oversight

Year 2000 Computing Challenge: Federal Efforts to Ensure Continued Delivery of Key State-Administered Benefits

Published by the Government Accountability Office on 1999-07-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          United States General Accounting Office

GAO                       Testimony
                          Before the Special Committee on the Year 2000 Technology
                          Problem, U.S. Senate




For Release on Delivery
Expected at
9 a.m.
                          YEAR 2000 COMPUTING
Thursday,
July 15, 1999             CHALLENGE

                          Federal Efforts to
                          Ensure Continued
                          Delivery of Key State-
                          Administered Benefits
                          Statement of Joel C. Willemssen
                          Director, Civil Agencies Information Systems
                          Accounting and Information Management Division




GAO/T-AIMD-99-241
                     Mr. Chairman and Members of the Committee:

                     Thank you for inviting us to participate in today's hearing on the Year 2000
                     challenge facing state and local governments. Among the critical functions
                     performed by states are the administration of federal human services
                     programs such as food stamps and Medicaid. As we reported in November
                     1998, many systems that support state-administered federal human
                     services programs were at risk from the Year 2000 challenge and much
                     work remained to ensure that services would continue.1 In February of this
                     year, we testified that while some progress had been achieved, many states’
                     systems were not scheduled to become Year 2000 compliant until the last
                     half of 1999.2

                     As requested, after a brief background discussion, today I will (1) highlight
                     the reported Year 2000 readiness of 10 key state-administered federal
                     human services programs, (2) discuss federal Year 2000 activities to assess
                     states’ readiness for these 10 programs, and (3) discuss the status of the
                     Department of Health and Human Services’ (HHS) Payment Management
                     System, which provides crucial support to state-administered programs,
                     and the overall reported status of federal/state data exchanges.



Background           Among the critical functions performed by states are the administration of
                     federal human services programs. These programs provide essential
                     benefits, such as food stamps and unemployment benefits, to millions of
                     people.

                     In March 1999, the Office of Management and Budget (OMB) designated
                     42 programs as high-impact (later adding a 43rd) and designated lead
                     agencies for each. OMB reported that it designated those programs that, if
                     disrupted, could have a direct effect on the public’s health and safety or the
                     well-being of individuals. Table 1 lists the 10 high-impact state-
                     administered federal human services programs.3



                     1
                      Year 2000 Computing Crisis: Readiness of State Automated Systems to Support Federal Welfare
                     Programs (GAO/AIMD-99-28, November 6, 1998).

                     2Year 2000 Computing Crisis: Readiness of State Automated Systems That Support Federal Human
                     Services Programs (GAO/T-AIMD-99-91, February 24, 1999).

                     3
                         Appendix I contains a description of each program.




             Leter   Page 1                                                                      GAO/T-AIMD-99-241
        Table 1: State-Administered Federal Human Services Programs
        Lead federal agency               Program
        Department of Agriculture         Child Nutrition programs
                                          Food Stamps
                                          Special Supplemental Nutrition Program for
                                          Women, Infants, and Children
        Department of Health and          Child Care
        Human Services
                                          Child Support Enforcement
                                          Child Welfare
                                          Low Income Home Energy Assistance Program
                                          Medicaid
                                          Temporary Assistance for Needy Families
        Department of Labor               Unemployment Insurance
        Source: OMB.


        For each high-impact program, the lead federal agency was charged with
        identifying to OMB the partners integral to program delivery; taking a
        leadership role in convening those partners; assuring that each partner had
        an adequate Year 2000 plan and, if not, helping each partner without one;
        and developing a plan to ensure that the program would operate effectively.
        According to OMB, such a plan might include testing data exchanges
        across partners, developing complementary business continuity and
        contingency plans, sharing key information on readiness with other
        partners and the public, and taking other steps necessary to ensure that the
        program would work. OMB directed the lead agencies to provide schedules
        and milestones of key activities in their plans by April 15, 1999; it also asked
        agencies to provide monthly progress reports.

        OMB also directed federal oversight agencies to include the status of
        selected state human services systems in their quarterly Year 2000 progress
        reports. Specifically, in January 1999, OMB requested that agencies
        describe actions to help ensure that federally supported, state-run
        programs would be able to provide services and benefits. OMB further
        asked that agencies report the date when each state’s systems would be
        Year 2000 compliant.




