Year 2000 Computing Crisis: Readiness of State Automated Systems To
Support Federal Welfare Programs (Letter Report, 11/06/98,
GAO/AIMD-99-28).

Pursuant to a congressional request, GAO reviewed the year 2000 status
of the state and local automated systems used in federal welfare
programs, focusing on: (1) the reported status of systems used in
Medicaid, Temporary Assistance for Needy Families, Special Supplemental
Food Program for Women, Infants, and Children, food stamps, child
support enforcement; child care, and child welfare programs, and the
potential consequences of not modifying these systems in time for the
year 2000 change; (2) year 2000 guidance provided by federal agencies to
the states; and (3) any year 2000 oversight and monitoring activities
that the federal agencies have performed.

GAO noted that: (1) the states reported that they were using 421
automated systems to manage the seven federal welfare programs in GAO's
survey; (2) several states reported that they use more than one system
to support a program; (3) while many states do not require year 2000
costs to be accounted for separately, states provided estimates
totalling about $545 million during fiscal years (FY) 1997 through 2001
for completing year 2000 conversion of their welfare information
systems; (4) failure to complete year 2000 conversion could result in
billions of dollars in benefits payments not being delivered; (5)
potential problems states cited were that: (a) new recipients could not
be added to the recipient file; (b) eligibility for new applicants could
not be determined; (c) recipients could be denied benefits; (d) payments
could be underpaid or overpaid; and (e) payments could be delayed; (6)
about one-third of the state welfare systems are reported to be
compliant; (7) the compliance rate ranged from only 16 percent of the
Medicaid systems to about half of the childcare and child welfare
systems; (8) states reported that they had completed the assessment
phase for about 80 percent of the welfare systems supporting the seven
programs; (9) according to the Office of Management and Budget
guidelines, systems renovation work should have been completed by
September 1998, however, as of the July/August 1998 response dates,
states reported having completed renovation on only about one-third of
the systems; (10) of those states that had not completed this phase,
many systems were no more than one quarter complete; (11) 18 states
reported that they had completed renovating one quarter or fewer of
their Medicaid claims processing systems; (12) these 18 states had
Medicaid expenditures of about $40 billion, one quarter of total
Medicaid expenditures, for about 9.5 million recipients in FY 1997; (13)
about one quarter of the systems were reported as having completed the
validation and implementation phases; (14) states said that they had not
developed test plans for about 27 percent of the systems; (15) 80
percent of states noted that routine systems development and maintenance
activities and other changes have been delayed because of the year 2000
compliance efforts; (16) states cited the Department of Agriculture and
the Health Care Financing Administration as providing the most guidance
and oversight; and (17) the top category of desired additional support
mentioned by the states was funding.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD-99-28
     TITLE:  Year 2000 Computing Crisis: Readiness of State Automated 
             Systems To Support Federal Welfare Programs
      DATE:  11/06/98
   SUBJECT:  Y2K
             Computer software verification and validation
             Systems conversions
             Strategic information systems planning
             Information resources management
             Information systems
             Federal/state relations
             Data integrity
             Public assistance programs
             Welfare benefits
IDENTIFIER:  HHS Temporary Assistance for Needy Families Program
             Medicaid Program
             Special Supplemental Food Program for Women, Infants, and 
             Children
             HHS Child Support Enforcement Program
             Y2K
             WIC
             
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Cover
================================================================ COVER


Report to Congressional Requesters

November 1998

YEAR 2000 COMPUTING CRISIS -
READINESS OF STATE AUTOMATED
SYSTEMS TO SUPPORT FEDERAL WELFARE
PROGRAMS

GAO/AIMD-99-28

State Welfare Programs

(511246)


Abbreviations
=============================================================== ABBREV

  CC - child care
  CSE - child support enforcement
  CW - child welfare programs
  FNS - Food and Nutrition Service
  FS - food stamps
  HCFA - Health Care Financing Administration
  HHS - Department of Health and Human Services
  OMB - Office of Management and Budget
  TANF - Temporary Assistance for Needy Families
  USDA - Department of Agriculture
  WIC - Women, Infants, and Children

Letter
=============================================================== LETTER


B-280131

November 6, 1998

Congressional Requesters

The federal government has a huge vested interest in automated state
and local systems that support welfare programs.  Many of these
systems must be renovated to make the transition to the year 2000. 
Unless renovated, many systems will mistake data referring to 2000 as
meaning 1900.  Such corrupted data--used by a locality or provided by
it to its federal counterpart (or vice versa)--can seriously hinder
an agency's ability to provide essential services to the public. 

