Since our 2002 report, the Children's Medical Services Program has taken steps to implement our recommendations. However, the program encountered problems developing a new information system, and it currently plans to merge data into another system that is not expected to be completed until June 2005. While the program expanded privatization by establishing a new Integrated Care System contract, all client groups are still not covered, and data limitations continue to impede full implementation. The program has consolidated administrative functions from 22 area offices into 8 regional offices, thus reducing duplication and producing annual cost savings of $700,000.