Low-Income Home Energy Assistance Program
Greater Fraud Prevention Controls Are Needed Gao ID: GAO-10-621 June 18, 2010Federally funded at about $5 billion a year, the Low-Income Home Energy Assistance Program (LIHEAP) provides financial assistance to low-income households for heating and cooling costs. The Department of Health and Human Services (HHS) awards LIHEAP funds based on low-income populations and other factors. Grantees--states, the District of Columbia, territories, and Indian tribes and tribal organizations--then provide energy assistance payments to low-income households. GAO was asked to audit (1) the risk of fraud and abuse in LIHEAP in selected states; (2) case studies of fraudulent, improper, and abusive LIHEAP activity; and (3) key weaknesses in the design of LIHEAP's internal controls framework. To meet these objectives, GAO analyzed LIHEAP data from seven states for fraud indicators, interviewed federal and state officials, performed investigations, and conducted proactive testing in two states using a bogus company, individuals, addresses, and documents. The seven states were primarily selected based on size of LIHEAP grant and availability of centralized database.
LIHEAP is at risk of fraud and improper payments in all seven of our selected states. About 9 percent of households receiving benefits--totaling $116 million--in the selected states contained invalid identity information, such as Social Security numbers, names, or dates of birth. Although some of these cases are likely due to simple errors such as typos or incomplete data, thousands of other cases show strong indications of fraud and improper benefits. For example, the identities of over 11,000 deceased individuals were used as applicants or household members for LIHEAP benefits. Hundreds of individuals were used as applicants or household members even though they were incarcerated in state prisons, making them ineligible. Finally, we identified over a thousand federal employees whose federal salary exceeded the maximum income threshold when they applied. We nonrepresentatively selected and investigated 20 cases that either validated the potential fraudulent activity noted above or illustrated other improper activities. Although states are primarily responsible for preventing fraud, LIHEAP's internal controls framework has several key weaknesses. HHS has not provided specific guidance to states, instead issuing only broad regulations for states to establish appropriate systems and procedures to prevent fraud. The selected states do not have an effective design for a comprehensive fraud prevention framework. In fact, the states lack key efforts in all three crucial elements of a well-designed fraud prevention system: preventive controls, detection and monitoring, and investigations and prosecutions. Specifically, states lack essential preventive controls by not verifying identities or income. Some states automatically enroll certain individuals based on their eligibility for other programs. Although efficient in reaching similarly targeted recipients, this practice is dependent on the accuracy of the initiating program's eligibility determination. Finally, several state officials stated that they generally did not pursue investigations and prosecutions. The reason is that the benefit amounts are relatively small. GAO makes six recommendations to HHS to issue guidance to states to better prevent fraud in LIHEAP. HHS agreed with the six recommendations.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Gregory D. Kutz Team: Government Accountability Office: Forensic Audits and Special Investigations Phone: (202) 512-9505GAO-10-621, Low-Income Home Energy Assistance Program: Greater Fraud Prevention Controls Are Needed
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
June 2010:
Low-Income Home Energy Assistance Program:
Greater Fraud Prevention Controls Are Needed:
GAO-10-621:
GAO Highlights:
Highlights of GAO-10-621, a report to congressional requesters.
Why GAO Did This Study:
Federally funded at about $5 billion a year, the Low-Income Home
Energy Assistance Program (LIHEAP) provides financial assistance to
low-income households for heating and cooling costs. The Department of
Health and Human Services (HHS) awards LIHEAP funds based on low-
income populations and other factors. Grantees”states, the District of
Columbia, territories, and Indian tribes and tribal organizations”then
provide energy assistance payments to low-income households.
GAO was asked to audit (1) the risk of fraud and abuse in LIHEAP in
selected states; (2) case studies of fraudulent, improper, and abusive
LIHEAP activity; and (3) key weaknesses in the design of LIHEAP‘s
internal controls framework. To meet these objectives, GAO analyzed
LIHEAP data from seven states for fraud indicators, interviewed
federal and state officials, performed investigations, and conducted
proactive testing in two states using a bogus company, individuals,
addresses, and documents. The seven states were primarily selected
based on size of LIHEAP grant and availability of centralized database.
What GAO Found:
LIHEAP is at risk of fraud and improper payments in all seven of our
selected states. About 9 percent of households receiving benefits”
totaling $116 million”in the selected states contained invalid
identity information, such as Social Security numbers, names, or dates
of birth. Although some of these cases are likely due to simple errors
such as typos or incomplete data, thousands of other cases show strong
indications of fraud and improper benefits. For example, the
identities of over 11,000 deceased individuals were used as applicants
or household members for LIHEAP benefits. Hundreds of individuals were
used as applicants or household members even though they were
incarcerated in state prisons, making them ineligible. Finally, we
identified over a thousand federal employees whose federal salary
exceeded the maximum income threshold when they applied. We
nonrepresentatively selected and investigated 20 cases that either
validated the potential fraudulent activity noted above or illustrated
other improper activities.
Table: Examples of Fraudulent or Improper Activity in LIHEAP:
Nature of activity: Deceased individuals;
State: IL;
Case details: Illinois provided $540 in energy assistance to an
applicant who fraudulently used the identities of two deceased family
members to qualify for LIHEAP.
Nature of activity: Federal employee salary over maximum income
threshold;
State: IL;
Case details: Illinois provided $840 in energy assistance to a U.S.
Postal Service employee who fraudulently reported zero income to
qualify for LIHEAP. Despite earning about $80,000 per year, the
employee stated that she saw ’long lines“ of individuals applying for
LIHEAP benefits and wanted the ’free money.“
Nature of activity: Residential facilities;
State: NJ;
Case details: New Jersey provided $3,200 in energy assistance to a
nursing home facility whose director claimed to represent eight
patients residing in the facility. These patients had their nursing
home care paid by Medicaid.
Nature of activity: GAO‘s proactive testing;
State: WV and MD;
Case details: Posing as low-income residents, landlords, and an energy
company, GAO used bogus addresses and fabricated energy bills, pay
stubs, and other documents to apply for energy assistance. All
fraudulent claims were processed and the energy assistance payments
were issued to our bogus landlords and company.
Source: GAO analysis of state, public, and other records.
[End of table]
Although states are primarily responsible for preventing fraud,
LIHEAP‘s internal controls framework has several key weaknesses. HHS
has not provided specific guidance to states, instead issuing only
broad regulations for states to establish appropriate systems and
procedures to prevent fraud. The selected states do not have an
effective design for a comprehensive fraud prevention framework. In
fact, the states lack key efforts in all three crucial elements of a
well-designed fraud prevention system: preventive controls, detection
and monitoring, and investigations and prosecutions. Specifically,
states lack essential preventive controls by not verifying identities
or income. Some states automatically enroll certain individuals based
on their eligibility for other programs. Although efficient in
reaching similarly targeted recipients, this practice is dependent on
the accuracy of the initiating program‘s eligibility determination.
Finally, several state officials stated that they generally did not
pursue investigations and prosecutions. The reason is that the benefit
amounts are relatively small.
What GAO Recommends:
GAO makes six recommendations to HHS to issue guidance to states to
better prevent fraud in LIHEAP. HHS agreed with the six
recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-10-621] or key
components. For more information, contact Greg Kutz at (202) 512-6722
or kutzg@gao.gov.
[End of section]
Contents:
Letter:
Background:
LIHEAP Is at Risk for Fraud and Improper Benefits in Selected States:
The Federal Government and Selected States Lack an Effective Fraud
Prevention Framework for LIHEAP:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Health and Human
Services' Administration for Children and Families:
Appendix III: Comments from the Social Security Administration:
Appendix IV: Comments from State of Illinois Department of Commerce
and Economic Opportunity:
Appendix V: Comments from State of Michigan Department of Human
Services:
Appendix VI: Comments from State of New Jersey Department of Community
Affairs:
Appendix VII: Comments from State of New York Office of Temporary and
Disability Assistance:
Appendix VIII: Comments from State of Ohio Department of Development:
Appendix IX: Comments from Commonwealth of Virginia Department of
Social Services:
Appendix X: Comments from State of West Virginia Department of Health
and Human Resources:
Appendix XI: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Cases of Fraudulent and/or Improper LIHEAP Activity in
Selected States:
Table 2: LIHEAP Fraud Prevention Control Measures: Selected States:
Figures:
Figure 1: LIHEAP Checks Provided to GAO Based on Bogus Applications:
Figure 2: GAO's Fraud Prevention Model:
Abbreviations:
HHS: Department of Health and Human Services:
LIHEAP: Low-Income Home Energy Assistance Program:
SNAP: Supplemental Nutrition Assistance Program:
SSA: Social Security Administration:
SSI: Supplemental Security Income:
TANF: Temporary Assistance for Needy Families:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 18, 2010:
The Honorable Joe Barton:
Ranking Member:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Michael Burgess:
Ranking Member:
Subcommittee on Oversight and Investigations:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Greg Walden:
House of Representatives:
In fiscal year 2009, Congress appropriated about $5 billion for the
Low-Income Home Energy Assistance Program (LIHEAP). This program
provides energy assistance to about 8.3 million low-income households
through payments to household members, home energy companies, or
landlords to help cover home heating and cooling costs.[Footnote 1] To
be eligible, households must fall under income thresholds, which
typically rise with the number of household members, set by states and
the federal government.
Managed by the Department of Health and Human Services (HHS), LIHEAP
is a federally funded block grant program in which each state is
funded according to a formula based on its weather and low-income
population.[Footnote 2] Because block grant programs generally give
states a great deal of flexibility in administering their programs,
states must have strong internal controls to prevent fraud and abuse.
However, a 2007 investigation by Pennsylvania's state auditor found
weak internal controls--inadequate policies, procedures, supervision,
and oversight--in the state's program, exposing the program to fraud.
For example, 429 applicants received more than $162,000 in LIHEAP
benefits using the Social Security numbers of deceased people.
Because of the magnitude of fraud that was found in Pennsylvania's
LIHEAP, you asked us to determine whether fraud and abuse exist in
other state programs. Specifically, this report discusses (1) the risk
of fraud and abuse in LIHEAP in selected states; (2) case studies of
fraudulent, improper, and abusive LIHEAP activity; and (3) key
weaknesses in the design of LIHEAP's internal controls framework.
To identify the risk of fraud and abuse in LIHEAP, we obtained and
analyzed benefit files for the latest year available for seven
selected states: Illinois, Maryland, Michigan, New Jersey, New York,
Ohio, and Virginia.[Footnote 3] These states were selected primarily
based on the magnitude of total LIHEAP funding and the availability of
a centralized database of applicants and benefits. These states
covered about one third of all LIHEAP funding in fiscal year 2009. Our
criteria for identifying the risk of fraud focused on LIHEAP
applications that were made using invalid identity information, such
as invalid Social Security numbers, or the identities of individuals
who were deceased or incarcerated. We compared LIHEAP data to data
from the Social Security Administration (SSA) and state prisoner
records. We also used federal salary data from the U.S. Department of
Treasury, the U.S. Postal Service, and the Defense Finance and
Accounting Service[Footnote 4] to determine whether civilian federal
employees receiving LIHEAP benefits earned incomes above program
thresholds. Our findings from our analysis only apply to these seven
states and cannot be projected to the states not covered in our review.
