Performance audit, Department of Economic Security, welfare programs

              A REPORT
TO THE
ARIZONA LEGISLATURE
Debra K. Davenport
Auditor General
Department of
Economic Security–
Welfare Programs
Performance Audit Division
APRIL • 2004
REPORT NO. 04 – 02
Performance Audit
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five senators
and five representatives. Her mission is to provide independent and impartial information and specific recommendations to
improve the operations of state and local government entities. To this end, she provides financial audits and accounting servic-es
to the State and political subdivisions, investigates possible misuse of public monies, and conducts performance audits of
school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Representative John Huppenthal, Chair Senator Robert Blendu, Vice Chair
Representative Tom Boone Senator Gabrielle Giffords
Representative Ken Clark Senator Peter Rios
Representative Ted Downing Senator Thayer Verschoor
Representative Steve Yarbrough Senator Jim Weiers
Representative Jake Flake (ex-officio) Senator Ken Bennett (ex-officio)
Audit Staff
Shan Hays, Manager and Contact Person
Mark Haldane, Team leader Jessica Tucker
Aaron Cook
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.auditorgen.state.az.us
2910 NORTH 44 th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553 -0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
April 19, 2004
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Mr. David A. Berns, Director
Department of Economic Security
Transmitted herewith is a report of the Auditor General, a Performance Audit and Sunset Review
of the Department of Economic Security’s welfare programs. This report is in response to a
November 20, 2002, resolution of the Joint Legislative Audit Committee. The performance audit
was conducted as part of the Sunset review process prescribed in Arizona Revised Statutes §41-
2951 et seq. I am also transmitting with this report a copy of the Report Highlights for this audit to
provide a quick summary for your convenience.
As outlined in its response, the Department of Economic Security agrees with all of the findings
and plans to implement all of the recommendations.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on April 20, 2004.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
Services:
The Department of Economic Security (Department) pro-vides
a variety of assistance programs to needy families and
individuals throughout Arizona. The Division of Employment
and Rehabilitation Services (DERS) is one of two divisions
that administer the Department’s primary welfare and
employment programs.
DERS administers the State’s Unemployment Insurance,
Job Service (recruitment), and Vocational Rehabilitation
Programs. Additionally, it provides job-training opportunities
through the Workforce Investment Act and Jobs Program
and administers a comprehensive set of child care pro-grams
through the Child Care Administration. Beginning in
July 2004, the Division is required to privatize the Jobs
Program and will then monitor the private contractors that will
provide Jobs Program services.
Facilities and equipment:
DERS leases office space in 102 locations, including 60
locations shared with other DES divisions, at an annual cost
of nearly $5.3 million. It also has offices in 19 DES-owned
buildings. Additionally, DERS owns a variety of equipment
and property, including standard office equipment such as
computer equipment, furniture, and a $3.2 million telephone
system, and 94 vehicles, costing approximately $1.75 mil-lion.
DERS also owns other equipment, including scanners,
Braille and eye-testing equipment, and Palm Pilots.
Mission:
To assist Arizonans in finding and maintaining meaningful
work and independence and to develop a skilled, produc-tive,
and resilient workforce.
PROGRAM FACT SHEET
Arizona Department of Economic Security
Division of Employment and
Rehabilitation Services
DERS staffing:
1,895.5 FTE, as of June 30, 2003, including 101.9 vacancies
Office of the Auditor General
DERS revenue:
$830,884,300 (fiscal year 2004 estimated)
Child Care
Administration
205
(9 vacant)
Jobs Program
277.2
(55 vacant)
Other1
1,413.3
(37.9 vacant)
1 Other Administrations within DERS include Employment Services,
Rehabilitation Services, Workforce Development, and General
Administration.
2 Other revenues include employer taxes for job training, interest and
penalties for late payments, and miscellaneous revenues.
3 Other federal funds include TANF Block Grant, Workforce Investment Act
Grant, Vocational Rehabilitation Grant, and Umemployment Insurance
Grant.
General Fund
$38,830,200
Federal Child Care
and Development
Block Grant
$125,143,000
Other2
$75,793,100
Other Federal
Funds3
$141,118,000
Unemployment
Insurance
Employer
Contributions
$450,000,000
1 According to the Department, DERS’ vacancies were unusually high due
to Special Session budget reductions in fiscal year 2003.
Jobs Program goals:
This audit focused on the Jobs Program in DERS. The Jobs Program has established the fol-lowing
goals:
􀁺􇩔 To increase the number of Temporary Assistance for Needy Families (TANF) partici-pants
who obtain employment.
􀁺􇩔 To increase the number of TANF participants placed in employment.
􀁺􇩔 To increase the number of TANF participants who obtain employment with medical
benefits.
􀁺􇩔 To increase the number of participants who remain employed 90 days following
placement.
􀁺􇩔 To increase the average wage of participants who obtain employment.
Adequacy of goals and performance measures:
The Jobs Program’s goals appear appropriate for its mission. However, it has established only
one performance measure for each of its five goals. Further, although it has output and outcome
measures, it does not have any input, efficiency, or quality measures. DERS should consider
adding input measures, such as the number of TANF recipients participating in Jobs Program
activities; efficiency measures, such as the average number of days to place a participant in a
job; and quality measures, such as employer satisfaction with participants placed in jobs.
State of Arizona
Source: Auditor General staff compilation of unaudited information obtained from the Department’s Web
site, the Department’s FTE Status/Tracking Report for the year ended June 30, 2003, the
Department’s Datawarehouse, the Department’s strategic plan, and information provided by the
Department from its Financial Management Control System for the years ended June 30, 2002
and 2003, and other information provided by the Department.
Services:
The Department of Economic Security (Department) pro-vides
a variety of assistance programs to needy families and
individuals throughout Arizona. The Division of Benefits and
Medical Eligibility (DBME) is one of two divisions that admin-ister
the Department’s primary welfare programs.
DBME’s Family Assistance Administration (FAA) administers
the Temporary Assistance for Needy Families (TANF), food
stamps, and state-funded General Assistance programs.
Additionally, DBME determines eligibility for the State’s med-ical
assistance program (AHCCCS), as well as supplemen-tal
security income through its Disability Determination
Services Administration.
Facilities and equipment:
DBME leases office space in 93 locations, including 60 loca-tions
shared with other DES divisions, at an annual cost of
$8.7 million. It also has offices in 11 DES-owned buildings.
Additionally, DBME owns a variety of equipment and proper-ty,
including standard office equipment such as computer
equipment, furniture, and an approximately $3 million tele-phone
system, and 62 vehicles costing approximately $1.15
million.
Mission:
Although DBME does not have its own mission, FAA’s mis-sion
is:
To assist individuals and families to improve their quality of life.
PROGRAM FACT SHEET
Arizona Department of Economic Security
Division of Benefits and Medical Eligibility
DBME staffing:
2,951.5 FTE, as of June 30, 2003, including 280.5 vacancies1
Office of the Auditor General
Program
Evaluation—58
(2 vacant)
DBME revenue:
$354,963,200 (fiscal year 2004 estimated)
Disability
Determination
Services—221.5
Family (39.5 vacant)
Assistance—2,660
(236 vacant)
Administration—12
(3 vacant)
Federal TANF
Block Grant
$121,788,500
General Fund
$83,347,700
Other Federal
Funds
$58,677,7001
Other
$47,111,2002
AHCCCS Eligibility
Line Funding
$44,038,100
1 Other Federal Funds include Food Stamps Administration and
Disability Determination Services Administration. They do not include
$616.4 million in Electronic Benefit Transactions for food stamps paid
directly to a third-party contractor.
2 Other revenues include tobacco taxes, general administrative activi-ties,
county share of eligibility determination costs, and miscellaneous.
1 According to the Department, DBME’s vacancies were unusually high
due to Special Session budget reductions in fiscal year 2003.
FAA Program Goals:
DBME does not have a mission and goals specific to it. Its FAA has established the following
goals:
􀁺􇩔 To improve customer service and accessibility.
􀁺􇩔 To improve job satisfaction.
􀁺􇩔 To increase efficiency and accountability.
Adequacy of goals and performance measures:
FAA’s goals and objectives appear appropriate for its mission. FAA has performance measures
that include all the recommended types of measures. Several of its efficiency and accountabili-ty
objectives, such as maintaining a high accuracy rate in the Food Stamp Program, are meas-ured
using data collected under a formal quality control system to meet federal requirements.
DBME’s Office of Strategic Planning, Budget, and Management Information compiles a month-ly
report on certain performance measures at the state-wide and district levels. According to the
Office’s manager, these reports are sent out of the districts. Providing such feedback is an impor-tant
component of a good performance measurement system.
State of Arizona
Source: Auditor General staff compilation of unaudited information obtained from the Department’s Web
site, the Department’s FTE Status/Tracking Report for the year ended June 30, 2003, the
Department’s Datawarehouse, the Department’s strategic plan, and information provided by the
Department from its Financial Management Control System for the years ended June 30, 2002
and 2003, and other information provided by the Department.
The Office of the Auditor General has conducted a performance audit of the Arizona
Department of Economic Security’s welfare programs, pursuant to a November 20,
2002, resolution of the Joint Legislative Audit Committee. This is the first in a series
of audits of the Department of Economic Security (Department) and was conducted
as part of the Sunset review process prescribed in Arizona Revised Statutes (A.R.S.)
§41-2951 et seq.
Arizona implemented federal welfare reform in 1996 through its Employing and
Moving People Off Welfare and Encouraging Responsibility (EMPOWER) Redesign
legislation. Before welfare reform, the federal Aid to Families with Dependent Children
(AFDC) program provided cash assistance and other benefits to eligible families, but
did not offer help or other incentives for participants to become employed. Arizona
obtained an AFDC waiver in 1995 through the original EMPOWER legislation, which
made several changes designed to reform welfare in the State. For example, it set
time limits for participation, capped family size for benefits, allowed families to save
money to ease the transition to working, and extended the length of time families who
began working could continue to receive some benefits.
In 1996, federal welfare reform changed AFDC to Temporary Assistance to Needy
Families (TANF), a block grant program that gives states more flexibility in program
administration, requires nearly all cash assistance recipients to participate in work
activities, and establishes a 5-year lifetime limit for receiving benefits. Although
Arizona had already modified its welfare program under the 1995 AFDC waiver, the
State made further modifications to conform with the federal lifetime limit. The
Legislature modified state law in 2003, effective September 2002, to conform to
federal requirements. According to the Department, it implemented the lifetime limit
in October 2002, after its waiver expired. Arizona uses block grant funding, in
combination with state monies, to pay for three of its four largest welfare programs:
TANF, the Jobs Program, and Child Care Assistance. The fourth program, Food
Stamps, receives nearly all of its funding from the U.S. Department of Agriculture.
􀁺􇩔 Temporary Assistance for Needy Families (TANF)—TANF provides cash
assistance to eligible families. A total of 50,280 households received assistance
from this program during June 2003.
Office of the Auditor General
SUMMARY
page i
􀁺􇩆 Food Stamps—The Department issues food stamp benefits to low-income
families and other eligible households. A total of 190,954 households received
assistance from this program during June 2003.
􀁺􇩊 Jobs Program—Nearly all adult TANF recipients must participate in work
activities through the Jobs Program, which provides training and other services
intended to help families make the transition from welfare dependence to
employment. A total of 14,614 individuals were actively participating in the Jobs
Program during June 2003.
􀁺􇩃 Child Care Assistance—The Department pays all or part of day care costs for
some Jobs Program participants, other low-income families, and families
referred by Child Protective Services to enable them to work or participate in
training. A total of 46,522 children were authorized to receive day care through
this program in June 2003.
Department should ensure proper oversight of privatized
Jobs Program (see pages 13 through 21)
State law requires the Department to privatize the Jobs Program by July 2004. The
program provides job training and other services to help TANF cash assistance
recipients move off welfare by obtaining employment. As long as participants comply
with program requirements, such as searching for a job or obtaining training, they
can receive other assistance such as transportation assistance, clothing vouchers,
and tools and equipment needed for a job. With few exceptions, all TANF recipients
are required to participate in the Jobs Program in order to continue receiving cash
assistance. Currently, the Department provides case management for Jobs Program
participants with its own staff in most parts of the State.
To successfully meet its requirement to privatize the State’s Jobs Program, the
Department needs to ensure that it can effectively oversee the work the contractors
will perform. A portion of the Jobs Program is run by a private contractor under a
program called Arizona Works, but by statute, the Department must change the
entire Jobs Program to a contractor-operated function by July 1, 2004. Currently,
during the 2004 legislative session, the Legislature is considering a bill to extend that
deadline to July 1, 2005, or July 1, 2006. Effective administration of the Jobs
Program, whether under state or contract employees, is important because it affects
the amount of money the State receives from the federal government. If the program
is particularly well-run, the State will receive bonuses; if it is deficient, the State could
be penalized.
