Report of the House Study Committee on Department of Economic Security Reorganization

              REPORT OF THE HOUSE STUDY COMMITTEE ON
DEPARTMENT OF ECONOMIC SECURITY REORGANIZATION
December 31, 1990
Members
Representative Leslie Johnson, Chairman
Representative Bev Hermon
Representative Lela Steffey
Representative Dave McCarroll
Representative Peter Goudinoff
Representative Sue Laybe
REPORT OF THE HOUSE STUDY COMMITTEE ON
DEPARTMENT OF ECONOMIC SECURITY REORGANIZATION
Backsround
The Legislative Study Committee on Department of Economic
Security Reorganization was appointed by Speaker Jane Hull during
the summer of 1990. The members appointed were Representative
Johnson, Chairman, Representatives Hermon, Steffey, McCarroll,
Goudinoff and Laybe.
The mandate of the Committee was to: - review the effectiveness of the current structure of DES;
- consider alternatives to dividing DES into separate
departments;
- make recommendations for the future structure of DES;
- submit a report of findings and recommendations to the
Speaker by December 31, 1990.
The Committee held seven meetings from October through
December, 1990, during which testimony was received from the
following:
Doug Norton, Auditor General
Linda Moore- Cannon, Director, DES
Lyn Rucker, Assistant Director, DES, Division of
Developmental Disabilities
Robert Harmon, Deputy Director DES
Michael Slattery, Assistant Director, DES Division of
Family Support
Ray Weaver, Program Administrator, DES Child Support
Enforcement Administration
Joel Bankes, Assistant Deputy to Maricopa Clerk of the
Superior Court
Mark Steinberg, Executive Director, Interagency Coor-dinating
Council for Infants and Toddlers
Richard Stavneak, Analyst, Joint Legislative Budget
Committee
Dr. Leonard Kirschner, Director, AHCCCS
Patricia Brown, Executive Director, Association for
Retarded Citizens
Rita Charron, Executive Director, Governor's Council on
Developmental Disabilities
Parents, foster parents and client advocates
The Department of Economic Security was created as an umbrella
agency combining all the state social services in 1973, pursuant
/
to Laws 1972, chapter 142. The law combined the agencies of the
Employment Security Commission, Department of Public Welfare,
Division of Vocational Rehabilitation, Veterans Service Commission,
Office of Economic Opportunity, Apprenticeship Council and Office
of Manpower Planning. Laws of 1973 added the Division of Mental
Retardation. The legislative intent of this Act was as follows:
The purpose of this act is to provide an
integration of direct services to the people
of this state in a pattern that would reduce
duplication of administrative efforts, ser-vices
and expenditures. The department of
economic security will provide the means by
which people with multiple problems might find
the solution to such problems in a single
department's coordinated service. This act
shall in no manner abridge the autonomy of the
state, counties or municipalities in carrying
out their authorized functions and respon-sibilities.
At that time, the reorganized DES budget for FY 1973- 74 was
$ 46,329,900 state- only dollars and $ 700,200 for the Division of
Mental Retardation. The new Department employed 1914 people.
However, the state had a much smaller population then with less
demand for services.
Since then, the Department of Economic Security has become the
largest of the state agencies in its number of personnel, employing
7992 people including 5132 federally/ other funded FTEs . Its FY
1990- 91 budget totals $ 979,511,100, including $ 349,566,400
appropriated dollars, $ 356,178,300 federal dollars and $ 273,766,400
in other funds from AHCCCS, U. I. benefits, grants, etc. A copy of
the DES budget for FY 1990- 91 follows in Appendix 2.
The Department has eight divisions, each of which is
administered by an assistant director who reports to the director
( see Appendix 1 for organizational chart) . Of these eight
divisions, there are four program and four support divisions which
interact on many issues related to accountability, planning and
client services.
The state is divided into six DES districts, with each having
a program manager who coordinates services within the district and
supervises local offices and programs. There are various levels
of middle- management personnel at both the state and district
off ices.
