
procuring his own air fare and lodging. Often times, these individuals are unaware of
the state's restrictive contract with one travel agency for air travel, which results in
DOA refusing to reimburse the traveller for his airfare. In addition, some employees
are unaware of the lodging per diem limits in various cities, and, consequently, they
cannot be fully reimbursed for their costs. A centralized travel procurement desk
would not only consolidate these tasks and therefore make the process more efficient,
but it would also allow for an " expert" in the area of travel rules to ensure all travel
expenses meet the appropriate guidelines.
DES does agree with issues related to limiting travel advance and will continue to
explore these options. The proposed scope of work for the travel desk will need
further development during implementation.
Section 6 - Page 7
duplication. AFIS II allows the department 8 characters for claim numbering, thereby
eliminating the need to create claims with duplicate numbers.
DES agrees that the travel claim process must be automated at some point. Due to the
fact that the same travel guidelines impact each agency throughout the state, possibly
DOA or several of the state agencies could develop a standard system to be used for all
agencies. A modification to FMCS to accommodate an automated travel claim, given
the department's other priorities, cannot be considered a high priority at this time.
While the department agrees that a work measurement system should be established to
track the activity at each travel desk, sometimes the cost of gathering useful data
outweighs the benefit of obtaining that data. Keeping that in mind, the Office of
Accounting is currently investigating ways to track and standardize workflow in a cost
effective manner.
H. Accounts Payable Unit; Telecommunications Bill Processine
The department agrees that all telecommunications bills should be paid through the
DES Office of Data Administration ( ODA). In order to make processing feasible for
ODA without adding resources, either the US West or the Department of
Administration ( DOA), or both, sets of telephone bills must be transmitted on magnetic
media. The magnetic transfer of the DOA phone bill would require procedural changes
at DOA and within DES.
Before determining the allocation process to be used in distributing telephone charges,
the Office of Accounting must determine the methodology that best distributes the costs
while taking into account the cost of administering the methodology versus the benefit.
In addition, any allocation process developed must comply with the department's cost
allocation plan which must be approved by participating federal agencies.
I. Accounts Payable Unit; Warrant Handline
DES agrees that the following SLIM recommendations would improve the efficiency of
warrant handling:
Section 6 - Page 9
1. Generation of warrants, including paychecks, at DES using the FMCS
2. Use of " snapset" checks to eliminate the need for stuffing.
3. Use of batch totals to verify the accuracy of warrant runs.
4. Printing client payroll warrants by program area to eliminate manual
sorting. ( Beginning July ~, 1992, DES has initiated the use of separate
Department of Administration ( DOA) " bank types" for each DES
generated client payroll, thereby creating a built in sort).
The current procedural operations of DES, DOA and the State Treasurer's Office,
however, will need to change significantly. The responsibility to initiate, approve and
effect disbursements is generally not granted to an individual agency. DES does not
have any authority over the change process in DOA or the State Treasurer's Office.
Strict, comprehensive procedures allowing for " adequate segregation of duties and
sufficient safeguarding of warrants and signature plates must be developed and
adequately conveyed to · staff. With the proper documentation of duties and the
assu~ ce of accountability by the department, the granting of authority to generate and
sign checks could reduce some of the inefficiencies between DOA and DES.
In addition, the cost of scrapping unused warrants and purchasing " snapset" checks, as
well as the necessary equipment to print these types of checks, must be considered in
analyzing the cost effectiveness of this proposal.
J. Accounts Payable Unit; Encumbered Claims Processine
DES agrees that a clarification of functions for the Accounts Payable Unit and the
Purchasing Unit is necessary. In addition, the department agrees with the transfer of
unit responsibilities to the Purchasing Unit, as displayed in this recommendation, given
the general approach of minimizing activities other than claim and warrant processing
in the Accounts Payable Unit. The additional buyer,. grade 18, would be needed to
accomplish this task. DES maintains, however, that a buyer assistant position may be
needed to adequately staff this task.
The department also agrees that the three way match and claim development process
should be automated. DES considers this critical; however, numerous other projects,
Section 6 - Page 10
such as AFIS II development and the FMCS modifications, have a higher priority.
Without this automation, this recommendation could not be accomplished with the staff
indicated in Exhibit 58.
