Credit rating firm helps state validate welfare recipients

Credit rating firm helps state validate welfare recipients

By Rebecca Lessner


State auditors hope to find less potential for fraud in their next audit of the Maryland Department of Human Resources, which recently partnered with an online credit bureau to validate that people receiving government assistance actually qualify.

In 2011, Human Resources entered into a contract with Equifax, one of the three major credit rating agencies, in order to use an online database called the “Work Number.”

Equifax is boasting a 200% improvement to DHR’s error rate in the first year of implementation alone, which means that state workers are able to quickly verify critical information for low-income programs like food stamps or disability assistance.

The service will also make it easier for people to apply for benefits, since the computer system will be able to verify employment status and hours worked.

Begun during audit

The contract began in the midst of the Office of Legislative Audits (OLA) three-year audit of DHR, ranging from from July 2010 to November 2013 that found a large potential for fraud. They identified 10,500 cases where documentation for public assistance recipients of several major programs was missing social security numbers for over a year after an alert had been issued that the information was needed.

The audit found that was part of an even larger pool of about 18,000 social security number alerts that had been unresolved for more than six months as of January 2014. Those numbers are critical because without proper documentation, low-income program fraud can be committed.

In their response to state auditors, DHR attributed some of the blame for missing documentation to flooding in a storage area.

Equifax & DHR claim better results

Employing the help of Equifax, Human Resources was able to cut out the use of fax-machines and switch to the online database called the Work Number.

The Work Number is a database of employees from large and medium sized companies that list the term of employment, wages received and hours worked.

“The fully online version of The Work Number is more convenient and responses are in real time,” said Vince Kilduff, deputy executive director of Programs of the Family Investment Administration at DHR. “Prior to March 2011, there was typically a one to two day lag between the request for data and the faxed response.”

DHR supervises more than one million residents throughout 24 separate local departments of social services, with programs ranging from Child Protective Services to Emergency Assistance to Families with Children.

Once relying on a fax-based system to transfer information between local departments, DHR’s switch to online methods may resolve issues of missing information faster, in order to stop fraud.

State auditors remain skeptical

“It’s good to hear that they’re doing something, but we won’t know if it’s satisfactory until we actually get there and follow up,” said Paul Denz, assistant director of fiscal compliance at Office of Legislative Audits.

Denz is not familiar with Equifax’s reputation and will remain critical until OLA can witness the productivity of the change for themselves.

“Certainly we had asked for documentation in several of the findings, particularly with the social security numbers, we had asked them to follow up on the alerts,” said Denz. “The best I can say is anything they are doing to move in that direction, but as far as this particular solution I’m not sure until we get there.”

Maryland pioneers Equifax’s state relations

Equifax Executive and Senior Director, Adrian Yu, highlighted Maryland as a state “leading the way” in their partnership with the agency.

“Instead of information transmitted via a fax machine, case managers have been able to get the information needed to make a decision from Equifax in about one minute,” said Yu, explaining the online process. “Saving countless hours of work and making staffing more efficient.”

Calling the previous fax-system “slow and cumbersome,” Yu said Equifax’s efficiency not only benefits Maryland case-managers, but citizens as well.

“Those applying for Maryland government assistance have also benefited,” said Yu. “They no longer have to return to an employer who fired them to obtain proof that their job ended… (they) don’t have to get their current employers to verify the number of hours they worked, or even inform them that they are applying for benefits, relieving them of the stigma of such a disclosure.”

Equifax also reports significant reduction in error rates, which refer to how often DHR is able to verify information like social security numbers that are flagged in the system as missing on applications for low-income benefits.

“Since 2010, error rates in Maryland’s Food Supplement program are down 72% due to numerous initiatives undertaken by the state, including the partnership with Equifax,” said Yu.

However, DHR acknowledged the Equifax contract was only one part of “a comprehensive strategy to reduce payment errors.”

“We can say it contributed to the rate reduction, but it was not the only reason for the improvement,” said Kilduff.

Kilduff explained that the Supplemental Nutrition Assistance Program (SNAP) Payment Error Rate was 6.06% for 2011, the year Work Number was implemented, and by 2013 the Error Rate was 2.12%, or approximately 200% lower.

1 Comment

  1. AdManTheLabRat

    Thanks Rebecca Lessner for helping to educate us Maryland Citizens how DHR still cannot bleeding our hard earned Tax dollars.

    More power to the this wonderful State’s OLA and Bonuses and Blessing to Denz. I am curious how much money this “Contract” with Experian is saving or costing us (I would rather see Denz and the OLA Team get cash incentives/bonuses).

    Maryland DHR leading the way into the information age with a centalized fax communication system for data validation. I hope at one point that the fax/data implimentation was the most efficient, hi-tech and secure solution and that whomever was responsible for it then has since moved on.

    Realizing that this DHR wound is superficial makes me wonder what other financial trauma has happened, is still happening and how much OLA can thwart from happening.


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