Summary: In 1964, the Department of Health, Education, and Welfare (HEW) developed a quality control program to control erroneous payments to recipients of Aid to Families with Dependent Children. In April 1973 HEW introduced a fiscal disallowance provision establishing allowable error rates and said it would not reimburse States for payments exceeding those levels. When the provision was ruled invalid by the courts because of arbitrary tolerance levels, it was revoked. While action on fiscal allowances was in effect, it encouraged States to implement programs to reduce errors. Some financial incentive is probably needed and, if disallowances based on State error rates are used, they should be based on payment errors rather than case errors. Legislation has been introduced providing for this basis for disallowances and excluding procedural type errors. The accomplishments of the quality control program were overstated because of: invalid statistical projections; assumptions made by HEW that reduction in case errors and savings are directly related; and failure to consider administrative costs of corrective actions. HEW should revise its basis for determining accomplishments and focus on assisting States with the greatest difficulty in reducing errors.