During fiscal year 1991, the three way match process saved the department more than
$ 40,000 by taking advantage of vendor discounts identified by the manual three way
match process. DES believes this figure could increase dramatically given a welldesigned,
automated process.
K. Accounts Payable Unit; DDD Bill Payment
The department agrees that modifications must be made to the DDD bill payment
process to avoid duplication of effort and other related inefficiencies resulting from the
joint responsibilities of the Division of Developmental Disabilities and the Division of
Business and Finance.
All bills associated with DDD provider claims should be paid by I? DD at the area
office level. Procedures must be in place, however, to ensure that the responsibility for
authorizing bills, inputting payment information on ASSISTS, and accounting for
warrants generated by the system is properly segregated.
In addition, it appears proper, given the focus of limiting the processes performed by
the Accounts Payable Unit, for DDD to perform the three way match process related to
all of its operating expenses. The Accounts Payable Unit would then be responsible
only for inputting claim information on the FMCS system. Comprehensive procedures
and adequate training must be developed and conveyed to staff to ensure processing is
consistent and accurate.
The DDD ASSISTS system does not currently function at a level that allows efficient
input, edit and interface with FMCS. The department is reviewing the feasibility of
additional automation development which would be critical to this recommendation.
This will be a monumental task, and will require additional time and funds to
Section 6 - Page 11
L. Accounts Payable Unit; Public Assistance and Administration Revolvinl
Fund ( PAARl
DES agrees that it must develop an on- line tracking system to track PAAR fund
expenditures and generate checks to eliminate manual logging and redundant data entry.
Centralizing the administration of the PAAR fund within the Office of Accounting
would further reduce the fragmentation and inefficiencies related to the current process.
It is crucial, given the other responsibilities of the Office of Accounting staff, however,
that any necessary automation is developed, tested and in place prior to the total
centralization of this task. It is also critical that the necessary internal accounting
controls, segregation of duties and written procedures be developed and that staff is
properly trained in fulfilling the associated job responsibilities.
Further, the DES agrees that a long- term alternative to be investigated is the possibility
of direct charging of funds to the appropriate fund categories. However, this would
require extensive modifications to the FMCS system, and must truly be considered a
long- term endeavor when coupled with other prop<;> sed modifications that require
immediate action.
In addition, if a methodology for direct charging funds at the time a warrant is
generated is implemented for PAAR related expenditures, the feasibility of
implementing a similar process for many other disbursements should be considered.
This would help to eliminate the delay in receiving warrants once clients, vendors and
providers have submitted all necessary information for payment.
M. Accounts Payable Unit; Client Trust Fund Accountinl
DES agrees that changes need to be made in the administration of the Client Trust Fund
account to ensure that the funds are being handled in an efficient manner.
DES also agrees that individual bank accounts utilizing automatic debits and credits to
the accounts would reduce much of the manual inefficiencies of the system. The
department does not agree with the provision of debit cards for case managers and
others responsible for handling client funds.
Section 6 - Page 12
In many cases, the clients of the Division of Developmental Disabilities ( DDD) are
being taught to live independently. Part of this training involves living within a limited
dollar budget. This is currently handled through the use of monthly allowances for
various minor expenses, which are logged and carefully monitored to ensure adherence
to the guidelines. The caseworkers may have difficulty finding the time to sufficiently
monitor the amount of money received by an individual client.
Further, it is the department's responsibility, as conservator for these funds, to exercise
due care and control in disbursing and administering these funds in the client's best
interest. Sufficient internal controls must exist to provide ' reasonable assurance that
funds could not be mismanaged. One of the primary rules in developing cash control
procedures is to segregate the duties of authorizing, initiating, receiving and accounting
for cash. The debit card proposal, coupled with the maintenance of receipts by the
caseworker, does not allow for sufficient safeguarding of the client's money.
Centralization of Client Trust Fund Accounting would eliminate many inefficiencies
associated with the current procedures for administering the fund. Prior to the
centralization of this function, sufficient modifications to the system or the development
of an on- line check authorization system mus~ be developed to ensure that the current
level of activity can be maintained with fewer resources.
The department will need to retain 1.5 of the 4 FTE proposed for elimination to track
and disburse client allowance checks for approximately 1,800 developmentally disabled
clients. In addition, to ensure proper segregation of cash handling procedures, DES
will need to retain .5 FTE to monitor receipts kept by case managers.
