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The budget, as you know, proposes a new initiative to combat high infant mortality rates in 10 "target cities." While the details of this initiative are not complete, it appears that most of the funds would be awarded to community health centers in designated target areas. I want to ask you about the existing infant mortality initiative we've been funding for several years through community health centers, known as the comprehensive Perinatal Care Program (CPCP).

Have you done any studies of this initiative?

Answer. We have conducted a program inspection which assessed the initial implementation of the CPCP, an initiative of the Public Health Service (PHS) to reduce infant mortality through supplemental grants to community and migrant health centers. We found that: (1) the goals and objectives set forth in CPCP grant proposals approved by PHS have been in accord with the intended purposes of the program; (2) in some cases, PHS had limited information on how grantees planned to spend the CPCP funds awarded during the first year; (3) PHS has established a basic framework for gathering information useful for assessing the impact of CPCP services, although it is too soon to have been tested; and (4) many areas of the country with high rates of infant mortality have not been receiving CPCP funds because some could not prepare acceptable grant proposals and some high infant mortality areas do not have community health centers.

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We recommend that: (1) PHS should strengthen its procedures for approving CPCP grants to assure adequate accountability for CPCP funds; (2) PHS should strengthen its efforts to provide technical assistance to community and migrant health centers preparing CPCP grant proposals so that they qualify; and (3) PHS should reexamine the approach for allocating CPCP funds to assure that these funds are directed to areas of high infant mortality.

Question. Why aren't areas with high rates receiving perinatal care grants?

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Answer. The definition established by PHS for high infant mortality is 12 or more deaths per 1,000 live births. Nearly half of the nation's largest cities with high infant mortality rates have not been eligible for CPCP grants because they have no community and migrant health centers funded through sections 329/330 of the PHS Act.

Approximately 25 percent of CPCP grants have been awarded to centers serving areas with infant mortality rates below the threshold of 12 deaths per 1,000 live births. However, these areas may have pockets of higher infant mortality rates, and the CPCP funds may help some areas maintain their lower rates.

Additionally, almost half of all community and migrant health centers have not applied for CPCP funds, while others including those serving areas with high infant mortality rates have applied and not been approved. Some were disapproved because they could not prepare an acceptable proposal.

Question. Do you think if the grants were available to other health care providers, too, that we could tar,et funds to high-impact areas more effectively?

Answer. Although our study did not address that question specifically, we believe that targeting more providers would help. However, as mentioned above, we did find that nearly half of the nation's largest cities with high infant mortality rates have not been eligible for CPCP funds because they lacked Federallyfunded community and migrant health centers, the required conduit for the CPCP funds. Our study recommends that Phs reexamine the approach for allocating CPCP funds to assure that these funds are directed to areas of high infant mortality.

Our analysis raises important policy issues as to whether these CPCP monies are being directed in the most strategic manner, and whether continuation of the present pattern of allocating these funds will serve the best interest of this initiative. Our recommendations include addressing the following policy questions: Should infant mortality rates figure more prominently in the application and funding process for CPCP funds? Should any increases in the CPCP appropriations be more selectively targeted to centers serving areas with the highest rates of infant mortality? How might perinatal services be supported more intensively in those very needy areas without community or migrant health centers? Is it a more effective use of limited resources to fund many centers in the ne adiest areas for more substantial support? Answers to questions such as these will allow the limited dollars available for the CPCP to achieve the maximum impact on this most pressing problem of infant mortality.


Question. Your office documented that administrative costs for the Foster Care program increased from $143 million to $400 million from fiscal years 1984 to 1988. These costs, for which the Federal government pays States, are estimated to top $1 billion in FY 1992.

What if any changes would you recommend to get a handle on these administrative costs?

Answer. Because the reasons for the rise in administrative costs are complex and a series of actions are needed to contain these costs, we recommended in our August 1990 report that a temporary stopgap legislative remedy be enacted until processes can be put into place to control this area. The series of actions follows:

Continue to pursue legislative approaches to cost
containment, including reducing the time period
for filing claims. The final funding proposal
should be selected after a reevaluation of the
original intent of Public Law 96-272 and current
practices of the States. Any proposals should
recognize that the current definition of
"administrative costs" is a misnomer, since under
this rubric States can claim for a variety of
child placement services.