Leter   Page 2                                                          GAO/T-AIMD-99-241
Some State Programs      Table 2 summarizes the latest information on state-administered federal
                         human services programs reported by OMB on June 15, 1999.4 This
Reported Already         information was gathered, but not verified, by the Departments of
Compliant; Others May    Agriculture, HHS, and Labor. It indicates that while many states reported
                         their programs to be compliant, a number of states did not plan to complete
Not Be Until Late 1999   Year 2000 efforts until the last quarter of 1999. For example, eight states did
                         not expect to be compliant until the last quarter of 1999 for Child Support
                         Enforcement, five states for Unemployment Insurance, and four states for
                         Child Nutrition. Moreover, Year 2000 readiness information was unknown
                         in many cases. For example, according to OMB, the status of 32 states’ Low
                         Income Home Energy Assistance programs was unknown because
                         applicable readiness information was not available.



                         Table 2: Reported State-Level Readiness for Federally Supported Programs
                                                                           Expected Date of 1999
                                                                               Compliance
                                                                       Jan.- April- July-            Oct.-
                         Programa                          Compliantb March June Sept.               Dec. Unknownc N/Ad
                         Child Nutrition                              29         0       9      10        4             2      0
                         Food Stamps                                  25         0      12      14        3             0      0
                         Women, Infants, and
                         Children                                     33         0      11       7        3             0      0
                         Child Care                                   24         5       5       8        2             6      4
                         Child Support Enforcement                    15         4      13       8        8             6      0
                         Child Welfare                                20         5       9      11        3             5      1
                         Low Income Home Energy
                         Assistance Program                           10         0       3       7        1            32      1
                         Medicaid – Integrated
                         Eligibility System                           20         0      15      15        4             0      0
                         Medicaid – Management
                         Information System                           17         0      19      14        4             0      0
                         Temporary Assistance for
                         Needy Families                               19         3      12      15        1             4      0
                         Unemployment Insurance                       27         0      11      10        5             0      1
                                                                                                     (Table notes on next page)




                         4
                          For Medicaid, OMB reports on the two primary systems that states use to administer the
                         program: (1) the Integrated Eligibility System, to determine whether an individual applying for
                         Medicaid meets the eligibility criteria for participation, and (2) the Medicaid Management Information
                         System, to process claims and deliver payments for services rendered. Integrated eligibility systems are
                         also often used to determine eligibility for other public assistance programs, such as Food Stamps.


                         Page 3                                                                           GAO/T-AIMD-99-241
                        Note: This table contains readiness information from the 50 states, the District of Columbia, Guam,
                        Puerto Rico, and the Virgin Islands.
                        a
                          According to OMB, the information regarding Child Care, Child Support Enforcement, the Low Income
                        Home Energy Assistance Program, Medicaid, and Temporary Assistance for Needy Families was as of
                        January 31, 1999; and the information for Child Nutrition, Food Stamps, and Women, Infants, and
                        Children was as of March 1999. However, OMB provided a draft table to the National Association of
                        State Information Resource Executives (NASIRE) which, in turn, provided the draft table to the states.
                        The states were asked to contact HHS and Agriculture and provide corrections by June 1, 1999. For
                        their part, HHS and Agriculture submitted updated state data to OMB in early June. The information
                        regarding Unemployment Insurance was as of March 31, 1999.
                        b
                          In many cases, the report indicated a date instead of whether the state was compliant. We assumed
                        that states reporting completion dates in 1998 or earlier were compliant.
                        cUnknown   indicates that, according to OMB, the data reported by the states were unclear or that no
                        information was reported by the agency.
                        d
                          N/A indicates that the states or territories reported that the data requested were not applicable to
                        them.
                        Source: Progress on Year 2000 Conversion: 9th Quarterly Report (OMB, issued on June 15, 1999).


                        Although many states have reported their state-administered programs to
                        be compliant, additional work beyond individual system completion likely
                        remains, such as end-to-end testing. For example, of the states that OMB
                        reported as having compliant Medicaid management information and/or
                        integrated eligibility systems at least four and five states, respectively, had
                        not completed end-to-end testing. The purpose of such testing is to verify
                        that a defined set of interrelated systems, which collectively support an
                        organizational core business area or function, will work as intended in an
                        operational environment. In the case of the year 2000, many systems in the
                        end-to-end chain will have been modified or replaced. As a result, the scope
                        and complexity of testing—and its importance—are dramatically
                        increased, as is the difficulty of isolating, identifying, and correcting
                        problems.



