L.A. County Overpaid $121 Million in Welfare : Error Rate for Misspent Aid Is on the Rise; Other Beneficiaries Shortchanged $25.4 Million

Los Angeles County erroneously gave out about $121.5 million in welfare benefits during a recent 18-month period, most of which is not likely to be recovered, state and county records show.

At the same time, the county Department of Public Social Services shortchanged thousands of poor households by underpaying them $25.4 million in welfare benefits during the 18-month period from October, 1987, to March, 1989, government documents indicate.

But it is the millions of dollars in erroneously paid-out funds--estimated at $97.8 million in Aid to Families with Dependent Children and $23.7 million in food stamps--that federal, state and county welfare officials say most worries them.

Errors on Increase

“It’s important when we are talking about taxpayers’ money to ensure the funds do go for those who are eligible and not those who are not,” said Robert Horel, deputy director of the state’s welfare program division.

Some of the money was lost in overpayments to people who qualified for welfare; some went to people who were not entitled to public assistance but who did not necessarily seek to defraud the government, county officials said.

State officials calculate the losses to Los Angeles County from their twice-yearly scientific samplings of the county’s welfare cases. The state scrutinizes a certain number of welfare cases to determine the amount of money erroneously paid out during each six-month period.

Through these figures, the state also arrives at an “error rate”--the percentage of welfare dollars that were misspent--which, in Los Angeles County’s case, is on the increase.

Difficult to Collect

The county’s experience has shown that the chances of recouping the money are slim. County welfare officials predict things will get worse as fewer workers have more cases to supervise. And both the state and county are threatened with multimillion-dollar fines for wasting taxpayers’ money.

The amount of benefits mistakenly paid during the 18-month period is relatively small compared to the $2.2 billion properly disbursed by the social services department during that time.

Nonetheless, officials said they are becoming increasingly concerned about the losses, especially those in the largest welfare program, AFDC, whose clients are mostly single mothers and their children.

The federal government considers an error rate above 3% to be excessive, and Los Angeles County’s rate has been higher than that in all but two of the last seven federal fiscal years.

Only Fresno County Higher

Among California’s counties, only Fresno County posted a higher error rate in managing its AFDC benefits during fiscal 1987-88, the latest figures available for county-by-county comparison. Fresno’s error rate was 5.25%, compared to 4.7% for Los Angeles. But, because of vastly larger volume, Los Angeles’ errors resulted in a much larger dollar loss--$63.4 million, compared to Fresno’s $9.3 million.

Six months into the current fiscal year, Los Angeles’ rate climbed to 5.1%.

The biggest loser in the welfare “giveaway” is the federal government, which provides 50% of the AFDC money and all of the food stamp funds. The state provides 45% of the AFDC money, while the county chips in 5%.

Alarmed by the county’s climbing error rates, officials from the state Department of Social Services dispatched two welfare experts last year to help the county curb its mistakes. The state also has sent the county’s welfare director a series of letters urging the county to improve, at one point characterizing the problem as “very concerning.”

County officials blame the mistakes on an overburdened staff and a staggering caseload that has been aggravated by a steady erosion of funding, which began with the passage of the landmark tax-cutting initiative, Proposition 13, in 1978. They also complain that a blizzard of confusing federal regulations encourages errors.

Eddy S. Tanaka, county social services director, predicted that the errors will continue to rise.

“The program is not getting any simpler; the caseload is not decreasing. But the resources to administer the caseload are going down,” Tanaka said.

Years of budget-cutting by a conservative Board of Supervisors has taken its toll on the beleaguered department. In the early 1980s, the county generally enjoyed one of the better performance records among urban counties in running its welfare programs, state officials said.

But in recent years, staffing levels eroded and mistakes increased.

Tanaka estimated that his 7,500-member department is 1,200 to 1,300 workers short of running smoothly--based on federal and state guidelines. Compounding the problem, the department, which handles more than 33% of all the state’s welfare cases, has been operating under a series of hiring freezes since early 1987. That year, department officials said, for example, they were short 204 eligibility workers; since then, they have lost another 182 such employees.

Consequently, each worker is reviewing new welfare applications or monitoring existing cases far in excess of county guidelines. For example, when the hiring freezes began in early 1987, workers who were handling certain types of AFDC cases processed no more than 170 cases per month apiece. Now they are up to 190 cases of their own, plus they and other workers must absorb the workload of 108 of their colleagues who are on stress disability leave.

