Director Hendrick: ...share some good news, talk about the SNAP Program, 
talk about some of the information that was shared with the Legislature 
on our Performance Review, some about the SORC & NORCE plan, some IT updates, 
sequestered Federal funds are coming and talk a little about the road ahead. 
This is a long report, I'm not going to go through all of the mid-year report 
that's following... that we usually do. I'm going to go through part of it. 
But there's a lot of things we need to really address today 
that are in transition so, we'll run through a lot of these things. 
I want to spend a little bit of time talking about the starred item here, 
"Meeting with the Child Support Staff to reduce the risk of distributing 
IRS Intercept of fraudulent refund claims." 
There's kind of a big national scheme going on where people are 
filing false tax returns to get refunds. 
What they don't realize is sometimes those identities that have been stolen 
and for which they're filing refunds are persons who owe child support. 
So when they file that refund and we intercept the child support, we get the refund. 
Okay, but because it's a fraudulent return, we're going to owe that money back to the IRS. 
We've tried to... technically we should not be in that position because we are not... 
the Department is not the recipient of the funds, 
the custodial parent is the recipient of the funds. 
But the IRS, and this is a big problem nationally, 
is holding some states responsible for that. 
To the credit of our staff they've really got a better screening protocol developed 
than the IRS has developed for actually identifying which cases 
may actually be fraudulent returns. 
And actually, this is a very busy time of year as you might know, a lot of returns... 
particularly people filing for refunds based on the Earned Income Tax Credit, 
do so during late January through the middle of March because they get money back. 
If you owe money you usually wait until April 15th but if you're getting a refund you're filing... 
To our staff's credit, in the first week we deployed this new methodology 
they were able to determine over a million dollars, just in one week, 
of what would likely be fraudulent disbursements of resulted IRS refunds. 
I think you ought to be aware that this is still being worked out because, 
in my opinion, the IRS should not be holding states accountable for their receipt 
of fraudulent refunds because we're merely passing through the money. 
We're not the owner of the refund, we're just the transferee. 
So, this is being worked at nationally, I just want you to be aware of that issue on the... 
and, really be aware of the good work our staff is doing to actually intercept 
or at least identify, prior to distribution, cases that have a high likelihood 
of being a fraudulent filing. 
We'll just rush through on these other things. 
I want to make a, really nice event here, the Black Heritage event that the Office of Civil Rights... 
each year they do a really good job. 
Also, an appreciation I'll show you in a little bit from now, 
on our Support Services Staff who really made the holidays special for thousands of foster kids 
by their really working to get the gifts distributed statewide. 
It's a very large undertaking we'll talk about in a minute. 
And we had a very nice adoption party this last Saturday. 
Good News: about 75 kids last Saturday, Douglas High School and Permanency staff, foster parents, 
prospective adoptive parents all attended a very nice event. We do this three or four times a year. 
There's another event coming up in Stillwater in a few weeks. 
So, we're able to identify good homes and good matches for kids out of this process. 
Very well attended this last year. 
I want to recognize Karl Haucke who's the supervisor of the Supply Warehouse group. 
Now, this is a van just to show you one example of a lot of the gifts that we distributed. 
But Karl's group actually drive bobtail semi trailers. This is simply a van distribution. 
So, the amount of gifts that were able to be redistributed across the state from donors to families, 
more than 6,000 children got their requested gift list. 
And the coordination that's really necessary to make that happen is remarkable. 
So we had a really nice event to honor Karl about a week ago 
and I just wanted you to be aware of this. 
Leon McCowen is a long-time Regional Administrator in Dallas and he was in my office yesterday 
for a plaque presentation because he couldn't be here today. 
But Leon has done a great job helping us through as our Regional Administrator. 
I don't know, I think he's been with the Federal Government more than 30 years, 35 years. 
Very kind about the way in which our agency has, really... I mean, he just couldn't say enough 
good things about the experience in all the different divisions, Child Welfare, Family Support, 
all these divisions that we work with the Federal Government on 
and Leon's been a really good partner to make all that happen. 
We also received an oral confirm... I've told you the last two months about my concern 
that we were at risk of a penalty because of some very complicated statistical analysis 
that's involved in how you compute before and after data. 
But we've received oral confirmation from our Regional Office that we'll get a Federal letter 
from the Federal Government telling us that we have cleared through all their data stuff. 
I've actually done quite a bit of work in the last month trying to understand better 
what they were doing with the data and they concluded on their own that we did pass 
the last indicator that I was concerned about. 
So we should be able to get a written confirmation that we will have successfully completed 
our Program Improvement Plan as part of the last Child and Family Services Review 
that was conducted three or four years ago. 
We finished Federal Year 2011. 
Internal auditors on the SNAP Program ended the year with a 96.1% accuracy rate, 
that's a 3.9% error rate. 
Ten years ago that would have been the lowest error rate in the nation. 
Now, it's probably a little better than average. 
There are some states that have very low error rates. 
Our staff has done... and this is what's really remarkable about this, 
this is again, with a 40% increase in the number of people getting services over three years ago 
and a 12% reduction in staff. 
So to be this accurate with that much volume really says a lot about how hard 
people are really working to get it right. So, very nice job. 
Last week, in the Official Journal of the American Academy of Pediatrics, 
this article appeared written by Mark Chaffin and others from the University of Oklahoma College of... 
Department of Pediatrics at the Health Sciences Center. 
And it is the official peer-reviewed results of the statewide assessment 
of our SafeCare Program in Child Welfare. 
So, I don't know of anybody else who's getting official publications in 
the Journal of the American Academy of Pediatrics documenting the efficacy of the protocols 
that we're doing for Child Welfare safety practices. 
The documentation really looked at more than 219 home visits and examined more than 2,000 children 
and their care that they received and did a detailed analysis to show how we've improved 
and how we've been able to document the practice that's documented in the SafeCare model. 
So, I'm very happy for Dr. Chaffin and the folks at... 
and it took a lot of our staff's willingness to cooperate with them to design the study, 
to get the University to approve all the peer reviews that are necessary to make all that work, 
so I'm very happy for the official publication to finally come out now. 
I would encourage you, if you have not attended any lecture series ever, 
to go on Friday, March 30th to the History Center to hear Craig Ramey. 
Craig Ramey is probably, in the 13 1/2 years I've been here... 
