Residential Energy
Oversight of Low-Income Home Energy Assistance Program Payments Gao ID: GAO-05-1039T September 27, 2005The Department of Health and Human Services' (HHS) Low-Income Home Energy Assistance Program (LIHEAP) is a block grant program with recent annual funding of about $2 billion that provides fuel payment assistance and payments for home energy efficiency improvements for low-income households. As energy prices continue to rise, this assistance is growing more important to mitigate the impact of higher prices on low-income households. HHS awards LIHEAP funds by formula to all 50 states and the District of Columbia, federally or state-recognized Indian tribes and tribal organizations, and territories. These grantees then provide energy assistance payments to low-income households. Within LIHEAP, the Residential Energy Assistance Challenge Option (REACH) program funds demonstration projects to help low-income families reduce their energy usage. GAO was asked to provide information on (1) HHS's oversight of LIHEAP payments made by grantees and (2) GAO's 2001 review of LIHEAP's REACH program.
HHS relies on individual grantees--the states, tribal organizations, and territories--to oversee the LIHEAP program. Because the Single Audit Act made state and local governments primarily responsible for obtaining independent audits of funds they receive from federal programs, HHS's principal oversight function is to monitor, not audit, LIHEAP payments made by grantees. Monitoring includes assessing the quality of single audits conducted under the act, reviewing audit results, and ensuring that corrective actions are taken to resolve audit findings. GAO's brief review of relevant 2004 Single Audit Act reports showed that the only LIHEAP costs that were specifically questioned involved relatively small sums--for example, one report cited incorrect or duplicate payments totaling $8,864. Another audit report questioned $1,285 in LIHEAP payments because of inadequate procedures to prevent overpayments. GAO's 2001 review of the REACH program found several projects that included social services that were not directly related to meeting home energy needs. For example, six projects included job skill or employment development services, and one project provided funds to help clients pay past-due rent or mortgage payments. In addition, the report stated that REACH did not have performance goals that were objective and quantifiable. As a result, GAO did not believe HHS could effectively evaluate the program's overall performance. The report also noted that such goals would provide a clearer basis for selecting individual projects to fund. GAO recommended that HHS develop performance goals for REACH that were objective, measurable, and quantifiable. While HHS agreed with this recommendation, GAO has been unable to identify any actions taken to implement this recommendation. According to HHS, the agency continues to work on the development of long-term performance measures for LIHEAP.
GAO-05-1039T, Residential Energy: Oversight of Low-Income Home Energy Assistance Program Payments
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Testimony:
Before the Subcommittee on Federal Financial Management, Government
Information, and International Security, Committee on Homeland Security
and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 2:30 p.m. EDT:
Tuesday, September 27, 2005:
Residential Energy:
Oversight of Low-Income Home Energy Assistance Program Payments:
Statement of Jim Wells, Director:
Natural Resources and Environment:
GAO-05-1039T:
GAO Highlights:
Highlights of GAO-05-1039T, testimony before the Subcommittee on
Federal Financial Management, Government Information, and International
Security, Senate Committee on Homeland Security and Governmental
Affairs:
Why GAO Did This Study:
The Department of Health and Human Services‘ (HHS) Low-Income Home
Energy Assistance Program (LIHEAP) is a block grant program with recent
annual funding of about $2 billion that provides fuel payment
assistance and payments for home energy efficiency improvements for low-
income households. As energy prices continue to rise, this assistance
is growing more important to mitigate the impact of higher prices on
low-income households. HHS awards LIHEAP funds by formula to all 50
states and the District of Columbia, federally or state-recognized
Indian tribes and tribal organizations, and territories. These grantees
then provide energy assistance payments to low-income households.
Within LIHEAP, the Residential Energy Assistance Challenge Option
(REACH) program funds demonstration projects to help low-income
families reduce their energy usage. GAO was asked to provide
information on (1) HHS‘s oversight of LIHEAP payments made by grantees
and (2) GAO‘s 2001 review of LIHEAP‘s REACH program.