This report responds to your request that we assess the Year 2000
status of the state and local automated systems used in federal
welfare programs.  Specifically, our objectives were to (1) determine
the reported status of systems used in Medicaid; Temporary Assistance
for Needy Families (TANF); Women, Infants, and Children (WIC); food
stamps (FS); child support enforcement (CSE); child care (CC); and
child welfare programs (CW), and the potential consequences of not
modifying these systems in time for the Year 2000 change, (2)
identify Year 2000 guidance provided by federal agencies to the
states, and (3) identify any Year 2000 oversight and monitoring
activities that the federal agencies have performed.  We briefed your
offices on October 8, 1998, on the results of our assessment. 
Materials presented during that briefing are included in appendixes I
through IX. 

To address our objectives, we developed a questionnaire which was
sent to the 50 states, the District of Columbia, and three
territories (Guam, Puerto Rico, and the Virgin Islands), and received
responses from all but South Dakota.  We conducted individual
pretesting of our questionnaire in Georgia, Maryland, and
Pennsylvania to ensure clarity before sending the questionnaires to
all 54 entities.  We used the pretest results to finalize our
questionnaire.  We mailed the questionnaire to each entity's Year
2000 coordinator.  We reviewed the completed questionnaires and
contacted respondents by telephone to obtain additional information
where data were not provided or the answers were not clear. 

We did not visit the state computer sites or evaluate the accuracy of
the state reports.  The information from states is self reported and
may therefore vary in accuracy.  All questionnaire data that were
entered into our database and reports from the resulting analyses
were individually verified by an independent analyst to ensure the
data were entered properly.  We also met with federal oversight
officials from the Department of Health and Human Service's (HHS)
Health Care Financing Administration (HCFA) and Administration for
Children and Families and from the Department of Agriculture's (USDA)
Food and Nutrition Service. 


   BACKGROUND
------------------------------------------------------------ Letter :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 "98" representing 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, or 2001 from
1901. 

The Office of Management and Budget (OMB) identified five phases
agencies should complete in conducting their Year 2000 work and
established target completion dates for each phase.  After awareness
of the need to make systems Year 2000 compliant, they must assess
(June 1997) systems, including inventorying, analyzing, and
prioritizing them.  Agencies must then renovate (September 1998)
their systems by converting or replacing them, validate (January
1999) through testing and verification that the renovation work was
appropriate, and implement (March 1999) the converted or replaced
systems.  These phases are discussed in detail in our publications
Year 2000 Computing Crisis:  An Assessment Guide (GAO/AIMD-10.1.14,
September 1997) and Year 2000 Computing Crisis:  A Testing Guide
(GAO/AIMD-10.1.21, Exposure Draft, June 1998). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

The states\1 reported that they are using 421 automated systems to
manage the seven federal welfare programs in our survey.  (See
appendix I for further details.) Several states reported that they
use more than one system to support a program.  While many states do
not require Year 2000 costs to be accounted for separately, states
provided estimates totaling about $545 million (federal and state
funding) during fiscal years 1997 through 2001 for completing Year
2000 conversion of their welfare information systems. 

Failure to complete Year 2000 conversion could result in billions of
dollars in benefits payments not being delivered.  Potential problems
states cited were that (1) new recipients could not be added to the
recipient file, (2) eligibility for new applicants could not be
determined, (3) recipients could be denied benefits, (4) payments
could be underpaid or overpaid, and (5) payments could be delayed. 

The reported status of state welfare systems is highlighted below and
the details are in appendixes II to IX. 

  -- Overall, about one-third of the systems are reported to be
     compliant.  The compliance rate ranged from only 16 percent of
     the Medicaid systems to about half of the CC and CW systems. 
     (See appendix II for details.)

  -- States reported that they had completed the assessment phase for
     about 80 percent of the welfare systems supporting these seven
     programs.  (See appendix III for details.)

  -- According to OMB guidelines,\2 systems renovation work should
     have been completed by September 1998.  By comparison, as of the
     July/August 1998 response dates, states reported having
     completed renovation on only about one-third of the systems.  At
     that time, only Arkansas, Idaho, and Utah reported that they
     were over 75 percent complete in renovating all systems
     supporting the seven programs.  Of those states that had not
     completed this phase, many systems (25 percent) were no more
     than one quarter complete.  Eighteen 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, one quarter of total Medicaid
     expenditures, for about 9.5 million recipients in fiscal year
     1997.  (See appendix IV for details.)

  -- About one quarter of the systems were reported as having
     completed the validation and implementation phases.  Thorough
     testing is required to ensure that Year 2000 modifications
     function as intended and do not introduce new problems.  Despite
     this need, states said that they had not developed test plans
     for about 27 percent of the systems.  (See appendix V for
     details.)

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
welfare programs.  Eighty percent of the states noted that these
systems activities have been delayed because of the Year 2000
compliance efforts.  (See appendix VI for the types of system
activities reported postponed due to Year 2000 effort.) Faced with
these competing priorities, states reported that they are struggling
to manage these workloads, including important initiatives such as
tracking and reporting requirements of federal welfare reform, new
HCFA programmatic requirements, and new child support requirements. 