N. Accounts Payable Unit; OrKanization of Accounts Payable Functions
DES agrees that the Accounts Payable Unit, as presented in the proposed
reorganization, could report directly to the Finance Director..
The department also agrees that elimination of levels of supervision is necessary.
Giving the Accounts Payable Administrator direct supervisory responsibility of all staff
will streamline the processing of payments. In addition, a revision to the current
mission statement will be necessary to reflect the proposed changes in organizational
Section 6 - Page 13
The Office of Accounting has attempted to develop numeric- based performance
standards to be used for measurement of performance for EPAS, but because of the
fragmented work flow and the need to change staff's duties based on evolving
priorities, standard work measures are virtually impossible to develop. With the
implementation of the proposed organizational structure, work functions appear to be
more standardized, allowing for determination of anticipated productivity levels.
Additional General Comments on Recommendations on Finance Operations:
Nearly every recommendation DBF received on the Finance issues will require further
automation of existing systems or development of new systems. The Project SLIM
report does not provide an estimate of automation development costs; therefore, it is
not possible to determine the cost- benefit of many of the SLIM recommendations. The
Project SLIM Team appears to concur with DES that these issues will need further
exploration during implementation.
The projected cost of the Accounts Receivable Integrated Collection System ( ARIeS) is
estimated at $ 250,000 to $ 1.2 million; this and other automation costs are not included
in the " savings" calculations.
The department will need technical assistance to help implement some of these
recommendations. The cost of this technical assistance has not been adequately
detailed. Implementation steps must be further detailed to determine the true
automation and assistance needs associated with proposals. Eliminations of staff
occurring simultaneously with implementation steps would place a burden on
existing/ remaining staff to perform current duties, redesign systems, develop new
procedures and train staff.
O. Office of Accounts Receivable: Collection of Overpayments
The Family Assistance Administration ( FAA), Office of Accounts Receivable ( OARC),
Office of Special Investigations ( OSI), and Appeals " review" overpayments, but their
functions are distinct. FAA writes the overpayment, OARC reviews the overpayment
for accuracy and potential intentional program violation with corresponding
disqualification penalty, OSI reviews the case for possible prosecution and then
investigates to determine if there is sufficient evidence to support the prosecution, and
Section 6 - Page 14
Appeals reviews the overpayment only if requested to do so by a client seeking
administrative review. Each of these functions involving overpayments is necessary in
order to comply with federal and state regulations and policies.
GARC's present automation does not allow for tracking of any kind of individual
performance of the collectors. Collector's evaluation performance standards are based
primarily on manual review of the quality of case file management, Le. taking
appropriate action for the debt owed.
The department agrees with the feasibility of SLIM's recommendation to re- engineer
the overpayment collection process, but enhanced automation is absolutely critical.
Feasibility of the SLIM recommendation for FAA staff to establish. claims, review
claims, input overpayment information, etc., is contingent upon FAA having sufficient
trained staff to assume these new responsibilities. Additional automation development
would also be necessary.
As a clarification point, if files are to be maintained in the FAA offices on cases to be
collected through automatic benefit reductions, OARC would not be able to answer any
questions pertaining to the Notice of Overpayment OARC is supposed to send.
If the above occurs, collection staff could be reduced, provided that there is funding for
implementation of' enhanced automation and contracting with a private collection
agency for collections occurs. It would be difficult however, to assess the precise
number of reduced collection staff as a result of these actions until full operation of the
automation system and determination of the extent of the viability of contracting with a
private collection agency.
Prior to contracting with a private collection agency, confidentiality issues, liability
issues, and approval from the federal government on the state administered federal
programs would have to be addressed. A cost analysis should be done also to
determine if contracting with a private agency is cost effective.
Statutorily, the Attorney General's Office files any civil actions against a state debtor.
Therefore, unless statutory change occurs, only the state could be involved in accounts
requiring civil action. It is not clear whether the SLIM recommendation concerning
Section 6 - Page 15
contracting with private attorneys to prosecute fraud refers to civil or criminal cases.
The Attorney General is the legal adviser for the state and the chief prosecutor for the
state ( Arizona Constitution Article V., A. R. S. 41- 191- 192). As such, the Attorney
General may employ attorneys, collect money owed to the state, and prosecute civil
and criminal actions for the state. It would be appropriate to contact the Attorney
General for changes to the Attorney General's authority.