Auditors identified two main areas in which the Department needs to strengthen its
preparations for privatizing the Jobs Program. First, the Department needs to more
State of Arizona
page ii
thoroughly prepare for monitoring the contractors. Prior to January 2003, the
Department did only limited monitoring of the Arizona Works contractor. Once the
Department increased its monitoring, it found that the contractor was not complying
with court-ordered requirements, had high error rates, and was not correctly reporting
program data. Auditors’ review of the Department’s initial request for proposals from
potential contractors for the state-wide privatized Jobs Program showed that the
specifications were deficient in such matters as ways for measuring performance.
The Department has since withdrawn the request for proposals and has yet to
release a new one. The Department needs to step up its efforts to train its own
monitoring staff, train contractors in procedures for complying with federal
requirements, and develop specific monitoring plans. Second, the Department
needs effective internal controls to secure its data. In addition, the Department needs
to develop additional security and training requirements for its contractors to protect
sensitive data.
Department can more effectively manage its food stamp
eligibility determination process (see pages 23 through
27)
The Department’s Division of Benefits and Medical Eligibility (Division), while
successful in the past in lowering its food stamp eligibility determination error rate,
needs to take steps to counter expected increases in this rate. The Division
successfully reduced its food stamp error rate from 15.42 percent in 1994 to 5.27
percent in 2002, and received several bonuses from the federal government for
keeping the error rate below federal thresholds. However, according to division
management, the error rate for federal fiscal year 2003, which is required to be
certified by June 2004, is expected to rise because of increasing total caseloads
coupled with reductions in eligibility determination staff, which resulted in higher
caseloads for eligibility interviewers.
Using a focus group of local office managers within the Division, auditors identified
several areas in which the Division can more effectively manage its eligibility
determination process. The Division’s local office managers identified barriers to
accurate eligibility determinations, including frequent policy changes and
clarifications, the absence of a local office manager’s training program, and
supervisors’ failure to meet quotas for case file reviews. To address these issues,
division management should ensure that local office supervisors consistently review
case files to help ensure that eligibility determination errors are identified and
corrected, continue its efforts to improve its policy change notification process, and
establish a management training program for local office managers.
Office of the Auditor General
page iii
Department should improve management of its benefit
overpayment referrals process (see pages 29 through
33)
The Division should establish a more reliable and effective system for managing its
benefit overpayment referral process. As of December 2003, internal reports
compiled by the Division indicated that its offices had accumulated a backlog of
more than 7,700 TANF and food stamp overpayment referrals that had not yet been
assessed and confirmed as claims. Based on an analysis of the Division’s internal
reports, auditors estimate that the more than 7,700 referrals could potentially
represent approximately $2 million in overpayments. During the past year, the
Division increased the number of overpayment specialists from 19 to 44 to help
process overpayment referrals. As a result, the Division was able to reduce its
pending overpayment referrals from more than 13,000 in July 2003 to its December
2003 level of 7,700. After audit work was conducted, the Division reported that it
further reduced its pending overpayment referrals to approximately 1,800, as of
February 2004.
It is important that the Division process its backlog of overpayment referrals in a
timely manner to increase the likelihood that the monies will be repaid and because
the federal government allows states to keep a portion of their overpayment
collections. In fiscal year 2003, the collections office collected nearly $2.7 million in
food stamp overpayments and slightly more than $1.7 million in TANF overpayments.
The food stamp collections were consistent with collection rates for past fiscal years
and met federal food stamp overpayment collection standards. The State retains
TANF overpayment collections and uses them for program costs. In federal fiscal
year 2003, the federal government allowed the State to retain more than $420,000 of
its food stamp overpayment collections. The federal government does not restrict the
states’ use of retained food stamp collections.
The Division should also improve its process for managing overpayment referrals.
During fiscal year 2003, the Division’s internal reports indicate that over 50 percent of
overpayment referrals were not pursued as claims. Some overpayment units
reported dropping a substantial portion of these overpayment referrals because the
necessary case files could not be located. Therefore, to help the Department collect
more overpayments, the Division should continue its efforts to implement an
electronic document-scanning system to limit the number of overpayment referrals
that are dropped because of inaccessible case files.
State of Arizona
page iv
Other pertinent information (see pages 35 through 41)
Welfare reform impact—Auditors developed information about the requirements
and effects of welfare reform in Arizona and nationally. Welfare reform’s primary
purpose was to end dependence on government benefits by promoting job
preparation, work, and marriage. The 1996 Personal Responsibility and Work
Opportunity Reconciliation Act changed welfare funding to a block grant that gives
states more flexibility in implementing welfare programs, and established new
requirements such as work participation and a lifetime limit for receiving benefits. The
Department operates the State’s welfare programs under a program called
EMPOWER Redesign. EMPOWER has a work-first orientation that requires nearly all
TANF cash assistance recipients to participate in work activities in order to receive
benefits. It also established Arizona’s cash benefit amount, and caps benefit levels
according to the family’s size when it begins receiving benefits. The Jobs Program,
which provides training and other services to help participants obtain work, and the
Child Care Assistance Program, which pays all or part of day care costs to enable
participants to work or attend training, are integral parts of Arizona’s welfare program
under EMPOWER. As of March 2002, Arizona’s TANF cash assistance recipients
received a monthly average of $272.23 per family (33rd nationally), compared to the
national average of $412.40. Arizona's amount is based on raising eligible families’
income to 36 percent of the 1992 Federal Poverty Level.
Between 1996, when the new program began, and March 2002, average caseloads
nationally dropped by 53.8 percent, and Arizona’s welfare caseload fell by 39.2
percent. With the drop in caseloads, Arizona accumulated some reserves from the
federal funding provided to operate the program, and it has been able to use these
reserves to supplement its budget in subsequent years.
According to federal studies, welfare reform has had a positive impact on family
income. For example, average monthly earnings for employed welfare recipients
rose 49 percent from federal fiscal years 1996 to 2001. However, moving from welfare
to work does not guarantee that single mothers will be able to lift their families out of
poverty. Auditors were unable to obtain data to show the impact on income for
Arizona recipients.
Employee fraud—Auditors also gathered information about recent welfare-related
employee fraud cases in the Department. During fiscal year 2003, the Department
investigated and substantiated 13 welfare-related employee fraud cases. The cases
involved at least 15 division employees who allegedly circumvented internal controls
and fraudulently obtained TANF and food stamp benefits for themselves and their
accomplices. Although the value of several cases will not be determined until
prosecution is complete, the Department estimates that the values of some cases
ranges from $586 to $57,010. The Attorney General’s Office is preparing several of
these cases for criminal prosecution. The Division has developed a corrective action
plan that includes improving the Division’s Electronic Benefit Transfer policies and
Office of the Auditor General
page v
procedures, increasing security controls, and creating system-generated reports to
monitor for unusual benefit issuance activity at the local offices. The Office of the
Auditor General is examining the adequacy of the Division’s newly implemented
procedures for monitoring, identifying, and preventing employee welfare fraud, and
will report its finding in March 2004.
State of Arizona
page vi
Office of the Auditor General
TABLE OF CONTENTS
continued
page vii
1
13
13
14
15
17
18
21
23
23
25
26
27
29
29
31
33
Introduction & Background
Finding 1: Department should ensure proper oversight
of privatized Jobs Program
TANF recipients must participate in Jobs Program
Jobs Program to be privatized
Past privatization activities demonstrated oversight weaknesses
Department should prepare to monitor contractors
Department needs to ensure the protection of Jobs Program data
Recommendations
Finding 2: Department can more effectively manage its
food stamp eligibility determination process
Accuracy of eligibility determinations affects federal funding
Despite past success, improvements are needed to reduce
eligibility determination errors
Quality assurance program can be improved
Recommendations
Finding 3: Department should improve management of
its benefit overpayment referrals process
Effective recovery of overpayments requires timely collection
efforts
Many potential overpayments are not being checked or referred
Recommendations
State of Arizona
TABLE OF CONTENTS
page viii
Other pertinent information:
Impact of welfare reform nationally and in Arizona
Employee fraud
Agency Response
Figures:
1 Source of Funding by Welfare Programs
Year Ended June 30, 2003
2 Error Rates in Food Stamp Benefit Payments
October 31, 1994 to 2002
3 Percentage Reduction in Number of
AFDC/TANF Recipients
August 1, 1996 through March 31, 2002
4 National Average After-Tax Income of the Poorest
Households Headed by Women with Children
Years Ended June 30, 1993 and 2000
Tables:
1 Eligibility Requirements for Four Welfare Programs
As of January 2004
2 Division of Benefits and Medical Eligibility
Schedule of Revenues and Expenditures for the Years
Ended or Ending June 30, 2002, 2003, and 2004 (Unaudited)
3 Division of Employment and Rehabilitation Services
Schedule of Revenues and Expenditures for the Years
Ended or Ending June 30, 2002, 2003, and 2004 (Unaudited)
4 Program Overpayment Balances
as of June 30, 2003
35
35
40
6
25
37
39
3
8
9
30
concluded
The Office of the Auditor General has conducted a performance audit of the Arizona
Department of Economic Security’s welfare programs, pursuant to a November 20,
2002, resolution of the Joint Legislative Audit Committee. This is the first in a series
of audits of the Department of Economic Security (Department) and was conducted
as part of the Sunset review process prescribed in Arizona Revised Statutes (A.R.S.)
§41-2951 et seq.
History of welfare
Welfare in the United States changed substantially in 1996. Before 1996, the nation's
primary welfare program was Aid to Families with Dependent Children (AFDC). This
program provided cash assistance to needy families based on states’ eligibility
criteria that was set within federal limitations. States defined “need,” set their own
benefit levels, established (within federal limitations) income and resource limitations,
and administered the program or supervised its administration. A rapid growth in
welfare caseloads, concerns about program costs, and concerns about
beneficiaries’ long-term dependence on welfare assistance prompted the federal
government to review national welfare policy. As a result, in the 1990s the federal
government increasingly used its authority to grant waivers authorizing states to
modify the way they implemented AFDC.
By 1996, a total of 43 states, including Arizona, had waivers that required AFDC
recipients to work, limited the time families could receive assistance, improved child
support enforcement, and encouraged parental responsibility. Arizona’s waiver
program, called EMPOWER (Employing and Moving People Off Welfare and Encouraging
Responsibility), was established through legislation in 1994, and Arizona received
federal approval to implement it effective November 1995. Among other provisions,
EMPOWER limited how long a person could receive assistance, capped family size
for benefits, extended child care and medical assistance, established sanctions for
failure to meet work requirements, and allowed families to establish savings accounts
for education and training purposes.
Office of the Auditor General
INTRODUCTION
& BACKGROUND
page 1
In 1996, the federal Personal Responsibility and Work Opportunity Reconciliation Act
(PRWORA), commonly called welfare reform, replaced AFDC nation-wide with
Temporary Assistance for Needy Families (TANF). The new program provides
funding through a block grant that gives states more flexibility to determine who is to
be served and what services to provide. In addition, TANF requires nearly all
recipients to participate in work activities and establishes a uniform national 5-year
lifetime limit for receiving benefits.1 (See Other Pertinent Information, pages 35
through 41, for information on the impact of welfare reform.)
Welfare in Arizona
The Department provides a variety of assistance programs to eligible families and
individuals throughout Arizona. In addition to administering several federal and state
welfare programs, the Department coordinates with local community food banks,
employment agencies, and charitable organizations to create a network of services
for Arizona’s needy populations.
The Department’s four largest welfare-related programs are all federally mandated:
􀁺􇩔 Temporary Assistance for Needy Families (TANF)—In 1996, TANF replaced the
previous welfare program, Aid to Families with Dependent Children. TANF
provides temporary cash assistance to children and their families.
Eligible persons include dependent children under age 18, and
parents or certain other relatives of eligible children who meet
certain income and asset thresholds (see Table 1, page 3). State
and federal law limits TANF participation to 5 years except in
hardship cases, such as the fact that the family includes
someone who has been subject to physical, sexual, or mental
abuse; threats of physical or sexual abuse; or deprivation of
medical care. The state may expand this federal hardship
definition as long as no more than 20 percent of the families
receiving assistance exceed the 5-year limit. In June 2003, the
Department reported a TANF cash assistance caseload of 50,280
households, a 17 percent increase over the previous year. The
Department must comply with federal TANF work participation
requirements (see Finding 1, pages 13 through 21). However,
because TANF is a block grant program, the federal government
allows states flexibility in how they use the money for their welfare
programs.2 For example, unlike AFDC, TANF allows states to use
TANF funds in a way that helps to end needy parents’
1 States can choose to extend assistance beyond the limit for up to 20 percent of families because of circumstances, such
as hardship, defined by the state.
