Administrative Expenditures and Federal Matching Rates of	 
Selected Support Programs (30-JUN-05, GAO-05-839R).		 
                                                                 
The federal government spends billions of dollars annually for	 
programs that help low-income families and other individuals. A  
significant portion of these funds cover administrative costs	 
rather than direct benefits and services. To provide information 
on how these administrative costs compare across programs and the
federal government's role in funding these programs'		 
administrative costs, we examined (1) total funding and the	 
amounts and types of administrative expenditures for selected	 
programs and (2) the federal matching rates for these		 
administrative expenditures.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-839R					        
    ACCNO:   A29398						        
  TITLE:     Administrative Expenditures and Federal Matching Rates of
Selected Support Programs					 
     DATE:   06/30/2005 
  SUBJECT:   Administrative costs				 
	     Child care programs				 
	     Comparative analysis				 
	     Disadvantaged persons				 
	     Economic analysis					 
	     Federal aid programs				 
	     Federal funds					 
	     Financial analysis 				 
	     Food relief programs				 
	     Funds management					 
	     Health care programs				 
	     Medicaid						 
	     State-administered programs			 
	     Program management 				 
	     Program evaluation 				 
	     Adoption Assistance Program			 
	     Food Stamp Program 				 
	     Foster Care Program				 
	     HHS Child Care and Development Fund		 
	     HHS Child Support Enforcement Program		 
	     State Children's Health Insurance			 
	     Program						 
                                                                 

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GAO-05-839R

United States Government Accountability Office Washington, DC 20548

June 30, 2005

The Honorable Wally Herger
Chairman
Subcommittee on Human Resources
Committee on Ways and Means
House of Representatives

Subject: Administrative Expenditures and Federal Matching Rates of
Selected Support Programs

Dear Mr. Chairman:

The federal government spends billions of dollars annually for programs
that help lowincome families and other individuals. A significant portion
of these funds cover administrative costs rather than direct benefits and
services. To provide information on how these administrative costs compare
across programs and the federal government's role in funding these
programs' administrative costs, we examined (1) total funding and the
amounts and types of administrative expenditures for selected programs and
(2) the federal matching rates for these administrative expenditures.

Our review included seven programs: Medicaid, State Children's Health
Insurance Programs (SCHIP), Food Stamp Program, Foster Care, Adoption
Assistance, Child Support Enforcement (CSE), and Child Care and
Development Fund (CCDF).1 The Food Stamp Program is administered by the
U.S. Department of Agriculture (USDA), and the remaining programs are
administered by the U.S. Department of Health and Human Services (HHS). To
determine the amounts and types of administrative expenditures for these
programs as well as the federal role in funding their administrative
costs, we examined information publicly available from legislation,
governmentwide publications, and the relevant federal agencies. We
determined that this information is sufficiently reliable for the purpose
of this correspondence. We conducted our work during May and June 2005 in
accordance with generally accepted government auditing standards.

Total expenditures, including administrative and all other expenditures,
for the seven programs in our review ranged from $2.9 billion for Adoption
Assistance to $295 billion for Medicaid, including both federal and state
expenditures, as shown in table 1. Total expenditures generally include
the costs of direct benefits, such as the costs of food stamps and medical
services, as well as all other costs of administering the programs and

1See enclosure I for descriptions of these programs. We agreed with your
staff on this set of programs that provide assistance to low

income families and other individuals. Each of these programs is jointly
funded by federal and state governments, employs federal

matching rates, and has annual federal outlays of over $1.5 billion.

providing benefits. For each of the programs in our review, both the
federal and state governments provide program funding. The federal share
of total program expenditures ranged from 53 percent for Foster Care to 91
percent for the Food Stamp Program.

Table 1: Total Federal and State Expenditures for Selected Programs,
Fiscal Year 2004

Dollars in billions

     Program name     Total expenditures     Federal share      State share a 
                                 (percent)     (percent)            (percent) 
       Medicaid                     $294.7            $174.1 
                                     (100)              (59) 

$120.6 (41) Source: GAO analysis of HHS and USDA data.

          Food Stamp Program             $29.8         $27.2             $2.6 
                                         (100)         (91)               (9) 
                 CCDF                    $9.4          $6.9              $2.5 
                                         (100)         (73)              (27) 
              Foster Care                $8.6          $4.5              $4.0 
                                         (100)         (53)              (47) 
                 SCHIP                   $6.6          $4.6              $2.0 
                                         (100)         (70)              (30) 
       Child Support Enforcement         $3.3b         $2.9              $0.4 
                                         (100)         (88)              (12) 
          Adoption Assistance            $2.9          $1.6              $1.3 
                                         (100)         (54)              (46) 

aIncludes local expenditures, where applicable.

bFederal and state expenditures are reduced by child support collections
that are used to reimburse the Temporary Assistance for Needy Families
(TANF) and Foster Care programs and by fees collected for certain
services. The federal total also includes administrative costs, payments
to states that meet established performance measures, and costs for
certain grants.