The states cited two federal agencies as most frequently providing
guidance.  USDA and HCFA were cited, respectively, by about 75 and 64
percent of the states for providing federal guidance.  Other
agencies, mentioned less than half of the time, included OMB, the
Administration for Children and Families, and the Social Security
Administration.  (See appendix VII for details.) The top category of
desired additional support mentioned by the states was funding
(mentioned by 77 percent).  Other categories, such as continuity
planning and guidance in testing, were mentioned by about a quarter
of the states.  (See appendix VIII.)

States also cited USDA and HCFA as providing the most oversight,
about 87 and 62 percent respectively.  Less than half of the states
noted that the Administration for Children and Families, Social
Security Administration, and OMB provided oversight activities. 
These activities included site visits, focus groups, and required
status reports.  (See appendix IX.)


--------------------
\1 Meaning the 49 states, the District of Columbia, and the three
territories that responded to our survey. 

\2 On January 20, 1998, OMB issued a memorandum to the heads of
executive departments and agencies entitled "Progress Reports on
Fixing Year 2000 Difficulties." This memorandum revised the target
dates for Year 2000 work and established September 1998 as the date
for completion of renovation of systems. 


---------------------------------------------------------- Letter :2.1

We sent copies of our briefing materials, which were used in
preparing this report, to the federal oversight officials with whom
we met at HCFA, the Administration for Children and Families, and
USDA's Food and Nutrition Service.  Copies were also sent to key
officials at HHS, OMB, USDA, and the National Association of State
Information Resource Executives, and we responded to their questions
on these materials.  Our work was performed from May through
September 1998, in accordance with generally accepted government
auditing standards. 

As agreed with your offices, we are providing copies of this report
to the Secretary of Health and Human Services; the Secretary of
Agriculture; the Administrators, Health Care Financing
Administration, Administration for Children and Families, and USDA
Food and Nutrition Service; the Director, Office of Management and
Budget; appropriate congressional committees; and other interested
parties.  Copies will also be made available to others upon request. 

Please contact me or Christie Motley, Assistant Director, at (202)
512-6408 if you have any questions regarding this report.  We can
also be reached by e-mail at [email protected] and
[email protected], respectively.  Major contributors to this
report are listed in appendix X. 

Joel C.  Willemssen
Director, Civil Agencies Information Systems

List of Congressional Requesters

The Honorable William V.  Roth, Jr.
Chairman
The Honorable Daniel Patrick Moynihan
Ranking Minority Member
Committee on Finance
United States Senate

The Honorable John D.  Rockefeller, IV
United States Senate

The Honorable E.  Clay Shaw, Jr.
Chairman
The Honorable Sander M.  Levin
Ranking Minority Member
Subcommittee on Human Resources
Committee on Ways and Means
House of Representatives

The Honorable Nancy L.  Johnson
Chairwoman
Subcommittee on Oversight
Committee on Ways and Means
House of Representatives


TOTAL NUMBER OF REPORTED STATE
WELFARE SYSTEMS
=========================================================== Appendix I



   (See figure in printed
   edition.)


REPORTED STATUS OF STATE WELFARE
SYSTEMS AS OF JULY/AUGUST 1998
========================================================== Appendix II



   (See figure in printed
   edition.)


REPORTED STATUS OF THE ASSESSMENT
PHASE
========================================================= Appendix III



   (See figure in printed
   edition.)


REPORTED STATUS OF THE RENOVATION
PHASE
========================================================== Appendix IV



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


REPORTED STATUS OF VALIDATION AND
IMPLEMENTATION
=========================================================== Appendix V



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


TYPES OF SYSTEM ACTIVITIES
POSTPONED DUE TO YEAR 2000 EFFORT
========================================================== Appendix VI



   (See figure in printed
   edition.)


FEDERAL GUIDANCE
========================================================= Appendix VII



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


ADDITIONAL SUPPORT NEEDED FROM
FEDERAL GOVERNMENT
======================================================== Appendix VIII



   (See figure in printed
   edition.)


FEDERAL OVERSIGHT
========================================================== Appendix IX



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix X

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

Mark E.  Heatwole, Assistant Director
Christie M.  Motley, Assistant Director
Norman F.  Heyl, Business Process Analyst
Sharon O.  Byrd, Senior Auditor
Michael P.  Fruitman, Communications Analyst
Rina Khemlani, Evaluator

ATLANTA FIELD OFFICE

Amanda C.  Gill, Information Systems Analyst
Pamlutricia G.  Bens, Senior Evaluator
Cynthia J.  Scott, Senior Evaluator

KANSAS CITY FIELD OFFICE

John B.  Mollet, Senior Evaluator
John G.  Snavely, Evaluator


*** End of document. ***