The local program offices are single- or multi- purpose offices
combining similar services as appropriate and as space allows. For
example, Job Services and Unemployment Insurance are housed
together, Family Assistance, DDD and Children, Youth and Families
are often in the same building. There are more multi- purpose
centers in the rural areas offering the range of DES services.
ISSUES CONSIDERED
DES Audits
Doug Norton, Auditor General, gave a preliminary report on the
DES audits currently underway. These include a management study,
long term care system audit, Handicapped Infants and Toddlers
Program audit and a single audit of the entire Department.
The status of these audits is as follows:
The second area of the management study on cost alloca-tion
is due about February, 1991. The first phase was
the Study and Evaluation of Accumulator Fund Internal
Controls released in October, 1990.
* The DD/ Arizona Long Term Care System audit of the
contract between DES and AHCCCS is due about the end of
January, 1991.
The audit of the Coordinating Council for Handicapped
Infants and Toddlers is due about early February.
The 1989 audit of the entire Department is due about
March, 1991.
Overview of DES
The Committee received a thorough overview of the Department,
including its organizational structure, programs, personnel
profile, budget, federal connections and populations served.
Division of Developmental Disabilities
The Committee spent considerable time reviewing the DD
programs, and receiving testimony from concerned parents, foster
parents and client advocates. The Governor's Council on Develop-mental
Disabilities was included in this review. Even though this
Council is separate from DES, it is a key component of the state
DD network. The Committee also heard testimony concerning AHCCCS
becoming the medical acute care provider for all eligible DD
clients.
Interasencv Coordinatins Council for Infants and Toddlers
This Council serves in an advisory capacity to the Governor
and DES and has the goal of assisting in implementing a statewide
program for at- risk children, ages 0- 36 months. It is' federally
funded and in its third year of operation.
Child Sumort Enforcement Administration
This section under the DES Division of Family Support provides
intake, locates absent parents, collects, enforces and investigates
child support orders. The CSEA also, in conjunction with the
courts, establishes the legal obligation, the amount of child
support, evaluates the absent parent's ability to pay, and modifies
child support orders. Child support services are provided to
people who receive Aid to Families with Dependant Children ( AFDC)
grants, as well as any other applicant for IV- D services.
The Committee received an update on the activities and
collections of the program as well as projected growth and needs.
Of special interest to the committee were the parent locator
program and paternity establishment. From January through
September, 1990, the CSEA has located 34,632 absent parents
compared to this period for 1989 which totaled 22,248. The number
of paternities established from January through September, 1990 was
1041 compared to this period for 1989 which totaled 1047. A
considerable amount of staff time is spent on these two programs
which have been key factors in enhancing the Bureau's ability to
increase collections to an average of approximately $ 10 million per
quarter, a 19.6% increase in the last two years.
Committee Findinqs and Concerns
From the testimony and much documentation submitted to the
Committee, it was concluded that DES is a very complex agency with
multi- layers of management and questionable accountability from one
layer to another, and from the Department to the Executive and
Legislative branches.
The following lists the key findings and concerns of the
Committee:
1. The degree of accountability within the Department and
between the Department and the Executive and Legislative
branches could be improved.
2. The co- mingling of funds and lack of ability to track
dollars in the Accumulator Fund is a problem addressed
in the Auditor General's Report on Evaluation of Ac-cumulator
Fund Internal Controls, October, 1990.
However, in the response from Linda Moore- Cannon, DES
Director, in the same report, she concurs that the
Accumulator Fund should be eliminated and other correc-tive
measures taken into account for federal, state and
other funds ( see Appendix 3 for copy of letter).
3. The number of exempt positions and reasons for creating
them at higher grade levels raised some questions about
the need and appropriateness of this practice. There are
currently 90 exempt FTEs within the Department.
4. The number of contracted professional consultants to
perform various studies and establish programs also
raised some questions. These contracts are often
renewable at greatly increased fees. The competitive
bidding process was also questioned. In addition, this
concern applies to contracts awarded by the Governor's
Council on Developmental~ Disabilities and the Interagency
Coordinating Council for Infants and Toddlers.