Assessments of State-   In addition to obtaining state-reported readiness status information for
                        OMB, the three federal departments are taking other actions to assess the
Administered Human      ability of state-administered programs to continue into the next century.
Services Programs Are   However, as table 3 shows, the approaches of the three departments in
                        assessing the readiness of state-administered federal human services
Ongoing                 programs vary significantly. For example, HHS’ Health Care Financing
                        Administration (HCFA) hired a contractor to perform comprehensive on-
                        site reviews in all states, some more than once, using a standard
                        methodology. Agriculture’s Food and Nutrition Service (FNS) approach
                        includes such actions as having regional offices monitor state Year 2000
                        efforts and obtaining state certifications of compliance. The Department of
                        Labor is relying on its regional offices to monitor state Year 2000 efforts as



                        Page 4                                                                            GAO/T-AIMD-99-241
well as requiring states to obtain and submit independent verification and
validation reports after declaring their systems compliant.




Page 5                                                    GAO/T-AIMD-99-241
Table 3: Number and Types of Assessments Performed

                                                                           Areas covered by assessments
                                                     Project
                        Number of states             management/                                     Business continuity and
Agency/program          assessed                     planning           Test plans/results           contingency plans (BCCP)
Agriculture/Child       Component entity’s           Varies by region   Varies by region             Varies by region
Nutrition Program       regional offices are
                        monitoring all states’
                        efforts
Agriculture/Food        Component entity’s           Varies by region   Varies by region             Varies by region
Stamps                  regional offices are
                        monitoring all states’
                        efforts
Agriculture/Women,      Component entity’s           Varies by region   Varies by region             Varies by region
Infants, and Children   regional offices are
                        monitoring all states’
                        efforts
HHS/Child Care          As of July 2, a contractor Yes                  Yes—all visits included      Partial—on-site visits included
                        had conducted on-site                           reviews of test plans and,   reviews of states’ BCCP
                        reviews of 20 states                            where applicable, test       processes, but not their content
                                                                        results
HHS/Child Support       As of July 2, a contractor Yes                  Yes—all visits included      Partial—on-site visits included
Enforcement             had conducted on-site                           reviews of test plans and,   reviews of states’ BCCP
                        reviews of 20 states                            where applicable, test       processes, but not their content
                                                                        results
HHS/Child Welfare       As of July 2, a contractor Yes                  Yes—all visits included      Partial—on-site visits included
                        had conducted on-site                           reviews of test plans and,   reviews of states’ BCCP
                        reviews of 20 states                            where applicable, test       processes, but not their content
                                                                        results
HHS/Low Income          As of July 2, a contractor Yes                  Yes—all visits included      Partial—on-site visits included
Housing Energy          had conducted on-site                           reviews of test plans and,   reviews of states’ BCCP
Assistance Program      reviews of 20 states                            where applicable, test       processes, but not their content
                                                                        results
HHS/Medicaid            A contractor conducted       Yes                Yes—all visits included      Partial—initial visits included
                        on-site reviews of 50                           reviews of test plans and,   reviews of states’ BCCP
                        states and the District of                      where applicable, test       processes, and, as of July 9, a
                        Columbia once, and as                           results                      contractor had reviewed the
                        of June 30, the                                                              content of 42 states’ BCCPs,
                        contractor had                                                               either on site or at headquarters
                        conducted follow-up
                        reviews of 14 states
HHS/Temporary           As of July 2, a contractor Yes                  Yes—all visits included      Partial—on-site visits included
Assistance for Needy    had conducted on-site                           reviews of test plans and,   reviews of states’ BCCP
Families                reviews of 20 states                            where applicable, test       processes, but not their content
                                                                        results
Labor/Unemployment      Labor’s regional offices   Unknown—not          Unknown—not specifically     Reviews ongoing
Insurance               are monitoring all states’ specifically         addressed in methodology
                        efforts                    addressed in
                                                   methodology


                                                 Page 6                                                             GAO/T-AIMD-99-241
                            In addition to the departments’ completed reviews, all of the departments
                            have ongoing initiatives to ensure that state-administered human services
                            programs will continue to function past the change of century. These
                            initiatives are part of the departments’ overall strategies to ensure the
                            continued delivery of these high-impact programs. I will now briefly
                            describe some of the specific actions that the Departments of Agriculture,
                            HHS, and Labor have taken or plan to take.