For our case studies, we identified 13 cases that represent and
validate the types of fraudulent and improper activity we found in our
analysis above. We identified an additional 7 cases from our analysis
of duplicate LIHEAP benefits and a comparison of LIHEAP data with
residency data regarding Medicaid long-term care facilities.[Footnote
5] In addition, we conducted proactive testing of LIHEAP controls in
Maryland and West Virginia. We selected these two states to conduct
our proactive testing because of their proximity to Washington, D.C.
We applied for benefits using bogus addresses and fabricated energy
bills and other supporting documents, and created a nonexistent energy
provider and landlords to receive the benefits on behalf of our
fictitious applicants. To apply for benefits, we obtained publicly
available data and used publicly available hardware, software, and
materials to counterfeit documents. To determine whether there are
weaknesses in the design of key aspects of LIHEAP's internal controls
framework, we interviewed LIHEAP officials from the selected states
and HHS on the extent to which the program had controls contained in
GAO's fraud prevention model. We did not systematically test the
effectiveness of LIHEAP's controls (e.g., we did not test the
implementation of those controls). A more detailed description of our
scope and methodology is provided in appendix I.
We conducted this forensic audit[Footnote 6] from June 2009 to June
2010 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain, sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives. We
conducted our related investigative work in accordance with standards
prescribed by the Council of the Inspectors General on Integrity and
Efficiency.
Background:
Title XXVI of the Omnibus Budget Reconciliation Act of 1981[Footnote
7] established LIHEAP to assist low-income households, particularly
those with the lowest incomes that pay a high proportion of household
income for home energy, in meeting their immediate home energy needs.
States, territories, Indian tribes, and tribal organizations that wish
to assist low-income households in meeting the costs of home energy
may apply for a LIHEAP block grant. These grantees operate their
LIHEAP programs by paying qualified households or energy service
providers for a range of covered home heating and cooling services.
LIHEAP benefits are provided to eligible beneficiaries up to the
maximum eligible payment for that beneficiary as determined by the
grantee. Grant funds are distributed in this manner until the annual
grant has been entirely expended or the program year has ended.
Although LIHEAP is 100 percent federally funded with no required state
match,[Footnote 8] states and other entities may contribute
supplemental funds.
While the federal government establishes overall guidelines, each
grantee operates its own program.[Footnote 9] For example, federal law
provides that an eligible household's income must not exceed the
greater of 150 percent of the poverty level or 60 percent of the state
median income (75 percent in fiscal years 2009 and 2010). Grantees may
not set their maximum income threshold below 110 percent of the
poverty level, but they may give priority to those households with the
highest home energy costs or needs in relation to income. Under the
law, LIHEAP grantees have the flexibility of serving households having
at least one member who also receives assistance under any of the
following federal programs: Temporary Assistance for Needy Families
(TANF), Supplemental Security Income (SSI), Supplemental Nutrition
Assistance Program (SNAP), and certain needs-tested Veteran Benefits.
LIHEAP grantees may also set additional LIHEAP eligibility criteria,
such as passing an assets test; living in nonsubsidized housing;
having a household member who is elderly, disabled, or a young child;
or having received a utility disconnection notice.
LIHEAP Is at Risk for Fraud and Improper Benefits in Selected States:
Our analysis of LIHEAP data revealed that the program is at risk of
fraud and providing improper benefits in all seven of our selected
states. About 260,000 applications--9 percent of households receiving
benefits in the selected states--contained invalid identity
information, such as Social Security numbers, names, or dates of
birth.[Footnote 10] Many applications may have inaccuracies due to
simple errors such as typos or incomplete sections, making it
impossible to determine whether these cases involve fraud. For
example, about a third of the applications had Social Security numbers
that were blank or obviously invalid (e.g., all zeros). Nonetheless,
these applications pose a higher risk of fraud because there is no
complete electronic record of beneficiaries' identities. These
benefits totaled some $116 million for the year we reviewed. Our
previous work, such as our audit of the Federal Emergency Management
Agency's management of the Individuals and Households Program for
hurricanes Katrina and Rita, found that limited or nonexistent use of
a third-party validation process left assistance programs vulnerable
to substantial fraud.[Footnote 11] As we will discuss later, LIHEAP
generally does not have this third-party validation process for the
seven selected states that we reviewed.
As described in the bullets below, thousands of cases show strong
indications of fraud and improper benefits. But because of the invalid
identity information noted above--a lack of a valid Social Security
number makes it impossible to fully investigate such cases--these
numbers are understated.
* Deceased individuals. The identities of over 11,000 deceased
individuals were used as applicants or household members for LIHEAP
benefits. Our analysis matching LIHEAP data to the SSA's death master
file found these individuals were deceased before the LIHEAP
application date. Benefits involved with these applications totaled
about $3.9 million for the year we reviewed.
* Incarcerated individuals. For the four states that provided reliable
incarceration data, we found 725 instances where the identities of
individuals incarcerated in state prisons were used as applicants or
household members. These identities were associated with about
$370,000 of LIHEAP benefits even though these individuals were in
prison at the time of the application and thus ineligible for benefits.
* Federal employees exceeding income thresholds. Matching LIHEAP data
with federal civilian payroll records, we identified about 1,100
federal employees whose federal salary exceeded the maximum income
threshold at the time of their application. The benefit payments
associated with those applications totaled $671,000.
Because LIHEAP is a block grant program, the potential fraudulent and
improper activities associated with these thousands of cases have an
adverse effect on the program. Specifically, these fraudulent and
improper activities will either reduce the amount of energy assistance
provided to recipients or prevent legitimate recipients from receiving
the energy assistance because the funds have been used.
Cases of Fraudulent or Improper Activity Expose Problems in LIHEAP:
We identified and further investigated 20 cases that demonstrate how
fraudulent or improper activity was perpetrated. Thirteen cases
concern applications with invalid identity information, deceased
individuals, incarcerated individuals, or federal employees receiving
LIHEAP benefits. Seven cases are examples of other types of improper
and potentially fraudulent activity, including individuals in
residential facilities being used to improperly receive benefits and
households receiving duplicate LIHEAP benefits. We are referring all
20 cases to the HHS Office of Inspector General (OIG) for further
investigation. See table 1 for case details.
Table 1: Cases of Fraudulent and/or Improper LIHEAP Activity in
Selected States:
Case: 1;
Location: Cleveland, OH area;
Nature of case: Deceased;
Case details:
* Ohio provided $400 in benefits to an applicant using the identity of
a deceased individual;
* The applicant did not apply in person but instead mailed the
application. The application file did not show that the applicant's
identity was validated;
* The applicant obviously doctored an SSA benefit letter using the
identity of the deceased individual. Specifically, the font sizes on
the date and amount were significantly different from the rest of the
letter;
* A death certificate showed that the name used in the application
belonged to an individual who had died 4 years before the application
was made.
Case: 2;
Location: Southwest NJ;
Nature of case: Deceased;
Case details:
* New Jersey provided $500 in benefits to an applicant using the
identity of a deceased individual;
* The applicant was in a public assistance program and thus the LIHEAP
benefits were automatically approved;
* A death certificate showed that the name used in the application
belonged to an individual who had died before benefits were approved.
Case: 3;
Location: Chicago, IL area;
Nature of case: Deceased;
Case details:
* Illinois provided $540 in benefits to an applicant using the
identities of two deceased individuals;
* The applicant's income would have exceeded the maximum income
threshold without the additional household members;
* The applicant stated that she had been denied the previous 3 years
for not having enough household members with her income. She stated
that she added her dead mother and brother when she remembered she had
their Social Security cards and numbers;
* Death certificates confirm that the dates of death were more than 4
years before the application date.
Case: 4;
Location: Cleveland OH area;
Nature of case: Incarcerated;
Case details:
* Ohio provided $400 in benefits to an applicant using the identity of
an incarcerated individual;
* The applicant did not apply in person but instead mailed the
application. The application file did not show that the applicant's
identity was validated;
* Prison records show that the incarcerated individual had been in
prison for 2 years and was still incarcerated.
Case: 5;
Location: South NJ;
Nature of case: Residential facilities;
Case details:
* New Jersey provided $3,200 in benefits to a nursing home facility
whose director claimed to represent eight patients residing in a
nursing home. These patients had their nursing home care paid by
Medicaid;
* The nursing home director submitted the LIHEAP applications, stating
that these funds were to offset heating and cooling costs for the
eight patients;
* New Jersey LIHEAP officials stated that individuals living in a
nursing home are not eligible to receive LIHEAP benefits.
Case: 6;
Location: Northwestern MD;
Nature of case: Residential facilities;
Case details:
* Maryland provided $3,600 in benefits. The applicant was residing in
a nursing home at the time of the application according to Medicaid
records. The address on the application for the benefits was not the
nursing home, but instead a house owned by another individual. That
same individual signed the LIHEAP application on behalf of the nursing
home resident;
* Maryland LIHEAP officials stated that individuals living in a
nursing home are not eligible to receive LIHEAP benefits.
Case: 7;
Location: Cleveland, OH;
Nature of case: Federal employee;
Case details:
* Ohio provided $300 in benefits to a Department of Veterans Affairs
(VA) employee whose $58,000 salary exceeded the maximum income
threshold of $18,200;
* The VA employee did not state in the application that she worked for
the federal government. The applicant provided documentation that
purported to show about $500 in monthly income.
Case: 8;
Location: Cleveland, OH;
Nature of case: Federal employee;
Case details:
* Ohio provided $300 in benefits to a VA employee whose $38,000 salary
exceeded the maximum income threshold of $18,200;
* The VA employee did not state in the application that he worked for
the federal government. The applicant provided documentation that
purported to show about $750 in monthly income.
Case: 9;
Location: Trenton, NJ area;
Nature of case: Federal employee;
Case details:
* New Jersey provided $1,500 in benefits to a U.S. Postal Service
employee whose $54,000 salary exceeded the maximum income threshold of
$31,500;
* The employee claimed that she earned half her actual monthly salary.
To substantiate the income, she included a pay stub that covered 2
weeks but claimed it covered a month.
Case: 10;
Location: Chicago, IL;
Nature of case: Federal employee;
Case details:
* Illinois provided $700 in benefits to the wife of a U.S. Postal
Service employee whose $84,000 salary exceeded the maximum income
threshold of $37,200;
* The applicant signed a waiver stating that the employee had zero
income;
* The employee claimed he did not know that his wife applied for and
received LIHEAP benefits. The LIHEAP application only required
signature of the applicant and not household members.
Case: 11;
Location: Chicago, IL;
Nature of case: Federal employee;
Case details:
* Illinois provided $840 in benefits to a U.S. Postal Service employee
whose $80,000 salary exceeded the maximum income threshold of $31,800;
* The applicant signed a waiver stating that the employee had zero
income;
* The employee admitted to our investigators that she was not entitled
to benefits. She stated that "Times are tough and I needed the money."
She saw "long lines" of applicants and wanted the "free money.".