I first heard Craig speak in August after I became Director on July 1st. 
And, probably, Mike's been here long enough to know some of the presentations I've given 
ten years ago about the valuable research that Dr. Ramey did 
at the University of North Carolina, Chapel Hill on the Abecedarian Project. 
That research has really helped us design what would come to be 
our Reaching for the Stars Program, which is now recognized 
by the National Association Child Care Resource and Referral Agencies 
as either the number one or number two, I think this year we're number one, 
some years we're number two, program for quality and monitoring and practices, 
policies in our Child Care Licensing Program. 
So, you will really enjoy... we're very fortunate to have him back.
He's not been here probably in eight or nine years, he came to actually review 
some of the two-star centers that we'd already certified to see whether or not the two-star centers 
had something comparable to what was delivered in Abecedarian. 
In his opinion, not fully, I mean he looked at a few sites but what he observed in the sites he saw, 
he said it was somewhat comparable to Abecedarian quality. 
And then of course another piece of this is we now have more than 200 three-star child care facilities. 
When we started this initiative we had zero three-star child care facilities, 
which are all nationally accredited. So, I give Craig a lot of credit for that. 
I don't know what he'll say except talking about early childhood again. 
And Craig was also the person appointed by Congress to assess 
all the Headstart programs in the country. 
So I can't tell you how much I've... how strongly I believe in what Dr. Ramey stands for 
in his research and over his whole lifetime. 
SNAP - This is the fourth consecutive month we've actually had a decline in SNAP. 
You can see in January we had 616,000 people. 
We still had more people in January 2012 than in any other January ever. 
We still had more people in the last six months than in any six month period ever. 
But it is a slight drop from December and you can see in February, 2011... 
February tends to be a month when we have a drop from January, 
either it's a shorter month or whatever. 
But whether that'll happen in February this year or not, we have an extra day 
in February this year, it may not happen. 
But we're seeing a plateau-ing here between 615 and 625 of the SNAP Program. 
But notice it's up 40% over 36 months ago, so it's still plateau-ing at a very high level. 
I want to show you 11 of the slides, some of you've seen before, 
but just to refresh your memory on some of the things that were shared 
with the Legislature in our annual performance review. 
This slide, I think, is one that is most critical 
because of the nature of the work that we're doing. 
We're down 9%, we're actually down deeper than that. 
2011 we had 7,257 FTEs. OPM says we're now down just below 7,000 on the FTE. 
So the number of employees is continuing to decline while the demand for services, 
as you can see, whether it's Child Support Collection, Subsidized Adoptions, 
we're going to be almost 13,000 children, by December 31, 2011 on Subsidized Adoptions, 
so that's continuing to grow. SNAP, 880,000 people, just an enormous amount of demand. 
This is a slide you've seen before but, again, just so you'll remember it. 
The state dollars are these $413 million in the red, $90 million in the pink 
and the $67 million in the yellow and these are the state dollars we use 
to get the Federal dollars here and here. 
These are the state dollars that by Federal law cannot be cut, 
so these are all maintenance of effort obligations. 
When we get the Governor's budget, for example, purposes that we have $537 million or so 
which is exactly the same appropriation we had from last year. 
What that means is about a $30 million cut for us because our State Budget Work Program 
has about $40 or $50 million of one-time funds which we won't have as much ability to have 
for carry-over going into 2013. So, we're looking at a very large cut. 
All those cuts will have to come out of either these $413 million here, 
which means reductions here and here, or they'll have to come out of these 
100% state dollar programs and some of these really can't be cut either. 
They're like rates, for example, for kids in Adoption Subsidy or foster care 
who don't qualify for Federal financial participation. 
You'll have  a very large challenge in terms of putting together the 2013 budget 
unless there's a commitment to give quite a bit more money here. 
Another thing to think about is the number of jobs that are supported. 
These are all private sector jobs. We talk about being down to 7,000 employees internally. 
You know, here's 30,000 jobs right here that are all private sector jobs 
that are supported by the work that we do here. 
Sometimes people think about, "Well, it's a government job, or it's a private sector job." 
These are private sector jobs funded by the government. 
So, it's not... there's going to be a lot of further reductions in private sector employment, 
is the point, as budgets continue to contract 
whether they're our state budgets or Federal budgets. 
This gives you a little bit more precise assessment of where we are on the food stamp demand. 
You can see, here are the number of employees we had on July of '09 doing food stamps, 1,432, 
now down to 1,258 - a 12% reduction in employees. 
Doing food stamps in July, we had 509,000 people. 
For the 12 months, ending June 30, 2009, for those 12 months we served 
almost a little under 700,000 people in State Fiscal Year 2009. 
693,000 people in State Fiscal Year 2009, for at least one month. 509,000 in that month. 
By three years later, we're serving another 190,000 people 
who've never been in our offices before. 
So in 36 months, 190,000 people who have never been in a DHS office before, 
in those 36 months came to see us just for food. 
187,667 - 27% increase in the number of different people. 
You can see that this is 106,000 people just month-to-month increase. 
Another thing to think about is in 
January of this year, we had 616,000 people on SNAP. 880,000 during this last year. 
The good news about that is that there's about 165,000 people, the difference 
between those two numbers, who were not on food stamps in January 
who had been on food stamps for at least one month in the previous 11 months. 
So, big challenge... and this is, kind of, the rate of moving folks to the OKDHS Live website. 
We're getting continued progress of picking this up here. 
This is really, we think, it'll be a very nice value for us in the long run. 
It's taken us a year and a half to get to where we can get out here 
and get advantage of all this leverage out here. 
This is moving people to telephone lines and moving web-enabled services, 
now, there's quite a process improvement we feel pretty good about, 
will be valuable for us down the road. 
Now, this slide is just showing the growth in child support collections over the last decade 
and that contribution to the reduction of the number of children 
who've been confirmed to be abused and neglected. 
So you can see, that this red line here shows that in 2000, we had about 16,000 victims 
per 1,000 children in the state the last two years. 
We're going to have a little increase this year but also we won't go back up to 2008 levels 
but we'll go into 2009 levels. We're going to be in this 8.5 to 10 per 1,000 victims. 
So that's still a significant drop from where we were ten years ago. 
Most of it is attributable to either this growth in child support collections 
or due to this growth in adoption subsidy. 