What GAO Found:
HHS relies on individual grantees”the states, tribal organizations, and
territories”to oversee the LIHEAP program. Because the Single Audit Act
made state and local governments primarily responsible for obtaining
independent audits of funds they receive from federal programs, HHS‘s
principal oversight function is to monitor, not audit, LIHEAP payments
made by grantees. Monitoring includes assessing the quality of single
audits conducted under the act, reviewing audit results, and ensuring
that corrective actions are taken to resolve audit findings. GAO‘s
brief review of relevant 2004 Single Audit Act reports showed that the
only LIHEAP costs that were specifically questioned involved relatively
small sums”for example, one report cited incorrect or duplicate
payments totaling $8,864. Another audit report questioned $1,285 in
LIHEAP payments because of inadequate procedures to prevent
overpayments.
GAO‘s 2001 review of the REACH program found several projects that
included social services that were not directly related to meeting home
energy needs. For example, six projects included job skill or
employment development services, and one project provided funds to help
clients pay past-due rent or mortgage payments. In addition, the report
stated that REACH did not have performance goals that were objective
and quantifiable. As a result, GAO did not believe HHS could
effectively evaluate the program‘s overall performance. The report also
noted that such goals would provide a clearer basis for selecting
individual projects to fund. GAO recommended that HHS develop
performance goals for REACH that were objective, measurable, and
quantifiable. While HHS agreed with this recommendation, GAO has been
unable to identify any actions taken to implement this recommendation.
According to HHS, the agency continues to work on the development of
long-term performance measures for LIHEAP.
What GAO Recommends:
This testimony does not make any recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-05-1039T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Jim Wells at (202) 512-
3841 or wellsj@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I appreciate the opportunity to be here today to discuss the Department
of Health and Human Services' (HHS) Low-Income Home Energy Assistance
Program (LIHEAP) and our observations on oversight methods for
determining the sources and magnitude of possible improper payments. As
you know, LIHEAP is a block grant program established in 1981 that
funds fuel payment assistance and home energy efficiency improvements
for low-income households. With recent annual funding of about $2
billion, LIHEAP seeks to increase the health and prosperity of
communities and tribes by helping low-income households--particularly
those with the lowest income, which pay a high proportion of household
income for home energy--meet their immediate home energy needs. As
energy prices continue to rise, this assistance is growing more
important to mitigate the impact of higher prices on low-income
households. HHS awards LIHEAP grant funds by formula to all 50 states
and the District of Columbia, federally or state-recognized Indian
tribes and tribal organizations, and insular areas (American Samoa, the
Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, and
the U.S. Virgin Islands). These grantees provide payments to households
to help them meet their energy needs. According to HHS, in fiscal year
2004, approximately 4.6 million households received heating assistance;
308,000 households received cooling aid; 1.1 million received
winter/year-round crisis aid; 92,000 received summer crisis aid; and
112,000 received weatherization assistance. Households may receive more
than one kind of LIHEAP assistance.
Within LIHEAP, the Congress established the Residential Energy
Assistance Challenge Option (REACH) program, which provides grants that
fund demonstration projects to test various approaches to help low-
income families reduce their energy usage and become more self-
sufficient in meeting their home energy needs. In a sense, the REACH
program serves as a "laboratory" for identifying better ways to ensure
that low-income families can afford home heating and cooling. With
annual average funding of about $6 million--less than 1 percent, on
average, of the total annual funding for LIHEAP--REACH had provided 112
grants totaling $55 million by the end of fiscal year 2004. Individual
grants ranged in amount from $50,000 to $1.6 million.
My statement today discusses (1) HHS's oversight of LIHEAP payments
made by grantees and (2) our 2001 review of LIHEAP's REACH program. To
address LIHEAP payment oversight, we gathered information on the
payment oversight process and conducted a brief review of 2004 Single
Audit Act reports that addressed LIHEAP. Specifically, we queried the
Single Audit Database from the Federal Audit Clearinghouse to identify
2004 Single Audit Act reports that addressed LIHEAP. We then examined
those reports that had findings to determine the nature of the findings
as they related to LIHEAP. Our discussion of the REACH program is based
on our 2001 report, which we conducted in accordance with generally
accepted government auditing standards.[Footnote 1] We did not update
our 2001 report on the REACH program.
LIHEAP Payment Oversight:
As a block grant program, LIHEAP offers much flexibility to states and
other grantees to manage and oversee their energy assistance programs
in the way that they feel best serves their low-income populations.