2 States must design their own plans for promoting work over welfare and self-sufficiency over dependency. These plans
are subject to U.S. Department of Health and Human Services approval and must meet federal requirements such as
ensuring that at least half of TANF families are engaged in work activities and limiting adult assistance to 5 years.
State of Arizona
page 2
Facts about TANF
households in Arizona
􀁺􇩍 Most are families of two or three people
􀁺􇩔 Two-person families can receive up to $275 per
month cash assistance and $256 in food stamps
􀁺􇩔 Three-person families can receive up to $347 per
month cash assistance and $366 in food stamps
􀁺􇩁 About one-fourth of all families and half of two-parent
families participate in the Jobs Program
􀁺􇩁 Average time on cash assistance is less than 8
months
􀁺􇩄 Department officials report 22 percent use child
care assistance
Source: Department of Economic Security Welfare Reform Report for
Fiscal Year 2003 and other information provided by department
administrators.
Office of the Auditor General
page 3
Temporary Assistance for
Needy Families (TANF)
• Dependent child under 18, or parent or specified relative of eligible child, or woman in her last
trimester of pregnancy, and
• Monthly family income below limits based on 1992 federal poverty level, and
• Family assets below $2,000, excluding a primary vehicle and homestead property, and
• Participate in Jobs Program unless exempt or deferred, and
• Has not exceeded time limits for receiving benefits except in cases of hardship.
TANF Income Limits
• Gross income below 185% of 1992 level, and
• Adjusted gross income below 36% of 1992 level.
Adjustments: $90 for work-related expenses, 30% of the
remaining gross income, some child care costs ($200 for
a child over 2), dependent's income.
Food Stamps • Monthly family income below limits based on the current federal poverty level, and
• Family assets below limits
Table 1: Eligibility Requirements for Four Welfare Programs
As of January 2004
TANF Exemptions/Deferral
Applicant is 16 to 18 years old and a full-time student, is
a dependent child under age 13, is already employed, or
is a parent with a baby up to 1 year old.
Food Stamps Income Limits
• Gross income below 130% of current level, and
• Adjusted income below current level
Adjustments: 20% of earned income, standard deduction
of $134, and other deductions such as for some child
care, excess shelter costs, and medical expenses.
Food Stamps Asset Limits
• $3,000 for a household of two or more people with a least
one member over age 60, or
• $2,000 for all other families.
Exclusions: primary residence, household goods,
vehicles used for income-producing or other defined
purposes, and some other assets such as some income-producing
property and some property essential to
employment.
Jobs Program • TANF recipient, or
• Former TANF recipient can receive some services for up to 2 years after ending TANF benefits.
Child Care Assistance • TANF recipient employed full- or part-time, or
• TANF recipient needing child care in order to participate in Jobs Program, or
• Former TANF recipient can receive services for up to 2 years, or
• Family referred by Child Protective Services, or
• Family with income at or below 165% of federal poverty level
Source: Auditor General staff compilation of information from Arizona Revised Statutes, the Arizona Administrative Code (R6-
12-304 through 503 and 6-14-201 through 310), the Arizona TANF State Plan, the Arizona Child Care and
Development Fund State Plan (FFY 2003-2005), the U.S. Code of Federal Regulations (7 CFR Chapter II Part 273),
the Arizona Department of Economic Security Division of Employment and Rehabilitation Services Jobs Program
Policy Manual (April 1, 2003), the U.S. Department of Agriculture Web site (Applicants & Recipients: Fact Sheet on
Resources, Income, and Benefits, downloaded October 8, 2003), and the U.S. Department of Health and Human
Services Web site (prior HHS Proverty Guidelines, downloaded January 28, 2004).
Example: 1992 federal poverty level for a family of three is $11,570 per year, or $964 per
month. To be eligible for TANF, the family must have a gross income below $1,784 and an
adjusted gross monthly income below $347.
1 All programs require recipients to be Arizona residents, and U.S. citizens or eligible noncitizens.
State of Arizona
page 4
dependence on government benefits or allows children to be cared for at home.
Arizona has set its monthly benefit rate somewhat lower than the national
average, and follows a work-first philosophy that requires recipients to
participate in the Jobs Program as soon as possible. Compared to Arizona’s
$347 benefit for a family of three in 2001, other states’ benefits ranged from $164
in Alabama to $923 in Alaska in 2001, according to the U.S. Department of
Health and Human Services’ most recent annual report to Congress.1 Also, in
contrast to Arizona, some states allow a 2-month to 30-month delay before they
require TANF recipients to participate in the Jobs Program.
􀁺􇩆 Food Stamps—Food stamps are provided to low-income families and other
households, whether or not there are children in the household.
Food stamp recipients must also meet certain federally
established income and asset thresholds (see Table 1, page 3).
These thresholds differ from that of TANF; thus, a family may
receive food stamps but not qualify for TANF. Participants use
food stamp benefits like cash to purchase eligible food and other
approved products. Individual benefits are based on the U.S.
Department of Agriculture’s Thrifty Food Plan, an estimate of what
it costs to provide nutritious yet inexpensive meals. In June 2003,
the Department reported that its food stamp caseload was
190,954 households, including 491,250 persons, a 26 percent
increase in food stamp households over the previous year.
􀁺􇩊 Jobs Program—The Jobs Program provides services to
help individuals make the transition from welfare dependence to
employment. For example, it provides career preparation
courses, GED testing fees, and vocational training. In addition, as
long as the participant complies with program requirements, such as engaging
in prescribed training or work search activities, the Jobs Program provides a
variety of other support services including transportation assistance, clothing
vouchers, testing and licensing, tools and equipment needed for a job, and
relocation and housing assistance. Additionally, the Jobs Program provides
limited medical, vision, dental, and mental health co-payments not provided
through other programs, such as the Arizona Health Care Cost Containment
System (AHCCCS). Finally, the Jobs Program provides day care registration
fees and co-payments not provided through other programs, such as the Child
Care Assistance program.
All TANF participants are required to participate in the Jobs Program as soon as
Jobs Program staff can activate their case, unless the Department grants a
temporary deferral or they have a job but still qualify for TANF. For example, a
parent may request delayed participation until the baby is 1 year old. In addition,
1 U.S. Department of Health and Human Services, Administration for Children and Families, Office of Family Assistance.
Temporary Assistance for Needy Families Program (TANF) Fifth Annual Report to Congress. February 2003.
Facts about Food Stamps
households in Arizona
􀁺􇩁 About one-fourth receive TANF cash assistance
􀁺􇩔 The most common household size is three people
􀁺􇩁 Average food stamp benefit is $228 per month
􀁺􇩉 Individuals with monthly net income below $739
can receive up to $139 per month in Food Stamps
􀁺􇩁 About 14 percent of recipients are in one-person
households, 16 percent are in two-person, and 20
percent in three-person households.
Source: Department of Economic Security Welfare Reform Report for fiscal
year 2003 and other information provided by department
administrators.
former TANF recipients can receive Jobs Program assistance for up to 2 years
following closure of their TANF case. As of June 30, 2003, the Department
reported having 14,614 active Jobs Program participants, an increase of 37
percent over the previous year. Further, it reported that, due to increasing
caseloads, it had not activated an additional approximately 11,700 referrals.
􀁺􇩃 Child Care Assistance—This program assists eligible families with day care
costs, enabling parents to participate in employment and specific training
activities related to employment. Four groups are eligible to receive child care
assistance: current TANF recipients who need child care for work or to
participate in the Jobs Program, former TANF recipients for up to 2 years who
need child care for the same reasons, all families referred by Child Protective
Services, and other families with income up to 165 percent of the Federal
Poverty Level (see Table 1, page 3). Participants may be required to pay co-payments,
depending on their income, and children must be cared for by
contracted providers. Child care payments average about $289 per month per
child. In June 2003, the Department reported that 46,522 children were
authorized to receive child care assistance, a decrease of 3.6 percent from the
previous year. The decrease occurred because the Department initiated a
waiting list in March 2003 as a result of budget constraints. As of June 2003, the
Department reported that there were 2,456 families (an estimated 4,838
children) on the waiting list, and in January 2004, the list had grown to 3,982
families (an estimated 7,964 children). All the children on the list are from families
who qualify for assistance because their families earn less than 165 percent of
the Federal Poverty Level. Current and recent TANF recipients who are eligible
for child care assistance and those referred by Child Protective Services
automatically receive child care assistance and are not put on the waiting list.
In addition to these four main federally mandated programs, the Department
determines AHCCCS medical eligibility and administers several other, smaller
assistance programs. Those programs include general assistance, which provides
interim cash assistance to disabled persons who have applied for federal Social
Security Income benefits, a tuberculosis control program that helps persons who are
unemployable because of communicable tuberculosis, and a federally funded
refugee resettlement program. The Department also administers Arizona’s
unemployment insurance program. This employer-funded program pays benefits to
workers who are unemployed through no fault of their own.
Most benefits are provided electronically. Under the federal welfare reform laws, in
1998, Arizona implemented an electronic benefits transfer (EBT) program. The
federal government requires electronic benefits transfers for all food stamp
programs. Under this program, welfare assistance clients access their benefits by
using an EBT card, known as the Quest card. The Quest card is similar to a debit
card and holds cash and food stamp benefits. The Department currently contracts
with a private company, Citicorp, to administer the EBT program, including updating
Office of the Auditor General
page 5
More than 5,000
children are on a waiting
list for child care
assistance.
State of Arizona
page 6
benefit information monthly. EBT program implementation costs, transaction fees,
and equipment costs for point-of-sale devices are shared equally between the
federal government and the State. According to the Department’s cost-benefit
analysis report to the federal government at the time of implementation, these costs
are more than offset by savings in administrative expenses and reduction in food
stamp losses. Further, issuing benefits by updating EBT cards was intended to
provide better control over fraud by making it harder for recipients to sell food stamps
for cash or for stores to accept food stamps for unallowed items.
Budget
Funding for Arizona’s welfare programs comes from a combination of federal and
state sources. Much of the funding comes from the annual TANF block grant. The
U.S. Department of Health and Human Services (DHHS) provides the block grant to
all states based on historical spending levels for Aid to Families with Dependent
Children (AFDC), Emergency Assistance, and Job Opportunities and Basic Skill
Figure 1: Source of Funding by Welfare Program
Year Ended June 30, 2003
Source: Auditor General staff analysis of the FY 2003 Budget Summary
prepared by the Department of Economic Security, Division of Benefits
and Medical Eligibility.
$0
$100
$200
$300
$400
$500
$600
Millions of Dollars
Temporary
Assistance for Needy
Families
Food Stamps Jobs Program Child Care
Assistance
Federal Dollars State Dollars
Eighty-nine percent of
Arizona welfare
programs’ funds comes
from federal sources.
Programs (JOBS), the precursors to TANF. Arizona’s block grant totaled more than
$222 million in federal fiscal year 2003. The State allocates a significant portion of
TANF block grant monies to three welfare programs: TANF, Jobs Program, and Child
Care Assistance. Specifically:
􀁺􇩔 TANF—In fiscal year 2003, the Division of Benefits and Medical Eligibility
(DBME) received more than $113 million, or about two-thirds of its total TANF
funding from the annual TANF block grant, as shown in Table 2 (see page 8).
The Legislature appropriated more than $51.4 million from the General Fund for
the TANF program in fiscal year 2003.
􀁺􇩆 Food Stamps—In fiscal year 2003, DBME reported that the General Fund
provided more than $18 million to cover approximately one-half of DBME’s
administration costs for the Food Stamps Program. DBME provides clients with
food stamp benefits through its Electronic Benefit Transfer System (EBT)
Program, which is administered by a contractor that receives funding directly
from the USDA. In fiscal year 2003, the USDA provided $465.4 million in food
stamp benefit reimbursements to DBME’s EBT contractor, as shown in Table 2,
footnote 4 (see page 8).
􀁺􇩊 Jobs Program—For fiscal year 2003, the Legislature approved over $20.3 million
in federal TANF monies for the Jobs Program administered by the Division of
Employment and Rehabilitation Services (DERS). Additionally, the Joint
Legislative Budget Committee (JLBC) reports that DERS received federal
Workforce Investment Act funding of $2 million, General Fund monies of nearly
$1.9 million, and $1.5 million from the Special Administration Fund to help fund
the Jobs Program.