You can see the number of children we support in adoption subsidies in 2000, was around 4,000 
and we're now supporting, at June 30, 2011, we're supporting a little over 12,000 
children in adoption subsidy. At December 31, 2011 almost 13,000 children. 
So, we're continuing to make that progress in terms of... 
Now, the bad news about this is, let's go back and talk about the bad news. 
The bad news about this is we are continuing to see a particularly large growth 
in the prevalence of out-of-wedlock births to mothers under 30. 
The New York Times reported two weeks ago that nationally the number of births 
to mothers under 30 has now, out-of-wedlock births has now exceeded 50%. 
A little more than half... more than half of all births in the nation now 
to mothers under 30 are to unmarried mothers. 
So, and our numbers will be very close to the national numbers here also. 
So, you're going to see a lot more fragile families, a lot more demand for Child Support, 
a lot more demand for all kinds of social services, more child abuse 
and neglect from fragile families. 
Those families, on the average, break up at a much faster rate than couples who marry and divorce. 
Couples who are still together... 80% of the couples that have a kid together 
are still together when the child's born. 
20% of the children who are born to mothers who are not married 
experience pre-birth paternal abandonment. 
But the length of time that the unmarried couple stays together is substantially shorter 
than the length of time that married couples have, who also divorce. 
So something to ponder here. 
Commissioner: Before you go on, I... 
Director Hendrick: Go ahead. 
Commissioner: A quick question - back on the Oklahoma Adoption Subsidy up here, 
I'm missing the connection. Okay you have the line, the red line... 
Director Hendrick: The red line is the number of victims of child abuse 
and neglect per 1,000 children. 
So, on the right-hand side you can see that in 2000, we had about 16 victims per 1,000 children. 
In 2002, for example, we had about 16 victims, also per 1,000 children. 
You get to 2007, we're down to about 14.5 victims. 
Get down here to 2009, we dropped to 8, in 2010... 
all these things are, it's the cumulative effect of getting both, I think, 
a growth in child support collections... no one factor's contributing to this. 
But this adoption rate is twice the national average. 
Commissioner: So you're thinking... Are you...? 
Director Hendrick: Let me finish that idea, just so, I think it'll help understand it. 
If we were adopting at the national average rate, instead of having... 
Commissioner: It'd be less. 
Director Hendrick: Which we, well, it'd be 50% of this if we were adopting 
at the national average rate. 
Instead of us having 12,000 children here on June 30, 2011 we'd have 6,000 children, okay? 
We'd only have 6,000 children in Subsidized Adoption, if we were just doing the average. 
We'd only have 6,000 children. So, where would those other 6,000 children be? 
Commissioner: Back in the bad... 
Director Hendrick: Back where they were. Okay? 
Where would this other number be then? That number would be a lot higher. 
Commissioner: I got you. 
Director Hendrick: Okay? All right, This chart is an eye chart that hurts you, 
I know, but let me just tell you the real easy way to look at this chart. 
This goes back from July of '97 to July 2010. 
The top line is the number of persons who get community-based services 
for developmental disabilities. 
You know we have this big furor going on about SORC and NORCE 
and that's an important thing for all those people involved, 
an important thing for whether they stay or whether they leave. 
The good news here, though, is that in July of 1997, this is a 13-year line, 
in '97 we were serving 2,500 people in the community. 
We're now serving more than 5,000 people in the community. 
The bad news is that these bar charts represent the number of people 
who are waiting to receive services. 
They've signed up, these folks have been waiting for more than three years, these folks two years, 
these folks one year, less than one year. 
So the number of persons, because we're not getting any money, we can't move the list, 
when we get money we move the list and this number drops, 
when we get money, we move the list and the number drops, 
the bar charts drop when we get money and these numbers go up. 
If we don't get money, we can't do much. 
So, the point is, I'm hoping that, among other things, when you think about 
where the budget's going to be in 2013, you'll remember the folks 
who need services on this waiting list and that's kind of the main point here. 
Continued progress here, this shows the difference between costs forADvantage Waiver service.
2011 it was $29.60 versus a nursing home bed, $100.49 a day, these are day rates.
The average ADvantage Waiver recipient cost about less than $30.00 a day, 
the nursing home beds cost a little over $100.00 a day.
You can see we've hit crossover where we now have more people in the community 
and it's saved us money by now we serve about 5,000 less people in the nursing homes 
at $100.00 a day, that's all good.  
And now the kind of a bad thing for us, as an agency, is all the savings 
from 5,000 fewer people in nursing homes that cost $100.00 a day, 
those savings go to the Health Care Authority. 
The cost to do the $30.00 a day, we bear that cost. 
We've had a little bit of drop here, several reasons for it, one is improved billing practices, 
better case monitoring but, that's what that is. 
This is another very important chart. 
I want to spend a little bit of time making sure you understand this even though I spent 
quite a bit of time with the Legislature to really explain this. 
I think this is very important. 
You'll notice that in 2005, this is the number of employees we had. 
2011 it's about the same number of employees, no big difference in '05, '06, '07, '08 and '09. 
Notice in 2005 the cost for our health insurance per employee was $6,000.00. 
It's now $11,000.00 per employee. 
So, it's costing us a little over $5,000.00 per employee more to provide health insurance 
for our employees than it did in 2005. 
This is, we're really over here in 2012 right now, this number would be even bigger 
if this went over into 2012, not a lot bigger but it'd be a little bigger. 
Notice that in 2005 our retirement costs, by statute, we're 10% of payroll. 
So we, at that time, were spending about $3,000.00 per employee for retirement costs. 
The Legislature amended the statute and said to put more money into OPERS 
and so we're going to put 11.5% in 2006, 12.5% in 2007, 13% in 2008, 
14.5% in 2009, 15% in 2010, this stayed here on the year 2011 but 2012, 
this is 16.5% over here, in the current year, okay? 
Notice that it was costing us $3,100.00 per employee. 
By 2011 it cost $5,200.00 per employee. So, what does that mean? 
It means that our costs, total costs in 2005 for retirement 
and health insurance was about $67 million. 
The next year was $77 million, so a $10 million increase. 
The next year was up $12 million, so $12 million, this is really $22 million though 
between these two years, plus the $10 million here, we've spent $32 million 
between these two years combined increased retirement cost. 