Meanwhile, new cases are stacking up. At the county’s Long Beach office, for instance, many people who applied for food stamps in November still have not heard whether they qualify, said F.C. Herbert, an eligibility worker and the office union representative.

“We know we are making mistakes,” Herbert said. “The office is filled up all the time. It’s frustrating. You never get any sense of accomplishment. There is more and more work and the more you do the more there is.”

Among those hurt most by those mistakes are the thousands of poor families in Los Angeles County whose welfare assistance has been reduced or eliminated as a result of errors made by an overwhelmed staff. Some of those needy people wind up on the streets, said Melinda Bird, an attorney with the Western Center on Law and Poverty, a public interest law firm.

Bird said she has talked to a “remarkable number” of homeless people who “have experienced an inexplicable denial of their AFDC payments.”

“Here you have people who are the least able of any in our society to tolerate this sort of error,” Bird said.

The county’s underpayment of about $25.4 million to needy households during the 18-month period was discovered by state officials in the same semiannual surveys of cases that disclosed the millions of dollars in erroneous payments.

As workloads have increased, some safeguards against fraud or innocent mistakes have been sacrificed, Tanaka said. County workers, for instance, used to visit the homes of all welfare recipients to make sure the information they provided was accurate. The visits have been all but discontinued.

County workers previously reviewed each welfare client’s case every six months to see whether he or she still qualified for aid. The reviews were then changed to once a year and now the department has proposed conducting them every two years, said Darrell Shultz, chief of the Department of Public Social Services’ budget and management services.

DPSS supervisors also used to review workers’ processing of every case where a client’s circumstances had changed--the recipient might have had a baby, a death in the family or moved to a new location. Now supervisors double-check only 10% of those files, Shultz said. And funding to train eligibility workers was cut by 40% since 1982.

At the same time, workers are expected to remain on top of a constant flow of new federal regulations governing the food stamp and AFDC programs. To illustrate, three workers at one county welfare office piled on a table 16 thick binders crammed with rules that govern the AFDC and food stamp programs.

“These are very, very technical programs,” said Steve Hemmerling, the state’s chief of the corrective action bureau. “Frankly, the eligibility workers are not paid commensurate in my mind with the . . . technical nature of these programs. If you could see the regulations, it’s mind boggling, and every case that comes in could have a different twist.”

Most of the money lost through overpayments is never recovered. In fact, the county often does not know who receives the funds in question.

During the 1987-88 fiscal year, the county did identify the recipients of $26.6 million in AFDC overpayments, according to state records. The county was able to recoup less than half that amount, $10.7 million. In the same period, $3.7 million in wrongly issued food stamps was pinpointed, and $1.3 million was recovered.

Recovering lost money is difficult because recipients tend to move a lot, and there are restrictions on how much money can be recovered monthly from a poor person who received too much aid, Tanaka said. The county does vigorously pursue the “welfare queens” who have bilked the county out of tens or hundreds of thousands of dollars, he added. But most of the overpayments, he said, result from unintentional errors by either the welfare workers or the clients.

In an effort to prod states and counties into doing a better job, the federal government in 1981 announced that it would levy fines when an AFDC error rate exceeded 3%. The states’ political outrage was so strong that the federal government has yet to collect any fines.

ERROR RATES IN SELECTED COUNTIES

Welfare payment error rates in the federal “Aid to Families With Dependent Children “ program for selected urban counties for 1987-88.

COUNTY ERROR RATE AMOUNT Fresno 5.25% $9,310,885 Los Angeles 4.7% $63,400,000 Ventura 3.9% $1,584,468 Contra Costa 3.4% $2,564,310 San Diego 3.3% $8,710,828 Orange 2.3% $2,369,669 San Francisco 2.6% $1,939,628 Alameda 2.1% $3,737,825 San Bernardino 1.75% $4,026,030 Riverside 1.15% $1,436,052 Sacramento .75% $1,626,387

Source: California Department of Social Services

L.A. COUNTY ERROR RATE

Los Angeles County’s error rate in the federal “Aid to Families With Dependent Children” program. Figures represent the percentage of welfare funds that were wrongly disbursed. Total dollar amounts were not available. 1981-82: 3.75%

1982-83: 2.9%

1983-84: 3.0%

1984-85: 3.7%

1985-86: 4.2%

1986-87: 3.6%

1987-88: 4.7%

Oct., ’88 through March, ‘89: 5.1%

Source: California Department of Social Services