Department of Agriculture   Agriculture’s FNS is responsible for three state-administered federal human
                            services programs—Child Nutrition; Food Stamps; and Women, Infants,
                            and Children. To obtain assurance that state systems are compliant, FNS’
                            regional offices are collecting readiness status information from states as
                            part of their monitoring efforts. Moreover, in June 1999, FNS required its
                            regions to provide for each program a copy of either a state letter certifying
                            that it was Year 2000 compliant or a business continuity and contingency
                            plan. As of June 18, 1999, FNS had received

                            • 9 certifications and 7 business continuity and contingency plans for
                              Child Nutrition;
                            • 12 certifications and 16 business continuity and contingency plans for
                              Food Stamps; and
                            • 23 certifications and 23 business continuity and contingency plans for
                              Women, Infants, and Children.

                            The number of certifications provided to FNS5 is much lower than the
                            number of compliant state-level programs given in OMB’s latest quarterly
                            report (see table 2)—29 states for Child Nutrition; 25 for Food Stamps; and
                            33 for Women, Infants, and Children.

                            It remains unclear whether all states will have adequate contingency plans
                            to ensure the continuity of these programs. Business continuity and
                            contingency plans are essential to respond to two types of failures: those
                            that can be predicted (e.g., systems renovations that are behind schedule)
                            and those that are unforeseen (e.g., a system that fails despite having been
                            certified as Year 2000 compliant). Therefore, it is important for
                            organizations to have such plans, regardless of the readiness status of their
                            systems. FNS officials told us that they instructed their regional offices to


                            5
                             FNS officials told us that some states are reluctant to provide certification statements because of
                            potential litigation concerns.




                            Page 7                                                                            GAO/T-AIMD-99-241
                           require state agencies for all three programs to prepare business continuity
                           and contingency plans regardless of the status of their systems. However,
                           FNS could not provide us with documentation at the time of our testimony
                           showing that its regional offices communicated these requirements to all
                           state agencies nor has it established time frames for when business
                           continuity and contingency plans should be completed. Also, a June 18 FNS
                           document summarizing its review of contingency plans received to date
                           noted that “all need work.”

                           To help states’ Year 2000 efforts, FNS employed a contractor to conduct
                           on-site visits to certain states. In May 1999, this contractor began visiting
                           states—for one or more state-administered programs—in which (1) the
                           state had estimated it would not be compliant until the last quarter of the
                           year, (2) the state had reported little or no progress to date, and/or (3) an
                           FNS regional office requested that the state be visited.

                           Using these criteria, FNS currently plans for the contractor to visit a total
                           of 20 states for one or more programs. As of July 9, FNS officials told us
                           that 16 states had been visited. With respect to the scope of these visits,
                           FNS’ regional offices determine for each state and program what specific
                           areas it should encompass. These visits are principally intended to provide
                           technical assistance to the states in areas such as Year 2000 project
                           management, hardware and software testing, and contingency planning.
                           However, the visits are not being used to independently verify state
                           information. Moreover, FNS officials told us that the agency had no plans to
                           follow up with the states in those cases in which the contractor had
                           recommendations for improvement.

                           At the request of the Chairman of the House Committee on Agriculture’s
                           Subcommittee on Department Operations, Oversight, Nutrition, and
                           Forestry, we are currently reviewing Agriculture’s efforts to ensure the Year
                           2000 readiness of the high-impact programs for which it is the lead agency.


Department of Health and   Six of the 10 state-administered federal human services programs are
Human Services             overseen by two HHS component entities, HCFA and the Administration
                           for Children and Families (ACF). HCFA, which oversees the Medicaid
                           program, has adopted an approach that includes on-site contractor reviews
                           of states (performed with the participation of HCFA regional and
                           headquarters offices) using a standard methodology. Between November
                           1998 and April 1999, the contractor completed an initial round of on-site
                           reviews in all 50 states and the District of Columbia. These reviews



                           Page 8                                                       GAO/T-AIMD-99-241
included assessments of states’ integrated eligibility systems and Medicaid
management information systems in areas such as project management
and planning, remediation progress, testing, and contingency planning.
After completing the on-site review, the contractor (1) identified barriers to
successful remediation, (2) made recommendations to address specific
areas of concern, and (3) placed Medicaid integrated eligibility and
management information systems into low, medium, or high risk
categories.