Then if we go compare this year, yet another $33 million between those two, 
so now we have about $60 million it's cost us for health care and retirement costs 
in just those three years. 
Take the difference between this $110 million, this $66 million, that's about a $40 million, 
another $40 million, so what are we up to now? 
$100 million, just through 4 years, then you take the difference between this $119 million 
and this $60... as you can see we're above $150 million. 
And we go $114 million here, now we're up to about $200 million. 
When you look at the cumulative effect of all these... what could we do with $200 million? 
We could buy a lot more Child Welfare Workers, we could move a lot of people off the waiting list, 
we could hire more staff to collect child support. 
The failure to contain the retirement costs and the failure to contain health care costs 
are seriously impairing the ability of state government to deliver services. 
So, you can see, just in these years combined, almost $200 million, 
maybe a little over $200 million cumulatively. Just in this one year, just compare one year. 
It's between $66 million and $114 million, you know, that's $50 million bucks in round numbers. 
So, it's a 78% growth over 6 years and this doesn't count what 2012 looks like. 
We'll have another percentage increase in 2012. 
So just something to keep aware of ó there's no increase in appropriations from the Legislature 
to cover these costs, by the way. Okay. 
Future plans for SORC and NORCE - this is the same slide you saw last month. 
The main thing here is the key vision points were to avoid capital costs, 
listen to the desires to all involved, develop a plan that was feasible 
and recognize the situation is difficult for everybody. 
I think that's the most important thing. 
Current status of where we are - last Commission meeting, Commissioner Peck met and Wilkerson met, 
I think both were reasonably satisfied with the plan the Department had submitted to the Legislature. 
At that point they were anyway. 
Then I had an independent discussion with Commissioner Lane 
and he said that if Mr. Peck was satisfied, he was satisfied. 
Yesterday, though, the House voted on a voice vote to disapprove the plan 
by adopting a Concurrent Resolution. The Senate may consider the resolution soon. 
If the Resolution is adopted and the plan is disapproved, the statute is silent about future steps. 
However, the statute that required the submission of the plan repealed the prohibition 
against closing the facilities. Okay? 
There was a previous prohibition against closing the facilities. 
That was repealed when the statute was amended to say the Department shall submit a plan. 
Therefore, if the Resolution is adopted across the street and the plan is disapproved, 
nothing would prohibit the Department from proceeding immediately to close the facilities. 
Similarly, only the lack of funds would prohibit the Department from building 
a million-dollar modern institution. That's the beauty of the plan. 
Each side gets some of their desire. 
Those who think, they're voting to keep the facilities open might be surprised to realize 
they are voting to close the facilities and may soon see a vacant campus for sale. 
Similarly, those who think they're voting for community-based services and desire the facilities 
to be closed may soon see construction crews spending millions of dollars on capital enhancements. 
My caution to everybody is, think about what is going on here and be sure 
if you really want to go down this road. 
To me, the best of both worlds is for people to work out, over some period of time, 
what they believe that is best for them. 
That was what, from my perspective at least, I had heard when I met with families 
that were involved in the situation, so very difficult situation for everybody involved. 
I just want everybody to be aware that there are significant consequences to both sides, 
as you process what should happen in the future. 
What I'm going to show you here is a few of several slides that were presented 
to the Director of the Office of State Finance, Terry White, Terry Cline, Finance people 
and some folks from the Data Service Division, and the Data Services Division 
of the Office of State Finance about the consequences to DHS of IT consolidation. 
The first consequence is that there would be an immediate loss of Federal funds. 
One consequence is there is an immediate loss of Federal funds if we're consolidated. 
We'll lose $537,000.00 a year in depreciation. We will lose a couple of grants - $1.78 million. 
We'll have the loss of Federal financial participation 
because the SWCAP methodology will not be used. 
And, then we'll lose the Public Assistance Cost Allocation Plan. 
Then, we'll have some unknown losses depending upon how staff are reallocated, 
for which we would lose control of how that works. We will lose allocated costs. 
IT costs are presently $50.5 million. 
IT costs are presently reimbursed at 56%, $28 million Federal, $22.2 million state. 
What makes this complicated is, I'm sorry this is kind of white on the screen where, 
it showed up better in your printed copy. I think, maybe you didn't need it. 
Sure looked better on my computer screen, let's put it that way. 
There are five methodologies for allocating costs in the Public Assistance Cost Allocation Plan. 
The agency indirect costs, the direct allocations, so in other words, if a program, like say 
if a person works exclusively on child support those IT costs 
are direct allocations to Child Support. 
Then there are random moment allocations, which are right here in this little... group here. 
Literally, people will get a call or an email that will say, "What program are you working on now?" 
There is a formula that allocates those costs based upon that random moment allocation. 
Then there are stepdown costs and I can't even read this, there are some other allocable costs. 
The point is there are five different methods for allocating 
these Federal costs that are fixing to change. 
The allocated loss of Federal funds will also mean that we will change 
from having about 56% of our current costs funded with the Federal Government 
to about 51.5% of our costs funded with the Federal Government. 
In other words, we're still spending $51 million but presently we're able to get 
the Federal Government to pay $28.3 million. 
Our best estimate is that if we're at the same $51 million of expenditures, 
the Federal Government will only be paying for $26 million of those costs. 
So, we'll lose about $2.3 million per year that will have to be replaced with state dollars. 
There will be an increased cost. 
Our best estimate is there will be an increased cost in terms of our share of the costs to DHS. 
When you go look at the overall cost for IT for state government, our share of those IT costs, 
based upon the only service that we presently know about, which is email, 
it presently costs us $4.51 per mailbox per month to provide email service. 
OSF, this is the only charge that they've published so far: 
their cost is going to be $7.00 per mailbox, per month. 
If we have a 55% increase... now $7.00 a month for some agencies is a big savings. 
For some agencies, if you're a small agency that's a big savings 
because you don't have to hire people to do this. 
You've got 15 people in your agency, it costs you a lot of money to take care of 15 mailboxes. 
But we have so many people, we... our costs are $4.51. 
So, if we had to have a 55% increase our total cost would go from $51 million a year, 
up by $27.9 million. 
We'd have a $78.4 million IT cost if that same ratio applied to all other costs. 
So, we'd have to have an increase. 
If we had a 51% indirect rate on the $78 million in costs, we'd have to have 
$38 million in state funds. 