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Modify the methodology for conducting
administrative cost reviews to (1) associate a
portion of administrative costs claimed with
ineligible maintenance payments, and (2) examine
the relationship between increased costs and
expansion of services to foster children.
Develop alternative ways to more curately count
the number of children in the program. This area
is being addressed through a September 1990 Notice
of Proposed Rulemaking (NPRM) which mandates a
data collection system to replace the current
system run by the American Public Welfare





Proceed with requiring states to uniformly identify and account for administrative costs by individual administrative activities and the required child care protections.

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Conduct a systematic analysis of cost allocation plans, sampling methodologies and eligibility determination systems used by states, with an emphasis on those states that have employed the services of consultants.

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Develop a national protocol for use in the routine
evaluation of cost allocation plans with respect
to foster care. This effort will be coordinated
with the Department's Division of Cost Allocation.

Continue efforts to look for ways to contain administrative costs. During this process, the

options on the preceding pages of this report
should be considered.

Consider expansion of the Quarterly Expenditure
Report (IV-E-12) from four cost categories of
"child placement services" to additional
categories, to allow for more discrete accounting
and to provide definitions for each of the cost

Earlier this fiscal year, Congress enacted requirements for States to separately report placement costs, but did not enact cost containment provisions. The President's FY 1992 budget proposes to contain costs by making "pre-placement costs" not allowable for Federal reimbursement, and by refocusing the program to target both maintenance and administrative payments only to eligible children in foster care. We endorse this proposal, which the Department estimates would reduce Federal costs by $1.7 billion over five years.


Question. The Chief Financial Officers (CFO) Act of 1990 aims to improve financial systems and functions across the government by requiring agencies to prepare and audit financial statements for all trust funds, revolving funds, and accounts that have substantial commercial activity.

What does the CFO Act mean for HHS how does it relate to service delivery and program performance?

Answer. The implementation of the CFO Act should result in significant improvements in the Department's financial management systems.

The combination of management assessments of financial management capabilities, annual financial audits, the Federal Managers Financial Integrity Act (FMFIA) process, and the five-year plans should result in both a reduction of internal control weaknesses and improvements in the usefulness of financial systems for collecting and summarizing program information. Such improvements should have a positive impact on program operations.

Implementation of the CFO Act should also result in closer integration of financial and program performance information. Thus, management should have a more accurate and detailed understanding of the cost of services and different levels of outputs. This information on operations costs should be very useful to program managers in terms of day-to-day operations. It should also be useful for planning the future direction and budget level of programs.

In addition, since passage of the CFO Act there has been a high level of interest in the Federal financial management community regarding reporting on

service efforts and accomplishments in the annual financial statements. At this point it seems quite likely that there will be efforts made to develop this concept for reporting in the financial statements required by the CFO Act. In fact, a recent financial statement report on the Veterans Administration provides an initial effort in this direction that may prove to be trend-setting. We are developing this concept of "service effort" reporting for financial statements in HHS. This provision of information on program productivity will undoubtedly affect both perceptions of and the futures of these programs as Department management, Congressional committees and citizen groups react to what is reported.

Question. How is HHS progressing on preparing the required financial statements?

Answer. We believe that the Department has so far done rather well in working towards development of the financial statements required by the Act. of course, for several years now the Department has produced financial statements for the Social Security Administration (SSA) and the Office of the Secretary's Working Capital Fund. Thus, the Department was quite farsighted in its understanding of the trend towards financial statements. The Department has also been working for some time towards financial statements for the trust funds in the Health Care Financing Administration which, together with SSA, constitutes the two largest financial statement challenges for HHS.

We would also give the Department high marks for its more current efforts in planning its implementation of the Act. From our knowledge of the work being done in other departments, HHS has done quite a lot. Throughout its entire planning effort, the Department has worked closely with our office. We believe this cooperation with the Inspector General's office is important for a smooth and successful implementation of the financial statement requirements of the Act.

Question. Which HHS appropriation accounts meet the CFO Act criteria for financial statements, and what proportion of the Department's spending will be audited?

Answer. A total of 60 of the Department's 112 appropriation accounts are covered by the CFO Act. These accounts contain about 80 percent of the Department's outlays. The following memorandum to the Director of the Office of Management and Budget (OMB) provides a listing of all the HHS appropriation accounts and a designation of those accounts that are thought to be covered by the CFO Act.

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