Case: 12;
Location: Detroit, MI area;
Nature of case: Federal employee;
Case details:
* Michigan provided $3,900 in benefits to a U.S. Postal Service
employee whose $50,000 salary exceeded the maximum income threshold of
$43,560;
* The employee told our investigators that she was not employed when
she applied. U.S. Postal Service salary records demonstrated and the
U.S. Postal Service OIG confirmed that she was employed at that time.
Case: 13;
Location: Chicago, IL;
Nature of case: Invalid identity information;
Case details:
* Illinois provided $1,000 in benefits to a household whose
application contained invalid identity information;
* The identities for 7 of the 14 household members claimed on the
application could not be validated with SSA's Enumeration Verification
System. Six of these 7 identities had incorrect birthdates so that the
household members would appear to be minor children and thus would not
have to report income;
* The applicant's income would have exceeded the maximum income
threshold without the additional household members who had invalid
identity information;
* The applicant admitted to our investigators that she forged her
husband's signature on the application. She claimed that the invalid
identity information was the state's fault even though she signed the
application with the invalid information. She also claimed that all 14
household members lived at the address at the time of the application.
However, her husband stated in a separate interview that 4 of the
listed household members did not live there at the time of the
application.
Case: 14;
Location: MI;
Nature of case: Duplicate LIHEAP benefits;
Case details:
* Michigan provided $2,200 in benefits, above the $1,100 maximum
benefit limit;
* The household automatically received duplicate benefits for being
enrolled in Medicaid and SNAP.
Case: 15;
Location: MD;
Nature of case: Duplicate LIHEAP benefits;
Case details:
* Maryland provided $1,400 in benefits to a household that submitted
two separate applications for the same time period for the same
address;
* One application was signed by the grandmother and included her
daughter and her grandchildren as household members. The other
application was signed by the daughter and only included her children.
Case: 16;
Location: Richmond, VA area;
Nature of case: Duplicate LIHEAP benefits;
Case details:
* Virginia provided three payments totaling $2,400 to three separate
applicants at the same address;
* One of the LIHEAP applications was automatically approved because
the applicant was enrolled in SNAP. Another application was submitted
by a son who listed his mother as a household member. The third
application was submitted by his mother with no other household
members listed on the application. All three applications had the same
last name.
Case: 17;
Location: Albany, NY;
Nature of case: Incarcerated;
Case details:
* New York provided $700 in benefits to a household that claimed two
incarcerated family members as household members;
* The applicant, a VA purchasing agent, needed the additional two
household members to qualify for benefits based on her salary of about
$50,000.
Case: 18;
Location: MD & VA;
Nature of case: Duplicate benefits;
Case details:
* Maryland and Virginia provided $1,100 in benefits to one applicant
claiming two separate households at once;
* The residences are 280 miles apart;
* The signatures on the two applications were distinctly different;
* The applicant was convicted of fraud in 1999 and 2003.
Case: 19;
Location: VA;
Nature of case: Incarcerated;
Case details:
* Virginia provided $430 in benefits to an individual using the
identity of an incarcerated person;
* Prison records indicate that the individual was imprisoned during
the time of the LIHEAP application date and had been in jail for more
than 15 years;
* The LIHEAP application file did not contain any proof of identity
(i.e., driver's license or social security number).
Case: 20;
Location: VA;
Nature of case: Residential facility;
Case details:
* Virginia provided $570 in benefits to an applicant claiming a
household member who, according to Medicaid records, resided in a long-
term facility.
Source: States' LIHEAP, states' Medicaid Programs, states'
incarceration records, SSA, U.S. Postal Service, and Department of
Veterans Affairs.
[End of table]
Further, we identified several instances of LIHEAP program funds being
disbursed to individuals who may have met the income threshold but had
significant assets. Specifically, we identified several beneficiaries
living in million-plus dollar houses in Potomac, Maryland, and the
Chicago suburbs. Because neither state considers the amount of a
household's assets in determining whether to provide energy
assistance, owning high-dollar assets cannot be considered fraud or
improper activity of the program in those states. Without access to
bank and tax records, our investigations could not determine whether
these individuals met the LIHEAP maximum income threshold. However, in
one case, a beneficiary conducted her counseling service from her
residence, according to an insurance company Web site. She lives in a
$2 million home in a wealthy Chicago suburb and owns a late 2000s
Mercedes. She also won a multimillion dollar settlement in the mid
2000s that is currently under appeal. The applicant refused to speak
with our investigators or the local police about her LIHEAP
application.
Finally, our proactive testing further demonstrated LIHEAP's
vulnerability to fraud. Posing as low-income residents, we used bogus
addresses and fabricated energy bills, pay stubs, and other supporting
documents to apply for energy assistance in West Virginia and
Maryland. For three of the five cases, the LIHEAP payments were made
to our fictitious energy company to pay the low-income resident's
energy bills. Our investigators created this energy-related company to
receive the energy assistance payments. For the other two cases, the
low-income residents "lived" in a rental house where the landlord paid
the energy assistance benefits as a part of the rent. For these two
cases, the investigators created fictitious landlords who received the
energy assistance payments. All five claims were processed and the
energy assistance payments issued and mailed to our fake company and
landlords (see figure 1).
Figure 1: LIHEAP Checks Provided to GAO Based on Bogus Applications:
[Refer to PDF for image: illustration]
Source: GAO.
[End of figure]
The Federal Government and Selected States Lack an Effective Fraud
Prevention Framework for LIHEAP:
LIHEAP's internal controls framework has several key weaknesses at
both the federal and state levels, as shown by GAO's fraud prevention
model. At the federal level, HHS has not provided specific guidance to
states and other grantees for preventing fraud and abuse of LIHEAP.
While grantees are primarily responsible for preventing fraud in
LIHEAP, the LIHEAP statute establishes a number of oversight and
enforcement responsibilities for HHS to ensure that grantees are
properly applying the funds, including requiring the issuance of
regulations to prevent waste, fraud, and abuse in LIHEAP.[Footnote 12]
HHS has issued regulations that require grantees to establish
appropriate systems and procedures to prevent, detect, and correct
waste, fraud, and abuse by clients, vendors, and administering
agencies, but it has not provided any additional detailed guidance to
the states or other grantees on how to develop an effective fraud
prevention system.[Footnote 13]
In addition, the selected states do not have an effective design for a
comprehensive fraud prevention framework. In fact, the states are
lacking key efforts in all three crucial elements of a well-designed
fraud prevention system: preventive controls, detection and
monitoring, and investigations and prosecutions.
Figure 2: GAO's Fraud Prevention Model:
[Refer to PDF for image: illustration]
Potential fraud, waste, and abuse:
Implementation of Prevention controls: leads to:
Smaller amount of Potential fraud, waste, and abuse:
Implementation of detection and monitoring (lessons learned influence
future use of prevention controls): leads to:
Smaller amount of Potential fraud, waste, and abuse:
Implementation of investigations and prosecutions (lessons learned
influence future use of prevention controls).
Source: GAO.
[End of figure]
Preventive controls. States lack essential preventive controls, which
are the most efficient and effective means to minimize fraud, waste,
and abuse. Social Security numbers are a key element in the
identification of a person's identity. Our analysis of 1 year of
LIHEAP data found that for the selected states about 100,000
individuals' records contained a blank or obviously invalid Social
Security number. HHS's prior interpretation of the Privacy Act
prohibited states from requiring recipients to provide Social Security
numbers in applying for LIHEAP benefits.[Footnote 14] However, 42
U.S.C. § 405 allows states to require that individuals disclose their
Social Security numbers for "the administration of any tax, general
public assistance, driver's license, or motor vehicle registration law
within its jurisdiction." We believe that LIHEAP falls within the
scope of this statute. In response to our draft report, HHS revised
its interpretation, and strongly suggested that states require Social
Security numbers. Under HHS' prior interpretation, the states were not
be able to validate individuals' identities and, without this basic
control, we believe it cannot have an effective fraud prevention
program.
The selected states do not have other measures that we believe are key
to preventing fraud, as we discovered from our discussions with state
officials (table 2). We believe that these are key preventive control
measures that states should integrate in their application processes
as long as the costs of these controls do not outweigh the benefits.
Table 2: LIHEAP Fraud Prevention Control Measures: Selected States:
Control measure: Validate applicant and household member information
with SSA;
Illinois: [Empty];
Maryland: [Empty];
Michigan: [Check];
New Jersey: [Empty];
New York: [Check];
Ohio: [Empty];
Virginia: [Empty].
Control measure: Check death record files;
Illinois: [Empty];
Maryland: [Empty];
Michigan: [Empty];
New Jersey: [Empty];
New York: [Empty];
Ohio: [Empty];
Virginia: [Empty].
Control measure: Check for incarcerated individuals;
Illinois: [Empty];
Maryland: [Empty];
Michigan: [Empty];
New Jersey: [Empty];
New York: [Empty];
Ohio: [Empty];
Virginia: [Empty].
Control measure: Verify reported income using outside source (e.g.,
New Hire Database);
Illinois: [Empty];
Maryland: [Empty];
Michigan: [Empty];
New Jersey: [Check];
New York: [Empty];
Ohio: [Empty];
Virginia: [Empty].
Control measure: Check for long-term care patients;
Illinois: [Empty];
Maryland: [Empty];
Michigan: [Check];
New Jersey: [Empty];
New York: [Empty];
Ohio: [Empty];
Virginia: [Empty].
Control measure: Check data to prevent applicants and household
members from receiving duplicate benefits;
Illinois: [Check];
Maryland: [Check];
Michigan: [Check];
New Jersey: [Check];
New York: [Check];
Ohio: [Check];
Virginia: [Check].
Source: Selected state officials.
Note: [Check] denotes fraud prevention control measures to screen all
or certain segments of LIHEAP applications according to statements
made by state officials. We did not test whether the states actually
had these measures in place or whether these measures were effective.
[End of table]
* Officials from five of the states said they did not validate
applicant and household member information with SSA, which can verify
a person's Social Security number, name, and date of birth against its
records.
* Officials from all seven states stated that they did not compare
applicant and household information against death records prior to
payment. Officials from these states stated that they did not check
death records from SSA or their state's Vital Statistics Office to
determine if applicants or household members were deceased.
* Officials from all seven states said that they did not check LIHEAP
applicants and household members against a listing of incarcerated
individuals in state prisons.
* Six states generally did not verify self-reported income of LIHEAP
applicants and household members with employment and wage databases
(e.g., State Directory of New Hires). After our inquiries, officials
from only one state said that they recently had begun to perform such
a comparison, and only for those individuals who claimed zero income.
* Six states did not verify household member residency through
checking long-term care facility records, according to officials. To
be eligible for LIHEAP, an individual must be a member of a household
that is eligible for the benefits and responsible for energy costs
either directly or through their rent. As such, an individual residing
over an extended period of time in a long-term care facility (e.g.,
nursing home) that is paid by Medicaid does not meet this requirement.
* System edit checks can be added to a grantee's electronic database
of LIHEAP beneficiaries to check for repeated use of a name, Social
Security number, utility account number, or other identifying fields.