P. Accounts Receivable and Collections Unit; Qaanization of Accounts
Receivable and Collection Units
DES concurs with the recommendation to redistribute current OARC functions
provided there is appropriate automation and staff available at the distribution point to
perform these functions. The available staff would also have to be properly trained,
supervised and accountable.
If the billing function is to be decentralized and the collection function centralized the
following must be considered and were not addressed in the recommendation: ( 1)
possibility of inconsistencies in the billing processes of the department, ( 2) the inability
of the collections staff to answer any billing questions of the client, and ( 3) fragmented
data necessary to filing civil action, i. e. information pertaining to debt would be in the
respective billing office, and ( 4) billing a DES client from more than one source,
requiring the client to find the billing source to obtain an answer regarding each billing.
DES concurs with the recommendation of reduced collections and administrative
support staff, inclusive of supervisors and management provided there is sufficient
automation enhancement and all of the other proposed recommendations occur.
Enhanced automation would be mandatory to concur with the recommendation of
expanded work measurement and performance standards.
Q. Payroll and Time Accountine Unit; Payroll Process
The department would like to add to the SLIM analysis that since the initial evaluation,
DES has completed development of the HRMS front- end interface which will be
implemented in June 1992. This will dramatically affect payroll timeframes which was
one of SLIM's recommendations. Due to the large volume of transactions, centralizing
all input has strained the unit's primary goal of accounting · · for wage and leave
Section 6 - Page 16
information. HRMS, which is the Department of Administration ( DOA) system, lacks
the edits necessary to ensure that data is properly edited which directly affects payments
and leave balances.
Decentralization of payroll operations with data input at the local office level could be
advantageous if certain procedures were implemented. Employee overtime ( for pay)
should not be decentralized since such an important issue would be better controlled if
placed under the supervision of one office. The Payroll Unit is concerned that the
recommended staffing levels would not meet the standards expected to process the
department's payroll. Several issues arise when considering staff reductions:
1. Reconciliations
2. HRMS interface errors
3. Processing of PAAR checks
4. Process/ reimburse PAAR fund and leave payoffs.
5. Filing of 226,000 time sheets annually.
6. Review of documents to ensure accountability.
7. Distribution of employee paychecks and timesheets.
DES does agree, however, with the recommendation to redefine the role of the Central
Payroll Unit.
Simplification of the coding structure is contingent on federal and state requirements.
Such implementation would require a substantial amount of restructuring and
automation enhancements.
The department also agrees that there is a need to reevaluate the cost allocation plan.
The Office of Finance is currently investigating the possibility of eliminating courier
DES agrees that placing the department on two pay cycles would improve processing;
however such a change would require extensive restructuring of HRMS. Such an
action may increase the work load on other areas such as personnel and may increase
the likelihood of late warrants. Implementation of this recommendation would require
extensive automation enhancements.
Section 6 - Page 17
R. Payroll and Accountina Unit; Oraanization of Payroll and Time Accountina
The department agrees in concept with the recommendations to relocate the Payroll
Unit, reduce the number of staff upon implementation of proper automation, further
automate the Arizona Random Moment Sample ( ARMS) process, consider expanding
the ARMS process, revise the mission of the payroll unit and establish work
measurement and performance standards.
There are three points of concern to be addressed during implementation:
1. It is proposed that staff should be reduced from 23 to 13, which DES believes is
3 less than is required to meet minimum standards to process the expected
2. Implementation of complete automation recommendations is contingent on
availability, training and testing.
3. The proposed organizational chart should reflect an Administrative Assistant III
in Position Control instead of the grade 15 Administrative Support Unit
s. Office of the Budaet; Budaet Process
DES agrees with the overall SLIM recommendation to decentralize the budget functions
assuming that sufficient time is allowed for the transition to occur, and automation is in
place to sustain the decentralization.
DES also agrees that the program management should provide a thoughtful review of
the program budget requests. DES maintains, however, that it is critical to raise the
issues of public need to the executive level to ensure that decisions regarding priorities
are made with as much information as possible. DES has implemented a new budget
development procedure this year which allows program staff to raise these critical
issues for discussion without first having to prepare formal decision packages. DES
does not agree that only potential successful budget issues should be raised for
discussion. It is critical for a human service agency to include local communities in its
Section 6 - Page 18
planning process-- this contributes to the identification of key policy issues for executive
and legislative consideration.