Administrative expenditures for these programs are listed in table 2. The
specific types of expenditures that are considered administrative differ
considerably across the programs. For example, administrative costs for
Foster Care include case planning, recruitment and licensing of foster
care homes, and eligibility determination activities, as well as other
activities. In contrast, administrative costs for CCDF do not include the
costs of providing direct services, such as determining eligibility and
placing children in child care. Both federal and state funds are used for
administrative expenditures. The federal share of administrative
expenditures ranged from 49 percent for the Food Stamp Program to 70
percent for SCHIP.

 Table 2: Federal and State Administrative Expenditures for Selected Programs,
                                Fiscal Year 2004

Dollars in billions

Program name

    Administrative expenditures (percent) Federal share (percent) State share
                                                                    (percent)

Types of expenses included in administrative costs

Medicaid $14.4 (100)

$8.0 (55)

$6.4 (45) Includes marketing, enrollment, customer services, overhead,
claims processing, and profits of for-profit entities.

Child Support  $5.3 $3.5 $1.8 Includes all expenses for administration and 
                                                                    operation 
Enforcementa  (100) (66) (34)      of the program. For example, personnel, 
                                                              payroll, travel 
                                 expenses, and costs related to carrying out  
                                 the basic                                    
                                             program activities.              

Food Stamp  $5.1 $2.5 $2.6 Includes all expenses other than benefits. For  
    Program   (100) (49) (51) example, certification of eligibility, issuance 
                                                                 of benefits, 
                                 quality control and fraud investigations,    
                                                 nutrition                    
                                education, outreach, system development and   
                              operation, and employment and training of       
                              recipients.                                     

Foster Care  $5.0 $2.6 $2.4 Includes all expenses other than payments to   
                               foster                                         
               (100) (52) (48)          families. For example, case planning, 
                                                              recruitment and 
                                  licensing of foster care homes, eligibility 
                                                                determination 
                               activities, development and operation of       
                               information                                    
                                      system, training, and overhead.         

    Adoption   $0.6 $0.3 $0.3    Includes all expenses other than payments to 
                                                                     adoptive 
Assistance (100) (52) (48)  parents. For example, case planning, review,   
                                                    and                       
                                   management, recruitment of adoptive homes, 
                                                                  eligibility 
                                 determination, negotiation and review of     
                                                 adoption                     
                                    agreements, training, and overhead.       

SCHIP $0.3 $0.2 $0.1 Includes "reasonable costs" to administer the
program. (100) (70) (30) Does not include outreach, case management, and
other services.

CCDF $0.2 NA NA 	Administrative costs include, for example, program
planning and monitoring, travel costs, and office equipment and supplies.
Administrative costs do not include eligibility determination, child care
placement, training, and computerized information systems.

Source: GAO analysis of HHS and USDA data.

aCSE administrative expenditures exceed total expenditures because total
expenditures are reduced by child support collections distributed to TANF
and Foster Care programs and fees collected for certain services.

NA = data not available.

The sharing of administrative costs between the federal and state
governments is based largely on federal matching rates, in accordance with
federal laws and regulations.2 Table 3 provides information on the federal
matching rates and other rules governing federal expenditures for
administrative costs for each program. The federal matching rate is 50
percent for most administrative expenditures for Medicaid, the Food Stamp
Program, Foster Care, and Adoption Assistance, although higher federal
matching rates may apply to certain expenses. For CSE, the federal
matching rate is 66 percent for most administrative expenditures. For a
portion of CCDF administrative expenditures, the federal matching rate
varies by state and ranges from 50 percent to 77 percent. For SCHIP, the
federal matching rate also varies by state and ranges from 65 percent to

2The federal matching rate and the actual share of expenditures that the
federal government pays, in practice, differ slightly, because of the
detailed rules governing the sharing of expenses and application of the
federal matching rate.

about 84 percent. In addition, administrative expenditures in SCHIP and
CCDF are

3

capped at 10 percent and 5 percent, respectively, of total expenditures.

Table 3: Federal Matching Rates and Other Rules Governing Federal
Expenditures of State Administrative Costs

      Program name     Federal matching              Other rules              
                             rate       
        Medicaid          50 percent          75, 90, and 100 percent federal 
                                                           matching rates for 
                                          certain administrative functions.   
                                        100 percent federal grant coverage of 
       Food Stamps       50 percenta    some                                  
                                           employment and training costs.     
       Foster Care        50 percent    75 percent federal matching rate for  
                                        training                              
                                                    expenditures.             
Adoption Assistance    50 percent    75 percent federal matching rate for  
                                        training                              
                                                    expenditures.             

CCDF 50 to 77 percent, as determined 5 percent limit on administrative
expenditures.

b

by formula for each state

SCHIP        65 to 84 percent, as 10 percent limit on use of federal funds 
                          determined                   for                    
         cby formula for each state          administration, outreach, health 
                                                     initiatives, and certain 
                                          other child health assistance.      
    CSE                                  90 percent federal matching rate for 
                 66 percent                                certain lab costs. 