Officials from all seven states said that they have some form of edit
checks to prevent duplicate benefits. However, the edit checks
performed varied by the state and are not comprehensive in certain
states.
Detection and monitoring. To be efficient in reaching similarly
targeted recipients, certain states automatically enroll LIHEAP
recipients based on the applicant or household member receiving
benefits for certain federal programs (e.g., TANF or SNAP). Thus,
LIHEAP relies on the preventive controls for these programs to ensure
that only eligible applicants and/or household members are receiving
the benefits. As a result, the LIHEAP's preventive controls will only
be as effective as the preventive controls for the federal program
(e.g., TANF or SNAP) from which the recipient originally received
benefits. Monitoring and detection within a fraud prevention program
involves data mining for fraudulent and suspicious applicants and
evaluating vendors and employees to provide reasonable assurance that
they continue to meet program requirements and follow program
protocols. The selected states generally do not match their
beneficiary files to third-party databases, such as State Directory of
New Hires, to determine continued eligibility, nor do they ensure that
applicants are not acting as their own vendor.
Investigation and prosecution. Several state officials stated that
they generally did not pursue investigations and prosecutions
involving LIHEAP. The aggressive investigation and prosecution of
individuals who defraud the government is the final component of an
effective fraud prevention model. Schemes identified through
investigations and prosecution can also be used to improve the fraud
prevention program. However, pursuing recipients who commit fraud can
be costly and time-consuming. The amounts of energy assistance
benefits to individuals are relatively small, which may deter
prosecution of the cases by federal or state prosecutors. Because of
this, it is important to have strong controls to prevent the
occurrence of fraud.
Conclusions:
Without an adequate fraud prevention framework, LIHEAP in the seven
states is vulnerable to individuals willing to commit fraudulent and
improper activities to receive energy assistance benefits. Given that
the states are responsible for administering LIHEAP and establishing
the proper controls, each state needs an effective fraud prevention
framework to provide reasonable assurance of the integrity of its
program. Without these proper controls, energy assistance benefits
will continue to be provided to ineligible individuals, which limits
the help that can be provided to those individuals who meet program
requirements. However, the responsibility for actively partnering with
and providing such guidance to the states rests with HHS.
Recommendations for Executive Action:
To establish an effective fraud prevention system for the LIHEAP
program in the seven states, the Secretary of HHS should evaluate our
findings and consider issuing guidance to the states addressing the
following six recommendations:
* Require applicants and household members to provide Social Security
numbers for themselves and all members of the household in order to
receive energy assistance benefits.
* Evaluate the feasibility (including consideration of any costs and
operational and system modifications) of validating applicant and
household member identity information with SSA.
* Develop prepayment edit checks to prevent individuals from receiving
duplicate benefits.
* Evaluate the feasibility of using SSA's or states' vital record
death data to prevent individuals using deceased identities from
receiving benefits.
* Evaluate the feasibility of preventing incarcerated individuals from
improperly receiving benefits, for example, by verifying Social
Security numbers with state's prisoner information.
* Evaluate the feasibility of using third-party sources (e.g., State
Directory of New Hires) at a minimum on a random or risk basis, to
provide assurance that individuals do not exceed maximum income
thresholds.
Agency Comments and Our Evaluation:
HHS and SSA provided written responses to our request for comments.
Seven of the eight states covered in our report also provided written
responses. Letters with comments from HHS, SSA, Illinois, Michigan,
New Jersey, New York, Ohio, Virginia, and West Virginia are reprinted
and discussed in further detail, when applicable, in the appendices.
Maryland stated that it did not have any comments on the report. HHS
and certain states also provided technical comments, which we
incorporated as appropriate. Responses from HHS, SSA, and the states
are reprinted in appendixes II-X.
HHS agreed with all our recommendations, stating that it had begun to
take action on some of them since reviewing a draft of this report.
While the agency stated that the Privacy Act prevents it from forcing
states to require Social Security numbers, it issued a memorandum
encouraging states to do so, as well as implement our other
recommendations. HHS also stated that it planned to take additional
steps to deter ineligible payments and prevent fraud, waste, and abuse
in the program, including requesting that states address key elements
of fraud prevention systems in their "LIHEAP Program Integrity Plan"
and reviewing those systems. We strongly support these additional
steps and encourage HHS to follow through on these additional actions.
In its written comments, SSA did not agree with our recommendation
that the Secretary of HHS evaluate the feasibility of validating
applicant and household member identity information with SSA. SSA
stated that it could validate applicants for LIHEAP, but not other
household members, because "the compatibility requirement of the
Privacy Act, 5 U.S.C. § 552a(b)(3), only permits us to disclose and
verify information to determine an applicant's entitlement to an
income maintenance program." Section 552a(b)(3) of the act allows
disclosure of information for a routine use published by the agency in
the Federal Register. However, the actual language of the routine use
that SSA published allows disclosure "to Federal, State, or local
agencies (or agents on their behalf) for the purpose of validating
SSNs those agencies use to administer cash or non-cash income
maintenance programs or health maintenance programs" as a routine use
in which disclosure is allowable.[Footnote 15] We believe that this
language is broad enough to include validation of household members
who are beneficiaries of LIHEAP assistance.
Illinois, New Jersey, New York, Ohio, and West Virginia expressed
difficulty in obtaining access to SSA records to validate Social
Security numbers and verify income. We support any initiatives, such
as EVS and State OnLine Query, that are allowed by federal law to
provide the states the necessary information from SSA. Lack of
validation of identity and income information were two of the major
problems that we identified in our investigation of LIHEAP.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the date of this letter. We will then send copies of this report
to other interested congressional committees, the Secretary of HHS,
the administrator of SSA, and the LIHEAP program offices of Illinois,
Michigan, New Jersey, New York, Ohio, Virginia, and West Virginia. The
report also is available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-6722 or kutzg@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report.
Signed by:
Gregory D. Kutz:
Managing Director Forensic Audits and Special Investigations:
[End of section]
Appendix I: Scope and Methodology:
To identify indications of fraud and abuse in the Low Income Home
Energy Assistance Program (LIHEAP),[Footnote 16] we obtained and
analyzed benefit files for the latest year available for seven
selected states: Illinois, Maryland, Michigan, New Jersey, New York,
Ohio, and Virginia.[Footnote 17] These states were selected primarily
based on the magnitude of total LIHEAP funding and the availability of
a centralized database of applicants and benefits. These states
comprised about a third of all LIHEAP spending in federal fiscal year
2009. Our analysis focused on LIHEAP applications that were made using
invalid identity information--such as invalid Social Security numbers,
names, or dates of birth--or the identities of individuals who were
deceased or incarcerated. We compared LIHEAP data to data from the
Social Security Administration (SSA) and state prisoner records.
[Footnote 18] We also used federal salary data from the U.S.
Department of Treasury, the U.S. Postal Service, and the Defense
Finance and Accounting Service to determine whether civilian federal
employees receiving LIHEAP benefits earned incomes above program
thresholds.
To illustrate cases of fraudulent, improper, and abusive activity in
LIHEAP, we identified 20 cases for detailed audit and investigation.
The 20 cases were chosen using a nonrepresentative selection approach
based on our judgment, data mining, and a number of other criteria
that provided indications of fraud and abuse. For example, to identify
case study examples of applicants or household members living in a
long-term care facility at the time of application, we compared the
LIHEAP data to the Medicaid long-term care claims files for the
selected states. We requested or obtained the application for LIHEAP
benefits from the states for each case and performed additional
searches of criminal, financial, and public records and obtained
documentation (e.g., death certificates) to substantiate cases of
fraud and abuse. We also interviewed several LIHEAP beneficiaries. In
addition, we conducted proactive testing of LIHEAP controls in
Maryland and West Virginia. We applied for LIHEAP benefits using bogus
addresses and fabricated energy bills, pay stubs, and other supporting
documents, which included a Social Security number of a deceased
individual. In addition, we created an energy provider and landlords
using phony documents to receive LIHEAP benefits on behalf of our
fictitious applicants.
To identify potential weaknesses in the design of key aspects of
LIHEAP's internal controls framework, we interviewed LIHEAP officials
from the selected states and HHS. In addition, we obtained and
reviewed the selected states' LIHEAP policies and procedures. We used
GAO's fraud prevention model as criteria for an effective fraud
prevention program, but did not test the effectiveness of LIHEAP's
controls.
Data Reliability:
To determine the reliability of the seven state LIHEAP applications
and benefit payment databases, we interviewed state officials
responsible for the quality of those databases. In addition, we
compared the total number of households served by each state for 1
year against reports each state provided to HHS. Finally, we performed
electronic testing to determine the reasonableness of specific data
elements in the databases that we used to perform our work.[Footnote
19] Based on our discussions with agency officials responsible for the
quality of the databases, reconciliation to independent reported
information, and our own electronic testing, we concluded that the
data elements used for this report were sufficiently reliable for our
purposes.
We performed our work from June 2009 through June 2010 in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. We conducted our related
investigative work in accordance with standards prescribed by the
Council of the Inspectors General on Integrity and Efficiency.
[End of section]
Appendix II: Comments from the Department of Health and Human
Services' Administration for Children and Families:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
Department Of Health & Human Services:
Office of the Assistant Secretary for Legislation:
Washington, D.C. 20201:
May 11, 2010:
Greg Kutz:
Managing Director:
Forensic Audits and Special Investigations:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, DC 20548:
Dear Mr. Kutz:
Enclosed are comments on the U.S. Government Accountability Office's
(GAO) report entitled: "Low Income Home Energy Assistance Program:
Greater Fraud Prevention Controls Are Needed" (GA0-10-621).
The Department appreciates the opportunity to review this report
before its publication.
Sincerely,
Signed by:
Andrea Palm:
Acting Assistant Secretary for Legislation:
Enclosure:
[End of letter]
General Comments Of The Department Of Health And Human Services (HHS)
On The Government Accountability Office's (GAO) Draft Report Entitled,
"Low Income Home Energy Assistance Program: Greater Fraud Prevention
Controls Are Needed (GAO-19-621):
The Department appreciates the opportunity to comment on the
Government Accountability Office (GAO) draft report.
GAO Recommendations:
To establish an effective fraud prevention system for the LIHEAP
program in the seven states, the Secretary of HI-IS should evaluate
our findings and consider issuing guidance to the states addressing
the following six recommendations:
* Require applicants and household members to provide Social Security
numbers for themselves and all members of the household in order to
receive energy assistance benefits;
* Evaluate the feasibility (including consideration of any costs,
operational and systems modifications) of validating applicant and
household member identity information with SSA;
* Develop prepayment edit checks to prevent individuals from receiving
duplicate benefits;
* Evaluate the feasibility of using the SSA's or state vital record's
death data to prevent individuals using deceased identities from
receiving benefits;
* Evaluate the feasibility of preventing incarcerated individuals from
improperly receiving benefits, for example, by verifying Social
Security numbers with state's prisoner information; and;
* Evaluate the feasibility of using third-party sources (e.g., State
Directory of New Hires) at a minimum on a random or risk basis, to
provide assurance that individuals do not exceed maximum income
thresholds.