We presently have $15.8 million less than that in state funds to do that. 
Another challenge is we'd lose our Client-Based Customer Service. 
Presently, under the OSF-ISD model, they would have responsibility for client service and performance. 
We would be accountable for client service and performance. 
We're also going to be accountable for customer service performance for Federal reporting, 
creating efficiency between Federal and state government. 
But, we would have limited ability to remedy any performance issues. 
We presently get 24/7 emergency response on our Z10 mainframe and iSeries. 
Upgrades are implemented on off-hours and holidays to minimize disruptions to the staff. 
We have regular disaster recovery exercises and failover exercises with our vendors. 
We have annual planning documents that we're required to file with the Federal Government. 
This would be a new experience for OSF. 
If that was to go to them they would have to get the Federal Government 
to approve all the APDs, Advance Planning Documents. 
There's really not a good plan that's out there yet. 
So, the consequence of that is a lot of our people are leaving 
and many of our positions that are vacant are not being approved to be replaced. 
The proposed charge-back invoicing will not satisfy the Federal draws, 
there'll be a timing... the amount... there's not going to be the documentation 
of costs that's going to be required. 
The loss of Federal funding is definitely going to happen. 
The responsiveness, we believe, will be compromised. 
We're divorcing accountability and responsibility and our costs are going to go up. 
Our disaster response ability will be impaired as well. 
We've presented all this... this is all presently in the lap 
of the Director of the Office of State Finance. 
To his credit, I think he listened very well. 
He will have to make a decision about whether or not he will grant an exemption to us. 
This is not something they have done yet. I don't know whether they will or not. 
But I would just say if it's not granted, I think, in my opinion, we are going 
to see significant loss of state... significantly more state dollars 
to even sustain what we presently utilize. 
Commissioner: Help me understand one piece. 
You're talking about when OSF is on client services and performance, 
it sounds like we have all the responsibility but none of the control. 
Director Hendrick: That's right. 
Commissioner: Is that what you're saying? 
Director Hendrick: Yup. 
Commissioner: But, what does that, when you say they're responsible 
for client-services and performance, what kind of client services and performance are you talking about? 
Director Hendrick: The problem is there are no written agreements between... 
if we were going to go out and hire a private company to do what they propose to do, 
we would have service-level agreements. 
We'd have things that... we already have service-level agreements, for example, 
with our private vendors who handle our EBT services. 
And what we say in those service-level agreements is, 
"If you're down when we need your service, we're going to charge you a penalty 
for being down. We can't have you down." 
We've actually done that, we've charged vendors money for not having the ACS services up 
that need to be up for clients to use to get their money off their debit card 
for child support or they need to buy food. 
If that system is down we actually do... 
Well, are we going to be able to charge OSF if our system is down? 
Commissioner: They're a government entity. 
Director Hendrick: So, we're not getting the same kind of acceptance of responsibility. 
They've not entered into any service-level agreements that I'm aware of with any state agency. 
There's not any way to hold someone accountable for their non-compliance 
in the same way we are already holding private vendors accountable. 
Commissioner: On the ground level, you're talking about the folks who receive services from DHS, 
for, you say, getting money, getting... 
Director Hendrick: Whatever they need. 
Commissioner: They are relying on this computer system... 
Director Hendrick: Let me say it a different way. 
Right now, and we've had this happen, our system goes down sometimes. 
Those people work for us, they come in nights and weekends when we need them. Okay? 
If our mainframe goes down and our mainframe is run by a different agency, 
those people don't work for us. They come in whenever... we don't know. 
Commissioner: How many, just, citizens then, I'm trying to take a gander at the... 
Director Hendrick: Almost 900,000 citizens got food stamps from us for at 
least one month in the last year. 
Commissioner: Okay. And this deal, for this to go down and that influences that... 
Director Hendrick: Well, take another example, Child Welfare, 
what if you can't get your system up? 
You miss one day of inputting all the records that go into the system for one day. 
You know, records are being developed as we speak. 
That's why we have to have live, recurrent, concurrent ability to come back up. 
We didn't always have that. 
There was times when we thought a back-up system was... 
we're putting tapes at the Tax Commission so we'll have our data tomorrow. 
We take another tape and tomorrow we'll take a tape over and that'll be our back-up system. 
Well, if our system goes down, you know how long it'd take us to get back up? 
Maybe a month with just data over there. 
We've got to have the ability to just bring the system back up to where we can be live 
and pretty... I'll give you an example. 
In Virginia, for example, they had a physical failure of a piece of equipment. 
The probability of it happening was some very small fraction. It happened. 
They literally, because they didn't have disaster recorvery in place, 
they literally lost up to 30 days of having to rekey in all this data. 
They could do their business in paper but then they had to bring up 
the records electronically later, so they took up all that time, 
all the while people were coming in the front door. 
So, the loss of even a day of time is critical. 
Commissioner: Are you saying they're not planning for that? 
Director Hendrick: What I'm saying is we don't have any control over that. 
I'm saying that they probably are planning for it. But how thorough will they be in that plan? 
You know, if we were in a contract with a private vendor with that, we would know. 
We'd have a service-level agreement that would say, 
"This is what we expect you to actually deliver." 
We don't have any service-level agreements that I'm aware of. 
Commissioner: So are you saying we can't trust the government? 
(laughter) 
Director Hendrick: No, what I'm saying is you separate accountability 
and responsibility you got a bad idea. 
Commissioner: I got you. That makes sense. Thank you. 
Director Hendrick: Yeah. Sequestered Federal funds - Under the Federal budget arrangement 
there are some funds that are covered that are to be sequestered as mandatory funds, 
some are discretionary funds, some are exempt from being sequestered. 
Our best information is that cuts will be delayed until after the November elections, 
probably January 1st. 
Our best current estimate is that we can expect to lose a total of slightly more than 
$5 million for the six months from January 1, 2013 through June 30, 2013. 
We'll have about $1.165 million sequestered from mandatory programs and about $3.866 million 
from discretionary programs and here are the specific programs and the amounts. 
This is our share, the first column here is the total savings at the Federal Government level, 
and this is our share of those savings, for just the six months 
from January 1, 2013 to June 30, 2013. 
So, when we get ready to think about how much money we're going to put into the budget for 2013, 
the dollars that are on these two charts may not be here to support services 
that are presently being delivered. 
