	Background

		Foster Care Program

Title IV-E of the Social Security Act provides for states to obtain federal  reimbursement for the costs of their Foster Care programs. Figure 1 shows federal outlays, as  reported by HHS, by type of expenditure for fiscal year 2010. OMB granted this approval in December  2004 with the expectation that continuing efforts would be taken to  improve the accuracy of ACF’s estimates of improper payments in the  ensuing years. ACF’s Methodology for Estimating Foster Care Program Improper Payments Is Not Statistically Valid or Complete

ACF’s methodology, which resulted in a reported $73 million (or 4.9  percent) estimate of improper payments in the Foster Care program for   had deficiencies in all three phases of its estimation  fiscal year 2010,methodology—planning, selection, and evaluation—when compared to  OMB’s statistical guidance, GAO guidance, and federal internal control  standards, as summarized in table 2. Validity of Reported Foster Care Program Improper Payment Reductions is Questionable

ACF has reported significantly reduced estimated improper maintenance  payments, from a baseline error rate of 10.33 percent for 2004 to a 4.9  percent error rate for 2010, but the validity of ACF’s reporting of reduced  improper payment error rates is questionable. Further, we  found that ACF’s ability to reliably assess the extent to which its  corrective actions reduced Foster Care program improper payments was  impaired by deficiencies in (1) its method for requiring when states  implement corrective actions and (2) information technology limitations  related to monitoring states’ Foster Care program-related Single Audit  findings. ACF did not use reported improper payment error rates—which are  based on the dollar amount of improper payments identified in a  sample of state Foster Care cases—to determine whether or not a  state is required to implement corrective actions. Instead, ACF uses  the number of sample cases found in error to determine which states  should develop a PIP. Therefore, some states with improper payment  dollar error rates exceeding 5 percent were not required to implement  corrective actions to reduce these rates. Similarly, deficiencies in its system for monitoring Single Audit findings  limit ACF’s ability to efficiently track and compare trends across states. Recommendations for Executive Action

In order to more accurately and completely estimate improper payments  for the Foster Care program and ensure that its methodology is  statistically valid, we recommend that the Secretary of Health and Human  Services direct the Assistant Secretary for the Administration for Children  and Families to take the following four actions: augment procedures for estimating and reporting Foster Care  program improper payments, to include administrative costs; develop and implement procedures to provide a statistically valid  methodology for estimating and reporting Foster Care program  improper payments based on complete and accurate payment data; augment guidance to teams gathering state-level Foster Care  program improper payment estimate data to include specific  procedures to follow in identifying and reporting any underpayments  and duplicate or excessive payment errors; and  revise existing procedures for calculating a national improper payment  estimate for the Foster Care program to include a statistically valid  method for aggregating state-level margins of error to derive an  overall, inflation adjusted, program estimate. In its written comments, reprinted in appendix IV,  HHS agreed that its improper payment estimation efforts can and should  be improved. With regard to our seven recommendations to help improve  ACF’s methodology to estimate improper payments and its corrective  action process, HHS generally concurred with four of the  recommendations and agreed to continue to study the remaining three  recommendations. We also reviewed results from the Title IV-E  eligibility reviews for periods 2000 through 2010, and prior GAO and  HHS Office of Inspector General (OIG) reports. To further determine the extent to which ACF’s methodology generated a  reasonably accurate and complete estimate of improper payments across  the Foster Care program, we:
Performed an independent analysis of ACF’s sampling methodology,  including a review of the sampling plan and other underlying  documentation, as well as evaluated whether ACF’s sampling  methodology complied with OMB statistical guidance, GAO guidance,  and federal internal control standards as criteria to determine the  accuracy and completeness of ACF’s reported fiscal year 2010  improper payment estimate for the Foster Care program.
Why GAO Did This Study

Each year, hundreds of thousands of the nations most vulnerable children are removed from their homes and placed in foster care. While states are primarily responsible for providing safe and stable out-of-home care for these children, Title IV-E of the Social Security Act provides federal financial support. The Administration for Children and Families (ACF) in the Department of Health and Human Services (HHS) is responsible for administering and overseeing federal funding for Foster Care. Past work by the HHS Office of Inspector General (OIG), GAO, and others have identified numerous financial deficiencies associated with the Title IV-E Foster Care program. GAO was asked to determine the extent to which (1) ACFs estimation methodology generated a reasonably accurate and complete estimate of improper payments across the Foster Care program and (2) ACFs corrective actions reduced Foster Care program improper payments. To complete this work, GAO reviewed HHSs fiscal year 2010 improper payments estimation procedures, conducted site visits, and met with cognizant ACF officials.

What GAO Found

Although ACF has established a process to calculate a national improper payment estimate for the Foster Care program, the estimate is not based on a statistically valid methodology and consequently does not reflect a reasonably accurate estimate of the extent of Foster Care improper payments. In addition, the estimate deals with only about one-third of the federal expenditures for Foster Care, and is therefore incomplete. ACFs methodology for estimating Foster Care improper payments was approved by the Office of Management and Budget (OMB) in 2004 with the understanding that continuing efforts would be taken to improve the accuracy of ACFs estimates of improper payments in the ensuing years. ACF, however, continued to generally follow its initial methodology which, when compared to federal statistical guidance and internal control standards, GAO found to be deficient in all three phases of ACFs estimation methodologyplanning, selection, and evaluation. These deficiencies impaired the accuracy and completeness of the Foster Care program improper payments estimate of $73 million reported for fiscal year 2010.
ACF has reported significantly reduced estimated improper payments for its Foster Care maintenance payments, from a baseline of 10.33 percent for fiscal year 2004 to a 4.9 percent error rate for fiscal year 2010. However, the validity of ACFs reporting of reduced error rates is questionable. GAO found that ACFs ability to reliably assess the extent to which its corrective actions reduced improper payments was impaired by weaknesses in its requirements for state-level corrective actions. For example, ACF used the number of cases found in error rather than the dollar amount of improper payments identified to determine whether or not a state was required to implement corrective actions. As such, some states with higher improper payment dollar error rates were not required to implement actions to reduce these rates. GAO also found deficiencies in ACFs Audit Resolution Tracking and Monitoring System that limited its ability to efficiently track and compare trends across states Single Audit findings.

What GAO Recommends

GAO is making seven recommendations to help improve ACFs methodology for estimating improper payments for the Foster Care program and its corrective action process. HHS agreed that its improper payment estimation efforts can and should be improved, and generally concurred with four of the recommendations and agreed to continue to study the remaining three recommendations. GAO reaffirms the need for all seven recommendations.