HHS Comments:
HHS has no tolerance for fraud or improper payments in the programs we
administer. While as GAO notes, under the structure of the block
grant, States, Tribes and Territories have broad discretion in
designing their program integrity systems in administering the
program, HHS has a responsibility as the Federal agency to ensure that
appropriate procedures are in place to prevent, detect and correct
waste, fraud and abuse. HITS agrees with and takes very seriously the
recommendations in the GAO study on LIHEAP, and intends to use this
report to work with the States to strengthen controls in the
implementation of this vital program that assists millions of low-
income families in meeting their home heating and cooling needs.
HHS has initiated steps to address many of the findings and
recommendations in the GAO report and ensure that effective preventive
controls, fraud detection, monitoring, and prosecution
systems exist at all responsible levels of the LIHEAP program's
administration to deter ineligible payments and prevent fraud, waste
or abuse in the program. Below, we identify the actions undertaken to
date, and the long-term strategies to ensure program integrity.
Social Security Numbers:
HHS recognizes the complexity of the existing Federal authorities that
govern Social Security Numbers (SSNs). We want to assist States and
work with them to ensure that the critical resources of the LIHEAP
program are provided appropriately to the households that most need
them. As such, we have conducted an analysis of current policy and
applicable federal provisions. While HHS remains bound by the Privacy
Act provisions (Section 7 of the Privacy Act of 1974 [5 USC 552a
note]) and cannot compel States to require Social Security Numbers for
LIHEAP without the specific Federal statutory authority to do so, we
have concluded that States have discretionary authority to require
SSNs in the administration of their LIHEAP programs.
Pursuant to that review and conclusion, HHS recently issued an
Information Memorandum (LIHEAP-IM-2010-06 issued on May 5, 2010) that
strongly encourages State LIHEAP administrators to require SSNs of
LIHEAP applicants in order to validate that individuals and households
receiving benefits are eligible and in need of these vital services.
Our specific guidance provides that:
* States may require that any individual applying for LIHEAP disclose
his/her Social Security Number, as part of the application, to
validate identity and as a condition for the receipt of benefits;
* States may require the Social Security Numbers of all household
members reported in the LIHEAP application in order to qualify the
household for any LIHEAP benefit; and;
* States may deny assistance to individuals and households upon a
refusal to provide Social Security Numbers.
HHS also strongly encourages States to establish and implement
policies and procedures governing individual program application
requirements to be used in requiring Social Security Numbers for
recipients in LIHEAP, including the accessibility to verification
tools by local administering agencies that administer LIHEAP benefits.
States are to ensure that adequate procedures are in place for the
safeguarding of such information in the administration of the program.
Access to Governmental Systems:
As part of this Information Memorandum, we also instructed States,
within Federal and State authorities, to use existing government and
other benefit systems to crosscheck SSNs and validate eligible
applicants. States are instructed to take measures to ensure that
payments are made on behalf of eligible households, including programs
that are administered by. State or local government agencies, and non-
profit organizations operating on behalf of the State program. We
urged States to explore using SSNs to access the following:
* The Social Security Administration's Enumeration Verification System
to confirm identity of applicants and household members;
* State directories of new hires or similar systems to confirm income
eligibility;
* Prisoner databases to ensure that applicants and individuals listed
as household members are eligible recipients; and;
* Other databases that may be used to confirm applicant and household
eligibility, such as State vital records registries.
Under the LIHEAP statute, States have the flexibility to serve
households that have at least one member who receives assistance under
the Temporary Assistance to Needy Families (TANF) program, the
Supplemental Nutritional Assistance Program (SNAP), Supplemental
Security Income (SSI), and certain needs-tested Veteran's benefits.
For households where LIHEAP eligibility is contingent upon this
"categorical eligibility," we advised States to establish procedures
to ensure that such eligibility provides sufficient verification of an
applicant's or household member's identity, income status, and other
eligibility criteria that may be established by the State.
FY 2011 LIHEAP Plan Supplement:
States have always been required to have systems in place to prevent
fraud, but we intend to require significantly expanded detail from
States on these efforts in FY 2011. We plan to issue an Action
Transmittal to States, to obtain information on their systems for
ensuring program integrity as a supplement to their FY 2011 State
Plans.(due to HHS on September 1, 2010).
HHS plans to request that each State provide their "LIHEAP Program
Integrity Plan" to specifically address a number of key elements to an
effective fraud prevention system. In response to the findings in the
GAO report and other purposes, HHS will develop a framework and
checklist, based in part on this GAO report, which States may use to
provide this information. LIHEAP grantees will be strongly advised to
examine their current procedures for LIHEAP program integrity and will
be asked to describe and/or enhance the measures for preventing and
detecting vulnerabilities in the administration of their programs. HHS
will look for descriptions in the Grantee's Plan Supplement that
clearly address the key elements of a sound integrity plan and provide
technical assistance as necessary, with particular respect to:
* Applicant and household verification measures for identity
(including the use of Social Security Numbers in applications) and
income employed by the State and its local administering agency;
* Controls exist that all recorded transactions actually occurred, are
valid in relation to the applicant household, and were properly
approved in accordance with the State's eligibility and authorization
policy;
* Energy vendor authenticity measures are employed by the State and
its local administering agency; and;
* Policies and procedures are in place by the responsible State agency
and local administering agencies that identify, assess and deter
improper payments, including via the prosecution of cases of improper
payments made due to fraud or abuse.
Strategic Plan for Further Actions:
HHS will initiate additional efforts on program integrity in the
months ahead. Some of these steps will be immediate, while others will
be implemented on an ongoing basis:
State Notification and Collaboration:
After the GAO report is released, ACF will issue a link to a copy of
the report on the LIHEAP website. We will direct States to the Report,
emphasize the seriousness of the findings, and provide details on the
Office of Community Services (OCS) plan to respond to the
recommendations, in order to assist States and gain their input on
proposed activities.
Meet with Grantees to Discuss Program Integrity:
ACF will present a strong message on LIHEAP program integrity at the
National Energy and Utility Affordability Conference (NEUAC) in June,
at two federal sessions attended by LIHEAP Grantees (States,
Territories, and Tribes and Tribal organizations) and others. We will
also discuss program integrity at conferences attended by LIHEAP
grantees in June and August.
Direct States to Take Immediate Corrective Actions:
ACF will work with the HHS Office of Inspector General to provide any
information or support necessary to review and pursue the 20 cases
referred for disallowance or other actions. In addition, we will work
with the 7 States that were part of the GAO study to determine
corrective actions and report that progress on the LIHEAP website.
Regular Engagement with Grantees on Program Integrity:
ACF will conduct quarterly conference calls and/or webinars with
LIHEAP grantees to discuss fraud prevention. The agency will establish
a work group or task force devoted to how States can more effectively
prevent fraud and abuse under State LIHEAP programs. We will also
begin gathering and analyzing the information obtained from the State
Plan Supplements and identifying "best practices" that will
subsequently be shared and circulated with all States.
Determining Compliance with Program Integrity Measures:
ACF will develop a set of detailed questions on program integrity that
will be integrated into the LIHEAP monitoring tool that will be used
by the review team during the course of an on-site compliance review.
The reviews will place a renewed emphasis, looking at
states' systems for fraud prevention, and ensuring that proper
controls are in place in accordance with the LIHEAP Plan Supplement.
Conclusion:
HHS has initiated a thorough examination of the steps that can be
taken to ensure program integrity. We are using the GAO study and
recommendations to identify and address specific challenges in program
integrity as it relates to improper payments, detection, monitoring
and prosecution. Where there is insufficient authority for Federal
direction, we will recommend opportunities for statutory change.
Number of Applications and Percent of Households:
As a technical matter, we arc not clear about the households
represented by the 260,000 applications that contained invalid
identity information in "9 percent of households" in the seven States,
as identified in the draft report and Statement of Facts provided to
HHS. The report is not clear on the total number of cases reviewed.
These figures also do not match up with the number of fraud cases
reported for deceased individuals (11,000), prisoners (700), and
federal employees (1,100), and the number of individuals (one-third of
260,000) that did not supply SSNs that GAO enumerates in the draft
report. It would be helpful to HHS to receive specificity on the
numbers cited in the draft report to better understand the breakout of
the 260,000 applications, so that we can better respond to the issues
and assist the seven States in question more effectively going forward.
Use of Assets Tests: [See comment 1]
The report cites individuals in two States having significant assets
(million dollar homes and expensive cars), though GAO acknowledges
these individuals may have met the income threshold in order to
receive LIHEAP benefits. GAO cites the lack of an assets test
requirement in both States as part of the eligibility determination
process, which may have led to improper activity in these particular
cases, though no further details are provided.
HHS does not have explicit authority to require States to implement
asset tests for LIHEAP applicants; however, as noted in the report,
States have the discretion to implement assets tests as part of their
eligibility requirements. Federal law governing LIHEAP benefits limits
eligibility based only on participation in other specified Federal
means-tested benefits or income level, as opposed to asset level. HHS
would need to seek legal authority to require LIHEAP applicants to
meet a certain asset test to be considered eligible for services. We
would like to know whether GAO is recommending that HHS be given
statutory authority to require asset tests in State L1HEAP programs.
HI-IS also asks that GAO consider removing this section in the draft
report, unless there is a specific recommendation to be made with
regard to assets tests.
Types of Fraud:
In its discussion of payments to fabricated energy companies, the
draft report is unclear whether these cases involved fraud committed
by individuals, fraud committed by unregulated vendors (and regulated
vendors, if applicable), or both. The report cites erroneous
information contained in LIHEAP applications, but it would be helpful
to our response efforts to know the extent to which applications were
falsified by the applicants themselves, or misrepresented by energy
vendors to include deceased or incarcerated individuals, or other
fraudulent client information.
The following are GAO's comments on the Department of Health and Human
Services' Administration for Children and Families' letter dated May
11, 2010.
GAO Comments:
1. States may set an asset test for determination of LIHEAP
eligibility criteria. In the report, we state that Illinois and
Maryland did not have this requirement. As such, owning high-dollar
assets cannot be considered fraud or improper activity of the program.
We are not making a recommendation on whether HHS should seek legal
authority to require asset tests in State LIHEAP programs.
[End of section]
Appendix III: Comments from the Social Security Administration:
Social Security:
The Commissioner:
Social Security Administration:
Baltimore, MD 21235-0001:
May 10, 2010:
Mr. Gregory Kutz:
Managing Director:
Forensic Audits and Special Investigations:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, D.C. 20548:
Dear Mr. Kutz:
Thank you for the opportunity to review and comment on the Government
Accountability Office (GAO) draft report, "Low Income Home Energy
Assistance Program: Greater Fraud Prevention Controls are Needed" (GAO-
10-621). Although you focused your recommendations on the Department
of Health and Human Services, we have several comments for your
consideration. Our comments on the report are enclosed.
If you have any questions, please contact me or have your staff
contact Candace Skumik, Director, Audit Management and Liaison Staff,
at (410) 965-4636.
