Report 2015-503 Summary - June 2015

Follow-Up—California Department of Social Services:

It Has Not Corrected Previously Recognized Deficiencies in Its Oversight of Counties' Antifraud Efforts for the CalWORKs and CalFresh Programs

HIGHLIGHTS

Our audit of the California Department of Social Services' (Social Services) progress in addressing issues we raised in our 2009 audit revealed the following:

Results in Brief

The California Department of Social Services (Social Services) is responsible for managing the California Work Opportunities and Responsibility to Kids (CalWORKs) program and the federal Supplemental Nutrition Assistance Program, known as CalFresh in the State of California. CalWORKs provides cash assistance for living expenses while CalFresh provides financial assistance for purchasing food. These programs are administered by counties under Social Services' oversight and serve many who legitimately qualify for assistance. However, state and federal agencies recognize that some fraud exists, and federal law requires that states develop ways to detect fraud within these programs. This report presents the results of a follow-up audit of Social Services' implementation of recommendations the California State Auditor (state auditor) made in 2009 related to fraud prevention in the CalWORKs and CalFresh programs.

In November 2009 the state auditor released an audit report titled Department of Social Services: For the CalWORKs and Food Stamp Programs, It Lacks Assessments of Cost-Effectiveness and Misses Opportunities to Improve Counties' Antifraud Efforts, Report 2009-101. The audit recommended that Social Services identify cost-effective antifraud practices and replicate these practices among all counties. In addition, the audit recommended that Social Services improve its oversight of counties' use of match lists, which help eligibility workers to identify current aid recipients who may be ineligible for that aid, and improve its oversight of counties' reporting of investigation activities. The audit also recommended that Social Services improve its process for reconciling and distributing the CalFresh overpayments that the counties collect, as well as monitor the county reports that Social Services uses to perform this reconciliation, to ensure that the information in these reports is accurate. Finally, the audit recommended that Social Services gauge the cost-effectiveness of the Statewide Fingerprint Imaging System (SFIS).

Despite the findings and recommendations of our 2009 audit to improve Social Services' oversight of counties' antifraud efforts, we found that more than five years later Social Services has fully implemented only one of the 15 recommendations, and that it either has not fully implemented, taken no action, or will not implement the other 14 recommendations. For example, we found that Social Services still has not developed a formula that enables it to analyze the cost-effectiveness of counties' antifraud efforts and to subsequently work to replicate the most cost-effective practices among all the counties. Social Services also has not determined whether SFIS is cost-effective, despite the fact that SFIS cost $12 million to maintain in 2014 and resulted in only 57 instances of fraud being found. We also found deficiencies in Social Services' oversight of the counties' antifraud activities, including an ineffective method for assessing how well counties are processing match lists that identify potential instances of fraud. We noted two primary reasons for the lack of implementation of the 2009 recommendations: Social Services does not have effective, documented procedures for its oversight of counties' antifraud efforts, and in one case Social Services continues to disagree with our recommendation. However, the weaknesses we identified in our 2009 audit and that we determined still continue during this follow-up audit diminish the efficiency and effectiveness of Social Services' guidance and oversight of counties' antifraud efforts.

Recommendations

To ensure that counties' efforts to combat fraud in the CalWORKs and CalFresh programs are effective, Social Services should fully address the 14 remaining recommendations from our 2009 audit. These recommendations include that Social Services develop a formula to regularly perform a cost-effectiveness analysis of counties' antifraud activities for the CalWORKs and CalFresh programs and that it improve its oversight of counties' processing of match lists.

The Legislature should require Social Services to annually report on the cost of SFIS and the fraud that it detects.

Agency Comments

Social Services generally agreed with our conclusions and recommendations. However, Social Services disagrees with our recommendation for it to analyze the effect of varying fraud prosecution thresholds on counties' decisions to investigate potential welfare fraud.