oversight

Year 2000 Computing Crisis: Readiness of State Automated Systems That Support Federal Human Services Programs

Published by the Government Accountability Office on 1999-02-24.

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

                          United States General Accounting Office

GAO                       Testimony
                          Before the Committee on Ways and Means, House of
                          Representatives




For Release on Delivery
Expected at
9 a.m.
                          YEAR 2000 COMPUTING
Wednesday,
February 24, 1999         CRISIS

                          Readiness of State
                          Automated Systems That
                          Support Federal Human
                          Services Programs
                          Statement of Joel C. Willemssen
                          Director, Civil Agencies Information Systems
                          Accounting and Information Management Division




GAO/T-AIMD-99-91
PAGE 3   GAO/XXXX-98-??? NAME OF DOCUMENT
                        Mr. Chairman and Members of the Committee:

                        Thank you for inviting us to participate in today's hearing on the Year 2000
                        status of states’ automated systems that support federal human services
                        programs, such as Medicaid, Temporary Assistance for Needy Families, and
                        Food Stamps. The federal government and states have a huge vested
                        interest--financial and social--in related automated state systems. Many of
                        these systems must still be renovated to make the transition to the year
                        2000.1 Unless successfully remediated, many systems will mistake data
                        referring to Year 2000 as meaning 1900. Such corrupted data can seriously
                        hinder an agency’s ability to provide essential services to the public and
                        ensure adequate accountability over program operations.

                        Given the magnitude and nature of the programs these automated systems
                        support, the potential problems of failing to complete Year 2000 conversion
                        could be felt by millions of needy Americans. While some progress has
                        been achieved, many states’ systems have been reported to be at risk and
                        not scheduled to become compliant until the last half of l999. Further,
                        progress reports to date have been based largely on state self-reporting
                        which, upon on-site visits, has occasionally been found to be overly
                        optimistic. Given these risks, business continuity and contingency
                        planning becomes even more important in ensuring continuity of program
                        operations and benefits in the event of systems failures.



Human Services          Failure to complete Year 2000 conversion activities could cause billions of
                        dollars in benefits payments to fail to reach our nation’s elderly, needy
Programs’ Essential     families, and women, infants, and children. Those newly approved for
Services Face Risk of   benefits could face an inability to be automatically added to the recipient
                        file; eligibility for new applicants might not be able to be determined in a
Year 2000 Disruptions   timely fashion; eligible recipients could be denied benefits; and payments
                        could be underpaid, overpaid, or delayed. Key state-administered
                        programs that could be affected include the following.



                        1
                          The Year 2000 problem is rooted in the way dates are recorded and computed in automated
                        information systems. For the past several decades, systems have typically used two digits to represent
                        the year, such as “99” to represent 1998, in order to conserve electronic data storage and reduce
                        operating costs. With this two-digit format, however, the year 2000 is indistinguishable from 1900
                        because both are represented simply as “00.” As a result, if not modified, computer systems or
                        applications that use dates or perform date- or time-sensitive calculations may generate incorrect
                        results beyond 1999.




                        Page 1                                                                           GAO/T-AIMD-99-91
                       • In fiscal year 1997, Medicaid provided about $160 billion to millions of
                         recipients. A joint federal-state program supported by the Department
                         of Health and Human Services’ (HHS) Health Care Financing
                         Administration (HCFA) and administered by the states, Medicaid
                         provides health coverage for 36 million low-income people, including
                         over 17 million children. Its beneficiaries also include elderly, blind, and
                         disabled individuals.
                       • Temporary Assistance for Needy Families (TANF), child support
                         enforcement, child care, and child welfare programs are likewise critical
                         to the health and well-being of needy families. HHS’ Administration for
                         Children and Families (ACF) oversees these programs that provide
                         benefits to economically needy families with children who lack financial
                         support from one or both parents because of death, absence, incapacity,
                         or unemployment. In fiscal year 1997, federal and state agencies spent
                         just under $14 billion on cash and work-based assistance. Of this total,
                         almost $8 billion was federal money, while just over $6 billion was
                         state-funded. This program served almost 8 million recipients as of
                         September 1998.
                       • Food Stamp and the Supplemental Program for Women, Infants, and
                         Children (WIC) programs provide food for millions of Americans. The
                         U.S. Department of Agriculture’s (USDA) Food and Nutrition Service
                         (FNS) oversees these programs. In 1998, almost 20 million people
                         received food stamp benefits, while an average of 7.5 million received
                         monthly WIC benefits.



Survey of State        Our survey last year of states’ Year 2000 status found that many systems
                       were at risk and much work remained to ensure continued services.
Readiness to Support   Overall, only about one-third of the systems supporting the Medicaid,
Federal Human          TANF, Food Stamp (FS), WIC, Child Support Enforcement (CSE), Child
                       Care (CC), and Child Welfare (CW) programs were reported to be
Services Programs      compliant.2 As figure 1 illustrates, the state-reported compliance rate
Raises Concerns and
Potential Risks


                       2
                        Year 2000 Computing Crisis: Readiness of State Automated Systems to Support Federal Welfare
                       Programs (GAO/AIMD-99-28, November 6, 1998). We sent a survey to the 50 states, the District of
                       Columbia, and three territories (Guam, Puerto Rico, and the Virgin Islands). All but one of the
                       54 entities surveyed responded.