5 . The key concerns regarding the Division of Developmental
Disabilities and the DD population included:
a. As more state dollars are needed to match Title 19
dollars for long term care eligible clients, this
will create a shortfall of money for services for
state- funded- only clients.
b. The fact that there is only one contracted acute
care provider for DD/ Title 19 clients in Maricopa
County presents a problem for many parents. Except
for foster care clients, the Arizona Physicians
Independent Practitioners Association ( APIPA) is the
sole provider for acute care. Most of the parent
testimony centered on difficulties in receiving
services and a lack of response from both local and
state personnel in resolving their problems. Such
issues as lack of medical expertise on the part of
caseworkers, difficulty in acquiring therapy in a
timely manner and associated medical equipment, and
lack of dental care were pointed out.
c. Parents also testified regarding their frustration
with the grievance procedures that seem to be
protracted or dead- ended with few or no results.
d. The number of private consultants contracted by DDD
( five currently) seemed to be high in the opinion
of the Committee.
e. Regarding the Governor's Council on Developmental
Disabilities, parents were frequently unaware of
their activities or advocacy role.
6. Concerning the Child Support Enforcement Administration
( CSEA), the Committee found that as the CSEA program
receives federal matching funds, federal incentives and
a share of collections, it is a much larger program than
the general fund contribution would indicate. In FY
1990, CSEA's total budget from all fund sources was
estimated to be $ 11,890,100, with only $ 1,520,300 coming
from the state general fund. Actual collections for FY
1990 were $ 32,725,052, with projections of over
$ P00,000,000 by FY 1993 if a five- year restructuring plan
was implemented.
Laws 1989, Chapter 295, appropriated $ 1,200,000 in state
general funds as part of a multi- year restructuring plan
to increase child support collections by reducing
collector caseloads from 5,600: l to 1,500: l. The
appropriation funded 113 new staff. In addition,
$ 299,800 was appropriated for the first year of a five-year
lease purchase of both a central processing unit
upgrade and individual hardware. Several studies have
singled out the Department's lack of automation as the
biggest obstacle to improving the program's collection
rate.
Under the restructuring plan originally promoted by DES,
the CSEA would eventually become self- sufficient through
the use of retained AFDC child support collections. For
example, the original DES plan would have reduced the
state general fund contribution to $ 600,000 in FY 1991.
DES, however, had difficulty in filling its new posi-tions,
which caused the increase in collections to be
less than expected. As a result, the general fund
contribution and the FY 1991 appropriation remained at
$ 1,200,000.
This amount, however, has apparently proven insufficient
as the November 24, 1990 DES report on expenditures is
showing the need for $ 2,200,000 in general funds in FY
1991. The report cites three factors as causing the
shortfall:
1. The withdrawal of several contracting county
attorneys over the past several years.
2. Unforseen increases in the cost of the Arizona
Tracking and Locating Automated System ( ATLAS).
3. Federal audits and the efforts to comply with
subsequent corrective action plans.
The CSEA has requested a general fund subsidy for FY 1992
in the amount of $ 6,029,200. As the restructuring is
supposed to be complete by June 30, 1992, and the program
self- sufficient after FY 1994, it might be time to re-evaluate
the program.
Due to problems associated with the conversion of
existing case files to the Arizona Tracking and Location
Automation System ( ATLAS), a portion of restructuring
funds will be spent on an outside contract to financially
reconcile cases and prepare for conversion. Therefore,
funds are not available to hire the planned staff and
remain on the three- year restructuring schedule.
JLBC staff was requested to obtain and analyze a copy of
this contract between CSEA and the consultant.
The restructuring plan called for 445 FTEs at the
beginning and 648 FTEs at the end of FY 1991. An
additional 135 FTEs was the target goal for a full
staffing level of 783 FTEs by the end of FY 1992.
However, due to difficulties in hiring and funds going
toward an outside contract, the full staffing level will
probably not be achieved.
Recommendations
The Committee recommends the following:
1. Further study to create a separate Department of Human
Services and leave the Department of Economic Security
to manage Employment and Rehabilitation Services
including Unemployment Insurance. A phase- in plan of up
to five years shall be developed to restructure the
Department.
2. Further study on whether to make the Developmental
Disabilities Division a separate departme- n t.
