Year 2000 Computing Challenge: Federal Efforts to Ensure Continued
Delivery of Key State-Administered Benefits (Testimony, 07/15/1999,
GAO/T-AIMD-99-241).

Pursuant to a congressional request, GAO discussed the year 2000
challenge facing state and local governments, focusing on: (1) the year
2000 readiness of 10 key state-administered federal human services
programs; (2) federal activities to assess states' readiness for these
10 programs; and (3) the status of the Department of Health and Human
Services' (HHS) Payment Management System.

GAO noted that: (1) much work remains at the state level to ensure that
major services are not disrupted; (2) 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; (3) 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; (4) 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; (5) further, data exchanges for the HHS
payment system, critical to making federal payments to states, have not
yet been tested; and (6) 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.

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

 REPORTNUM:  T-AIMD-99-241
     TITLE:  Year 2000 Computing Challenge: Federal Efforts to Ensure
	     Continued Delivery of Key State-Administered Benefits
      DATE:  07/15/1999
   SUBJECT:  Y2K
	     Computer software verification and validation
	     Systems conversions
	     Strategic information systems planning
	     Information resources management
	     Federal/state relations
	     Data integrity
	     Public assistance programs
	     State-administered programs
IDENTIFIER:  HHS Child Support Enforcement Program
	     USDA Homeless Children Nutrition Program
	     HHS Low Income Home Energy Assistance Program
	     Medicaid Program
	     Food Stamp Program
	     Special Supplemental Food Program for Women, Infants, and
	     Children
	     HHS Temporary Child Care and Crisis Nurseries Program
	     HHS Child Welfare Services Program
	     HHS Temporary Assistance for Needy Families Program
	     HHS Payment Management System
	     HHS Program Support Center
	     Y2K
	     WIC

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ai99241t GAO United States General Accounting Office

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

For Release on Delivery Expected at 9 a. m. Thursday, July 15,
1999

YEAR 2000 COMPUTING CHALLENGE

Federal Efforts to Ensure Continued Delivery of Key
StateAdministered Benefits

Statement of Joel C. Willemssen Director, Civil Agencies Information Systems Accounting and Information Management Division 

GAO/T-AIMD-99-241

Statement of Joel C. Willemssen Director, Civil Agencies
Information Systems Accounting and Information Management Division
GAO/T-AIMD-99-241

Page 1 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 stateadministered 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). 2 Year 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.

Lett er

Page 2 GAO/T-AIMD-99-241

Table 1: State- Administered Federal Human Services Programs

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.

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 Human Services Child Care

Child Support Enforcement Child Welfare Low Income Home Energy
Assistance Program Medicaid Temporary Assistance for Needy
Families Department of Labor Unemployment Insurance

Lett er

Page 3 GAO/T-AIMD-99-241

Some State Programs Reported Already Compliant; Others May Not Be
Until Late 1999

Table 2 summarizes the latest information on state- administered
federal human services programs reported by OMB on June 15, 1999.
4 This information was gathered, but not verified, by the
Departments of 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

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

(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.

Expected Date of 1999 Compliance

Program a Compliant b Jan. March AprilJune

JulySept. Oct. Dec. Unknown c N/ A d

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

Page 4 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. c Unknown 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 StateAdministered Human Services Programs Are
Ongoing

In addition to obtaining state- reported readiness status
information for OMB, the three federal departments are taking
other actions to assess the ability of state- administered
programs to continue into the next century. However, as table 3
shows, the approaches of the three departments in assessing the
readiness of state- administered federal human services programs
vary significantly. For example, HHS' Health Care Financing

Administration (HCFA) hired a contractor to perform comprehensive
onsite 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 5 GAO/T-AIMD-99-241

well as requiring states to obtain and submit independent
verification and validation reports after declaring their systems
compliant.