So, you actually have a deeper hole in our state budget than just these dollars here. 
So that's just FYI. 
Okay, the road ahead - for the agency a new Director and Commission unity, 
I really want to encourage you, I appreciate what you've done particularly in recent days 
to try to come together with some training and work together on some issues. 
I hope that that will continue to be. 
You have a lot of challenges with going forward and I wish you the best. 
I really, really, really do. Child Welfare plan is due by March 31st. 
You're going to get a little update from Deb on that, here today. 
Figuring out the future for SORC and NORCE is a big challenge in front of you as well. 
Managing uncertainty in IT, and then the budget for next year. 
I think the word here is 2013 is going to be a budget year where you're not going to have 
one-time funds like you've had in the prior years. 
Not to the degree, at least, that you've had in prior years to be able to avoid cuts. 
We're through with one-time funds in terms of our ability to do that. 
There might be a little bit but nowhere near the ability that we've had in prior years 
to finance recurring costs with one-time funds. Sequestration is coming, too. 
And, we have several senior staff members that have already, either publicly or privately, 
indicated that they are going to be retiring soon. 
A lot of talent to be worked in at the same time working on the budget for the next year. 
For me, I just want to say thank you. It's been a good run. I'm tired, but's been a good run. 
Thanks for giving me the privilege of working with you. It's been a good joy. 
I want to introduce Terri White who is the Commissioner of Mental Health 
and you've selected to be the Interim Director. 
Terri and I have had several meetings over the last month or so and she knows she can call me 
and I'll do what I can. And she's terrific... 
I couldn't be happier for anybody to be picked to step in here and do a great job 
and I know she will so... I'm very excited about that.  
(applause) 
Director Hendrick (continues): Okay, we're going to switch off and run through this other slide. 
I'm not going to spend much time, normally this is a long presentation 
and I'm going to just fly through this very quickly 
because I'm just going to show you some of the key points of where we are. 
This is the org chart, you've seen this before, just to put it in your mind two things. 
Let's go back here. 
There is pending legislation that would do some changes to our organization. 
You can figure out whether that's a good idea or talk to Legislators in that process, 
the pros and cons of that. 
But, I would caution you, as you do that, to think about whether you're going to continue 
to be able to get the efficiencies that the slide that I mentioned earlier has in it about, 
you know, 9% less staff, higher demand. If you can do that, that's great, if you think 
there's more value in doing that. 
I would look at organizational structural change through the lens of 
whether you really get efficiencies or not. 
That's, in my view, you know, we have the fewest number of employees we've ever had already. 
And we're serving the most people we've ever served. So just to keep that in mind, okay? 
Budget wise - this is our appropriation level for the current year - $514 million. 
We're running a $580 million State Budget Work Program. 
Actually the Legislature really considers our base to be $22 million more than this 
because we had some ARRA funds that are in this $580 million 
that could really be shown over here. 
So if you took $22 million add this number it'd be $537 million, 
that's the same number that the Governor has in her budget for appropriation for 2013. 
It's this $514 million plus this $22 million. 
So, that $535 million, you can see about a $45 million gap, 
some of which could be filled with some one-time money. 
You know, if you get $30-$35 million here... let's just run through the math one time 
for about two minutes here, maybe one minute, so you can just appreciate what that really means. 
Let's say you get what the Governor suggests and that's our appropriation, 
$535 million and then you get, let's say, $10 million or so that you've got in carry over 
and so $545 million, so you're looking at about a $30 million cut. Say, $35 million cut. 
If you remember about $90 million of the appropriation, by Federal law, cannot be cut. Okay? 
So all the cuts have to come out of the other moneys. 
So, if you're going to have State Budget Work Program of $550 million, $90 million of which 
is off the table, you're looking at about a $460 million cutable base from which 
you've got to find $30 million. 
So, $30 million divided by $460 million in round numbers is about a 7% or 8% cut. 
Plus the Federal dollars that you're going to lose by that 7% or 8% state dollar cut. 
So, a stand-still budget in the eyes of what the Legislature traditionally looks at 
in our agency really means a much deeper cut, another additional cut. 
Now that doesn't count... here's one other thing, think about it... 
there's three things that are happening, some people are looking at only one ball. 
The three things that are happening are: one, the revenues are going down. 
Number two, demand is going up. Number three, the costs are going up. Okay? 
People are looking at only at the revenue number. 
Remember when we talked about how much costs are going up for health care and retirement costs? 
If you do just the 7% cut that just takes care of the revenue, 
it doesn't take care of any cost increases. 
So if you have cost increases for health insurance and cost increases for other mandates 
and cost increases for the Child Welfare plan or something else, you're going to cut 9% of it 
to be able to cover those cost increases. So, just be aware of the challenge. 
And you guys have done this enough to where you'll be fine to get through it 
and we got great people that can help you work through it, we've got tremendous confidence in them. 
But, the word is "beware." This is going to be a very challenging budget to put together. 
These are the same... these are... this is the first time we've had below 7,000 FTEs 
according to the Office of Personnel Management. 
I looked back a few years ago, you know, we're paying, at the beginning... 
76% of our employees have a college degree. 
When I came here the number was like, 60%, 62% something like that. 
A significant increase in the number of people having a college degree here. 
But our starting salaries really are not respectable, in my opinion, 
for a person with a college degree. We really have to improve that pay. 
There's another cost, of course, for which we have no money. 
We could do something about that if our retirement and health insurance costs were not so excessive.  
We could actually pay our people better, which we should. 
This is the chart I was mentioning earlier, if you're going to look at organizational changes, 
can you continue to produce like this? If you can, more power to you, that's great. 
If you can't, be cautious about moving things that don't actually produce value. 
I'm going to fly on through here. These are the different programs by division.

(((51:35.69
 
TANF - you all are well aware of TANF. 
Number of TANF beneficiaries in the... all the charts give you, just a refresher here. 
The data are presented in three ways. If you look up at the top, it says, "at the end of the year." 
That's a point in time piece of data.  
Or the data is presented as a monthly average, that means you take the number of participants 
divided by the number of months. 
So, for example, in FY11, this is the number of months... number of participants and divide it by 12. 
This is the product of what's happened in the first six months this year. 