3. Further study on the issue of AHCCCS becoming the acute
care provider for the eligible DD population.
4. DES develop and refine procedures for greater accoun-tability
to the Executive and Legislative branches.
5. DES make better use of their own personnel to prevent
hiring so many outside consultants.
6. DES streamline its administrative structure to minimize
the layers of administration and maximize direct services
to clients.
7. DES evaluate and simplify the grievance procedures for
the DD- Arizona Long Term Care System. A revised
expedited grievance procedure should be communicated to
the Speaker and Chairman of House Human Resources and
Aging Committee.
8. Auditor General perform an in- depth study of the nature
and number of private consultant contracts, the
procedures for competitive bidding and awarding eon-tracts,
including renewable contracts.
9. Further study on the issue of restructuring an
appropriately funded Child Support Enforcement
Administration which is state administered and county
operated. The study should include the removal of CSEA
from DES as now structured.
10. Further study on the feasibility and applicability ofthe
counties delivering certain services now offered by DES.
11. A bill be drafted to require legislative oversight of
federal funds which impact the state budget process.
12. The Governor's Council on Developmental Disabilities
continue to sponsor public awareness programs to inform
the public of their activities, advocacy services and
contacts for assistance. The programs should be
coordinated with those of the DD Division and other
entities.
13. Before any reorganization of DES is planned, a fiscal
study be done by the Legislature.
14. The Speaker appoint a study/ oversight committee to
continue the work started by the Committee and to follow
up on recommendations, especially those relating to
AHCCCS and DDD.
,\ It IZONA 1) 1313\ IYl'b113N'I' 01; ECONOMIC SEGUlt U"
( C o v m N o i t 1
GOVERSOK'S ADVISORY COUNCILS --------- a I + c---------
ECONOMIC SECURITY ADVISORY COUNCIL
GUV. ADVISORY COUNCIL ON AGING
GOV. C0UE; CIL ON DEVELOP. DISABILITIES
A Z EhIYLO\'.\ IENT & TRAINING COUNCIL
. INTERAGEXCY COORDINATING COUNClL
: I II r-------- VENTURE TEAM BOARD I
FOR INI: AITS it 1Ot) ULERS I I I 1
I . I I 1
PUBLIC INFOIWATION OFFICE OFFICE 01~ INTEltCOVEKNMEN?' AL
OPERATIONS
Georgia + lvarez
Elouise Chlcharello
DIVISION OF
DEVELOP. MANAGEMENT DUDGEI; POLICY
PLANNING &
SERVICES AFI'EALS -\ RD
1: AbllLY k AOCLC REIIADI1. I TATION CIII1. D SUPrORT
SERVICES S\ t'S. AUZIIN. Erc'l'ORCE. AULIIN.
w'vrce w EQUAL
OI'lYlRl Uh'l t Y
RESIDENTIAL COIISIUNITY SICS.
DETER\ IISATION ADXIINISTRATION OFFICE SERVICES OFF. OF INTERNAL
SX- S. ADIIIN.
IlObIE 4 COMSICSIT1 PROGRAXI EVAL.
ACCOUNlS WEC OFF. OF INTERNAL EVALUATION
UNSED SERVICES UNEbIPLOYIlEh'T
INS. ADIIIN. & COUECCIONS PROGRAMhllNG
IIUMAN RESOURCES
CASE MANAGEMEST
VENTURE TEAM
LONG TERM O R E ADblIrc'lSTRATION
SERVICES
OI'F. OF SPECIAL
ACUTE CARE INVUTIWIONS UP SYSTEblS
SERVICES
OI-' F. OF DATA
SUPPORT SERVICES AND I'URCIIASING
RISK ANALYSIS
Appendix 2
Sec. 24. COUNCIL FOR THE HEARING IMPAIRED
Lump sum appropriation
Sec. 25. DEPARTMENT OF ECONOMIC SECURITY
Administration
Personal services a $ 9,292,900
Employee related expenditures 2,083,300
All other operating expenditures
AZTECS modification
FMCS modification
ACYF ASSISTS
Aging and adult ASSISTS
DD ASSISTS
DES west opening
LAN lease purchase
Mainframe lease purchase
From the public assistance collections fund, the following
17 is appropriated:
18 Public assistance collection 190,700
19 Total - administration $ 25,875,600
2 0 AS authorized by Laws 1987, chapter 55, the $ 190,700 appropriated
21 for public assistance collection is available for deposit into the public
22 assistance collections fund ( personal services, $ 121,300; employee related
23 expenditures, $ 27,200; and all other operating, $ 42,200).
