Summary

Over $900 million paid to poor families under the Aid to Families with Dependent Children program was paid in error during 1978. This estimate includes overpayments to eligible families and payments to ineligible families and is based on data reported by the quality control system. The quality control system was established to improve the program's administration by identifying errors and developing corrective actions to eliminate them. The system is also the basis for fiscal sanctions against States for erroneous payments in excess of error tolerance levels. There is a congressional conference directive for sanctions based on quality control error rates. Fiscal sanctions create an adversary relationship between the Federal Government and the States at a time when a cooperative effort is needed to reduce errors. Using the quality control system as the basis for sanctions limits the system's value as a means for improving payment processes. Because a high error rate will result in sanctions, there is an incentive to identify fewer errors. To be most effective, the quality control system should identify as many errors as possible giving management more information to develop corrective action plans. Among the weaknesses noted in the program were: both State and Federal quality control reviews differ from State to State and Federal region to region reviews; some case reviews include extensive verification of eligibility and grant amount factors, while others rely heavily on statements by recipients; the agency has recognized the differences between quality control reviews but has not determined how this affects the identification of incorrect payments; agency regional offices do not follow consistent procedures, and the agency has no assessment system for its regional offices' quality control functions; the quality control program does not provide for reporting incorrect payments of less than $5 or those caused by changes in circumstances that occur during the payment review month or the month before; the system provides for reporting only one error cause per case even if there are several; and quality control data were not being adequately analyzed at either the State or Federal level.

Efforts to sanction high error in States based on quality control error rates should be discontinued. Instead of sanctioning States, the Federal Government should provide more assistance in error reduction efforts. The Appropriations Committees should play a role in discontinuing this effort. Although the Aid to Families with Dependent Children quality control system has led to improvements in the program, the system itself needs improvement. The agency needs to make sure that all States make adequate efforts to determine the correctness of program payments and that its regions make their reviews of State quality control cases uniformly. The agency's planned changes in its quality control procedures manual, if properly implemented, should help correct these problems so that reviews can be made on a comparable basis. The agency's current monitoring of State and Federal quality control performance also needs improvement. If the quality control system reported and compiled incorrect payments of less than $5, those occurring because of changes during the administrative period, and secondary errors, the managers would have additional useful information for developing corrective actions to reduce incorrect payments. There is insufficient analyses to identify the specific causes of errors. States need time to make the necessary analyses, and the agency needs to place more emphasis on data analysis.