So, in the first six months of this year, we've served an average... 
sorry, an average of 3,762 adults. Why is this important? 
Why is this particular chart important? Why am I spending a little bit of time on this one? 
Why would the number of adults in TANF be dropping? What could cause this number to change? 
Well, one of the main things that happened in Welfare Reform was people went to work. 
As a result of going to work, people earned the right to get unemployment benefits, 
when they stayed home they didn't earn the right to get unemployment benefits. 
They went to work, they lost their job, they got laid off, they get unemployment. 
If you never went to work you never got unemployment. 
Now you go to work, you get unemployment. 
So, we have been spared a big jump in TANF in one of the worst job markets ever 
because people went to work and now when they've been displaced, they're getting unemployment. 
Now, what happens when the Congress chooses to not extend unemployment? 
When Congress decides they're not going to extend unemployment 
this number is likely to jump by a whole lot. 
So, the $12.5 million the Commission chose to put back into reserve is a wise savings 
for such a time as this maybe. 
In the event we actually have unemployment losses of significant kinds, 
if Congress doesn't choose to extend, at least people with kids who get some cash assistance 
through TANF where they're presently, probably getting some help through unemployment. 
Child Beneficiaries is about the same number, monthly average numbers. 
Unduplicated counts - This is... this one slide here is just for people who... 
by Federal law nobody gets more that 60 months of cash assistance in their lifetime. 
So, if a young mother, 19, 20 years old with two kids comes in and needs help 
and she stays on TANF for four years, trying to get a job. 
Now, we don't let people just stay on, I mean, you got to work. 
If you don't work, you don't work the plan at least, you can have 
your case closed for failure to cooperate. We don't just pay people money for 60 months. 
But, let's say she tries to work, can't find skills, she's impaired, something happens, 
can't get transportation worked out, lives in a sparsely populated area in a place where 
it has signif... double-digit unemployment. 
She's stuck there for three or four years okay, so she's burned up 48 months. 
Now, she's got her life back together, she's doing fine and she's 30 years old 
and has two more kids so now she's got four kids, she's 30 years old 
and her new husband abandons her. She's only got 12 months to take care of all four of those kids. 
So these cases here are people who qualify for a very limited exception 
to go above this lifetime 60 months. 
So, for example, these persons may have a case pending with the Social Security Administration 
for Disability Determination. 
Well, if the Social Security Administration hasn't yet decided whether the person 
is disabled or not, we're not going to say, 
"You get no more cash because you crossed the 60 month barrier." 
We're going to keep helping you until the Social Security Administration says 
you're either disabled or you're not disabled. 
So once they decide that, we will discontinue coverage but those are very limited cases. 
So you can just appreciate number of people who are presently being helped in this. 
Unduplicated counts - this is SNAP recipients... this is Medicaid. 
We do some of this, we don't do all of this, but you can see 
these are all Federal fiscal year data. 
Another very interesting thing about the comment I made earlier about the fact 
that more than half of all births in America are now to mothers under 30... 
more than half of all the births to mothers under 30 are now out of wedlock. 
What that means is the younger mothers who have the younger children are the most financially fragile. 
And, if you look at the Health Care Authority's most recent annual report, 
you'll recognize that last year 74% of all children under age five in our state were on Medicaid. 
Commissioner: What was that? 
Director Hendrick: 74% of all children under age five were on Medicaid last year. 
So, what I'm saying is youngest parents, younger children more fragility of very young kids. 
So, 65% of all the births are funded with Medicaid. 
This is... these are Federal fiscal year data, unduplicated number of recipients for Medicaid. 
We do part of the eligibility so that's why it's here. 
SNAP - This is the December 31 number, 620,000, 612,000 June 30th. 
A monthly average for the first six months of this year we averaged 621,000 people. 
Last fiscal year we averaged 609,000 people. 
So, we're on target again this year to have a record number of Food Stamp recipients, 
again this year. Not as big of a growth but still some growth. 
Unduplicated recipients - 881,000 last year. 
Think about this number right here, 756,000 different people, for the first six months of this year. 
Now, what's the good news that comes from that number? 
756,000 different people for at least one month 
from July 1st to December 31, 2011 were on Food Stamps. 
The good news is, that's 620,000 were in December. 
So, 620,000 from 756,000 means there was 136,000 people who were not on Food Stamps 
in December who had been on Food Stamps for either July, August, September, October or November. 
136,000 people were not on Food Stamps in December who had been on Food Stamps 
for at least one of the five previous months. ABD population - you're familiar with that. 
APS investigations - first six months, this is a monthly number, this is a December 31st number 
for the month of December, this is the month of June. 
Referrals for vulnerable adults for the first six months of this year, 
we're on track to have another about 17,000 referrals for the year. 
Child Care Subsidies - this is an interesting number here with Child Care... 
35,000 people in December. 
Now in the course of the year we'll have about 70,000 different kids get the benefit. 
But 35,000 were getting services in December, that's... 
usually we have about 38-39,000 and one of the reasons we were concerned 
when we were putting together the budget this year was that our co-pays would drop, 
we didn't have... we didn't do a co-pay adjustment and we still have seen some reduction. 
So that may help us spare that budget a little bit from what we... 
we may be able to come in with the budget... some of the budget savings we'd hoped 
because participation is down a little bit. 
Monthly average, 36,900. 37,000 compared to 39,000 last year. 
Adoption authorizations - here's the really big number for the first six months of this year: 
more than 1,000 children have been finalized in adoptions. 
So, a really terrific start on the year for this year. 
We've got a lot of work to do to get things... these are 6-month data here. 
Almost 13,000 children in December were getting subsidized adoptions. 
So again, no new money for these 600 kids... and normally this is not a problem. 
But the reason why this is a problem this year, unlike prior years, 
we're supporting 600 or so more kids with adoption subsidy for the last six months 
but normally we finance this growth with a drop in the number of kids in foster care. 
If you look at the total number of kids in foster care is down 
from about 12,200 four years ago to now, about 8,000 kids. 
But if you look at the last year's worth of growth, we've had actually a growth 
in the number of kids in foster care. 
So this is going to be a problem for us to be able to finance this growth in adoption subsidies 
because we're now also having a growth in the number of kids in care. 
Unless we can get the number of kids in care to drop also. 
Abuse and neglect investigation referrals, family-based referrals - we're on target to have 
about the same kind of year, maybe up a little bit from the prior year. 