􀁺􇩃 Child Care Assistance—Federal dollars provide nearly 90 percent of Arizona’s
Child Care Assistance funding. In fiscal year 2003, the Department received a
little more than $101.3 million from the Federal Child Care and Development
Block Grant, as shown in Table 3 (see page 9). The Legislature appropriated
$38.9 million from TANF monies and almost $19.3 million from the General
Fund.
Organization and staffing
This audit focused on welfare programs administered by two divisions within the
Department, the Division of Benefits and Medical Eligibility and the Division of
Employment and Rehabilitation Services. The Department operates administrative
offices in Phoenix and six districts with local offices throughout the State.
Office of the Auditor General
page 7
State of Arizona
page 8
Table 2: Division of Benefits and Medical Eligibility
Schedule of Revenues and Expenditures1
For the Years Ended or Ending June 30, 2002, 2003, and 2004
(Unaudited)
2002
(Actual)
2003
(Actual)
2004
(Budgeted)
Revenues:
State General Fund appropriations 2 $ 86,613,078 $ 81,590,200 $ 83,347,700
General administrative activities 3 11,984,500 11,928,416 11,181,500
Government grants and contracts:
Federal Temporary Assistance for Needy Families 88,587,934 113,605,763 121,788,500
Food Stamps Administration 4 24,057,108 27,565,492 26,777,700
Disability Determination Services Administration 19,535,963 20,961,205 31,900,000
AHCCCS Eligibility Line Funding 5 40,228,841 35,284,053 44,038,100
Tobacco taxes 6 44,840,508 34,505,700 26,570,000
County share of eligibility determination costs 450,000 8,418,200 5,200,000
Miscellaneous 170,864 301,503 4,159,700
Total revenues 316,468,796 334,160,532 354,963,200
Expenditures: 7
Personal services and employee-related 100,237,583 107,830,717 108,097,600
Professional and outside services 12,611,639 11,684,074 8,322,000
Travel 2,168,498 938,468 690,900
Assistance to individuals and other governments 145,548,435 169,141,065 188,141,900
Equipment 5,778,946 607,804 361,500
Other 9,254,166 8,357,833 9,575,000
Support services costs 40,411,605 35,494,663 39,774,300
Total expenditures 316,010,872 334,054,624 354,963,200
Excess of revenues over expenditures $ 457,924 $ 105,908 $ - 0
1 Amounts presented for 2002 and 2003 represent actual revenues and expenditures as of November 5, 2003; however, the Department
anticipates further administrative adjustments for those years. In addition, amounts presented for 2004 represent budgeted revenues and
expenditures.
2 Amounts presented are net of unexpended appropriations that the Department anticipates will be reverted to the State General Fund.
The Department estimates the reversion to be $155,100 for 2002, but has no estimate for 2003.
3 The Department allocates support service costs to its various divisions. That portion of the support service costs allocated to the Division
that was funded by the Department’s Administration Division budget is reported as general administrative activities revenues in this
schedule.
4 Amounts presented do not include Electronic Benefit Transactions (EBT) for the Food Stamps Program of approximately $356.1 million
and $465.4 million for 2002 and 2003, respectively, and $616.4 million estimated for 2004, as these transactions are processed by a
third-party contractor who receives payment directly from the federal government.
5 Consists of monthly premium payments from the Arizona Health Care Cost Containment System (AHCCCS) for providing healthcare
services to eligible participants.
6 Consists of tobacco tax settlement receipts allocated to the Department for eligibility determination costs for Title XIX program members.
7 Amounts presented are net of amounts reimbursed by tribal governments for EBT payments made to tribal members. The Department
received tribal reimbursements of approximately $18.9 million and $7.7 million for 2002 and 2003, respectively, and estimates receiving
$5.3 million for 2004.
Source: Auditor General staff analysis of financial information provided by the Arizona Department of Economic Security for the years
ended June 30, 2002 and 2003, from its Financial Management Control System, and budgeted information provided by the
Department for the year ending June 30, 2004, as of November 5, 2003.
Office of the Auditor General
page 9
Table 3 : Division of Employment and Rehabilitation Services
Schedule of Revenues and Expenditures1
For the Years Ended or Ending June 30, 2002, 2003, and 2004
(Unaudited)
2002
(Actual)
2003
(Actual)
2004
(Budgeted)
Revenues:
State General Fund appropriations 2 $ 38,856,300 $ 33,685,400 $ 38,830,200
General administrative activities 3 2,238,917 1,936,076 2,224,500
Government grants and contracts:
Federal Child Care and Development 79,101,800 101,317,700 125,143,000
Federal Temporary Assistance for Needy Families 74,759,500 65,998,000 23,016,500
Federal Workforce Investment Act 47,591,900 47,527,500 58,960,700
Federal Vocational Rehabilitation 37,887,196 36,821,250 23,489,800
Federal Unemployment Insurance 34,652,916 35,472,637 35,651,000
AHCCCS capitation payments 4 6,341,637 6,383,683
Federal Reed Act 3,578,000
Other 40,544,036 46,131,679 65,858,200
Employers’ unemployment insurance contributions 403,686,120 301,956,465 450,000,000
Job Training Fund 5 3,746,400
Special Administration Fund 6 3,585,000 1,585,000 1,585,000
Spinal and Head Injury Trust Fund 7 2,188,200 2,366,900 2,379,000
Total revenues 775,011,522 681,182,290 830,884,300
Expenditures:
Personal services and employee-related 66,304,107 68,986,201 70,343,900
Professional and outside services 4,130,210 5,044,327 5,062,600
Travel 1,295,282 1,004,695 1,349,100
Assistance to individuals and other governments 677,181,875 585,756,891 717,921,500
Equipment 3,274,656 1,203,082 3,458,500
Other 7,862,311 7,308,462 8,437,500
Support services costs 25,223,824 24,585,081 24,311,200
Total expenditures 785,272,265 693,888,739 830,884,300
Deficiency of revenues under expenditures 8 $(10,260,743) $(12,706,449) $ -0
1 Amounts presented for 2002 and 2003 represent actual revenues and expenditures as of October 31, 2003; however, the Department
anticipates further administrative adjustments for those years. In addition, amounts presented for 2004 represent budgeted revenues
and expenditures.
2 Amounts presented are net of unexpended appropriations that the Department anticipates will be reverted to the State General Fund.
The Department estimates these reversions to be $2.5 million for 2002 and $500,000 for 2003.
3 The Department allocates support service costs to its various divisions. That portion of the support service costs allocated to the
Division that was funded by the Department’s Administration Division budget is reported as general administrative activities revenues in
this schedule.
4 Consists of payments from the Arizona Health Care Cost Containment System to provide long-term support services to persons with
developmental disabilities who need additional assistance to maintain employment. In 2004, this program was moved to another
division within the Department and, therefore, is not included in the 2004 budgeted amounts presented.
5 Consists of taxes collected from employers for job training pursuant to A.R.S. §23-769.
6 Consists of interest and penalties collected from employers who fail to make timely contributions to the unemployment insurance
program.
7 Consists of assessments on speeding violations pursuant to A.R.S. §12-116.02 and interest on investments.
8 The deficiency of revenues under expenditures was paid for with the Department’s available nonappropriated fund balance.
Source: Auditor General staff analysis of financial information provided by the Arizona Department of Economic Security for the years
ended June 30, 2002 and 2003, from its Financial Management Control System, and budgeted information provided by the
Department for the year ending June 30, 2004, as of October 31, 2003.
State of Arizona
page 10
􀁺􇩄 Division of Benefits and Medical Eligibility (DBME), 2,951.5 FTE—DBME
operates in 104 local offices. It serves as the intake center for the Department’s
welfare programs. DBME’s Family Assistance Administration (FAA) determines
eligibility for TANF and food stamps. In addition, under an agreement with
AHCCCS, FAA determines eligibility for medical assistance. Altogether, the
Department reports that these programs received approximately 933,000
applications during fiscal year 2003. FAA also provides information to clients
regarding other avenues for assistance. It has 2,660 FTE who work in the
Department’s 104 local offices, 58 medical facilities, and 81 community
organization sites. In addition to these FAA staff, DBME has 60 staff in its Office
of Program Evaluation, responsible for quality control over TANF, food stamp,
and general assistance eligibility determination, and 221.5 staff in the Disability
Determination Services Administration, which is responsible for determining
Supplemental Security Income and Social Security Disability Insurance eligibility.
Additionally, DBME has 15 FTE in Administration.
􀁺􇩄 Division of Employment and Rehabilitation Services (DERS), 1,895.5 FTE—
DERS administers programs that provide training and support to help people
prepare for and find jobs. The Jobs Program is intended to help TANF and food
stamp recipients to move off welfare and into self-sufficiency. Until July 1, 2004,
the Department will administer the Jobs Program throughout the State except in
eastern Maricopa County, where a privatized program, called the Arizona Works
Program, provides job services. As of that date, the Department must privatize
the Jobs Program state-wide in accordance with Laws 2003, Ch. 223. Then, the
Department will be responsible for oversight of the private Jobs Program service
providers and Jobs Program contract management, and will administer the
program directly only in areas where it cannot find appropriate contractors. The
Jobs Program has 277.2 FTE at 45 field offices and 8 temporary sites. The Child
Care Administration in DERS helps eligible, low-income families pay child care
expenses. Eligible clients include those referred from TANF, the Jobs Program,
or Child Protective Services. The Child Care Administration has 205 FTE located
at 41 field offices and 5 temporary sites. Additionally, DERS administers
nonwelfare programs through its Employment Services, Rehabilitation Services,
and Workforce Development Administrations, which have a total of 1,413.3 FTE.
Scope and methodology
This audit focused on three of the Department’s four main welfare programs,
including preparations for privatization of the Jobs Program, TANF and food stamp
eligibility determination processes, and overpayment collection management. This
audit includes the following findings and associated recommendations:
Office of the Auditor General
page 11
􀁺􇩔 To better ensure success when privatizing the Jobs Program, the Department
should provide staff and contractor training; develop monitoring tools for
contract compliance, performance, and fiscal expenditures; and take necessary
steps to ensure that its data is secure and accurate.
􀁺􇩔 To improve its food stamp eligibility determination error rate, the Department
should ensure that local office supervisors meet case file review quotas and
continue its efforts to improve its policy change notification process, and
develop a management training program;
􀁺􇩔 To improve its TANF and food stamp overpayment collections, the Department
should assign additional staff to process overpayment referrals, standardize its
overpayment referral process, and continue its efforts to implement an
electronic document-scanning system to increase case file accessibility.
In addition, the report contains Other Pertinent Information (see pages 35 through 41)
on the impact of welfare reform nationally and in Arizona, and internal control issues
related to recent fraud cases in which department employees illicitly obtained TANF
and food stamp benefits.
Auditors used a variety of methods to study the issues addressed in the audit. Audit
methods included interviews with management and staff from the Department and
its Divisions of Employment and Rehabilitation Services, Benefits and Medical
Eligibility, and Child Support Enforcement; and review of applicable statutes,
regulations, policies, and procedures. To perform more specific audit steps, auditors
used the following methods:
􀁺􇩔 To determine the Department’s preparedness for the Jobs Program
privatization, auditors reviewed national reports related to welfare reform and
privatization of welfare services from the U.S. General Accounting Office;
Mathematica Policy Research, Inc., which examined TANF privatization in six
regions; and the U.S. Department of Health and Human Services, as well as a
study of the Arizona Jobs Program by Abt Associates, a for-profit government
and business research and consulting firm.1,2,3,4,5
1 Winston, Pamela, Andrew Burwick, Sheena McConnell, and Richard Roper. Privatization of Welfare Services: A Review of
the Literature. Washington, D.C.: Mathematica Policy Research, Inc.; May 2002.
2 McConnell, Sheena, Andrew Burwick, Irma Perez-Johnson, and Pamela Winston. Privatization in Practice: Case Studies of
Contracting for TANF Case Management. Washington, D.C.; Mathematica Policy Research, Inc. March 2003.
3 U.S. General Accounting Office, Report to Congressional Requestors. WELFARE REFORM: Federal Oversight of State
and Local Contracting Can Be Strengthened. GAO-02-661, June 2002.
4 U.S. General Accounting Office, Report to the Chairman, House Republican Task Force on Privatization. PRIVATIZATION:
Lessons Learned by State and Local Governments. GAO/GGD-97-48, March 1997.
5 Kornfeld, Bob, and Laura Peck. The Arizona Works Pilot Program: A Three-Year Assessment. Cambridge, MA: Abt
Associates, Inc., Feb. 2003.