HCFA’s contractor is currently conducting a second round of on-site
reviews in at least 40 states—primarily those in which at least one of their
two systems was categorized as a high or medium risk during the initial
visit. As of June 30, 14 states had been visited during this round. The focus
of this second round of visits is on determining how states have resolved
Year 2000 issues previously identified, as well as reviewing activities such
as interfaces and end-to-end testing. The risk level of state programs may
change as additional information about their actions is evaluated.

Of the seven states reviewed during the second round of visits for which
final reports had been written, (1) three states’ integrated eligibility system
risk levels were reduced to medium or low and (2) four states’ Medicaid
management information system risk levels were reduced to medium or
low, and one state’s risk level increased to high. For all states’ integrated
eligibility systems, 5 states were identified as at high risk of failing to fulfill
Medicaid requirements after 1999, 22 at medium risk, and 24 at low risk.
For Medicaid management information systems, 8 states were identified as
at high risk of failing to fulfill Medicaid requirements after 1999, 15 at
medium risk, and 28 at low risk.6

HCFA plans to conduct a third round of on-site reviews in the fall of 1999
for those states that continue to have systems categorized at high risk.
Additionally, another HCFA contractor is reviewing the content of all
states’ business continuity and contingency plans, with some of these
reviews being performed in conjunction with the second round of state
visits.

HCFA’s actions in monitoring states’ Medicaid Year 2000 issues have helped
identify critical areas and reduced the risk of Year 2000 disruptions.


6
 The risk levels for the integrated eligibility systems and Medicaid management information systems
were based on the results of the first round reviews of 44 states and second round reviews of 7 states.




Page 9                                                                           GAO/T-AIMD-99-241
However, many state Medicaid programs are not yet compliant, and several
are still designated as high risk. We are currently reviewing states’ Medicaid
Year 2000 efforts at the request of the Senate Finance Committee.

ACF, which oversees the Child Care, Child Support Enforcement, Child
Welfare, Low Income Housing Energy Assistance, and Temporary
Assistance for Needy Families programs, modeled its state assessment
program after that of HCFA. Because ACF began its Year 2000 review of
state programs several months later than HCFA, however, it is not as far
along in its assessment of each state’s ability to continue the operation of
these programs into the next century. As of July 2, 1999, an ACF contractor
had conducted on-site reviews of 20 states and planned to complete these
reviews for all states in the last week of August or first week of September.
These reviews, performed with the participation of ACF regional offices,
were to encompass areas such as project management, business risk
assessments, interfaces, testing, and the business continuity and
contingency planning process.

The results of the on-site reviews conducted to date are not yet available
because ACF and its contractor are revising the reporting format to be
used. Under the new reporting format, each program within a state will be
given a risk level (i.e., high, medium, or low) rather than a combined risk
level for a state that included all five programs. At the request of ACF, the
contractor is revising the assessments that it initially provided and expects
to have this completed by the end of this month for the states visited thus
far. The contractor also expects to begin to provide ACF with draft reports
on its findings on these states in the next 3 to 4 weeks. ACF plans to
continue working with the states after these initial on-site reviews are
completed, and a second round of reviews is expected. However, according
to an ACF official, the scope of the next round of reviews has not yet been
decided upon.

ACF has not obtained recent readiness status data from the majority of
states, and therefore the actual number of state programs that are
compliant is unknown. For example, as shown in table 2, four ACF
programs had estimated completion dates of January through March 1999
for between 3 to 5 states, but the agency does not know whether these
states’ programs are currently compliant. While HHS had requested that
states provide updated status information for these programs on
July 1, 1999, only 5 states had responded as of July 7.