DES generally agrees with the recommendations to reduce and redirect budget staff.
These changes can be accomplished as part of the long term process of decentralizing
the budget activities. However, these positions must remain in place until the
automation support is available, standards of accountability are developed and the
decentralization occurs.
DES does not agree with the amount of " savings" identified by Project SLIM. As
Project SLIM states on page 432, the recommendation to decentralize the budget and
reallocate staff depends upon new automation development in order to provide staff
with the appropriate information and tools to perform their job. The automation costs
have not been identified by Project SLIM.
DES is concerned about the recommendation for a statewide on- line budget
development process managed through OSPB because of the large number of highly
experienced staff that OBPB would require to interpret the information. This seems
duplicative of work that state agencies would need to do anyway.
T. Office of the Budeet; Allocation of Expense Budeets
DES generally agrees with Project SLIM's recommendation to delegate expenditure
authority downward in the organization. DES already coordinates equipment purc~ ases
including automation equipment, and is working on improving its method of
anticipating indirect charges and decreasing its reliance on cost pools and direct charge
wherever appropriate. Although DES agrees with the use of blanket purchase orders,
DES believes that the Department of Administration ( DOA) objects to this practice.
Delegation of expense budget authority will take significant staff time and cost to
implement-- including further development of FMCS. Project SLIM could not calculate
the increased costs associated with this recommendation, and the agency agrees that it
would be premature to do so. In addition, this automation development may need to
wait until federal directed and DOA changes to FMCS are accomplished.
Section 6 - Page 19
A. Unemployment Benefit Appeals
Project SLIM's recommendations regarding Unemployment Benefit Appeals and the
establishment of a Fair Hearing Unit Pilot Project in Maricopa and Pima Counties are
problematic. This is undoubtedly one of the more complex legal functions of the
department and greatly restricted by federal arid state law and approvals from the
federal Department of Labor. DES mu~ t, therefore, oppose this SLIM
recommendation on the following grounds:
1. Federal statutes and guidelines, with which the State of Arizona is required to
comply, set forth the requirements for a Fair Hearing. The Social Security Act,
Title III, provides that the Secretary of Labor shall make no certification for
payment to any state unless it finds that the law of such state includes a
provision for an " opportunity for a fair hearing before an impartial Tribunal, for
all individuals whose claims for unemployment compensation are denied. "
There is no provision for intermediate resolution of disputes and to do so would'
probably place the State of Arizona out of compliance with the federal
If Arizona fails to comply with the provlSlons mandat~ by the federal
government, the federal government can notify the state that further payments
will not be made to the state. In order to recover its certification, the State of
Arizona would have to file a petition for review with the United States Court of
Appeals and a judicial review would be initiated.
Furthermore, under the Federal Unemployment Tax Act ( FUTA), employers
receive a tax credit for 90% of the state unemployment tax which they pay. If
the state is found not to be in compliance with the federal provisions, employers
lose this credit. The loss of certification can thus be seen to be catastrophic to
the unemployment compensation program and devastating to Arizona
Section 7 - Page I
2. It must also be noted that the SLIM proposal is partially based upon a review of
the Unemployment Tax Section within the DES Unemployment Insurance
Administration ( UIA).
Pursuant to A. R. S. 23- 724, an employer adversely affected by the
determination issued by the department may request a reconsideration. The
reconsideration is then issued by the department after further investigation. An
employer may then petition the Appeals Board for review of the reconsidered
The report states that approximately one- half of the cases reviewed annually are
resolved immediately because of the education of the employer about
regulations regarding the program. Only 15% to 20% of the initial
unemployment insurance tax determinations are appealed and, accordingly, 80%
- 85% could be said to have been " resolved". This statistic is misleading and
not representative of the true picture.
SLIM states that three employees resolve these tax cases; however, an additional
twelve employees spend approximately 50% of their time obtaining facts and
resolving issues.