Sincerely,
Signed by:
Michael J. Astrue:
Enclosure:
[End of letter]
Comments On The Government Accountability Office (GAO) Draft Report,
"Low Income Home Energy Assistance Program: Greater Fraud Prevention
Controls Are Needed" (GAO-10-621):
While this study relates to a program that is administered by the
Department of Health and Human Services (HHS), the Social Security
Administration (SSA) is mentioned prominently in the report. We offer
the following comments.
General Comments:
In the report you recommend that HHS provide guidance to States
requiring them to verify Low Income Home Energy Assistance Program
(LIHEAP) applicants' Social Security number (SSN) information with our
agency. We note that many States already do so. In the study you
examined activity for seven States: Illinois, Maryland, Michigan, New
Jersey, New York, Ohio, and Virginia. We currently have formal
information exchange agreements in place with five of those States
(all but Illinois and New Jersey) specifically for the purpose of
verifying SSNs for LIHEAP activity. We signed every one of these
agreements with the respective States during the last year, and they
were negotiated under the terms of the Computer Matching and Privacy
Protection Act (CMPPA) of 1988, 5 U.S.C. § 552a(o) et seq, which
amended the Privacy Act. Thus, many States already have the capability
to verify SSNs during the LIHEAP application process. In addition, the
verification provides a death indicator.
The CMPPA provides certain protections to persons applying for, or
receiving, Federal benefits. Specifically, applicants and
beneficiaries must be notified that their information is subject to
matching, and persons retain certain due process rights before
suspending, terminating, or denying their benefits.
Comments on Recommendations:
Recommendation 2:
Evaluate the feasibility (including consideration of any costs,
operational, and system modifications) of validating applicant and
household member identity information with SSA.
Comment:
We disagree. As noted above, we already have matching agreements in
place for five of the seven States GAO reviewed. Under the Privacy
Act, however, we can only verify SSNs of applicants, and not household
members. The compatibility requirement of the Privacy Act, 5 U.S.0 §
552a(b)(3), only permits us to disclose and verify information to
determine an applicant's entitlement to an income maintenance program.
Verifying the SSNs of other household members would require their
consent. The LIHEAP is not administered under the Social Security Act
and thus we may have to establish a reimbursable agreement to provide
the requested data.
Recommendation 4:
Evaluate the feasibility of using SSA's or State vital record's death
data to prevent individuals using deceased identities from receiving
benefits.
Comment:
We agree. To the extent we have death data reported to us, our SSN
verification routine includes a death indicator. Some of our death
data is reported directly by States and may be disclosed as permitted
by section 205(r) of the Social Security Act, 42 U.S.C. § 405(r).
[End of section]
Appendix IV: Comments from State of Illinois Department of Commerce
and Economic Opportunity:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
Illinois Department of Commerce and Economic Opportunity
Pal Quinn, Governor:
Warren Ribley, Director:
James R. Thompson Center
100 West Randolph Street, Suite 3-100:
Chicago, Illinois 60601-3219:
[hyperlink, http://www.commerce.state.il.us]
May 10, 2010:
Matthew Valenta:
Assistant Director:
United States Government Accountability Office:
1999 Bryan Street, Suite 2200:
Dallas, Texas 75201:
Dear Mr. Valenta:
The United States Government Accountability Office (GAO) Forensic
Audits and Special Investigations Team was asked to audit the Low
Income Home Energy Assistance Program (LIHEAP) for indications of
fraud, waste, and abuse. The State of Illinois is one of the seven
states that was selected for the review. A draft report with the GAO's
recommendations was provided to the Department of Health and Human
Services (HHS) and the seven states involved in the investigation for
review and comments.
The State of Illinois respectfully submits the following comments for
your review and consideration:
The report identified 20 cases of fraudulent and/or improper LIHEAP
activity found in the selected states. Four cases were identified in
the State of Illinois concerning applications with deceased
individuals, federal employees receiving LIHEAP benefits and, invalid
identity information. As part of the requirements for eligibility
determination, Illinois policy states that all applicants over the age
of one must provide a valid Social Security Number (SSN) in addition
to income documentation. Hard copy proof must be obtained and may
include a copy of the social security card itself, a letter or print
out from Social Security Administration, or any other form of
government-issued identification that shows both the name and Social
Security number. This requirement has allowed the State to improve the
verification of the program recipients' social security numbers.
The investigation also found cases involving federal employees
receiving LIHEAP benefits, even though they exceeded the LIHEAP income
threshold. According to the report, these recipients claimed zero
income. The Illinois Policy states that households claiming zero
income must provide documentation (for each member claiming zero
income) and the applicant will be required to complete and sign the
Zero Income Affidavit form for households members age 18 or older.
LIHEAP Local Agencies are strongly encouraged to request the following
documentation in documenting a zero income client: denial letter for
social security benefits, denial letter for unemployment compensation
benefits, denial letter for worker's compensation benefits, and proof
of application for Food Stamps, TANF and, AABD.
Despite the State's efforts to verify social security numbers and
income, it has been difficult for the State to verify the accuracy of
the social security cards and income information (especially in zero
income households) without having access to the State OnLine Query
(SOLO) provided by the Social Security Administration (SSA). We
suggest that HHS work with the SSA to obtain SSA's approval to allow
states and their sub-grantees to use the SOLO database to help in
ensuring the accuracy of LIHEAP recipients' income and social security
numbers. [See comment 1]
Our understanding is that states would be able to use SOLO for LIHEAP
if the Commissioner of the Social Security Administration were to
agree to make this database system available for this purpose.
Enabling states to use an available federal database system would be
invaluable in eligibility determination for federally funded programs
like LIHEAP. Access to this system would be a tremendous tool for
states to prevent potential fraud and abuse in the LIHEAP. The State
of Illinois pursued access to SOLO with the Illinois SSA office a few
years ago for this purpose, but the request was denied. The State of
Illinois will be pursuing access to external databases that will
assist in the validation of applicant data such as State directories
of new hires to confirm income eligibility, prisoner databases to
ensure that applicants and individuals listed as household members are
eligible recipients and, other databases that may be available to
confirm applicant and household eligibility. The success of the
verification will rely on whether these databases will be available to
our local agencies since LIHEAP applications are taken in real-time by
the State's database system.
Illinois utilizes a database system called LIHEAP.net for LIHEAP
application entry, benefit calculation and payment. Illinois is
currently assessing the possibility of interfacing LIHEAP.net and the
SOLO database system so that we and our sub-grantees may prevent fraud
and abuse at the time of the application intake.
The report also identified a case involving a woman who lives in a $2
million dollar home in Illinois who received LIHEAP benefits during
the last program year. The case relates to the issue of LIHEAP funds
being disbursed to individuals that may have met the income threshold
but had significant assets. As indicated in the report, the State of
Illinois does not consider the amount of the household's assets in
determining eligibility for LIHEAP. Instead, Illinois bases
eligibility determination on the last 30 days of household income. We
request that GAO provide us with the identity of the household in this
case for further review by Illinois LIHEAP staff. [See comment 2]
The State conducts regular programmatic and fiscal monitoring reviews
of all the State's sub-grantees. If potential fraud/abuse is
identified by staff, an internal investigation is conducted and
corrective actions are identified and requested from the sub-grantee.
If staff suspect fraud or abuse, the facts are documented and provided
to the Department's Legal Bureau for referral to the proper
authorities for potential prosecution.
The Department recently implemented a Fraud Risk Assessment Policy in
which LIHEAP assesses potential fraud risks each year and undertakes
corrective action when an internal control deficiency is identified or
if the residual fraud risk is higher than an acceptable level.
The State of Illinois is committed to improving the verification
system utilized in the Illinois LIHEAP program. We pride ourselves on
innovation and are open to considering GAO recommendations and best
practices identified in other states by both the GAO and HHS. We look
forward to enhancing our partnership with HHS and working on an
improved fraud prevention system for the LIHEAP.
Please do not hesitate to contact Maria Gallardo or me with any
questions or further need for information.
Sincerely,
Signed by:
Larry Dawson:
Deputy Director:
Cc: Yolanda J. Butler:
Nick St. Angelo:
Warren Ribley:
Scott Harry:
Maria Gallardo:
The following are GAO's comments on the State of Illinois Department
of Commerce and Economic Opportunity's letter dated May 10, 2010:
GAO Comments:
1. See our discussion in the "Agency Comments and Our Evaluation"
section.
2. States may set an asset test for determination of LIHEAP
eligibility criteria. In the report, we state that Illinois did not
have this requirement. As such, owning high-dollar assets cannot be
considered fraud or improper activity of the program. Without access
to bank and tax records, our investigation could not determine whether
these individuals met the LIHEAP maximum income threshold. As
requested, we will be referring this case to the State of Illinois
Department of Commerce and Economic Equality for further investigation.
[End of section]
Appendix V: Comments from State of Michigan Department of Human
Services:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
State Of Michigan:
Department Of Human Services:
Jennifer M. Granholm, Governor:
Ismael Ahmed, Director:
235 South Grand Avenue:
P.O. Box 30037:
Lansing, Michigan 48909:
[hyperlink, http://www.michigan.gov]
(517) 373-2035:
May 5, 2010:
Matthew Valenta, Assistant Director:
Financial Management and Assurance:
General Accountability Office-Dallas:
1999 Bryan Street, Suite 2200:
Dallas, Texas 75201:
Dear Mr. Valenta:
Thank you for the opportunity to comment on the draft Low Income Home
Energy Assistance Program: Greater Fraud Prevention Controls Are
Needed report. This was compiled as a result of a recent audit of the
LIHEAP program by the Government Accountability Office (GAO). This
audit was conducted in seven states, including Michigan. The purpose
of the audit was to assess the risk of fraud and improper payments in
LIHEAP. The report contains observations as well as recommendations.
The following comments are Michigan's view of the results and may not
reflect the views of the other states involved in the audit.
In the course of the audit, 16 Michigan cases were reviewed by the
auditor(s). Two of the cases were cited as showing fraudulent and/or
improper LIHEAP activity. [See comment 1]
* One case was cited because the applicant stated she was not employed
at the time of application. The auditors subsequently discovered the
applicant was an employee of the U.S. Postal Service. This was
discovered through federal salary data from the U.S. Postal Service.
This is not a resource available to our state at this time. We feel
the caseworker acted properly based on the information available, but
agree it is appropriate to pursue a fraud referral on this client.
* The second case for which we were cited was due to a client
receiving the maximum benefits available on two different cases. In
our previous Legacy computer system, this could occur if the client
was issued more than one case number for different types of
assistance. For example, a client might have one case number for
his/her food assistance benefits and another case number for his/her
medical assistance. Our Legacy system tracked payments by case number
which is why this overpayment was able to occur”maximum benefits were
issued on each case number and the system didn't catch it was the same
client. However, we would like it noted our new BRIDGES computer
system now tracks by recipient identification number for all members,
rather than by case number. Therefore, we believe this particular
issue is resolved.
In general, I believe Michigan makes every effort to ensure the
integrity of the LIHEAP program. We are one of the states that
currently validate applicant and household member information with the
Social Security Administration (SSA). In addition, Michigan does
pursue investigations and prosecutions when instances of fraud are
discovered, regardless of the amount. If a provider is involved in
fraudulent activity, that provider is disenrolled from our system and
we pursue a refund of any expended funds. If the fraud involves a
client, we pursue recoupment from the client.