Page 6 GAO/T-AIMD-99-241

Table 3: Number and Types of Assessments Performed Areas covered
by assessments

Agency/ program Number of states assessed Project

management/ planning Test plans/ results Business continuity and

contingency plans (BCCP)

Agriculture/ Child Nutrition Program Component entity's regional
offices are monitoring all states' efforts

Varies by region Varies by region Varies by region Agriculture/
Food Stamps Component entity's regional offices are monitoring all
states'

efforts Varies by region Varies by region Varies by region

Agriculture/ Women, Infants, and Children Component entity's
regional offices are monitoring all states' efforts

Varies by region Varies by region Varies by region HHS/ Child Care
As of July 2, a contractor had conducted on- site

reviews of 20 states Yes Yes all visits included reviews of test
plans and,

where applicable, test results

Partial on- site visits included reviews of states' BCCP
processes, but not their content

HHS/ Child Support Enforcement As of July 2, a contractor had
conducted on- site

reviews of 20 states Yes Yes all visits included reviews of test
plans and,

where applicable, test results

Partial on- site visits included reviews of states' BCCP
processes, but not their content

HHS/ Child Welfare As of July 2, a contractor had conducted on-
site reviews of 20 states

Yes Yes all visits included reviews of test plans and, where
applicable, test results

Partial on- site visits included reviews of states' BCCP
processes, but not their content

HHS/ Low Income Housing Energy Assistance Program As of July 2, a
contractor had conducted on- site

reviews of 20 states Yes Yes all visits included reviews of test
plans and,

where applicable, test results

Partial on- site visits included reviews of states' BCCP
processes, but not their content

HHS/ Medicaid A contractor conducted on- site reviews of 50 states
and the District of Columbia once, and as of June 30, the
contractor had conducted follow- up reviews of 14 states Yes Yes
all visits included reviews of test plans and,

where applicable, test results

Partial initial visits included reviews of states' BCCP processes,
and, as of July 9, a

contractor had reviewed the content of 42 states' BCCPs, either on
site or at headquarters

HHS/ Temporary Assistance for Needy Families As of July 2, a
contractor had conducted on- site

reviews of 20 states Yes Yes all visits included reviews of test
plans and,

where applicable, test results

Partial on- site visits included reviews of states' BCCP
processes, but not their content

Labor/ Unemployment Insurance Labor's regional offices are
monitoring all states' efforts Unknown not

specifically addressed in methodology

Unknown not specifically addressed in methodology Reviews ongoing

Page 7 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 FNS 5 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 8 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 Human Services

Six of the 10 state- administered federal human services programs
are 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 9 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 10 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 11 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 12 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' Payment
Management System

A federal system critical to the administration of several state-
administered federal programs is HHS's Payment Management System
(PMS). HHS' Program Support Center (PSC) provides grants payments
and cash 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. 8 Year 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 13 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 Other Programs

The remediation and testing of data exchanges are also important
to other 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 14 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 Acknowledgments

For information about this testimony, please contact Joel
Willemssen at (202) 512- 6253 or by e- mail at willemssenj. aimd@
gao. gov. Individuals 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 15 GAO/T-AIMD-99-241

Page 16 GAO/T-AIMD-99-241

Appendix I Descriptions of 10 State- Administered Federal Human
Services Programs Appendi x I

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
Nutrition Program for Women, Infants, and Children

This program provides nutrition assistance, nutrition education
and counseling, and health and immunization referrals to low-
income women, infants, and children. Agriculture provides grants
to states, most of which, in turn, provide vouchers that
participants use at authorized food stores. In 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.

Appendix I Descriptions of 10 State- Administered Federal Human
Services Programs

Page 17 GAO/T-AIMD-99-241

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 Assistance

This is a federal block grant program that assists eligible low-
income 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 Needy Families

This program provides time- limited assistance to low- income
families. HHS 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.

Appendix I Descriptions of 10 State- Administered Federal Human
Services Programs

Page 18 GAO/T-AIMD-99-241

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) Let t er

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