Auditors also attended Jobs Program and Arizona Works management
meetings and the Request for Information meeting related to the Jobs Program
privatization Request for Proposals; reviewed Arizona Works’ case file review
outcomes; reviewed the Department’s internal audits of its Arizona Works
contractor and the Jobs Program’s follow-up monitoring of the contractor;
reviewed the Jobs Program privatization Requests for Proposals, contracts,
monitoring tools, guides, and plans from other jurisdictions that privatized their
TANF employment case management functions;1 interviewed officials from
AHCCCS and the Department of Health Services Division of Behavioral Health
Services, regarding issues such as data security, monitoring practices, and its
authority to withhold funds for vendor contract noncompliance; and examined
Arizona Government Information Technology Agency and the Department of
Administration’s data security standards, and Health Insurance Portability and
Accountability Act (HIPAA) security standards that apply to DHS and AHCCCS.
􀁺􇩔 To assess the adequacy of the Department’s food stamp eligibility determination
quality assurance process, auditors reviewed management reports detailing
error rate causes and trends, and federal regulations and procedures regarding
the food stamp quality control program; interviewed the federal quality control
specialist for Arizona; conducted site visits to four District 1 local offices
(Maricopa County) to observe eligibility interviews and gain an understanding of
the overpayment referral process; and held a focus group comprising selected
local office managers to determine causes for food stamp determination errors
and backlogs.
􀁺􇩔 To determine the adequacy of the Department’s TANF and food stamp
overpayment referral and claims management process, auditors reviewed
internal management and system-generated claims and collections reports for
fiscal years 2000 through 2003; and surveyed each District’s overpayment units
to determine its process for managing and reporting overpayment referrals.
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the director of the Department
of Economic Security and his staff for their cooperation and assistance throughout
the audit.
State of Arizona
page 12
1 The states of Wisconsin and Delaware; the counties of Hennepin, Minnesota, and San Diego, California; and Texas’
Lower Rio Grande Workforce Development Agency.
1 The Forty-Sixth Legislature is considering Senate Bill 1265, which would delay the date by which the Department has to
privatize the Jobs Program. If the bill becomes law, the Jobs Program privatization would begin by July 1, 2005, or July
1, 2006, depending on whether Congress reauthorizes the TANF program before or after July 1, 2004.
Office of the Auditor General
page 13
Department should ensure proper oversight of
privatized Jobs Program
To successfully meet the requirement to turn the State’s Jobs Program over to private
contractors, the Department needs to ensure that it can effectively oversee the work
these contractors will perform. By statute, the Department must change the Jobs
Program from a direct service provided by department staff to a contractor-operated
function by July 1, 2004.1 However, auditors identified several weaknesses in the
Department’s preparedness to ensure that privatization offers the best quality service
for minimal cost. Two matters stand out as particularly
important. One is the thoroughness of preparations for
monitoring the contractors. The Department needs to step up
its efforts to train its own monitoring staff, train contractors in
complying with federal requirements, and develop specific
monitoring plans. The other is effective control over data. To
help protect sensitive data that will now be handled in new
settings by employees who may not know the requirements
for handling and securing the information, the Department
needs to develop additional security controls and training
requirements.
TANF recipients must participate in Jobs
Program
Federal and state law require nearly all adult Temporary
Assistance for Needy Families (TANF) recipients to participate
in defined work-related activities in order to receive benefits. Laws 1997, Chapter 300,
established work activities for Arizona consistent with federal TANF work
requirements. These activities include job search, subsidized or unsubsidized
FINDING 1
The Jobs Program must
be privatized by July 1,
2004.
Jobs Program Services and
Requirements
􀁺􇩓 Services include career preparation courses,
GED testing fees, and vocational training
􀁺􇩐 Program provides financial support for
expenses such as child care services, tools
and equipment necessary for a job, clothing,
and medical or dental services
􀁺􇩉 Individual employment plans typically require
a period of job searching before receiving
services
􀁺􇩐 Progressive penalties are applied to
participants who fail to comply with work
participation requirements, ending with
termination of TANF benefits for at least 1
month or until meeting compliance
State of Arizona
page 14
employment, job skills training, education, unpaid work experience, community
service programs, and vocational training. TANF applicants must attend an
orientation where they learn about requirements and are informed about Jobs
Program services before their TANF eligibility interview. Once the Department’s
Family Assistance Administration determines that a family is eligible for TANF cash
assistance, it sends a referral to the Jobs Program. As soon as the Jobs Program
staff activate the case by pulling it from the referral file, the participant must attend a
welcome meeting and an initial interview with a Jobs Program case manager. The
participant and case manager conduct a job readiness assessment and formulate
an employment plan that includes an employment goal and a plan for moving the
individual into employment as quickly as possible. Generally, new participants spend
a few weeks looking for work on their own before entering the Jobs Program training
programs, such as career preparation courses and vocational training. The Jobs
Program also provides GED testing fees to participants without a high school
diploma or GED. As long as the client complies with program requirements, Jobs
also provides a variety of other support services such as transportation assistance,
clothing, vouchers, medical and dental assistance not covered by the Arizona Health
Care Cost Containment System (AHCCCS), and day care registration and co-payment
fees not covered by other programs. The program continues to provide
some of these services, such as transportation and educational assistance, for up to
2 years after a successful participant begins earning more money than is allowed to
qualify for TANF cash assistance. However, if an individual fails to comply with work
requirements, the participant’s TANF cash assistance grant is reduced, and after
repeated instances of noncompliance, it is terminated.
Jobs Program to be privatized
Laws 2003, Ch. 223 requires the Department to privatize the
Jobs Program state-wide by July 1, 2004.1 Under
privatization, contractors will be responsible for providing
program services. The Department’s own case managers
currently provide this function for most of the State.
Effective administration of the Jobs Program, whether under
state or contract employees, is important because it affects
the amount of money the State receives from the federal
government. Specifically, the Jobs Program’s effectiveness in
helping cash assistance recipients obtain and retain jobs
affects the State’s TANF Block Grant funding level. For
example, good performance in areas such as job placement,
job retention, and earnings gain can result in bonus awards
of up to 5 percent of the State’s $222.4 million TANF Block
1 The Forty-Sixth Legislature is considering Senate Bill 1265, which would delay the date by which the Department has to
privatize the Jobs Program. If the bill becomes law, the Jobs Program privatization would b begin by July 1, 2005, or July
1, 2006, depending on whether Congress reauthorizes the TANF program before or after July 1, 2004.
State-wide Privatization
Timeline
May 2002—New law passed that requires state-wide
privatization beginning January 2004.
December 2002—Department issues RFP.
February 2003 to May 2003—Concerns develop over
possible cuts in the budget for the Jobs Program, possible
federal changes in the program, and the RFP’s specific
provisions.
May 2003—Legislature extends privatization deadline until
July 2004.
June 2003—Department withdraws RFP for reworking.
February 2004—Department has not yet issued a new RFP.
July 1, 2004—Department required by statute to
implement privatization, unless deadline extended to 2005
or 2006 by Senate Bill 1265 (46th Legislature).
Office of the Auditor General
page 15
Grant. In contrast, federal TANF Rules and Regulations specify that poor Jobs
Program performance, such as failing to meet the federal work participation rate or
failure to submit accurate and timely reports, could potentially cost the State up to 21
percent of its adjusted grant amount.
Arizona has experimented with privatization on a limited basis since April 1999, when
the Legislature established the Arizona Works Pilot Program to determine the
feasibility of privatizing Arizona’s administration of public assistance. Arizona Works
has operated in much of the northern and eastern parts of the Phoenix metropolitan
area and for 6 months in Greenlee County. A national for-profit research and
consulting firm, Abt Associates, found that Arizona Works has roughly the same
success in job placements and average earnings as the Department, although in
fiscal year 2001, Arizona Works cost approximately 134 percent of what it would have
cost the Department to provide the same services.
Past privatization activities demonstrated oversight
weaknesses
Two past problems related to the Department’s privatization activities illustrate that
the Department may not be fully prepared to effectively monitor the privatized state-wide
Jobs Program. First, the Department’s sporadic monitoring of the Arizona
Works Pilot Program revealed issues of contract noncompliance and lack of
information to demonstrate compliance. Second, the original Request for Proposal
(RFP) issued for the state-wide program did not adequately address concerns that
had been found in other states that had already privatized their programs.
Arizona Works contract monitoring limited and sporadic—Prior to
supervisory reviews in March 2003, the Department did only limited monitoring of the
Arizona Works contractor. The limited monitoring the Department did conduct
revealed issues of contract noncompliance and lack of information to demonstrate
compliance. Specifically:
􀁺􇩉 Internal DES audits released in 2000 and 2001 each found such weaknesses as
lack of internal fiscal controls, lack of documentation for expenditures and client
participation hours, and inconsistent enforcement of sanctioning procedures.1
However, the Department did not monitor Arizona Works’ corrective action plan
and ensure that the plan adequately addressed problems found during the DES
audits until a June 2003 review was conducted.
1 Sanctioning is the process of taking action to reduce or eliminate assistance when participants do not comply with job
search or employment requirements. In June 2003, the Jobs Program conducted its first review of processes Arizona
Works implemented to comply with recommendations in the 2000 and 2001 internal audits. The review found that such
processes were in place, but the Jobs Program has yet to review if the processes have eliminated the problems identified
in those audits.
State of Arizona
page 16
􀁺􇩃 Case reviews conducted in January-March 2003 by the Department to comply
with court orders showed that the contractor failed to properly follow court-ordered
requirements. Problems included lack of documentation and an inability
to follow procedures designed to ensure due process in the sanctioning of
cases.1 Supervisory case reviews conducted in March 2003 showed similar
results, as well as inaccuracies of employment and work participation data
entered into the Jobs Automated System (JAS).
􀁺􇩉 In May 2003, the Department found that the contractor was not correctly
providing data the Department reported to the federal government. According
to department e-mail messages to the contractor, the contractor had to resubmit
up to 39 weeks of employment information on more than 1,600 cases to bring
those cases into compliance.
􀁺􇩉 In November 2003, the Department performed its first review of the contractor’s
child care functions, including child care eligibility determination. The case file
review found a lack of documentation and child care request logs, a high rate of
client notice errors, incorrect information entered into the Department’s Child
Care information system, and untimely verification of continuing eligibility.
Initial RFP lacked elements common to procurement of TANF case
management services—Auditors’ review of the initial RFP for state-wide
privatization showed that it contained weaknesses related to liquidated damages
and performance measurements. Specifically, although the U.S. General Accounting
Office found that common performance measurements for state and local TANF
contractors include the federal work participation rate and job retention, the
Department’s original RFP failed to include these measures. Further, other states’
RFPs penalize contractors who fail to meet specified performance goals or provide
contracted services. For example, Wisconsin assesses liquidated damages up to
$5,000 for each instance of contract failure and may withhold funds if a contractor
fails to submit or comply with a corrective action plan when deficiencies are detected.
The Department’s original RFP included contract termination as the only penalty for
contractor deficiencies. However, the severity of this penalty would deter the State
from imposing it as frequently as liquidated damages. A contractor’s failure to meet
the federal work participation rate could result in a 5 percent reduction of the State’s
TANF Adjusted Basic Grant, equal to approximately $10 million. However, the
Department’s original RFP would not penalize individual contractors that failed to
meet the work participation rate, although the amounts received by all contractors
would be adjusted by up to 5 percent to reflect the State’s decrease in TANF funding.
The Department should consider expanding performance measurements to include
the federal work participation rate and job retention, and should assess liquidated
damages for contractor deficiencies.
Disbursement of $7.8
million in child care
subsidies not
monitored.
1 The Department must ensure Jobs Program participants receive proper due process before they receive a sanction to
comply with a court order in Amanda Olea, et al. v. John Clayton, Director, Arizona Department of Economic Security, CIV
99-106 TUC WDB.
Department should prepare to monitor contractors
To successfully oversee a state-wide privatization program, the Department needs
better monitoring procedures. It needs to develop monitoring practices that could
potentially be used with Arizona Works in the short-term, then with all contractors
once privatization occurs. The Department needs to address three aspects of
contract monitoring as it prepares for state-wide privatization of the Jobs Program—
training its own staff in contractor oversight, training contractors in procedures they
will need to comply with program requirements, and developing effective monitoring
plans.
Training for staff who will monitor contractors—The Department plans to
use 13 employees to monitor contractors, but has not developed a training program
for them. These individuals will need to monitor the contractors’ contract compliance,
performance, and fiscal expenditures. The Jobs Program has acknowledged the
need to provide training to its contract managers, but has not formulated curriculum
or identified trainers.
