Quality in Student Financial Aid Programs A New Approach (1993) / Chapter Skim
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7 Quality Control in Other Monetary Distribution Systems
7 Quality Control in Other Monetary Distribution Systems
Pages 127-148
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From page 127... ...
In response to past recommendations that ideas for improvement be sought, the department commissioned a study that compared several family assistance programs and student aid programs (Advanced Technology and Westat, 1987a,b)
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From page 128... ...
; income limit related to state or area median income; · income limit related to the lower living standard income levels used by the Bureau of Labor Statistics; · income below absolute dollar standard; and · income level deemed to indicate "need" (typically, student financial aid programs use this type of income test)
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From page 129... ...
In the AFDC and Medicaid programs, states and localities pay a substantial addition in benefit amounts (between 50 and 83 percent depending on a formula based on state per capita income) , and they pay 50 percent of administrative costs in all three programs.
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From page 130... ...
When error rates exceed specified thresholds, penalties are collected dollar-for-dollar against the federal share of benefit payments for AFDC and Medicaid and against the federal administrative share in the Food Stamp program. States are required to correct AFDC underpayments and recoup overpayments promptly, whatever the cause or identifying source, including the quality control system.
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From page 131... ...
There is a variety of exclusions, such as grants, loans, scholarships, and income or subsidies from certain other assistance programs (e.g., Social Security Insurance, or SSI, payments, nutrition subsidies, low-income energy assistance, and at state option, certain job-training program income)
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From page 132... ...
Income is further verified through matching systems. State agencies administering AFDC, Medicaid, and Food Stamps must operate an Income and Eligibility Verification System (IEVS)
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From page 133... ...
, are required to develop a system of single interviews to determine eligibility for AFDC and Food Stamps. Further, they must develop procedures that may permit, at state option, a single application form for Food Stamps, AFDC, or other public assistance programs, as well as permit, again at state option, a single verification based on the public assistance application.
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From page 134... ...
Indeed, although early studies of the system were inconclusive about the level of error, the fact that true error rates were hard to establish only added to concern about ineligibility, fraud, and abuse, and the need for systematic error rate monitoring. The original quality control system design, developed in the 1960s, used caseworker actions, rather than active cases as is currently done, as the sample units.
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From page 135... ...
. Utilizing data from state quality control reviews of this sample and federal re-reviews of a subsample, the federal agency estimates a payment error rate, which is used to determine the disallowance.
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From page 136... ...
Limited field investigation can be used if the record cannot be clearly established. In the Food Stamp program, documents from a governmental or public agency constitute primary evidence, and collateral information constitutes secondary evidence.
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From page 137... ...
attempts to issue error rates within one year after the quality control reviews for the final month of a fiscal year are completed, although interim findings on individual cases are provided to the state as they are completed. The rules are generally similar for Food Stamp reviews.
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From page 138... ...
Performance Over Time and System Reform For fiscal 1980 through 1984, the measured national payment error rate declined for all three programs from 7.8 to 6.0 for AFDC, from 5.1 to 2.7 for Medicaid, and from 9.5 to 8.6 for Food Stamps (although the decline was not consistent over the five years) (Kramer, 19881.
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From page 139... ...
As with the student financial aid programs, many so-called technical errors procedural errors, such as failure to provide a Social Security Number, that may or may not represent true eligibility errors are included in the measurement of error and the assessment of penalties. The NRC panel recommended eliminating the two-tiered review structure, changing error tolerances to reflect performance, and remedying the imbalance between incentives and disincentives to meet all program objectives.
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From page 140... ...
The Department of Education previously commissioned a study of the quality control systems in other federal benefit programs, including family assistance programs, in order to develop some alternative incentive and disincentive structures that could be considered for the student financial aid programs (Advanced Technology, 1987~. Some of the conclusions of that report were based on the experiences of a pilot project in which selected educational institutions assessed their management controls, estimated error rates in a subsample of awards, and developed corrective actions in response to the level and sources of error found.
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From page 141... ...
The study assessed tightening or lessening regulatory and other oversight controls on institutions according to performance. The options included were graduating disbursement authority according to performance, altering required quality control sample size, allowing alternative documentation for verification, altering the percentage of beneficiaries that must be verified, reducing regulatory and audit requirements, allowing reduced quality control sample sizes along with diminished appeals rights, altering administrative allowances or allowing bonuses related to performance, allowing fund transfers across programs based on performance, and allowing flexibility in corrective action planning requirements, including waiver of sanctions tied to performance.
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From page 142... ...
In general, the study views this disincentive as unenforceable and does not consider increasing reporting requirements universally or otherwise increasing beneficiary responsibility as a means of reducing beneficiary error. Imposing substantial and immediate penalties on the applicant for clearly willful misreporting would, however, be consistent with the family assistance programs and would, it would seem, be consistent with public fiduciary responsibilities.
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From page 143... ...
Many monetary distribution systems in the private sector have processes and quality problems similar to those found in the student financial aid system. For example, credit card lenders, mortgage bankers, auto loan providers, and insurance companies also face the problem of incorrect data being supplied by applicants and have difficulty maintaining and improving quality in a distributed network of service centers.
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From page 144... ...
In addition to having such compliance monitoring responsibilities, the central organizations show concern for their own quality by using surveys to measure the satisfaction of the servicers as their own cus tomers. LESSONS FOR STUDENT FINANCIAL AID PROGRAMS In comparing any quality control strategy with that used in student financial aid programs, at least three issues should be explored.
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From page 145... ...
For example, in the family assistance programs and the student financial aid programs, technical (procedural) error is intermingled with actual payment error.
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From page 146... ...
Other techniques for improving performance, such as an aggressive federal role in the transfer of technology across states, have also been used in the family assistance programs, but they were viewed with uneven enthusiasm by state quality control administrators. Perhaps most important in comparison with the student financial aid programs is the emphasis in the family assistance programs on front-end verification.
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From page 147... ...
Student financial aid programs do some matching, but they do not match with IRS records. Such matches are done by the family assistance programs and by several Department of Veterans Affairs need-based programs.
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From page 148... ...
A1though few, including the earlier NRC panel, have argued against sanctions, and error rates have declined substantially over the history of the quality control systems, the stringent (financial) penalties have had varying effects, depending on their severity and on the resources and capabilities of the states to improve their performance.
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