We look forward to receiving additional guidance from the Department
of Health and Human Services on the concerns raised in the report.
Again, Michigan appreciates the opportunity to comment on this audit
and will continue to do all in our power to safeguard the taxpayer's
funds.
Sincerely,
Signed by:
Ismael Ahmed:
c: Nick St. Angelo via email:
Susan Kangas via email:
Barbara Anders via email:
The following are GAO's comments on the State of Michigan Department
of Human Services' letter dated May 5, 2010.
GAO Comments:
1. In our report we cite 2 cases from Michigan. Based on our data
mining, all 16 Michigan cases reviewed in our audit had indications of
fraud or improper benefits. However, because we did not investigate in
detail the other 14 cases, we cannot conclude whether fraudulent or
improper activities were associated with those cases.
[End of section]
Appendix VI: Comments from State of New Jersey Department of Community
Affairs:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
State Of New Jersey:
Department Of Community Affairs:
Lori Grifa, Acting Commissioner:
Chris Christie, Governor:
Kim Guadagno, Lt. Governor:
101 South Broad Street
Po Box 800
Trenton, NJ 08625-0800:
May 7, 2010:
Mr. Matthew Valenta, Assistant Director:
US Government Accountability Office:
Forensic Audits & Special Investigations:
Dear Mr. Valenta,
The New Jersey Department of Community Affairs (NJDCA) would like to
thank you for the opportunity to provide comments on the draft report
(GAO-10-621) titled "LIHEAP ” Greater Fraud Prevention Controls Are
Needed" and tentatively scheduled for issuance during June 2010.
Comments are provided below on the Recommendations for Executive
Action section of the report, as well as NJDCA efforts and actions
with regard to enhancing our Fraud Prevention Framework for the
program.
Recommendations for Executive Action:
* Require applicants and household members to provide Social Security
numbers for themselves and all members of the household in order to
receive energy assistance benefits.
Comment: This is a requirement of the NJ LIHEAP program. Specific
guidance issued by US-PIHS (LIHEAP Information Memorandum 2010-6) on
May 5, 2010 will also be reviewed to ensure that controls and program
requirements in NJ are consistent with the directives outlined in this
document.
* Evaluate the feasibility of validating applicant and household
member Social Security numbers with the SSA.
Comment: We support having the SSA provide the NJ LIHEAP program with
access through the SSAIEVS system or other similar information
exchange processes to enhance controls and reduce the risk of fraud
within this program. An informational exchange agreement between the
SSA and New Jersey could provide the ability to validate applicant and
household member social security numbers through routine or periodic
data file comparisons between the state and federal systems prior to
benefit payments or check runs being processed. NJDCA will implement
this recommendation as soon as access can be obtained from SSA. [See
comment 1]
* Develop pre-payment edit checks to prevent individuals from
receiving duplicate benefits.
Comment: The data system developed and administered for LIHEAP by the
NJ Office of Information Technology already includes this function as
noted on page 14 of the GAO report.
* Evaluate the feasibility of using the SSA's or state vital record's
death data to prevent individuals using deceased identities from
receiving benefits.
Comment: We support obtaining this access from the SSA in conjunction
with the SS# validation process previously described as it would be
more efficient to handle both validity checks from one source. In the
alternative or if an informational exchange agreement with SSA is not
feasible, the Department will begin discussion with the New Jersey
Department of Health and Senior Services -Bureau of Vital Statistics
and Registration to determine the feasibility of running validity
checks on LIHEAP data against their vital statistic data. NJDCA will
implement this recommendation as soon as access can be obtained from
SSA.
* Evaluate the feasibility of preventing incarcerated individuals from
improperly receiving benefits, for example, by verifying Social
Security numbers with state prisoner information.
Comment: The Department will evaluate and develop a procedure for
cross-referencing State prisoner information with LIHEAP application
data.
* Evaluate the feasibility of using third party sources (e.g. State
Directory of New Hires) at a minimum on a random or risk basis, to
provide assurance that individuals do not exceed maximum income
thresholds.
Comment: The NJDCA currently has a Memorandum of Agreement with the
New Jersey Department of Labor and Workforce Development to verify
income for non-Federal employees working in New Jersey. In addition,
an Income Integrity Unit has also been recently created to randomly
review applications to ensure compliance with all programmatic
guidelines as related to income and documentation for LIHEAP and other
benefit-type programs administered by NJDCA.
Fraud Prevention Framework Enhancements:
NJDCA hopes to expand its current requirement of collecting Social
Security numbers through a mutual data and informational exchange
agreement with SSA that will provide checks and balances with regard
to the validity of applicant and household member information. The
specific guidance recently issued on May 5, 2010 by US-1MS for the
LIHEAP program will also help to strengthen controls to prevent fraud,
waste and abuse.
The recently created Income Integrity Unit will also assist this
process through ongoing detection and monitoring activities to ensure
that applicant and household information supplied is valid and that it
is checked against various 3rd party sources of information.
NJDCA will also continue to refer suspected or reported cases of fraud
to the NJ Division of Criminal Justice. Should the collaborative
efforts previously described between NJDCA, SSA, and other state
and/or federal agencies be effectuated it may provide the LIHEAP
program with better resources and more opportunities to reduce fraud,
seek prosecutions of offenders, and deter the commission of such
offenses in the future.
Sincerely,
Signed by:
Paul G. Stridick, Director:
NJ Department of Community Affairs:
Division of Housing and Community Resources:
Cc: Lori Grifa, NJDCA Commissioner:
Brian Phillips, Director, NJDCA Office of Auditing:
Yolanda J. Butler, Ph.D., Acting Director, USHHS-ACF/OCS:
The following are GAO's comments on the New Jersey Department of
Community Affairs' letter dated May 7, 2010.
GAO Comments:
1. See our discussion in the "Agency Comments and Our Evaluation"
section.
[End of section]
Appendix VII: Comments from State of New York Office of Temporary and
Disability Assistance:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
New York State:
Office Of Temporary And Disability Assistance:
40 North Pearl Street:
Albany, New York 12243-0001:
David A. Paterson, Governor:
May 10, 2010:
Mr. Matthew Valenta:
Assistant Director:
Forensic Audits and Special Investigations:
U.S. Government Accountability Office:
1999 Bryan Street, Suite 2200:
Dallas, Texas 75201:
Dear Mr. Valenta:
This is in response to Mr. Greg Kunz's e-mail of April 15, 2010
requesting New York State's comments on GAO's draft report entitled
"Low Income Home Energy Assistance Program: Greater Fraud Prevention
Controls are Needed."
New York State is committed to operating an efficient and effective
LIHEAP program that we and our local social services districts operate
with the utmost integrity. During the 200809 LIHEAP season, New York
State issued over 1.5 million LIHEAP benefits totaling over $400
million. These funds were critical in enabling low-income households
struggling with the effect of the recession and volatile home energy
prices to avoid potentially life-threatening loss of heat. This large
volume of LIHEAP funds is distributed within a constrained time period
(usually between November and May), and our local districts and their
alternate certifiers do an exemplary job in determining eligibility
and authorizing benefits with a high degree of accuracy within
constrained timeframes.
As we explained during the course of the GAO review, the New York
Office of Temporary and Disability Assistance (OTDA) and the New York
City Human Resources Administration (BRA) have numerous measures
currently in place to prevent and uncover fraud and abuse in New York
State's LIHEAP program. Because individuals applying for Safety Net
Assistance, Family Assistance, Code A "living alone" Supplemental
Security Income and/or Supplemental Nutrition Assistance Program
benefits are required to provide their Social Security Number (SSN) at
the time of application for one or more of these programs, individuals
who are categorically income eligible for LIHEAP based upon their
receipt of one or more of these program benefits have an SSN that has
been validated by the Social Security Administration (SSA) prior to
the issuance of a LIHEAP benefit. In addition, New York State asks
household members applying only for LIHEAP to provide their SSN, and
New York's upstate Welfare Management System verifies such SSNs with
SSA for validity.
New York State's upstate Welfare Management System application
clearance process detects duplicate records in LIHEAP application
fields, and New York City's LIHEAP system checks for duplicate names
and addresses. New York City conducts a match against SSA data to
identify deceased individuals before LIHEAP benefits are sent for
payment, and single-person LIHEAP cases on the upstate Welfare
Management System were added to the monthly SSA death match beginning
in June 2009. New York State conducts a monthly prison match to detect
individuals who are prisoners who are applying for or are
categorically income eligible for LIHEAP and are also in receipt of
Safety Net Assistance, Family Assistance and/or Supplemental Nutrition
Assistance Program benefits.
The GAO review found that there are areas where we could do more to
improve our ability to prevent fraud and abuse in the LIHEAP program,
and we welcome your suggestions. We will consider these
recommendations within the context of the limitations on the amount of
federal funding available for such efforts. The federal LIHEAP statute
limits the amount of funds that states may use for administration to
10 percent of our total federal LIHEAP allocation. Ten percent is one
of the lowest administrative percentages of all federal block grants;
for example, TANF has a 15 percent allowable administrative rate. The
way in which New York State operates our LIHEAP program is directly
related to the limited funding for administration that is available to
us, as New York State is limited in our ability to make state funding
available for such purposes. We will assess the feasibility of
implementing GAO's recommendations; however, such implementation may
be contingent upon receipt of additional federal administrative
funding that is guaranteed at a sufficient level on an annual basis.
Of equal importance is ensuring that the imposition of additional
fraud and abuse measures not impede the ability of states to provide
timely heating assistance to vulnerable households, and to resolve
energy crises within federal statutorily mandated timeframes.
Because states operate LIHEAP benefit programs that require large
volumes of applications to be processed and paid annually within a
tight time period within constrained funding, choices have to be made
about what fraud prevention measures can be put in place both from a
practical perspective as well as from a resource perspective. As GAO's
report states on page 3, federal LIHEAP funds are provided to assist
households "in meeting their immediate home energy needs."
Accordingly, additional fraud and abuse prevention measures must take
into account the need for states to be responsive to the immediate
needs of eligible applicants, particularly in light of the federal
statutory requirement to resolve household energy crises within 18 to
48 hours.
With regard to the specifics of the report itself, we offer the
following two comments:
* Footnote 3 on page 2 and footnote 16 on page 17 incorrectly state
that the LIHEAP benefit files provided to GAO by New York State
covered the July 2007 through June 2008 period. The files we provided
were actually for the October 1, 2007 through September 30, 2008
period. [See comment 1]
* We have confirmed that the finding in case 17 in Table 1 on page 10
is correct. A $240 regular 2007-08 HEAP benefit and a $425 emergency
2007-08 HEAP benefit were provided to an Albany County applicant who
included two incarcerated individuals as members of her household on
her application. The household would not have been income eligible for
a LIHEAP crisis benefit without the inclusion of two household members
who were incarcerated at the time of application. We have instructed
Albany County to take action to recover the erroneously issued
benefit. New York State's LIHEAP application clearly asks the
applicant to list only those people living in the same house or
apartment. When an applicant lists adult children without income, our
procedures (as described in our LIHEAP Manual) direct the certifier to
require the applicant to provide a signed statement for any adult
household member with zero income stating the adult has no income.