Other jurisdictions that have privatized TANF employment services have provided
extensive training to their contract managers. For example, San Diego County
contract managers undergo a 5-day training course on areas such as contract
project planning, contracting for compliance, and contract administration. They also
receive periodic training to address specific issues. Other units within the Department
have more contract monitoring experience, and the Department should draw upon
their expertise to develop training for the Jobs Program contract managers.
Training for contractors—Contractors and their staff will need to understand and
follow department policies and procedures. Doing so will be important, because the
State is responsible for contractor actions. Further, if the contractors do not meet
federal and court-ordered standards, the State could face sanctions. In addition, to
comply with the Olea, et al. v. John Clayton, Director of the Department of Economic
Security principles of agreement, the Department must ensure that Jobs participants
receive due process before eliminating their cash assistance benefits. The
Department has acknowledged the importance of ensuring contractor training, but
has not established a training plan.
Timely and effective training, especially at the beginning of the contractual
relationship, increases the likelihood of contract compliance. Wisconsin’s
Department of Workforce Development requires contractors to train their staff in
accordance with the Department’s policies and procedures. Contractors must detail
how they train employees and ensure that case managers do not manage cases until
an agreed-upon level of training has been completed. Additionally, Wisconsin
monitors to ensure that training does occur.
Office of the Auditor General
page 17
The Department must
ensure that contractors
comply with court-ordered
standards.
State of Arizona
page 18
The Department has at least three options for ensuring contractor staff receive
appropriate training: requiring that contractors provide department-developed
training, training the contractors’ trainers, or approving a contractor’s own curriculum.
Regardless of the option chosen, the Department should review training sessions
and attendance as part of its contract monitoring.
Monitoring plans—The Department has developed a plan, guidelines, and nearly
all other tools for monitoring contractor performance of the Arizona Works contractor,
which presumably could be used as a good starting point for state-wide privatization
monitoring. According to the Jobs Administration’s Contract Management
Supervisor, a monitoring review of Arizona Works should take place in April 2004. In
2003, the Department began conducting extensive reviews of the contractor, but it
did not begin developing its first monitoring tool until August 2003.
Other jurisdictions, such as the State of Wisconsin, have developed tools to monitor
high-risk areas. For example, auditors in Wisconsin discovered that contractors had
overcharged the state hundreds of thousands of dollars by charging the state for
time spent on other projects and for questionable or unallowable costs. As a result,
Wisconsin developed monitoring tools for reviewing contractors’ staff time-cost
allocation and expenditure receipts. During the current audit, the Jobs Program’s
contract management supervisor has received monitoring tools, guides, and plans
used by other agencies that monitor their private TANF employment case managers,
which can serve as models to guide the Department’s efforts for both monitoring the
Arizona Works contractors and all contractors under state-wide privatization.
Because the Department is only beginning to develop these monitoring practices
and instruments, it will need to refine them and develop a plan that consolidates
annual and ongoing monitoring.
Department needs to ensure the protection of Jobs
Program data
The Department also needs to take steps to protect information in the Jobs
Automated System (JAS).1 This data must be both accurate and secure because it
affects federal reports that could affect Arizona’s TANF funding and includes clients’
personal information, such as Social Security numbers. Adding contractors to the
layers of personnel who can access this information could increase the threats to
data security. Various controls are needed, such as setting minimum security
standards for contractors and requiring them to implement specific procedures for
reporting security-related incidents.
1 The Jobs Automated System is the computer system the Department developed for tracking and managing Jobs
Program employment cases. It contains personal information about each client, as well as the client’s employment plan
and services the client has received.
Office of the Auditor General
page 19
Contractor access to data creates potential for additional risk—
Allowing outside parties to process and transmit department data poses several
potential threats. First, it potentially increases data transmission between locations,
creating more risk that data can be lost or intercepted. Under the original RFP,
contractors would be allowed either to use department office space and its
connections to the department mainframe, or to use their own office space and
establish their own connection to the department mainframe; the latter option may
increase the number of locations to which data will be transferred. Second, it adds
contractor employees to the list of authorized users who must be screened, trained,
and monitored.
The Department has already experienced at least one security breach with the
Arizona Works contractor. A contractor employee was arrested for allegedly selling
several printouts containing recipients’ names and other personal information she
had obtained from the Department’s systems. The Department terminated her
access to the system, and she never returned to Arizona Works.
Security controls need to ensure that data is accurate and secure—
To protect JAS data security, the Department needs to take several steps. These
steps may vary somewhat depending on the specific assessed risk—for example,
whether the contractor is working in department space or will be obtaining and using
the data at another site. In general, the steps should consist of the following:
􀁺􇩄 Defining security standards—Although the Department requires all contractors
to complete a data-sharing agreement, the document contains only general
security language. The Department has never prescribed specific security
requirements nor monitored the security practices of the Arizona Works
contractor. Integrity of the system and its data can be better ensured if minimum
security standards are met and contractors and their staff understand security
policies. Some common security standards recommended by the Arizona
Government Information Technology Agency (GITA) include firewall technology,
virus protection, and minimum password requirements. Other state agencies,
such as the Department of Health Services and AHCCCS, and other states,
such as Wisconsin, provide minimum security requirements for vendors that
provide Jobs Program services.
􀁺􇩒 Requiring contractors to conduct security assessments—Conducting security
audits or assessments to monitor security processes, events, and policies, and
determining if proper security is established and maintained is a practice
recommended by GITA.
The Department should
improve internal controls
to prevent data security
breaches.
State of Arizona
page 20
􀁺􇩒 Requiring contractors to formulate policies on key security issues—These
policies would cover such areas as incident reporting, limiting access to cases
and screens as appropriate, inventory listing, and review of access logs.1,2 GITA
recommends these procedures as well.
􀁺􇩄 Developing monitoring and reporting procedures—Both the Department and
the contractor should monitor access logs and complete incident reports from
such monitoring. Currently, JAS cannot track its use history. The Department’s
information technology staff reported that, with current staffing and workload
levels, it would take about 6 months to program this function into the system. As
resources become available the Department should undertake this project.
To help ensure that data is adequately secured, the Department should review
compliance with these requirements after initially awarding the contract and on an
ongoing basis.
Contractor employees should receive security training—The
Department does not have a department-wide policy for requiring and ensuring
security training of contractors or their employees. According to Jobs Administration
data security officials, it has never verified that Arizona Works employees have
received such training. A lack of security awareness and training decreases an
entity’s ability to avoid and recognize security breaches. The Department’s Division
of Child Support Enforcement (DCSE) has developed a computer-based training
module to train its employees and those of its contractors. During the 30-minute
training, an individual must pass a series of quizzes, after which a printout is
generated and sent to DCSE, which then issues the individual a user name and
password. The Department should require that contractors and their employees
receive this same training, adapted to the Jobs Program, on an annual basis.
1 Security incidents occur when any person who, without authority or in excess of authority, accesses, alters, damages, or
destroys an IT device (server, storage, or client), network, computer applications system, or data; knowingly obtains
information that by law is to be kept confidential; or introduces a computer contaminant (virus) into any IT device or
network.
2 Access logs register access or attempted access to screens and files within a system, creating a history track. Typically,
these logs will contain access by types of users, servicing activities, failed sign-on attempts, error/exception conditions,
and sufficient information to identify individual user IDs, resources, and information accessed, access paths, and patterns
of access.
Recommendations
1. The Department should include performance measurements such as the
federal work participation rate and job retention in the new RFP. The Department
should also assess liquidated damages for vendor deficiencies as determined
by the Department.
2. The Department should ensure that staff who will perform contract management
functions receive training targeted toward contract compliance, performance,
and fiscal monitoring. The Department should identify resources that could
provide help in designing and teaching these classes, and develop its
curriculum.
3. The Department should develop a training plan so that contractors and their
employees are aware of necessary policies concerning case documentation,
JAS input, and other matters. The Department should monitor that such training
takes place.
4. The Department should implement its newly developed plans to monitor
contract compliance beginning with the monitoring review of Arizona Works in
April 2004.
5. The Department should ensure that data is secure and accurate by doing the
following:
a. Define and require minimum security standards for contractors, allowing for
variation according to assessed risk;
b. Require security audits or evaluations of contractors, possibly requiring
contractors to procure an independent firm to perform the audit;
c. Require contractors to formulate policies that the Department would
approve, such as log access review, incident report alerts, limiting access
to cases and screens as appropriate, and inventory listing;
d. Modify JAS to include the ability to maintain access logs;
e. Monitor access logs and complete incident reports from such monitoring
and require the contractor to do the same;
f. Require contractor employees to undergo annual security awareness
training, possibly using a computer-based approach already developed by
the DCSE; and
g. Review compliance with the security requirements after the initial contract is
awarded and on an ongoing basis thereafter.
Office of the Auditor General
page 21
State of Arizona
page 22
Department can more effectively manage its food
stamp eligibility determination process
Although the Department’s Division of Benefits and Medical Eligibility (Division)
successfully lowered its food stamp eligibility determination error rate, it needs to take
steps to counter potential future increases in this rate. The Division successfully
reduced its food stamp error rate from 15.42 percent in 1994 to 5.27 percent in 2002,
and has received several bonuses from the federal government for keeping the error
rate below federal thresholds. However, the Division’s food stamp error rate for
federal fiscal year 2003 is expected to have increased—not enough to cause federal
penalties, but these increases could result in a potential loss of future bonus monies.1
According to division management, increasing total caseloads coupled with
reductions in eligibility determination staff have negatively affected the error rate.
Using a focus group of local office managers within the Division, auditors identified
several areas in which the Division can more effectively manage its eligibility
determination process. These include more consistent supervisory review of case
files, improved processes for communicating policy changes to local staff, and
establishment of a management training program for local office managers.
Accuracy of eligibility determinations affects federal
funding
The U.S. Department of Agriculture, Food and Nutrition Service (USDA) requires
states to implement quality control programs to monitor food stamp error rates and
has established performance measures, which can result in sanctions or bonuses,
to encourage states to limit eligibility determination error rates. To ensure that
eligibility determinations are accurate and do not adversely affect federal funding, the
Division implemented a quality assurance program that consists of two main
functions: (1) supervisor case file reviews, and (2) comprehensive error rate analysis
and reduction activities.
Office of the Auditor General
page 23
1 The USDA is required to certify the fiscal year 2003 food stamp error rates by June 2004.
FINDING 2
State of Arizona
page 24
States must evaluate their accuracy in eligibility determinations—The
USDA requires states to implement a quality control program to identify and reduce
program deficiencies, such as eligibility determination error rates, for their respective
food stamp programs. The goal of the quality control program is to ensure that states
spend food stamp benefit monies in accordance with federal regulations.
To encourage states to implement effective quality control programs, the USDA
established performance bonuses and sanctions based on error rate limits. Prior to
the federal fiscal year 2003 quality control review period, federal regulations
established a 5.9 percent payment error rate ceiling. If states kept their payment error
rates below 5.9 percent, they became eligible for performance bonuses.1 Conversely,
if states report consistently high error rates, the USDA may impose sanctions. For
example, the USDA fined the State of California more than $62 million for its
excessive federal fiscal year 2002 error rate.
The USDA’s food stamp quality control program requires each state to select and
audit a statistically valid sample of cases from active food stamp recipients and
applicants who were denied benefits. The Division’s Office of Program Evaluation
(OPE) conducts this review. Although not required to do so, the Division follows a
similar process for the State’s TANF program.2
Quality assurance program designed to limit errors—In Arizona, eligibility
determinations are made by eligibility interviewers in local offices. These
interviewers determine whether an applicant is eligible to participate and,
if so, the level of benefits that applicant is eligible to receive, using such
supporting documentation as birth certificates, bank statements, and
employment records.
The Division has established a quality assurance program to identify,
monitor, and limit errors in the work of these interviewers. An eligibility
determination error occurs when a client is denied benefits to which he or
she is entitled or receives more or fewer benefits than allowed under state
and federal laws. The Division continually monitors the accuracy of
eligibility determinations through error rates. It calculates the error rate by
dividing the total benefit dollars issued in error by the total benefit dollars
issued based on its sample of cases. The quality assurance program has
two main components:
1 The federal 2002 Farm Bill eliminated the 5.9 percent standard and established new standards for bonuses and liabilities.
Specifically, effective in fiscal year 2003, a state may only be penalized for its food stamp error rate if there is a 95 percent
statistical probability that its error rate has been greater than 105 percent of the national average for 2 consecutive years.
The 2002 Farm Bill also established a performance system that will award $48 million in bonuses each year to states with
high or improved performance for actions taken to correct errors or to improve eligibility determinations, or for other
activities that demonstrate effective administration of the Food Stamp Program.
2 In 1996, TANF regulations eliminated the quality control requirements established under the Aid to Families with
Dependent Children (AFDC) program. However, the Division has continued the quality control program for TANF.