1 The $ 298,000 appropriated for DES west opening shall revert to state
2 general fund if the building does not open by June 30, 1991.
3 Develoomental disabilities
4 Personal services $ 14,442,800
5 Employee related expenditures 3,852,000
6 A11 other operating expenditures 3,429,780
7 Purchase of care 26,633,800**
8 Foster care 2,261,700**
9 Vocational rehabilitation contracts 119,200'"
10 Stipends and allowances 10,400**
1 1 - Out of district placement 807,700**
12 Housekeeping payments 336, OOO*"
13 Assistance to families 463, ZOO*"
14 . ASH community placement 152,300**
15 Total - developmental disabilities $ 52,508,800
16 The $ 3,429,700 appropriated for all other operating expenses
17 includes $ 30,000 for contracted staff support for human rights committees.
18 The $ 26,633,800 appropriated for purchase of care includes $ 247,700
19 to increase the salaries of direct care staff in vendor- operated
20 facilities.
2 1 Lona- term care system fund
2 2 Persona1 services
23 Employee related expenditures
24 All other operating expenditures
- 16-
Purchase of care 49,265,100**
Foster care 6,728,500**
Stipends and allowances 205,400**
Fee for service 5,714,4OOe*
Acute care 13,801,100**
Less title X I X and other funds b ( 58,757,000)
Total - long- term care system fund $ 41,295,300
The $ 49,265,100 appropriated for purchase of care includes $ 202,300
in state general funds and $ 527,000 in total expenditure authority to
increase the salaries of direct care staff in vendor- operated facilities.
Family support
Personal services
Employee related expenditures
All other operating expenditures
Aid to families with dependent children
General assistance
Emergency relief
Tuberculosis control
Information and referral services
Rural food bank
Homeless shelter
Food distribution information
Child support restructuring
Child support automation
Total - family support $ 95,802,000
Except as otherwise provided by law, the $ 55,147,500 appropriated
for aid to families with dependent children is based on 47.2 per cent of
need as defined by the 1983 uniform assistance payments standard. This
appropriation shall be exempt from the transfer of funds provisions of
section 35- 173, subsection C, Arizona Revised Statutes, and a transfer of
funds to or from this account shall require approval of the joint
legislative budget committee.
It is the intent of the legislature that the $ 107,800 appropriated
for information and referral services shall be used to fund such services
in each city of the state with a population of more than 250,000 persons
and that no contract shall be for less than $ 20,000.
Social services
Persona 1 services
Employee related expenditures
All other operating expenditures
Comprehensive medical and dental
Children services
Intensive family services
High risk infant services
Adult services
Day care
LTC ombudsman
Adoption services
Child severance project 182,600**
Institutional support payments 490, 800**
Transitional child care 948,600**
JOBS child care 856,100**
Total - social services $ 113,410,900
& The $ 18,810,400 appropriated for day care represents a day care
subsidy for children of families whose income does not exceed a maximum of
65 per cent of the state median income as determined by the department of
economic security.
Employment and rehabilitative services
Personal services
Employee related expenditures
All other operating expenditures
Navajo employment services 257,000
Job search stipends 139,100**
Vocational rehabilitation services 1,702,000**
Comprehensive services for independent living 533,500**
JOBS 3,838,500**
Other receipts ( 1,000.000)
Total - employment and rehabilitative services $ 8,674,000
It is the intent of the legislature that the special administration
fund serve as the source of other receipts.