                       Page 2                                                                          GAO/T-AIMD-99-91
ranged from a low of about 16 percent (Medicaid systems) to a high of
56 percent (child care systems).3



Figure 1: Percentage of Systems Reported Compliant – July/August l9984
Percentage of systems

90
            84
80                        75             76
70
                                                       62          62
60                                                                          56
                                                                                          51
50                                                                                             49
                                                                                   44
40                                               38           38

30                   25            24
20     16

10

 0

         Medicaid     TANF           FS             CSE          WIC          CC            CW
         programs
                                        Compliant     Not compliant
                 Programs


States reported having completed renovation on only about one-third of the
systems as of July/August. Of those states that had not completed this
phase, many systems (25 percent) were no more than one-quarter
complete. For example, 18 states reported that they had completed
renovating one quarter or fewer of their Medicaid claims processing
systems. These 18 states had Medicaid expenditures of about $40 billion in


3The Office and Management and Budget endorsed a five-phase approach for conducting Year 2000
work, and established target completion dates for each phase. Following awareness, agencies were
instructed to assess systems (by June l997), including inventorying, analyzing, and prioritizing them.
Agencies then had to renovate their systems, either by converting or replacing them (by September
l998); validate through testing and verification (by January 1999), and then implement the converted or
replaced systems (by March l999). These phases are detailed in GAO's Year 2000 assessment guidance,
Year 2000 Computing Crisis: An Assessment Guide (GAO/AIMD-10.1.14, September l997) .

4
  The states reported using a total of 421 automated systems to manage these programs. (Several states
reported using more than one system to support a program.)




Page 3                                                                           GAO/T-AIMD-99-91
                          fiscal year 1997--one-quarter of total Medicaid expenditures nationwide,
                          covering about 9.5 million recipients.

                          Thorough testing is required to ensure that Year 2000 modifications
                          function as intended and do not introduce new problems. Despite this
                          need, states said last summer that they had not yet developed test plans for
                          about 27 percent of the systems. Further, only about one-quarter of the
                          systems were reported at that time as having completed validation and
                          implementation.

                          In addition to Year 2000 systems conversions, states must continue to
                          perform routine systems development and maintenance activities, as well
                          as implement other systems changes required to support their human
                          services programs. Eighty percent of the states noted that these systems
                          activities had been delayed because of Year 2000 compliance efforts. Faced
                          with these competing priorities, states reported struggling to manage their
                          workloads, including important initiatives such as tracking and reporting
                          the requirements of federal welfare reform, new HCFA programmatic
                          requirements, and new child support requirements.



Updated Results of        Since our report, federal guidance and oversight activities for state human
                          services systems have increased; however, concerns regarding states’
State Human Services      systems status remain. Following our report, OMB implemented a
Systems                   requirement that federal oversight agencies include the status of state
                          human services systems in quarterly Year 2000 progress reports.5
                          Specifically, it requested that federal agencies describe actions to help
                          ensure that federally supported, state-run programs will be able to provide
                          services and benefits. OMB has further asked that agencies report the date
                          when each state’s systems will be Year 2000 compliant, and provide
                          information on any significant difficulties that states are encountering.


Medicaid Systems Remain   Since last summer, HCFA has administered two state self-reported surveys
at Risk                   and conducted several on-site visits and found that overall state Medicaid
                          systems status has improved little. For example, HCFA reported in


                          5
                            OMB Memorandum for the Heads of Selected Agencies, Revised Reporting Guidance on Year 2000
                          Efforts, January 26, 1999. The state programs included were Food Stamps, Medical Assistance,
                          Unemployment Insurance, TANF, Child Support Enforcement, WIC, Low Income Home Energy
                          Assistance, Child Nutrition, Child Care, and Child Welfare.




                          Page 4                                                                     GAO/T-AIMD-99-91
November 1998 that Medicaid systems had shown some progress in
renovation, but that the number of states reporting completion of this
phase had actually decreased compared to the July/August 1998 data that
was reported to us by the states. It found, further, that 11 states’ Medicaid
systems were still reported to be 25 percent or less renovated, and about
half of the states were 50 percent or less renovated. Only five states—
Arkansas, California, Idaho, Illinois, and Iowa—reported their Medicaid
systems to be 100 percent renovated. Thus, while OMB guidelines target
completion of systems renovation by September 1998, states’ self-reported
data to HCFA showed that about 90 percent of states had not completed
renovation for the Medicaid programs as of November 1998.