Page 10                                                      GAO/T-AIMD-99-241
Department of Labor   With respect to Unemployment Insurance, State Employment Security
                      Agencies (SESA) use automated systems to pay unemployment
                      compensation benefits to eligible workers and collect state unemployment
                      taxes from employers. Labor’s regional offices are responsible for
                      monitoring the SESAs Year 2000 activities to better ensure the reliability of
                      state-reported readiness status information provided to Labor quarterly.
                      Based on these quarterly reports, Labor places states in one of three
                      categories. As of March 31, 1999—the latest quarter for which information
                      was available—(1) 1 state was a code red—at the highest risk of failure,
                      (2) 5 states were code yellow—in a cautionary status, and (3) 47 states
                      were code green—those that appear to be on schedule to complete system
                      repairs, fully test all system components, and develop and test business
                      continuity and contingency plans. Yet, as we testified in May 1999, Labor
                      requires that state agencies report on their readiness status only every
                      quarter (the next report is scheduled to be released in August 1999 based
                      on data as of June 30, 1999).7 With such a relatively large gap in time
                      between reports, it would be difficult for Labor to quickly identify and
                      address key state issues. We therefore suggested that Labor may wish to
                      consider more frequent reporting of state systems’ compliance status.
                      Labor agreed with our suggestion and has been requesting updates more
                      frequently from the SESAs with noncompliant systems.

                      In September 1998, Labor established another key element in gauging the
                      readiness status of state Unemployment Insurance programs by requiring
                      that all SESAs conduct independent verification and validation reviews of
                      their Unemployment Insurance programs. The department set a target date
                      of July 1, 1999, for states to submit independent verification and validation
                      certifications of their Unemployment Insurance systems to Labor’s regional
                      offices. Labor required its regional offices to review independent
                      verification and validation reports and certifications of Year 2000
                      compliance that SESAs submitted, and ascertain whether the material met
                      the department’s requirements. If Labor’s requirements are met, the
                      regional offices are to approve the SESAs’ certification and independent
                      verification and validation reports and forward copies of the approved
                      certifications and reports along with regional office comments to Labor’s
                      national office by July 16, 1999.




                      7
                       Year 2000 Computing Challenge: Labor Has Progressed But Selected Systems Remain at Risk
                      (GAO/T-AIMD-99-179, May 12, 1999).




                      Page 11                                                                    GAO/T-AIMD-99-241
                     The state readiness information reported by OMB appears to overstate the
                     status of state systems. While OMB reported that 27 state Unemployment
                     Insurance programs were already compliant, which it defined as having
                     completed testing, Labor’s most recent quarterly report on the Year 2000
                     status of the SESAs, which was as of March 31, 1999, stated that these state
                     systems were only “Y2K Ready” and that testing had not necessarily been
                     completed. Specifically, Labor reported that “Y2K Ready” meant that all
                     date fields in the program application had been converted to correctly
                     interpret dates and that “this does not necessarily mean that the systems
                     are fully tested and certified as Y2K compliant.” Indeed, six states that OMB
                     reported as compliant had not completed the validation phase, which,
                     according to Labor, included testing the integrated system or subsystem in
                     a Year 2000-compliant test environment.



Status of HHS’       A federal system critical to the administration of several state-administered
                     federal programs is HHS’s Payment Management System (PMS). HHS’
Payment Management   Program Support Center (PSC) provides grants payments and cash
System               management services through PMS for seven state-administered federal
                     human services programs: Child Care, Child Support Enforcement, Child
                     Welfare, Low Income Home Energy Assistance, Medicaid, Temporary
                     Assistance for Needy Families, and the administrative costs of the
                     Unemployment Insurance program. For example, states receive
                     approximately $96 billion in Medicaid payments annually through PMS.
                     Overall, PMS allows federal agencies to make available $165 billion to
                     approximately 20,000 grant recipient organizations, including states,
                     counties, cities, Indian tribes and tribal councils, and private organizations.

                     As we testified in February, PSC had encountered serious delays in
                     developing, as part of its Y2K strategy, a replacement for its 30-year-old
                     PMS.8 As a result of these delays, HHS decided to repair the existing
                     system instead.9 According to agency documents, PSC, with the assistance
                     of contractors, recently completed remediation of the system and in June it
                     was independently validated and certified as compliant by a contractor.




                     8Year
                         2000 Computing Crisis: Readiness Status of the Department of Health and Human Services
                     (GAO/T-AIMD-99-92, February 26, 1999).