1 Child protective services training proqram
2 From the children and family services training program fund, the
3 following is appropriated:
4 Lump sum appropri at ion $ 440,600
5 Total appropriation - department of economic security $ 338,007,200
The above appropriation is in addition to funds granted to the state
by the federal government for the same purposes, but shall be deemed to
include the sums deposited in the state treasury to the credit of the
department of economic security, pursuant to the provisions of section
42- 1341, Arizona Revised Statutes.
A monthly report comparing total expenditures for the month and
year- to- date shall be forwarded to the president of the senate, the
speaker of the house of representatives and the staff director of the
joint legislative budget committee by the twenty- fifth of the following
month. The report shall include an estimate of ( a) potential shortfalls
in entitlement programs and ( b) potential federal and other funds, such as
the statewide assessment for indirect costs, that may be available to
offset these shortfalls.
Sec. 26. DEPARTMENT OF HEALTH SERVICES
Office of the director
Personal services
Employee related expenditures
All other operating expenditures
I ARIZONA DEPA# I; MENT OF EGQNOMC S E C 1 . W
1717 W. Jefferson e P. O. Box 6123 Phoenix, AZ 85085
RBSd MoffOrd Linda Moore- Cannon
Governor Director
OCT 2 3 1990
buglas R. Norton, C. P. A.
Auditor General
State of Arizona
Office of Auditor General
2700 North Central Avenue, Suite 700
Phoenix, Arizona 89004
I Dear Mr. Norton:
The departmnt has reviewed the Sumry Report on a Study and Evaluation of
Accemulator Fund Internal Controls. The report is a reasonable evaluatiop of
the problems facing the department in addressing the deficiencies of the past
in its cash management practices and its present accounting system, the Financial
Management and Control System ( FMCS) .
The Accumulator Fund has its basis in the July 1, 1982 implementation of WIS.
This tund was established due to a weakness in AFIS of not permitting payments
of rmlti- funded claims to cross funds. Hence, the fund was established to pay
these claim with a single warrant.
The department concurs with the recomrdation of eliminating the concept of the
Accumulator Fund from its accounting system. Furthermore, the department also
concurs w i t h the recomrdation of establishin- s se- w rate federal funds for each
of the federal agencies participating in its programs. Each grant award w i l l
be an account within the appropriate federal fund.
The department has developed corrective action measures in its cash manaaement
practices, beginning w i t h a complete reconciliation of all opn prior years'
funds and controls. To date over 500 of these accounts are in the process of
being reconciled, cleared, closed d proper cash balances rolled forward or
reverted to the General Fund.
The department, since March 1989, has been developing and w i l l continue to develop
the necessary internal controls, account code structure, system edits and manage-ment
financial reports. A l l of these activities do incorporate the auditors'
recomndations. Progress in these areas has been made.
During the conversion of the U. S. Department of Labor ( DOL) financial requirements
from the
revision
efforts.
State Cmployment Security ~ g e n cs~ c'o st Accounting
of the account code structure was an integral part
System
of the
into % st
conversion
the
buglas R. Norton, C. P. A.
Page 2
This conversion also addressed system generated WL quarterly; federal financia. -- ; reports beginning with the quarter ended September 30, 1990 report4ngc cycle. .:.
Furthemre, the department is presently testing system generated U; S. rpapam
of Agriculture quarterly federal financial reports. The project is-# 2getG#* to:.:
k complete by January, 1991 for the quarter ending December 3Pp 1990 tQ@ t4= ing-:
cycle. - reafter, the U. S. Ikpartment of Health and Human Semices. repbtts, wU. l
be addressed, starting with the AFDC program.
Several of the system edits recomnded by the auditors have already- been devewped
and migrated into production during this month, October. Others are presently being
adckesW.
fie departtblent has incorporated all of the auditorst recomndations in its fiscal
year 1990/ 91 work plan. These t a s k s are targeted to be completed by July I, 199s.
However, this would be wholly dependent u p n resources available to the departmuat.
Please express the departmentts gratitude to your staff members for the numrmz-suggestions
and professional courtesies extended to its personnel- during the -:*:*
course of the study.
Since rely, .*- -.
~ J L - J ~ 7.*.&.' m'- -/-
d,
Linda MooreCannon . . ,, ' I