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Audit Report - A-09-96-62003

Office of Audit

Review of the County of Los Angeles’ Performance as Representative Payee for Title II and Title XVI Children in Foster Care - A-09-96-62003 - 7/9/97

This report is in response to a request from the Social Security Administration (SSA) that we review operations of the County of Los Angeles’ (County) Department of Children and Family Services (DCFS). The primary objective of this audit was to determine whether DCFS has established adequate procedures to perform as a representative payee for children in its care who receive Old-Age, Survivors and Disability Insurance (title II) and Supplemental Security Income (SSI) benefits (title XVI). SSA also requested that we evaluate the adequacy of SSA’s instructions to DCFS.

DCFS has made organizational and procedural changes to improve its ability to identify and report events in a timely manner which affect children’s title II and title XVI status. We have concluded that SSA can rely on DCFS to function as the representative payee. Concerning the adequacy of SSA’s procedural instructions to DCFS, we concluded that the guidance was sufficient. However, DCFS raised technical issues to which SSA was not always able to provide timely guidance.

During the audit, we identified an issue involving DCFS policies to reimburse foster care parents at increased rates for children receiving title XVI. Although the issue was resolved for DCFS, we are recommending that SSA issue procedural instructions for institutional representative payees. The procedure would limit the amount paid for the care of children receiving title XVI benefits while in foster care programs consistent with the amount paid for other children in foster care.

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In a memorandum from the Deputy Commissioner for Programs, Policy, Evaluation and Communications, dated April 26, 1996, SSA requested that we review the representative payee activities of DCFS. In particular, SSA asked us to determine if:

  • changes made by DCFS are sufficient to permit SSA to continue relying on DCFS as a payee;
  • deficiencies in DCFS’ recordkeeping as representative payee for title II and title XVI beneficiaries were identified; and
  • SSA’s instructions to DCFS were adequate.

DCFS acts as the representative payee for children who receive Social Security benefits and are in the County’s foster care program. In 1995, DCFS began an internal review of its accounting for revenue. This review disclosed that bank account balances for children were not being monitored. As a result, some children’s account balances exceeded the $2,000 resource limit under the title XVI program. Generally, under title XVI, children with countable resources in excess of $2,000 are not entitled to benefits. In addition, DCFS determined that SSA had not always been informed when children were no longer in the County foster care program. When children leave the care and control of the program, the County is no longer providing for the living expenses of the children. Thus, Social Security benefits paid for the care of these children improperly accumulated in the County’s bank accounts. SSA is unaware of when children leave the County’s program until either DCFS reports the information or a new representative payee requests to receive the children’s benefits. DCFS voluntarily returned over $1 million to SSA representing children’s conserved funds in excess of the $2,000 title XVI resource limit and benefits received for children who were not in the County’s care.

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We conducted our review in accordance with generally accepted government auditing standards. Our objective was to address concerns about DCFS’ performance as the representative payee for children in the County foster care program who receive title II and title XVI benefits. We focused on assessing the changes DCFS made in its operations to prevent problems in reporting events to SSA and determining if DCFS received adequate instructions from SSA. We also addressed a DCFS policy to use title XVI funds to reimburse foster care parents at increased foster care rates for children in their care who were receiving benefits.

We interviewed DCFS staff and SSA employees. We also reviewed DCFS procedures for its new Eligibility Hotline (Hotline) and SSI units. Our audit was conducted in San Francisco and Los Angeles, California. We performed our field work from May through October 1996.

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The changes made by DCFS in its operations allow SSA to rely on DCFS as a representative payee for children in the County foster care program receiving Social Security benefits. DCFS has established a Hotline and a SSI unit to monitor children receiving Social Security benefits and report timely to SSA events that may affect the children’s benefits. These changes should substantially eliminate the types of problems previously identified. We have initiated another review to determine if DCFS has identified events that should have been reported to SSA. This review will focus on events which occurred prior to November 1996.