                     9
                         Implementation of the replacement system has been postponed until March 2000.




                     Page 12                                                                        GAO/T-AIMD-99-241
                             Now that PMS has been certified as compliant, additional work related to
                             its data exchanges must be completed quickly. In particular, the testing of
                             data exchanges must be closely coordinated with exchange partners. PSC
                             has agreed to accept data in two different formats, using either two-digit or
                             four-digit years. However, PSC plans to test only a sample of data
                             exchanges and, as of July 12, PSC had not finalized test plans for any of
                             these exchanges. While all grant awarding agencies have been given the
                             opportunity to participate in the test, some may decide to accept the test
                             report results of the sample test in lieu of actual participation. It is
                             therefore not clear what will be tested or with whom. In its draft test plan,
                             PSC calls for 2 days of testing in August and 2 days of testing in September,
                             and HHS intends to give priority to testing with federal high-impact
                             programs. The limited time remaining until January 1, 2000, the sampling
                             approach taken by PSC, and the lack of a final test plan combine to
                             increase the risk to PMS and its data exchange partners. We are currently
                             reviewing PMS for the Chairman of the House Committee on Government
                             Reform’s Subcommittee on Government Management, Information and
                             Technology.


Data Exchanges Critical to   The remediation and testing of data exchanges are also important to other
Other Programs               federal/state programs. For example, the Social Security Administration
                             exchanges data files with the states to determine the eligibility of disabled
                             persons for disability payments.

                             Last year, the General Services Administration (GSA) developed a database
                             to capture information on federal/state data exchanges. Federal and state
                             agencies provided information to the database through a secured Internet
                             World Wide Web site. Having the federal agencies and states provide status
                             information separately was intended to provide a check and balance
                             mechanism to make sure that the data were consistent. OMB’s quarterly
                             report issued June 15, 1999, stated that 75 percent of federal data
                             exchanges with the states were successfully bridged,10 tested by both
                             parties, and/or were fully compliant as of May 27. However, this
                             information is based solely on information provided by federal agencies.
                             The states never fully populated the database as originally intended
                             because of (1) inconsistencies among the states and federal agencies over
                             the technical descriptions of some of the data exchanges, (2) limited state


                             10
                               A bridge is used to convert two-digit years to four-digit years or to convert four-digit years to two-digit
                             years.




                             Page 13                                                                              GAO/T-AIMD-99-241
                  resources that could be applied to this issue, and (3) technical difficulties
                  with the database.

                  In addition, according to GSA and NASIRE officials, both federal agencies
                  and states are still identifying data exchanges and, therefore, the GSA
                  database may not contain all federal/state exchanges. Nevertheless, these
                  officials stated that they are confident that the most critical exchanges
                  have been identified and are ready for the Year 2000 date change.


                  In summary, much work remains at the state level to ensure that major
                  services are not disrupted. At particular risk are several states that do not
                  plan to have their systems that support state-administered federal human
                  services programs Year 2000 compliant until the last quarter of this year.
                  Federal agencies are working with their state partners to obtain readiness
                  information and evaluate and provide assistance in key activities such as
                  business continuity and contingency planning. Nevertheless, some state
                  completion dates are so close to the turn of the century that the risk of
                  disruption to their programs is substantially increased, especially if
                  schedule delays or unexpected problems arise. Further, data exchanges for
                  the HHS payment system critical to making federal payments to states have
                  not yet been tested. With less than 6 months to go until the turn of the
                  century, testing of these data exchanges and other essential federal/state
                  exchanges must be completed expeditiously.

                  Mr. Chairman, this concludes my statement. I would be happy to respond to
                  any questions that you or other members of the Committee may have at this
                  time.



Contact and       For information about this testimony, please contact Joel Willemssen at
                  (202) 512-6253 or by e-mail at willemssenj.aimd@gao.gov. Individuals
Acknowledgments   making key contributions to this testimony included David Alston,
                  Pamlutricia Bens, Margaret Davis, Seth Goodman, Norman Heyl, Troy
                  Hottovy, Heather McIntyre, Glenn Nichols, Linda Lambert, Steve Schwartz,
                  Cynthia Scott, and Mark Shaw.




