approach resulted in too many hands touching a single case, according to the state.

On the other hand, Daniels said Indiana will retain electronic document technology, fraud prevention measures and other improvements developed by IBM.

"The fraud which was rampant in the Indiana welfare system has apparently stopped," Daniels said. "There hasn't been a single allegation -- let alone conviction -- whereas there were dozens before. And official reports say more than $100 million was stolen in the last year before we began to try to make this change."

Still Expecting Savings

Although the modernization will be scaled back, Daniels still expects the state to save about $40 million over the next 10 years -- $10 million less than was estimated under the IBM outsourcing arrangement.

The governor, who has been a proponent of privatizing state services, denied that the initiative's problems stemmed from outsourcing. "This has nothing to do with a private or public agency doing the work. It has to do with the concept itself," he said. "If we would have brought in that same concept that IBM used and had state workers do all of the work, we would have had the same result, or worse."

Daniels also disagreed with criticism that the state lost too many experienced eligibility workers during its transition to the outsourced system.

"A lot of them needed to be gone; they were the ones giving money to their cronies and friends," he said. "They were running the worst welfare system in America, ranked number 50 in Welfare to Work. The federal government sanctioned Indiana for the failures of its system, so doing nothing was not an option."

Under the modernization program, 1,500 of the FSSA's 2,200-member work force were transferred to IBM, which was required to offer them jobs for a minimum of two years. Daniels said Thursday that he didn't know how many former state workers remained with IBM or its subcontractors.

Both Daniels and Buscemi said FSSA employees still make all final eligibility determinations under the new system. Private workers help citizens through the application process until the application is turned over to a state employee for authorization.