Local Office Positions
Eligibility Interviewer (EI)—Interviews
applicants and reviews documentation,
determines eligibility for TANF, food stamps,
and medical assistance programs.
Supervisor—Ensures that EI’s have correctly
applied federal and state eligibility criteria
and have met application processing
timeliness performance standards.
Local Office Manager—Coordinates staff
resources to meet the Division’s timeliness
and eligibility determination accuracy goals.
The USDA has
established error rate
performance measures.
Office of the Auditor General
page 25
􀁺􇩓 Supervisor case file reviews—The Division requires supervisors to review
selected case files to ensure that the interviewer correctly determined the client’s
eligibility and benefit level. To minimize errors, the Division encourages
supervisors to conduct this review before benefits are issued. In October 2002,
the Division implemented an automated system to monitor the results of these
reviews, providing detailed information about the most common types of errors
and allowing management to target these types of errors.
􀁺􇩅 Error rate analysis and review—In addition to conducting the annual quality
control review to determine the Division’s TANF, food stamp, and general
assistance error rates, OPE provides program managers with reports detailing
the reasons for client-caused errors and division-caused errors. According to a
department official, local offices with consistently high error rates are designated
as “state focus offices” and receive additional OPE review. Additionally, the
Division established a quality control review committee to review potential errors
that are identified through OPE’s quality control reviews.
Despite past success, improvements are needed to
reduce eligibility determination errors
The Division’s success in reducing its food stamp error rate in the late 1990s and
early 2000s resulted in federal bonuses, but the error rate trends for 2003 indicate a
potential increase. In the 1990s, the USDA fined the Division more than $13 million
for failing to meet federal error rate
standards. Under an agreement with
the USDA, the Division agreed to
invest $1 million into its quality
assurance program in exchange for
the USDA’s agreeing to waive almost
$13 million if the Division kept its food
stamp error rates below the national
average. The Department’s efforts
succeeded in reducing the error rate
from 15.42 percent in 1994 to 5.27
percent by 2002 (see Figure 2). For
Arizona’s federal fiscal year 2002
performance, USDA awarded the
Department a more than $3.8 million
bonus and identified the quality
assurance program as a best practice
0 2
4 6 8
10
12
14
16
18
1994 1995 1996 1997 1998 1999 2000 2001 2002
Federal Fiscal Years
Percentage of Errors
Arizona's Error National Average Error
Figure 2: Error Rates in Food Stamp Benefit Payments
Federal Fiscal Years 1994 to 2002
Source: Auditor General staff analysis of information provided by the Department of Economic Security’s
Office of Program Evaluation and the U.S. Department of Agriculture.
The Division
successfully reduced its
food stamp error rate.
State of Arizona
page 26
model. However, according to the Division’s internal reports, the food stamp error
rate for 2003 is expected to increase.1
Quality assurance program can be improved
According to division management, increasing caseloads coupled with reductions in
eligibility determination staff have negatively affected eligibility
determination error rates. However, the Division can improve its current
quality assurance program to help limit eligibility determination errors.
Auditors conducted a focus group comprising local office managers to
identify effective components of the Division’s quality assurance program
as well as suggestions for improving the management of accurate
eligibility determinations. Based on the results of the focus group and
additional audit work, auditors identified three main areas in which the
Division can more effectively manage the program: (1) supervisor case
file reviews, (2) policy change notifications, and (3) local office manager
training.
Increasing supervisor case file reviews—Although the Division
requires each supervisor to review 35 case files per month, its internal
system indicates that a majority of supervisors have not consistently
reviewed the required number of cases. According to division
management, increasing caseloads have been a contributing factor in
the shift of supervisor focus away from case reviews. However, local
office managers reported that these reviews are an important way to
identify eligibility determination errors in time to correct them before
benefits are issued. Without consistent case file reviews, supervisors
cannot effectively identify and prevent eligibility determination errors. Further, the U.S.
General Accounting Office reported that supervisor case file reviews are one of the
most effective ways to reduce error rates.2 Therefore, the Division should continue its
efforts to ensure that supervisors review the required number of case files by
monitoring the monthly reports that detail the number of case files reviewed by
supervisors. The Division can use these reports to identify local offices that are
unable to meet the monthly quotas and should take steps to improve these offices’
performance. Additionally, the Division should identify local offices that have
established effective procedures for ensuring that supervisors consistently conduct
case file reviews and share these procedures with all offices.
Providing better notice of policy changes—Local office managers identified
frequent policy changes and clarifications as a significant barrier to accurate eligibility
determinations. Eligibility interviewers in local offices must understand and apply
1 The USDA is required to certify the fiscal year 2003 food stamp error rates by June 2004.
2 U.S. General Accounting Office (GAO). Food Stamp Program: States Seek to Reduce Payment Errors and Program
Complexity. GAO-01-272, January 2001.
Local Office Manager
Focus Group
Auditors conducted a focus group composed
of ten local office managers from District 1 to
solicit input regarding the nature and cause of
errors and identify reasons why eligibility
determination error rates are increasing.
The focus group identified several barriers to
accurate eligibility determinations, including
limited resources, inadequate staffing levels,
frequent changes to complex policies, and
the lack of management training. The
managers also discussed techniques they
employ to help identify and prevent eligibility
determination errors, including supervisor
case file reviews.
complex policies and procedures when determining TANF and food stamp eligibility,
but these policies and procedures are subject to change through federal policy
clarifications, state legislation, and internal management decisions. During calendar
year 2003, for example, the Division’s policy unit issued 93 policy notifications.
Improvements can be made in the quality of the notifications provided to local office
personnel. Specifically, the Division notifies local office staff of policy change through
a standard e-mail, regardless of the policy notification’s nature or significance. The
notifications do not clearly specify whether the policy notification is a minor internal
clarification or a major change to eligibility determination criteria. The Division is
currently attempting to improve its policies and procedures for communicating policy
changes. For example, in February 2004, the Division implemented a new policy
requiring that local office managers review and discuss new policies with their staff
within one week of their issuance. Further, each employee is to sign an
acknowledgement to ensure that he or she has received and reviewed the policy.
Creating training programs for local office managers—Although the
Division has established comprehensive training programs for eligibility interviewers
and supervisors, it has not developed a management training program for its local
office managers. Several local office mangers who participated in the focus group
stated that they did not receive formal training regarding time and employee
management, report use and management, and ways to balance increasing
caseloads with reduced staff. The Division is in the process of developing a training
program for local office managers.
Recommendations
1. The Division should continue its efforts to ensure that supervisors review the
required number of case files by monitoring the monthly case review reports,
identifying local offices that are unable to meet the monthly quotas, and taking
steps to improve these offices’ performance. In addition, the Division should
identify local offices that have established effective procedures for conducting
consistent case file reviews and share these procedures with all offices.
2. The Division should continue its efforts to improve its process for
communicating policy changes to local office staff. Specifically, the Division
should continue its efforts to update its policies and procedures. It should also
continue its efforts to identify local offices that have developed effective
processes for communicating policy changes to their staff and should share
these processes with all offices.
3. The Division should continue its efforts to develop a training program for local
office managers. The Division should ensure that the curriculum for this program
includes classes on time and employee management, report use and
management, and balancing increasing caseloads with reduced staff.
Office of the Auditor General
page 27
State of Arizona
page 28
Department should improve management of its
benefit overpayment referrals process
Although the Department’s Office of Accounts Receivables and Collections
(Collections Office) adequately recovers overpayments of TANF and food stamp
benefits when it receives notifications of the overpayments, many other
overpayments may be going unrecovered because they are not referred to the
Collections Office on a timely basis. Internal reports compiled by the Division of
Benefits and Medical Eligibility (Division) indicate that its offices have accumulated a
backlog of thousands of possible overpayments, the value of which is likely in the
millions of dollars. However, the process for tracking and reporting overpayment
referrals and claims is unreliable and prone to inaccuracies. Additionally, in the
Division’s largest district, many possible overpayments cannot be confirmed
because local offices are unable to locate needed case files. The Division needs to
continue its current efforts to reduce the backlog, address the problem with lost case
files, and improve its process for tracking and reporting possible overpayments.
Effective recovery of overpayments requires timely
collection efforts
Overpayments occur when clients receive more TANF or food stamp benefits than
they are entitled to under federal and state eligibility criteria. Benefit overpayments
can result from (1) client error, for example when a client fails to report that he/she
has a new job or other new source of income, (2) department error, such as mistakes
in calculating benefits, or (3) fraud, as when a client intentionally misrepresents
income or household composition. Timely processing of such cases increases the
likelihood that the client will pay it back. The U.S. Department of Agriculture (USDA)
also encourages states to process potential cases of overpayments no more than 3
to 6 months after it establishes the claim to increase the potential for collection.
Office of the Auditor General
page 29
FINDING 3
Inaccurate eligibility
determinations can
result in overpayments.
State of Arizona
page 30
The processing of potential overpayments involves personnel in several different
offices. Within the Division, Eligibility Interviewers (EIs) identify potential benefit
overpayments and are responsible for referring them to the districts’ designated
overpayment units. Potential overpayments are also identified through quality control
audits, management reviews, and special fraud investigations. Overpayment
specialists within these units then review the file and other supporting documentation
(such as employment records) to determine if there is a legitimate overpayment
claim. According to the Division’s policies, overpayment specialists should not
pursue food stamp referrals if the overpayment is less than $125, or if the specialist
is unable to verify the information in the overpayment referral. They submit valid
claims to the Collections Office. The Collections Office notifies the client of the
overpayment or, in cases of suspected fraud, refers the overpayment claim to the
Department’s Office of Special Investigations for further investigation. Once they are
notified of the overpayment, clients have the right to request a fair hearing through
the DES Office of Appeals.
During the past 4 federal fiscal years, the Collections Office has complied with federal
food stamp overpayment collections standards.1 In state
fiscal year 2003, the Collections Office collected nearly
$2.7 million, while only about $2.3 million in new food
stamp overpayment claims were established during that
year. In state fiscal year 2000, the Collections Office
collected more than $2.6 million, compared to more than
$2.3 million in new food stamp overpayment claims
established during that year. The Collections Office is able
to collect more claims than it establishes during a fiscal
year because there is an outstanding balance of
overpayment claims (see Table 3). This balance is an
accumulation of both current and past debt.
The federal government has not established a standard for
TANF collections, but in state fiscal year 2003, the Office
collected slightly more than $1.7 million, compared to the
nearly $1.9 million in TANF and AFDC overpayment claims
established during that year.
Federal food stamp regulations allow states to retain a
certain percentage of the collected overpayment monies.
The percentages are based on the nature of the
overpayment—client error, agency error, or fraud:
1 Prior to federal fiscal year 2002, federal guidelines required states to maintain a food stamp overpayment collection rate
of 72 percent. The federal government determined the states’ collections rates by dividing the total claims collected
during the fiscal year by the total claims established during the fiscal year. In federal fiscal year 2002, the UDSA
established new standards for collections that include several measures of effectiveness. In fiscal year 2003, the USDA
rated Arizona’s food stamp collections as above average.
Program
Accounts
Receivable
Balance
Number
of
Active Claims
Average
Amount per
Active Claim
Food Stamps $ 8,889,738 12,594 $ 706
AFDC1 5,867,784 4,328 1,356
TANF2 8,425,540 12,608 668
Total $23,183,062 29,530
Table 4: Program Overpayment Balances
as of June 30, 2003
1 Although the Aid to Families with Dependent Children Program
(AFDC) ended in August 1996, the U.S. Department of Health and
Human Services requires states to continue to collect outstanding
overpayment claims for this program until the full amount is repaid. For
example, the Collections Office continues to collect on one AFDC
overpayment that was established in 1969.
2 The Temporary Assistance for Needy Families program began on
August 22, 1996.
Source: Auditor General staff analysis of the Monthly Overpayment Collections Report for
June 2003, provided by the DES Office of Accounts Receivable and Collections.
Office of the Auditor General
page 31
1 According to division management, overpayment referrals that are not processed within 30 days are considered
backlogged. However, the Division tracks overpayment referrals on a 45-day standard.
􀁺􇩉 If the overpayment monies collected are due to errors made by the agency
(DES), then 100 percent of the collection amount goes to the federal
government.
􀁺􇩉 If the overpayment monies collected are due to errors made by the client, then
80 percent goes to the federal government and the remaining 20 percent goes
to the State.
􀁺􇩉 If the overpayment monies are due to client fraud, then 65 percent goes to the
federal government and the remaining 35 percent goes to the State.