Although SSA’s instructions to DCFS were adequate, they were not always timely. SSA’s written procedures did not address technical issues raised by DCFS. As a result, there were delays in responding to DCFS questions. We also identified a policy issue which SSA should address. The issue is whether a county should be able to increase its foster care rates for children who receive title XVI benefits based on their title XVI eligibility rather than use the established procedures used for other children in foster care.

DCFS Operational and Procedural Changes to Improve Reporting to SSA

The primary changes made by DCFS to improve its reporting of events to SSA was the establishment of a Hotline and an SSI Unit. The Hotline was established to provide a central location for foster care parents and DCFS’ social workers and eligibility workers to report events affecting children. For example, when a child runs away from a home or is no longer in the County’s custody, these events are to be reported to the Hotline. The Hotline staff is responsible for resolving the issues that arise from telephone calls and forwarding actions to the SSI unit for children receiving Social Security benefits.

The SSI unit is responsible for reviewing the information received from the Hotline and reporting to SSA, in a timely manner, events that may affect children’s eligibility. In addition, DCFS has assigned the SSI unit the responsibility of monitoring children’s conserved funds to ensure that resources do not exceed the title XVI limit of $2,000. These operational and procedural changes allow DCFS to report events which affect children’s benefits in a timely manner and prevent the deficiencies previously identified from recurring in the future.

Communication Between SSA and DCFS

Generally, SSA’s instructions to DCFS were adequate, although not always timely. The lack of SSA written procedures to address technically complex problems presented by DCFS and the need for policy guidance from SSA Headquarters caused delays. We believe that SSA’s instructions generally were written to address the concerns of private payees providing custody for an individual or small groups of beneficiaries, not public agencies acting as intermediaries for large numbers of children receiving various forms of assistance, such as Medicaid and Aid to Families with Dependent Children. For example, on February 26, 1996, DCFS officials asked the Pasadena District Office for approval to retroactively increase the foster care rates for 127 children. SSA employees had no procedural guidelines as a basis for a decision about the allowability of using conserved title XVI funds to provide retroactive reimbursement. On March 19, 1996, DCFS requested guidance in writing and sent it to SSA Headquarters. SSA did not provide an official response until September 11, 1996.

Use of Title XVI Funds for Pay Increases to Foster Care Rates

During July 1996, DCFS retroactively increased the foster care rates of some title XVI children. DCFS also made a policy decision to administratively increase current foster care rates of children awarded title XVI benefits. The effect of DCFS’ policies was to establish foster care rates for children receiving title XVI benefits solely on the basis of their title XVI eligibility.

We informed DCFS officials that the Office of the Inspector General would take exception to any policy which increased the foster care rates based only on the children’s title XVI eligibility. The DCFS procedures must comply with State law which requires the assessment of each child’s needs as a basis for establishing the foster care rate to be paid to a foster care parent. This assessment is based primarily on a social worker’s opinion and medical professionals’ evaluations as to a child’s level of care needed. Therefore, establishing foster care rates based on the fact that children are receiving title XVI benefits without actually assessing the needs of each child is not in accordance with the County’s foster care program nor the spirit of the foster care or title XVI programs. The Counsel to the Inspector General has reviewed this issue and concurred with our position.

In August 1996, a DCFS official told us DCFS reversed the policies and that the foster care rates for children receiving title XVI benefits will be determined based on the criteria used for all children entering the County’s foster care program. As a result, the rates should be reduced and DCFS will have to continue to conserve about $150,000 per year in excess funds for children’s future needs. This is based on foster care rate changes to about 34 children. These are children whose foster care rates had been increased based on the prior policy.

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DCFS has made operational and procedural changes which allow SSA to rely on the County as the representative payee for children in its foster care program. We are recommending that SSA issue nationwide guidance to limit title XVI spending on behalf of children receiving foster care to the foster care rates established by State or local governments for other children in foster care.


SSA stated that they will proceed in developing appropriate procedures for representative payee agencies nationwide after receiving the two remaining reports related to the County’s performance as payee for children in foster care.

David C. Williams

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Appendix B


Office of the Inspector General

William Fernandez, Director of Program Audits
Jimmie Harris, Team Leader
James Sippel, Senior Auditor

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