GAO Looks Into ACF’s Improper Foster Care Payment Methodology

A new U.S. Government Accountability Office (GAO) report reviews the Administration for Children and Families (ACF) process for calculating a “national improper payment estimate” for the IV-E Foster Care program that they are responsible for administering and overseeing. GAO was asked to determine the extent to which (1) ACF’s estimation methodology generated a reasonably accurate and complete estimate of improper payments across the Foster Care program and (2) ACF’s corrective actions reduced improper Foster Care program payments. To do so, GAO reviewed the Department of Health and Human Service’s (HHS) fiscal year 2010 improper payments estimation procedures, conducted site visits, and met with ACF officials.

The GAO found that the estimate was not based on a statistically valid methodology and consequently does not reflect a reasonably accurate estimate of the extent of improper Foster Care payments. In addition, GAO found the methodology to be deficient in all three phases of ACF’s estimation methodology—planning, selection, and evaluation. ACF’s methodology was approved by the Office of Management and Budget (OMB) in fiscal year (FY) 2004, with the understanding that continuing efforts would be taken to improve the accuracy of the estimates of improper payments in the ensuing years, which GAO did not find to be the case as of FY 2010. Although ACF has reported significantly reduced estimated improper payments, from a baseline of 10.33 percent for FY 2004 to a 4.9 percent error rate for FY 2010, the validity of ACF’s reporting of reduced error rates was found to be questionable by GAO.

GAO has recommended seven actions steps that HHS should direct ACF to take to help improve their methodology for estimating improper payments for the Foster Care program and corrective action process.