Source: GAO analysis of HHS and USDA data.

aThe 50 percent federal share of state and local administrative expenses
is reduced by $197 million a year to account for costs covered by grants
for TANF, resulting in an actual federal share paid under the Food Stamp
Program that is slightly below 50 percent.

bFederal matching rates for CCDF are determined using the Federal Medical
Assistance Percentages. States' federal matching rates are inversely
related to their average per capita income levels. Federal matching rate
applies only to one component of CCDF funding, which is available to
states that achieve required levels of state spending.

cFederal matching rates for SCHIP are determined using the Enhanced
Federal Medical Assistance Percentages. States' federal matching rates are
inversely related to their average per capita income levels.

We shared a draft of this document with knowledgeable officials from each
program for their technical review. We discussed the draft with Child Care
and Development Fund and Food Stamp Program officials and incorporated
their comments where appropriate.

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this letter until 30 days
after its date. At that time, we will send copies of this letter to the
Secretaries of HHS and USDA, appropriate congressional committees, and
other interested parties. We will also make copies available to others
upon request and on GAO's Web site at http://www.gao.gov.

3The 10 percent cap applies to expenditures for administration, outreach, health
            initiatives, and certain other child health assistance.

If you have any questions about this letter, please contact me at (415)
904-2272. You may also reach me by e-mail at [email protected]. Gale Harris
served as assistance director on this engagement. Heather Hahn was the
analyst-in-charge. Cindy Ayers, Rebecca Christie, Susan Higgins, and
Carolyn Taylor provided key information.

Sincerely yours,

David D. Bellis Director, Education, Workforce, and Income Security Issues

Enclosure

Enclosure I

                              PROGRAM DESCRIPTIONS

Adoption Assistance

The purpose of the Adoption Assistance program, authorized under title
IV-E of the Social Security Act, is to assist states in finding adoptive
homes for eligible children with special needs. This program provides
funds to states to assist in providing adoptive families with ongoing
financial and medical assistance for adopted children with special needs
as well as funds to support staff training and administrative costs.

Child Care and Development Fund

This program, authorized by the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996, Pub. L. No. 104-193, assists
low-income families, families receiving temporary public assistance, and
those transitioning from public assistance in obtaining child care so that
they can work or attend training or education. With this block grant,
states develop and pay for child care programs. Within certain federal
guidelines, states have discretion in deciding how these funds will
support child care, who will be eligible, and what payment mechanism will
be used.

Child Support Enforcement

The Child Support Enforcement (CSE) program is a joint federal and state
partnership established in 1975 under title IV-D of the Social Security
Act to ensure that parents provide support to their children. State CSE
programs are responsible for carrying out the basic activities for
locating absent noncustodial parents, establishing paternity and support
orders, and collecting and distributing child support payments. Although
the states administer the child support enforcement program, the federal
government plays a major role, which includes funding most of the program,
establishing policies and guidance, and overseeing and monitoring state
CSE programs' compliance with federal requirements.

Food Stamp Program

The Food Stamp Program, established in 1964 and administered at the
federal level by the U.S. Department of Agriculture's (USDA) Food and
Nutrition Service (FNS), is designed to provide basic nutrition to
low-income individuals and families in the United States by supplementing
their income with benefits to purchase food. FNS pays the full cost of
food stamp benefits and shares the states' administrative costs. FNS is
responsible for promulgating program regulations and ensuring that state
officials administer the program in compliance with program rules. The
states administer the program by determining whether households meet the
program's income and asset requirement, calculating monthly benefits for
qualified households, and issuing benefits to participants on an
electronic benefits transfer card.

Enclosure I

Foster Care

The purpose of the Foster Care program, authorized under title IV-E of the
Social Security Act, is to help states provide proper care for eligible
children who need placement outside their homes-in a foster family home or
an institution. This program provides funds to states to assist with the
costs of foster care maintenance for eligible children, administrative
costs to manage the program, and training for program staff and foster
parents.

Medicaid

Medicaid (title XIX of the Social Security Act) is an entitlement program
that pays for medical assistance for certain individuals and families with
low incomes and few resources. This program became law in 1965 and is
jointly funded by the federal and state governments (including the
District of Columbia and U.S. territories) to assist states in providing
medical assistance to people who meet certain eligibility criteria.
Medicaid is the largest source of funding for medical and health-related
service for people with limited income. Within broad federal guidelines,
each state (1) establishes its own eligibility standards; (2) determines
the type, amount, duration, and scope of services; (3) sets the rate of
payment for services; and (4) administers its own program.

State Children's Health Insurance Program (SCHIP)

SCHIP programs are established and administered by a state, jointly funded
with the federal government, to provide child health assistance to
uninsured, low-income children through a separate child health program, a
Medicaid expansion program, or a combination program. Title XXI of the
Social Security Act, enacted by the Balanced Budget Act of 1997,
authorizes federal grants to states for provision of child health
assistance to uninsured, low-income children. Within broad federal rules,
each state decides eligible groups, types and ranges of services, payment
levels for benefit coverage, and administrative and operating procedures.

(130490)
*** End of document. ***