Year 2000 Computing Crisis: Readiness of State Automated Systems That
Support Federal Human Services Programs (Testimony, 02/24/99,
GAO/T-AIMD-99-91).

Pursuant to a congressional request, GAO discussed the year 2000 status
of states' automated systems that support federal human services
programs, such as Medicaid, Temporary Assistance for Needy Families
(TANF), and Food Stamps.

GAO noted that: (1) GAO's survey last year of states' year 2000 status
found that many systems were at risk and much work remained to ensure
continued services; (2) overall, only about one-third of the systems
supporting human services programs were reported to be compliant; (3)
since GAO's report last year, federal guidance and oversight activities
for state human services systems have increased; (4) since last summer,
the Health Care Financing Administration (HCFA) has administered two
state self-reported surveys and conducted several on-site visits and
found that overall state Medicaid systems status has improved little;
(5) while Office of Management and Budget (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 Medicaid programs as of November 1998; (6)
HCFA reported in the Department of Health and Human Services' (HHS)
February 1999 quarterly report to OMB that based on seven site visits,
some of the dates' states had reported to GAO in July/August 1998 had
already slipped, underscoring the need for on-site visits to secure more
accurate information; (7) thus, HCFA and its independent verification
and validation contractor plan to make on-site visits to all 50 states
and the District of Columbia by the end of this April; (8) the
Administration for Children and Families (ACF) is currently surveying
the states to determine the status of TANF, child support enforcement,
child care, and child welfare systems, however, it does not have current
information on states' systems; (9) in response to OMB's requirement to
provide updated state systems status in the quarterly year 2000 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; (10) as of February 16, 1999, ACF had
received responses from 27 states; (11) the Department of Agriculture's
(USDA) Food and Nutrition Service is tracking and reporting on year 2000
progress for the Food Stamp and Special Supplemental Food Program for
Women, Infants, and Children (WIC) programs for all 50 states, the
District of Columbia, Guam, Puerto Rico, and the Virgin Islands; and
(12) for both programs, USDA initiated a survey in April 1998, asking
states when their hardware, software, and the telecommunications
supporting automated Food Stamp and WIC systems would be compliant.

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

 REPORTNUM:  T-AIMD-99-91
     TITLE:  Year 2000 Computing Crisis: Readiness of State Automated 
             Systems That Support Federal Human Services Programs
      DATE:  02/24/99
   SUBJECT:  Y2K
             Systems conversions
             Computer software verification and validation
             Federal/state relations
             State-administered programs
             Strategic information systems planning
             Data integrity
             Information resources management
             Information systems
             Surveys
IDENTIFIER:  Medicaid Program
             HHS Temporary Assistance for Needy Families Program
             Food Stamp Program
             Special Supplemental Food Program for Women, Infants, and 
             Children
             HHS Child Support Enforcement Program
             HHS Child Welfare Services Program
             Y2K
             WIC
             
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AI99091T.book GAO United States General Accounting Office

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

For Release on Delivery Expected at 9 a. m. Wednesday, February
24, 1999

YEAR 2000 COMPUTING 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

  GAO/T-AIMD-99-91

PAGE 3 GAO/ XXXX- 98-??? NAME OF DOCUMENT

Page 1 GAO/T-AIMD-99-91

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 Programs' Essential Services Face Risk of Year 2000
Disruptions

Failure to complete Year 2000 conversion activities could cause
billions of dollars in benefits payments to fail to reach our
nation's elderly, needy families, and women, infants, and
children. Those newly approved for 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 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 2 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 Readiness to Support Federal Human Services
Programs Raises Concerns and Potential Risks

Our survey last year of states' Year 2000 status found that many
systems were at risk and much work remained to ensure continued
services. Overall, only about one- third of the systems supporting
the Medicaid, TANF, Food Stamp (FS), WIC, Child Support
Enforcement (CSE), Child Care (CC), and Child Welfare (CW)
programs were reported to be compliant. 2 As figure 1 illustrates,
the state- reported compliance rate 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 3 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
l998 4

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

3 The 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.)

16 84

25 75

24 76

38 62

38 62

56 44

51 49 0 10

20 30

40 50

60 70

80 90

Compliant Not compliant Percentage of systems

Medicaid programs

TANF FS CSE WIC CC CW Programs

Page 4 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 State Human Services Systems

Since our report, federal guidance and oversight activities for
state human services systems have increased; however, concerns
regarding states' systems status remain. Following our report, OMB
implemented a 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 at Risk Since last summer, HCFA has
administered two state self- reported surveys

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 5 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 6 GAO/T-AIMD-99-91

Current Status of Systems Supporting ACF Programs Is Unknown

ACF is currently surveying the states to determine the status of
TANF, child support enforcement, child care, and child welfare
systems, however, it does not have current information on states'
systems. In response to

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 Systems Status for Food Stamps and WIC

The Department of Agriculture's Food and Nutrition Service (FNS)
is 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 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 7 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) Lett er

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