                  Page 14                                                      GAO/T-AIMD-99-241
Page 15   GAO/T-AIMD-99-241
Appendix I

Descriptions of 10 State-Administered Federal
Human Services Programs                                                                                    AppeIx
                                                                                                                ndi




Agriculture

Child Nutrition Programs   These provide healthful, nutritional meals to children in public and
                           nonprofit private schools, child care institutions, adult day care centers,
                           and summer recreational programs through the National School Lunch
                           Program, School Breakfast Program, Special Milk Program, Child and
                           Adult Care Food Program, Summer Food Service Program, and Nutrition
                           Education and Training Program. Agriculture funds these programs, while
                           state and local governments administer them. In fiscal year 1998, about
                           $8.7 billion was obligated for these programs.


Food Stamps                This program provides low-income households with coupons or electronic
                           benefits transfer cards to ensure that they have resources with which to
                           obtain food. Agriculture funds the program, while state agencies administer
                           it at the state and local levels. In an average month in 1998, 19.8 million
                           people, or 8.2 million households, received benefits.


Special Supplemental       This program provides nutrition assistance, nutrition education and
Nutrition Program for      counseling, and health and immunization referrals to low-income women,
                           infants, and children. Agriculture provides grants to states, most of which,
Women, Infants, and
                           in turn, provide vouchers that participants use at authorized food stores. In
Children                   1998, the program reached an average of 7.4 million people each month.



HHS

Child Care                 This is a block grant program that provides low-income families with
                           financial assistance for child care. It also funds activities to improve the
                           quality and availability of child care, and to establish, expand, or conduct
                           early childhood development programs and before- and after-school
                           programs. Grants are made to the states and Indian tribes to administer
                           such programs. In fiscal year 1998, about $1 billion in grants were made to
                           provide child care services for about 1.25 million children.




                           Page 16                                                     GAO/T-AIMD-99-241
                            Appendix I
                            Descriptions of 10 State-Administered
                            Federal Human Services Programs




Child Support Enforcement   This program provides four major services—locating noncustodial parents,
                            establishing paternity, establishing child support obligations, and enforcing
                            child support orders—to ensure that children are financially supported by
                            both parents. The federal government provides funding to the states and
                            local governments to run this program. In fiscal year 1998, the federal
                            government provided about $2.6 billion to states and local governments.


Child Welfare               Federal grants provide for programs delivering foster care, adoption
                            assistance, independent living for older foster children, family preservation
                            and support services, child welfare services, prevention of neglect/disabled
                            infants, and programs designed to improve the investigation and
                            prosecution of child abuse and neglect cases. Grants are provided to states
                            and local agencies to develop and administer such programs. In fiscal year
                            1998, about $4.3 billion was obligated to the states in grants for child
                            welfare programs.


Low Income Home Energy      This is a federal block grant program that assists eligible low-income
Assistance                  households in meeting their home energy needs. Grants are made to states,
                            the District of Columbia, Indian tribes and tribal organizations, and insular
                            areas. They can be used for energy assistance in heating, cooling, energy
                            crisis intervention, and low-cost residential weatherization and other
                            energy-related home repairs. In fiscal year 1998, about $1.2 billion was
                            obligated for this program.


Medicaid                    This is a federal/state-funded health care program furnishing medical
                            assistance to eligible needy persons. In fiscal year 1998, this program
                            served 33 million low-income Americans, with the federal government
                            spending $101 billion and the states spending $76 billion. Within broad
                            federal guidelines, each state establishes its own eligibility standards;
                            determines the type, amount, duration, and scope of services; sets the rate
                            of payment for services; and administers its own program.


Temporary Assistance for    This program provides time-limited assistance to low-income families. HHS
Needy Families              provides block grants to the states to operate the program. The states are
                            given broad flexibility to set eligibility criteria and determine the types of
                            assistance they provide. In fiscal year 1998, the federal government
                            provided $16.5 billion in grants to the states.



                            Page 17                                                      GAO/T-AIMD-99-241
                         Appendix I
                         Descriptions of 10 State-Administered
                         Federal Human Services Programs




Labor

Unemployment Insurance   The Unemployment Insurance program is a federal-state partnership that
                         covers 97 percent of all wage-earners. Under this program, Labor is
                         responsible for establishing broad guidelines, general oversight, and
                         administrative funding, while State Employment Security Agencies pay
                         unemployment compensation benefits to eligible workers and collect state
                         unemployment taxes from employers. In fiscal year 1998, these state
                         agencies collected $22 billion in state unemployment insurance taxes.




(511768)      L
              ertet      Page 18                                                 GAO/T-AIMD-99-241
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