Children - about the same, up a little bit maybe from last year. Actually, up a little bit more. 
We're on track to be about 120,000. 
Investigations completed - we're going to be in this 27-28,000 range again here. 
Investigations completed - about the same. 
About 50% all the way through here on confirmations, maybe up a little bit on that. 
You can see, 4,500 confirmed victims in the first six months, 
that's on track to be about a 9,000 number. 
So, remember when I was talking about we had 8 or 9 kids per 1,000, 
this is more like a 9 child per 1,000 victims this year. 
Up a little bit, plus the number of kids may be growing also, may also be, may affect it some. 
Trial reunification is a challenge. 
Let's talk a little bit about that just so you'll appreciate that. 
Under the Federal rules, trial reunifications counts as a child who's in care. 
In other words, because the child is in our legal custody, even though the child 
is physically back home with their parents they still count as being in foster care. 
So some of these kids may have been home since last March. 
But, they're still being counted in our foster care numbers because their 
trial reunification status hasn't been eliminated by the court. 
Trial reunification is down a lot right now for a number of reasons, I think. 
Getting fingerprints now is a requirement for trial reunification. 
That's slowing reunifications down. 
So, we'll have to see how that works out over the course of the next few months. 
Under the... Go ahead. 
Commissioner: You were talking in foster care about the process in the foster care family 
and fingerprints came up as one of the things that makes the system sluggish. 
What can we do, if anything, to take that logjam and eliminate it? 
Somewhere, someone's got to provide some leadership and some innovation to get the fingerprinting done. 
Someone suggested, and it may be sarcastic, that there be a mobile van fingerprinting unit 
that drives to people's houses and gets it done. 
Director Hendrick: Actually, there's a lot of work that's already been done on that 
so I'll bring you up to speed on that. 
The big logjam has to do with the FBI and has to do with access to quality images. Okay? 
If you go roll your fingers in a traditional ink run fingerprint and you send it to the FBI, 
they say, "We can't tell very much about this." 
You can play ping pong with the FBI several times. 
If you go get your fingerprints electronically scanned and send it to the FBI, 
they can tell within 24 hours whether they can read it. 
Okay, that doesn't mean they can tell, really pretty easy if they can read it or not, 
can't tell whether it will match or not instantly but they can tell whether they can read it or not. 
There are extremely tight rules propegated by the FBI on who can even look at a fingerprint. 
All of our staff has had to be fingerprinted and approved by the FBI to even look at a fingerprint. 
Even judges have to be fingerprinted before they can look at fingerprints. 
So these are all FBI protocols. 
So the Department of Education and us have worked together in an inter-agency arrangement 
to try to put out into... in a private RFP 
- I don't know what the exact status is but there is conceptual support and I think we're pretty close, 
maybe even on the street, I don't know - for an RFP, a private vendor... 
They have a private vendor right now that only covers about three sites in the state 
and we're going in with them to get this private vendor to jointly place maybe 10, 15 or 20 
different sites across the state so we can greatly expand the private access to the electronic image. 
So, there's a lot of work that's been done to get us further down the road with more sites. 
But using both of our purchasing power because they have to do it for all people who work 
with kids in schools, you know, we have to do it for all our foster parents 
and adoptive parents and those folks. 
Together we have enough "oomf" to justify the buying of additional machines 
for a private vendor to get it done. 
The problem is when you pay for those fees, the money goes to a lot of different places. 
So that's why the private vendor is really the best place to have that work 
because they're in the best position to manage the distribution of all the money 
that goes to different people as a result of the fingerprints. 
Some of it goes to the FBI, some of it goes to OSBI, some of it goes to other places. 
So, there's been a lot of work done on it. 
It's not finished yet, but people are talking, trying to do all that stuff. 
Unduplicated counts - I'll fly all the way through here. 
The main thing to say is that there were 9,828 different children without trial reunification, 
11,298 different children who were for at least one month 
in our legal custody over the last six months. So, dropping still. That's good. 
We'd like it to drop some more if we can and do it safely. 
We're going to fly through Aging Services here... Adult Day Care... Senior Nutrition. 
ADvantage Waiver - these are the same numbers you've seen, very little change really, 
in these numbers over the last year. 
One of the interesting things about Child Care though, you can see, 
at December 31st we only had 2,500 or so Child Care Homes. 
The number of people delivering child care at home is continuing to drop. 
Child care centers dropped some, but total facilities dropping some... 
Oops, sorry, I went through that too quickly. Child care slots really hasn't dropped some. 
So even though we have less licensees, the number of child care slots is only down 
about 1,700 out of 135,000. 
So, I think that's what you are seeing is a consolidation of the market. 
Two-star facilities - 996. 825 homes. Total, 1,821 two-star facilities. 
182 three-star facilities. 45 three-star homes. 227. 
I'm just very impressed the provider community continues to step up. 
And these are all nationally accredited facilities so a lot of progress is being made in this. 
Commissioner: Let me just add for the Commissioners who are keeping up in their printed report, 
we're on page 48. We just flipped through a bunch of slides, just in case anybody's catching up. 
Director Hendrick: Child Support Collections - I think the main thing I want to say here 
is this is a remarkable number for the first six months of this year. 
$160 million in the first six months. Why is that remarkable? 
Because that's on track to be $320 million. So what? 
Well, what it really means is they're probably going to be $330 or $340 million 
because most collections actually happen in February and March and April when we do tax intercepts. 
So, the fact that we have $160 million in December 31 is very good. 
I went through these different kinds of assistance; skip on through here. 
These are different categories of child support collections. 
This is a very interesting number here, these number of cases for child support, 
continuing to grow the number of cases. 
That represents about 220,000 children in these 202,000 cases. 
220,000 children, there are only 912,000 kids in the state. 
So, think, almost two out of nine kids in the state have a child support case with us. 
That doesn't count all the private sector lawyer who's collecting child support. 
These are just the people who come see us to collect child support. So, pretty significant work. 
Paternities - as you know we are the number one state in the nation for paternity establishment 
per capita... not just per capita but just in terms of the way we establish paternity. 
Very good job and we're on track to have another good year in terms of establishing paternity. 
DDSD - no big change in the facility population this year for six months. 
No big change in the waiver population, about the same from June 30th to now, to December 31.