The recommendation states that " a lack of informal intervention early in
disputes results in an inflated volume of cases, inefficient and costly resolution
practices, and a backlog of disputes in appeal." The proposed " intervention", in
addition to being improper under the federal guidelines, would add extra days,
or even weeks to the appeal process. DES is operating under federal guidelines
which mandate that the Office of Appeals decide 60% of its cases within 30
days of the appeal date and 80% of its cases within 45 days. At present, DES
barely meets the 45 day standard. Any extra delay will place an extreme burden
on the appeals process and place DES out of conformity and subject to
The recommendation states that approximately 20% of the cases reviewed in
New York are returned to the local office for corrective action. DES
understands that figure is actually 12% and that New York does not track the
number that are reappealed. The return of the cases for corrective action does
Section 7 - Page 2
not resolve the case, but only causes the issuance of another determination
which may be appealed. The " corrective actions" are merely rejected
determinations which are reissued by the local office. DES has recently learned
that the federal Department of Labor is now refusing to fund the activities
performed in the New York agency that result in withdrawal of cases.
Furthermore, Arizona's record for meeting federal timelines is better than New
5. DES does not believe the comparison of Unemployment Insurance ( UI) Benefit
appeals to Family Assistance Administration ( FAA), AHCCCS, or even UI Tax
appeals is appropriate because:
Rules governing FAA and AHCCCS cases are more exact, e. g., the
amount of income or savings, the blue- book value of vehicles, etc.,
whereas, the UI Program makes judgments on work search adequacy,
whether a person acted reasonably, etc. These cases are two party cases,
unlike UI benefit cases that frequently have three interested parties.
The UI Tax redetermination process is a legal process established by
statute which replaces the Office of Appeals and results in a formal
decision. Additionally, the fact that a number of employers drop out of
the appeal process in the redetermination process is not necessarily
because they agree with the decision, but that there is another " hoop" in
the process. Over 95% of the tax determinations are affirmed in the
redetermination process.
6. DES believes the SLIM proposal poses potential constitutional violations of the
due process and equal protection rights of the interested parties to the UI appeal
decisions and of the prohibitions againstex pane communications.
• Over 40% of benefit appeals have three parties ( the program, the
claimant and the employer) involved and approximately 50% of the
appeals on separation cases are employer appeals. There is no mention
of an employer appeal going through the Fair Hearing Unit ( FHU). The
SLIM proposal would be treating claimants and employers differently
and placing claimants at a disadvantage if every employer appeal
Section 7 - Page 3
" automatically" goes to a hearing while claimant appeals have to go
through the FHD process first.
• In most separation cases, there is disagreement on the facts between the
employer and the claimant. Adjudicators must many times base their
determinations on " hearsay evidence" from the employer's personnel
office or employer representatives while hearing officers have the
authority to obtain their own facts in the case and follow the rules of
evidence. In many cases, the appeal decision may be in favor of the
appellant if the other party fails to appear at the hearing or fails to bring
witnesses with first- hand knowledge of the circumstances in the case.
Because of this, it appears unfair to the appellant to discourage his/ her
appeal even though the deputy's determination might appear to be
• The proposal describes a pilot project in District II and subsequent
" complete implementation" by establishing a FHl.! in District I. This
implies only cases in District I and II would be handled through the
FHD process. If that is true, DES would be treating differently those
claimants who reside outside those districts.
7. DES has concerns with the impacts of the FHU process on timeliness In
resolving contested UI benefits cases.
• A. R. S. 23- 773. D provides that VIA has seven calendar days in which to
reconsider a determination. If a determination cannot be reconsidered
within the seven days, it must be forwarded to the Office of Appeals.
DES believes it is unlikely that the department would be able to meet
this seven- day requirement. The process would require: transmittal of
all documentation from the local office to the FHD; contacting the
claimant and scheduling a mutually agreeable time for a pre- hearing
conference; and remanding the case to the local office adjudicator for
reconsideration if that is determined appropriate.
• The national criteria established by the Secretary of Labor for timely
disposition of first level UI appeals is 60% within 30 days and 80%
Section 7 - Page 4
within 45 days. The timeliness calculation begins when the appellant
flIes his/ her appeal with the department. ill procedures require that
appeals be forwarded immediately to the Office of Appeals if there is no
reconsideration of the determination. Any appeal not forwarded within a
day of its receipt in the local office seriously hampers the issuance of a
timely decision by the Office of Appeals.
8. DES does not believe the cost savings · would be as great as those identified in
the propo~ al.
• The PHD costs shown are only staff costs. In addition to the staff costs,
establishment of the PHD would involve additional costs for space,
furniture, telephone, and computer equipment for the new unit. These
would be costs beyond our current operation costs and would decrease
the potential savings.
• There would be additional staff COS! s not only in the PHD but also in
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