To obtain more reliable Year 2000 state Medicaid status information, HCFA
hired a contractor to conduct independent verification and validation of
states’ systems. As an initial effort, the contractor and HCFA distributed a
survey to all states to ascertain background and Year 2000 status
information. However, based on more recent information from on-site
visits, the independent verification and validation (IV&V) project leader
said that the survey data were not as reliable as HCFA had expected
because states tended to overstate their progress. As a result, HCFA has
instead decided to rely on on-site contractor visits to ascertain accurate
Medicaid systems’ status.

HCFA reported in HHS’ February 1999 quarterly report to OMB that based
on seven site visits, some of the dates that states had reported to us in
July/August 1998 had already slipped, underscoring the need for on-site
visits to secure more accurate information. For example, according to
HCFA, while four states appeared to have made some progress in the
6 months since our survey, three states’ status remained the same. Further,
HCFA found that one state’s Medicaid eligibility system was not as far along
as the state had reported in our survey. As of February 17, 1999, HCFA told
us it had visited 14 states and that half of those states have shown some
improvements. Thus, HCFA and the IV&V contractor plan to make on-site
visits to all 50 states and the District of Columbia by the end of this April.
For states considered at risk, HCFA will conduct second site visits between
May and September 1999 and, if necessary, third visits between October
and December 1999. The later visits will emphasize contingency planning
to help the states ensure continuity of program operations in the event of
systems failures.




Page 5                                                        GAO/T-AIMD-99-91
Current Status of Systems   ACF is currently surveying the states to determine the status of TANF, child
Supporting ACF Programs     support enforcement, child care, and child welfare systems, however, it
                            does not have current information on states’ systems. In response to
Is Unknown
                            OMB’s requirement to provide updated state systems status in the quarterly
                            Y2K progress reports, ACF sent letters and surveys to state chief
                            information officers asking for such information and asked the states to
                            return the survey by January 31, 1999. As of February 16, 1999, ACF had
                            received responses from 27 states. Further, according to HHS’ Year 2000
                            Program Manager, the information provided by the states raised more
                            questions than answers--some states did not answer all questions or
                            complete the survey for all systems.

                            ACF is now proposing on-site reviews of state systems for TANF and the
                            child support enforcement, child welfare, and child care programs in all
                            50 states. ACF sees these reviews as enhancing the available information
                            concerning states’ Year 2000 readiness and providing a vehicle through
                            which the agency can provide states with technical assistance. ACF is
                            considering developing a process similar to the one being used by HCFA, or
                            possibly working with HCFA in gathering information.


USDA Has Been Tracking      The Department of Agriculture’s Food and Nutrition Service (FNS) is
Systems Status for Food     tracking and reporting on Year 2000 progress for the Food Stamp and WIC
                            programs for all 50 states, the District of Columbia, Guam, Puerto Rico, and
Stamps and WIC
                            the Virgin Islands. For both programs, USDA initiated a survey in April
                            1998, asking states when their hardware, software, and
                            telecommunications supporting automated Food Stamp and WIC systems
                            would be compliant.

                            FNS updated the survey last December, and noted that 13 of the states’
                            software, hardware, and telecommunications systems supporting the Food
                            Stamp Program were reported as being Year 2000 compliant. Another
                            15 expected to be compliant by March 31, and another 13 by June 30 of this
                            year. The remaining 13 states reported that they would not achieve
                            compliance until the last 6 months of calendar year 1999--which puts them
                            at high risk of failure if any unforeseen problems are encountered during
                            testing.

                            Regarding WIC, as of last December, FNS reported that 42 states said their
                            WIC systems were already compliant or would be Year 2000 compliant by
                            June 30, 1999. However, 12 states reported that they would not be
                            compliant until the last 6 months of 1999. For states reporting that they


                            Page 6                                                      GAO/T-AIMD-99-91
                   will not be compliant by March 31, 1999, USDA has requested the state to
                   certify in writing that it has a working contingency plan in place that will
                   ensure the delivery of benefits to Food Stamp Program and WIC recipients.

                   In closing, although some states are reporting progress in achieving Year
                   2000 compliance, many human services systems may not become
                   compliant until later this year. Consequently, these systems are at a high
                   risk if any unforeseen problems are encountered during testing. Business
                   continuity and contingency plans will thus become increasingly critical for
                   these states in an effort to ensure continued timely and accurate delivery of
                   benefits and services. Federal oversight agencies, through their monitoring
                   activities, plan to likewise continue to emphasize the need for contingency
                   planning to ensure continuity of service.

                   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.




(511737)   Leter   Page 7                                                       GAO/T-AIMD-99-91
Ordering Information

The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order made
out to the Superintendent of Documents, when necessary, VISA and
MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address are
discounted 25 percent.

Orders by mail:

U.S. General Accounting Office
P.O. Box 37050
Washington, DC 20013

or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any list
from the past 30 days, please call (202) 512-6000 using a touchtone
phone. A recorded menu will provide information on how to obtain
these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with “info” in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov
United States                       Bulk Rate
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. GI00
Official Business
Penalty for Private Use $300

Address Correction Requested