While the federal government establishes overall guidelines, each
grantee operates its own program, taking applications, establishing
eligibility, and making decisions on the kinds of assistance payments
it will offer. HHS accepts the grantee's interpretation of the LIHEAP
statute unless HHS finds it to be "clearly erroneous."LIHEAP payments
are subject to review under the Single Audit Act. The Single Audit Act
made state and local governments primarily responsible for obtaining
independent audits of federal programs, including payments made under
LIHEAP. As a result, HHS's principal oversight function is to monitor,
not audit, LIHEAP payments made by grantees. Monitoring includes
assessing the quality of single audits conducted under the act,
reviewing audit results, and ensuring that corrective actions are taken
to resolve audit findings. Through the audit or other federal review
processes, grantees must return funds when spent in ways contrary to
the LIHEAP statute. Our brief review of 2004 Single Audit Act reports
addressing LIHEAP showed relatively few specific LIHEAP-related audit
findings. In some cases, grantees were found to have not met accounting
criteria for managing federal funds they were awarded--both from LIHEAP
and other programs--so it was difficult to distinguish any specific
improper LIHEAP payments. For example, one grantee lacked adequate
documentation to support costs it charged to manage its federal funds.
We were able to identify only certain relatively small LIHEAP payments
questioned in the audit reports, such as $8,864 in what appear to have
been incorrect or duplicate payments made by one grantee. Another audit
report questioned $1,285 in LIHEAP payments because of inadequate
procedures to prevent overpayments.
In addition to the Single Audit Act, the Improper Payments Information
Act of 2002 requires federal agencies to review their programs and
identify those that may be susceptible to significant improper
payments. Agencies are required to estimate the annual amount of
improper payments and submit those estimates to the Congress; when
improper payments are estimated to exceed $10 million, those estimates
must be accompanied by a report of actions being taken to reduce such
payments. As part of this process, HHS has conducted risk assessments
identifying specific program risks and assessing related controls.
Although HHS identified seven of its programs as high-risk, LIHEAP was
not among them. We are not aware of any more comprehensive information
on the appropriateness of payments made by LIHEAP grantees other than
the few examples discussed above.
REACH Program:
While we have not reviewed overall LIHEAP compliance, at the request of
the Senate Committee on Health, Education, Labor and Pensions and the
House Committee on Education and Workforce, in 2001 we did review and
report on REACH--a small part of the overall program. We found that
many REACH projects involved energy-related repairs to homes and budget
counseling, and three state REACH projects were developing consumer
cooperatives to purchase electricity or bulk fuels, such as heating
oil. However, some REACH projects made payments for social services not
directly related to meeting home energy needs. For example, six
projects made payments for job skill or employment development
services, and one project provided funds to help clients pay past-due
rent or mortgage payments.
The legislation authorizing REACH identified three performance goals
for individual REACH projects: reduce energy costs of participating
households, increase the regularity of home energy bill payments, and
increase energy suppliers' contributions to reduce eligible households'
energy burden. Despite these broad purposes for the program, in 2001
HHS had not developed performance goals that were objective and
quantifiable. Consequently, we did not believe HHS could effectively
evaluate the program's overall performance and report to the Congress
on what was accomplished for the resources expended. We also noted that
developing such goals would provide a clearer basis for selecting
individual projects to fund. Our report recommended that HHS develop
program performance goals for REACH that were objective, measurable,
and quantifiable. HHS agreed with the recommendation and planned to
develop performance goals for REACH as part of the agency's Government
Performance and Results Act (GPRA) plan. However, the most recent FY
2005 Performance Plan did not include goals for the REACH program under
LIHEAP. We have been unable to identify any actions taken to implement
this recommendation. According to HHS officials, they have continued to
examine this issue and work on the continuing improvement and
development of long-term performance measures for the overall LIHEAP
program.
Mr. Chairman, this concludes my prepared statement. I would be happy to
answer any questions that you or other Members of the Subcommittee may
have at this time.
Contacts:
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this statement. For further
information about this testimony, please contact Jim Wells at (202) 512-
3841 or Wellsj@gao.gov.
FOOTNOTES
[1] GAO, Residential Energy Assistance: Effectiveness of Demonstration
Program as Yet Undetermined, GAO-01-723 (Washington, D.C.: August 17,
2001).