In federal fiscal year 2003, the State retained over $420,000 in food stamp
overpayment recoveries. All TANF overpayment monies are retained by the State and
used for program costs, regardless of the nature of the overpayment.
Many potential overpayments are not being checked or
referred
The Division has not established an effective and reliable process for managing its
overpayment referrals, which are used to identify potential overpayment claims.
Internal reports indicate that, as of December 2003, the Division had a backlog of
more than 7,700 food stamp and TANF overpayment referrals that had not yet been
assessed and confirmed as claims. After audit work was conducted, the Division
reported it had further reduced its backlog to about 1,800 as of February 2004.
However, because the Division does not have a reliable system of tracking and
reporting overpayments, auditors were not able to verify the size of the backlog.
Improvements are needed in three areas—more timely processing of potential
overpayments, implementation of an automated system for tracking and reporting
referrals and claims, and development of supporting systems for making case
information more readily available to overpayment investigators.
The Division has a backlog of overpayment referrals—The Division’s
overpayment reports indicate that, as of December 2003, there were more than 7,700
pending TANF and food stamp overpayment referrals that had not been assessed
and confirmed as claims. Over 86 percent of the total pending overpayment referrals
reported in December 2003 were considered backlogged.1 Although auditors were
able to confirm that the Division has a substantial backlog of overpayment referrals,
the true extent of the backlog could not be verified due to the Division’s unreliable
process for tracking and reporting overpayments. The Division’s reports also indicate
that the backlog has increased substantially in recent years. Specifically, the number
of reported pending overpayment referrals grew from more than 5,000 in June 1999
to more than 13,000 in July 2003. Between September and November 2003, several
The Division had more
than 13,000 pending
overpayment referrals.
overpayment units reported that their backlog included referrals dating back several
years. For example, one overpayment unit reported that it had referrals dating back
to 1997. According to division management, the backlog resulted from a shift in staff
resources to respond to increasing caseloads. Local office managers reassigned
overpayment specialists to help manage the caseloads.
At the request of division management, some district managers have assigned staff
to overpayment specialist positions in an effort to reduce the backlog. Specifically,
according to internal reports, the number of overpayment specialists state-wide has
increased from 19 prior to January 2003 to 44 as of December 2003. As a result, the
Division was able to reduce its pending referrals by more than 5,000. The Division
reports it has reduced its backlog by almost 6,000 more after audit work was
conducted. Therefore, the Division should continue to assess its staffing, and as
resources permit, it should assign extra staff to help address the overpayment
backlog.
As mentioned in the previous section, it is important that the Division process
referrals in a timely manner to increase the likelihood that the overpayment will be
identified and repaid. Further, overpayment referrals represent potential dollars that
are owed to the State’s TANF and Food Stamp Programs. While no comprehensive
estimate is available of the amount of money involved in these backlogged cases,
based on analysis of the Division’s state fiscal year 2003 internal overpayment
reports, auditors estimate that the approximately 7,700 referrals could potentially be
worth approximately $4 million. However, given that the Division does not generally
pursue half of its overpayment referrals because of the low dollar value of them or the
inability to verify the information in the referral, the actual dollar value of the referrals
is most likely closer to $2 million. After audit work was conducted, the Division
reported that it further reduced its referral backlog to approximately 1,800 as of
February 2004. These referrals had a likely value of about $500,000.
Lack of reliable tracking system limits ability to effectively monitor the
backlog—Auditors could not confirm the reliability of the reported backlog, in large
part because several of the Division’s largest overpayment units do not reliably and
accurately track their overpayment referrals. Several overpayment supervisors
reported that their tracking processes are labor-intensive and prone to error. For
example, after auditing the number of referrals in its files in July 2003, one
overpayment unit discovered that it had underreported its pending overpayment
referrals by more than 700.
To address this problem, according to division management, the Division’s IT unit
has developed an automated system for tracking and reporting overpayment
referrals and claims. Division management stated that this system will be
implemented in 2004 and funded with the monies from its operating budget.
State of Arizona
page 32
Some overpayments are dropped because of inaccessible case
files—Separate from the issue of backlogged referrals, some overpayment units
also reported dropping a substantial portion of the cases they received from local
offices—in some cases, because the necessary files could not be located. State-wide,
approximately 50 percent of overpayment referrals were not pursued during
fiscal year 2003. One overpayment unit in District 1 reported that it did not pursue
over 70 percent of its overpayment referrals during fiscal year 2003. According to the
overpayment unit supervisor, about half of these referrals were dropped because the
local office could not provide the case file.
The Division’s policies state that overpayment specialists should not pursue food
stamp referrals if the overpayment is less than $125, or if the specialist is unable to
verify the information in the overpayment referral. However, according to division
management, the Division does not centrally track the reasons why overpayment
units do not pursue overpayment referrals.
Although a survey of the Division’s overpayment units revealed that some referrals
may be dismissed because the eligibility interviewer did not apply the policy correctly,
several of the Division’s largest overpayment units reported that the most common
reason for dismissal was the local offices’ inability to provide case files. According to
one local office manager, a reduction in clerical staff coupled with increasing
caseloads complicated the management of case files. For example, this manager
said at least 500 of the office’s more than 7,000 case files were stacked in boxes
because the office did not have clerical staff to file them. To eliminate the need to
manage and file thousands of paper case files, division management has developed
a proposal to implement an electronic document-scanning system. The Division
would use some of the $3.8 million in federal bonus monies it received for its low
2002 food stamp error rate to fund this project.
Recommendations
1. The Division should continue to assess its staffing and, as resources permit it,
should continue to assign extra staff to help address the overpayment backlog.
2. To standardize its process for managing overpayment referrals, the Division
should continue its efforts to implement an automated system for tracking and
reporting overpayment referrals and claims, including the reasons referrals are
not pursued.
3. To help the Department collect more overpayments by limiting the number of
overpayment referrals that are dropped due to inaccessible case files, the
Division should continue its efforts to plan to implement an electronic document-scanning
system.
Office of the Auditor General
page 33
State of Arizona
page 34
During the audit, auditors developed information about the impact of welfare reform
nationally and in Arizona, and recent welfare-related employee fraud cases.
Impact of welfare reform nationally and in Arizona
In 1996, the face of welfare programs changed drastically across the nation with the
creation of the Temporary Assistance for Needy Families program (TANF). This
program focused heavily on moving recipients into jobs and creating more stable
family structures. The Department operates the State’s version of this program, which
operates with a combination of federal and state funding. As of March 2002,
recipients received a monthly average cash assistance amount of $272.23 per family
(33rd nationally), compared to the national average of $412.40. Between 1996, when
the new program began, and March 2002, Arizona’s welfare caseload fell by 39.2
percent (42nd nationally in terms of the size of the caseload reduction). However,
Arizona’s caseload increased by 20.1 percent in the following year, while caseloads
declined 2.0 percent nationally. According to national statistics, welfare reform has
had a positive impact on family income. Auditors were unable to obtain data to show
the effect for Arizona alone.
Welfare reform implemented nationally—In 1996, the Personal Responsibility
and Work Opportunity Reconciliation Act (welfare reform), created TANF to replace
the old welfare system, Aid to Families with Dependent Children (AFDC). Welfare
reform’s primary purpose was to “end the dependence of needy parents on
government benefits by promoting job preparation, work, and marriage” (HR3734).
Under welfare reform, states receive an annual block grant to administer several
welfare programs. States have significant flexibility in allocating block grant funds and
designing eligibility criteria, benefit rules, and benefit amounts. Additionally, welfare
reform requires that those receiving cash assistance participate in state-defined work
activities within 24 months of cash receipt unless the state exempts the individual
from work requirements. Recipients are subject to a 5-year lifetime limit with limited
exceptions, such as for state-defined hardship. The federal work participation rate,
which measures the number of cash assistance recipients participating in work
activities, is the primary performance measurement.
Office of the Auditor General
OTHER PERTINENT
INFORMATION
page 35
Department administers Arizona’s program—The Department
implemented welfare reform under a program called EMPOWER Redesign. The
State uses the block grant funding for its TANF, Jobs Program, and Child Care
Assistance programs. Some important features of Arizona’s program are as follows:
􀁺􇩗 Work-first orientation—Participants must begin work activities as soon as Jobs
Program staff activate their case. According to department officials, participants
usually start with a job search during the first several weeks of employment
service assistance. As is typical of most states, Arizona progressively sanctions
recipients who fail to participate in work activities by reducing their cash
assistance.
􀁺􇩃 Cash benefit amount—As of March 2002, Arizona’s TANF recipients received a
monthly average of $272.23 per family, compared to the national average of
$412.40. Arizona’s average monthly cash assistance payments rank 33rd
nationally. Arizona’s amount is based on raising eligible families’ income to 36
percent of the 1992 Federal Poverty Level.
􀁺􇩆 Family benefit cap—Arizona does not allow for a cash increase for an additional
child born to a family receiving cash assistance, except under very strict
conditions. Seventeen other states follow a similar policy. The majority, 27 states,
allow a normal cash increase for additional children, while the remaining 5 states
allow a partial increase.
Arizona’s caseload reduction less than most states—Since 1996, when
TANF began, the average number of AFDC/TANF families nationally fell from more
than 4.5 million in federal fiscal year 1996 to less than 2.1 million during the first half
of federal fiscal year 2002. Figure 3 (see page 37) illustrates the state-by-state
change in caseload. Studies have shown that welfare reform played a substantial role
in this reduction, although the economy also played an important role. During this
time, Arizona’s caseload fell from 63,404 to 38,578. This 39.2 percent reduction was
42nd nationally—that is, 41 states had greater percentage reductions than Arizona’s.
Further, between March 2002 and March 2003, while caseloads declined 2 percent
nationally, Arizona’s caseloads increased 20.1 percent to 47,302. According to the
Department’s welfare reform report for fiscal year 2003, Arizona’s population growth
and a slow economy were major factors in its increased caseloads.
Reduced spending has allowed Arizona to use TANF resources in
subsequent years—States spend both federal TANF money and state funds on
welfare programs. The federal grant funds the majority of program expenditures, and
its basic contribution has remained unchanged since the program began in 1996.
This federal aid comes in the form of a block grant, and states are not required to
spend the entire amount. Given the drop in the welfare caseload, Arizona, like most
states, built up a reserve balance in the first years of the program. Arizona had a
balance of almost $86 million in unspent TANF block grant funds at the beginning of
State of Arizona
page 36
Office of the Auditor General
page 37
fiscal year 2002, nearly $69 million at the start of fiscal year 2003, and an estimated
$16 million at the start of fiscal year 2004. Like many other states, Arizona has used
these reserves in recent years. Arizona will nearly exhaust the remaining surplus by
the end of fiscal year 2004.
Several other government subsidies for low-income families are now being
expended at a much greater rate. For example:
􀁺􇩃 Child care subsidies at state and federal levels grew from about $6.6 billion in
1999 to nearly $10.2 billion in 2002. Falling caseloads have freed up TANF
dollars, allowing TANF fund transfers to child care to grow from $180 million in
1997 to $3.5 billion in 2000. In Arizona, day care subsidies and transitional child
care expenditures have increased from an approved amount of more than $60
million in fiscal year 1997 to nearly $149 million approved for fiscal year 2004,
including monies from TANF, the federal Child Care and Development Fund, and
the State General Fund. In fiscal year 1997, more than $19 million of Arizona’s
child care funding came from the General Fund, and in fiscal year 2004,
approximately $31 million in General Fund monies were appropriated.
Arizona will nearly
exhaust its TANF
surplus in 2004.
WA
-43.9
OR
-46.5
CA
-48.1
AZ
-39.2
NM
-48.8
AK
-50.7
HI
-46.9
NV
-31.4
UT
-47.3
WY
-89.8
CO
-66.8
ID
-84.9
MT
-47.1
ND
-34.8
SD
-52.1
NE
-30.2
KS
-45.3
OK
-62.5
TX
-48.6 LA
-65.3
MS
-63.8
AR
-46.2
TN
-37.0
AL
-56.6
GA
-58.1
FL
-71.2
SC
-56.7
NC
-61.1
VA
-53.8
KY
-51.0
MO
-44.4
IL
-76.8
IA
-38.0
MN
-39.3
WI
-68.9
IN
-9.4
MI
-56.9
OH
-59.0
PA
-56.9
NY
-57.1
ME
-53.2
MD
DE
NJ
CT
RI
MA
NH
VT
WV
-55.6
Percent Decrease for 50 States and
District of Columbia
October 1996 - March 2002
less than 50%
50% or greater
CT -57.8
DE -46.9
DC -36.5
MA -46.8
MD -62.3
NH -37.3
NJ -59.6
RI -30.6
VT -42.8