This procedure was not followed in this case.
We would like to take this opportunity to offer a simple suggestion
that could be easily implemented through FIRS and SSA collaboration
that would be of tremendous value to states in combating fraud and
abuse in the LIHEAP program. SSA does not allow states to use the
State OnLine Query (SOLQ) system to determine initial and ongoing
eligibility for LIHEAP. Elderly and disabled applicants often leave
their Social Security or SSI/SSDI benefit amount blank on their LIHEAP
application. If SOLQ were to be available for LIHEAP, the certifier
would be able to find out the correct income amount via SOLQ, thus
expediting the processing of the LIHEAP application as well as
ensuring the accuracy of the applicant's income as well as the
accuracy of their Social Security number. Moreover, SOLQ would also
enable the certifier to determine how the applicant's Medicare
premiums are being paid, which would facilitate a correct
determination as to whether the applicant was income eligible for
LIHEAP. [See comment 2]
While local social services districts have alternative ways of
verifying income and SSNs (via SSA batched data that is used to update
our Welfare Management System), this data is not real-time and the WMS
system is not available to alternate certifiers. Our understanding is
that states would be able to use SOLQ for LIHEAP if the Commissioner
of the Social Security Administration were to agree to make this
system available for this purpose, and to allow the system to be used
by both county and contracted LIHEAP alternate certifier staff. It
seems to us to be a logical extension to enable states to use an
available federal system to assist in correctly determining
eligibility for a 100% federally funded program such as LIHEAP.
We appreciate the opportunity to provide comments on the draft report.
Please feel free to contact Phyllis Morris at 518-473-0332 if you have
any questions or require additional information.
Sincerely,
Signed by:
Russell Sykes:
Deputy Commissioner:
Center for Employment and Economic Supports:
John Meglino:
Director:
Audit and Quality Improvement:
cc:: OTDA Executive Deputy Director Elizabeth Berlin:
Cecile Noel, NYC BRA:
Michael Normile:
Eileen Stack:
Elizabeth Segal:
Robin White:
Christine Unson:
Carolyn Karins:
Alicia Sullivan:
Phyllis Morris:
Paula Cook:
The following are GAO's comments on the State of New York Office of
Temporary and Disability Assistance's letter dated May 10, 2010.
GAO Comments:
1. We revised the report to reflect the dates of the data provided by
New York.
2.See our discussion in the "Agency Comments and Our Evaluation"
section.
[End of section]
Appendix VIII: Comments from State of Ohio Department of Development:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
Ohio Department of Development:
Ted Strickland, Governor:
Lee Fisher, Lt. Governor:
Lisa Pact-McDaniel, Director:
77 South High Street:
PO. Box 1001:
Columbus, Ohio 43216-1001:
[hyperlink, http://www.development.ohio.gov]
May 11, 2010:
Government Accountability Office:
Attn: Matthew Valenta:
Assistant Director:
valenta@gao.gov:
Re: Draft Report ” Low Income Home Energy Assistance Program:
Ladies and Gentlemen:
The Ohio Department of Development (Development), through its Office
of Community Services (OCS), administers the Low Income Home Energy
Assistance Program (LIHEAP) program in the State of Ohio. OCS
cooperated with the Government Accountability Office (GAO) to provide
information for its review of fraud in the LIHEAP program.
Summary:
Development believes that appropriate measures should be taken to
minimize fraudulent applications for LIHEAP benefits. Guidance from
the U.S. Department of Health and Human Services (HHS) and
standardized procedures aimed at reducing fraud risk could be helpful
to the states in administering the LIHEAP program. The cost of
activities aimed at reducing fraud risk must be considered in relation
to the benefit amount provided to individual households as well as the
cap on expenses of administration. In Ohio, the average LIHEAP benefit
in 2009 was $320.
The GAO's draft report, "Low Income Home Energy Assistance Program:
Greater Fraud Prevention Controls are Needed," (the Draft Report)
discusses state rules and procedures in a summary fashion that does
not completely describe any state's application, monitoring, or
enforcement procedures. As a result, the Draft Report could lead some
to conclude that fraud in Ohio is widespread even though the GAO
identifies only four Ohio cases involving aggregate benefit payments
of $1400. We believe the Draft Report would be more useful to the
Congress, HHS and the states if it provided additional detail about
the specific procedures followed by the states reviewed by the GAO so
that both best practices and gaps could be more readily identified and
considered.
More specific comments about the Draft Report as it relates to the
administration of the LIHEAP program in Ohio follow.
Ohio's Current Efforts at Fraud Prevention:
In administering LIHEAP, Development establishes eligibility
guidelines as well as procedures to verify household eligibility.
Development leverages Ohio's network of community action agencies
(CAA) to interact with potentially eligible households. Development
accepts applications for LIHEAP both directly (in person and by mail)
and through Ohio's fifty-two CAA's, which serve as local LIHEAP intake
agencies.
Centralized Applicant Database. Development has made a substantial
investment over a number of years to establish and implement a
centralized, web-based information system known as the Ohio Community
and Energy Assistance Network (OCEAN), to determine household
eligibility and to authorize and track LIHEAP benefits. All
applications for LIHEAP, whether received by Development or initiated
at a CAA, are entered in and processed through OCEAN. The centralized
database and automated review features of OCEAN provide a strong
foundation for fraud prevention.
Social Security Numbers. The Draft Report emphasizes use of Social
Security numbers for applicant identification. Ohio generally requires
LIHEAP applicants to provide Social Security numbers for all household
members over the age of two. Development uses the Social Security
numbers to assist with the verification of household income under
limited circumstances. Social Security numbers are also used, as
described further below, as part of Development's screen for duplicate
applications.
Development does not currently have direct access to information from
the Social Security Administration (SSA). Development accesses
information from the SSA-administered State Verification and Exchange
System (SVES) through an interagency arrangement with the Ohio
Department of Job and Family Services (JFS). As a condition for
accessing SVES data, Development was required to enter into an
Information Exchange Agreement (IEA) with SSA. (A copy of the lEA is
attached for reference, excluding the security procedures and other
Attachments identified in the lEA, and the arrangement for
transmitting SVES data to the state is described on page 3 of the EA.)
JFS, in turn, provides Development a special interface to its
information system known as CRIS-E. Using CRIS-E, Development can
verify certain household and income information about individuals who
receive public assistance benefits administered by JFS. The JFS system
includes data elements from SVES as well as data elements JFS obtains
directly from individuals program beneficiaries. Development cannot
specifically identify the source of individual data elements in
beneficiary records through the JFS interface. [See comment 1]
Development checks applicant Social Security numbers against the JFS
database, CRIS-E, when an application omits Social Security numbers
for household members or when the application omits income
verification documentation. In those cases, Development may be able to
confirm identity and/or income by reference to the CRIS-E database if
the household receives public assistance benefits. If identity or
income cannot be verified through CRIS-E, a follow-up letter is sent
to the applicant for the missing information, and LIHEAP benefits are
not approved until missing identify and/or income information is
provided by the applicant.
Development does not check all LIHEAP applicants' Social Security
numbers against the SVES. Without direct access to SVES, such
verification would not be practical. CRIS-E records are accessed
manually one application at a time. Direct access to SVES might
accommodate batch verification review of applicants' Social Security
numbers against SSA-administered data. Also, Development does not have
access to all databases SSA administers. Note, for example, in the lEA
that access to and use of tax return data is restricted to programs
that do not include LIHEAP.
Applicants must answer citizenship/resident alien status questions,
and applicants must submit documentation to verify
citizenship/resident alien status. Applicants who are not citizens of
the United States or who do not have resident alien status are not
permitted to apply for LIHEAP benefits.
Income Verification. Except under the limited circumstances described
above, Development does not rely on government-compiled databases to
verify income eligibility. LIHEAP applicants must provide documentary
evidence of income for each household member. If an applicant lists no
countable[Footnote 1] household income, the applicant must sign a self
declaration statement explaining how the household is able to meet its
living expenses.
Control for Duplicate Applications. Ohio currently uses five different
methods to determine if duplicate applications have been submitted or
to check for duplicate household members. OCEAN is set up to check for
duplicate Social Security numbers in the database of Ohio
beneficiaries when applications are entered. OCEAN is also programmed
to allow only Social Security numbers within the range of numbers that
have been deemed valid by SSA. Further, duplication checks include
manual case review if duplicate names in the same county or addresses
in the same city are detected, as well as when partial fields of
addresses match or the same utility or fuel vendor account numbers are
detected.
Audit of Application Files. Development's current quality control
procedures include staff dedicated to reviewing samples of
applications processed. All incomplete applications are reviewed by
designated staff members for follow-up. In addition, randomly-selected
application files are reviewed for accuracy and compliance with
program procedures. Approximately seven percent of application files
are reviewed as part of the quality control monitoring. Any errors or
omissions found must be corrected before benefits are determined. OCS
field monitors sample and review files at the local community action
agencies (intake centers) for accuracy in processing and verification
that proper documentation has been submitted.
No Categorical Eligibility. Ohio does not currently provide LIHEAP
benefits based upon eligibility for other public assistance programs,
i.e., categorical eligibility. Therefore, fraud risk is not influenced
by the rules or procedures for administration of other public
assistance programs.
Practical Limitations. Development does not use an asset test in the
LIHEAP application process. The benefit amount does not support the
administrative cost of an asset test. LIHEAP benefits are issued only
once per heating season. In 2009, the average benefit amount per
household was $320. Administrative costs for LIHEAP are capped at 10%.
Development does not believe additional income verification through a
labor intensive assets testing process is warranted in light of other
measures taken to verify eligibility. Furthermore, an asset test is
not necessarily consistent with the emergency nature of LIHEAP
benefits. An applicant may own substantial assets, e.g., a residence,
but experience temporary income loss or other economic crisis that
requires immediate assistance. In many cases, liquidating assets is
neither practicable nor consistent with longer-term goals of
maintaining residents in their homes through the heating season.
Access to Additional Databases to Verify Applicant Information:
Development welcomes guidance from GAO and HHS about additional
database information that may be available to verify applicant
information. In light of the fraud risks highlighted in the Draft
Report, Development will explore with other Ohio agencies access to
records with which it may avoid claims in the name of deceased,
incarcerated or residents of long-term care facilities. Development
currently does not have access to databases of death records, prison
populations, or residents of long-term care facilities. Development
obtains information about the status of household members as
incarcerated or residents of long-term care facilities only through
its application questions. Until such time as additional data sources
can be obtained to verify applicant eligibility, Development will
consider whether its LIHEAP application can be modified to reduce the
risk of fraudulent claims.
With respect to verification against additional data sources,
Development foresees certain challenges to implementation that will
require time and additional resources. First, Development would have
to obtain access to databases which may be protected by federal and/or
state privacy laws. A clear mandate from HHS support the use by
Development of databases that may assist in identifying eligible
applicants for LIHEAP could be useful in the process of obtaining on-
going access to such databases. In addition, a reasonable time should
be allowed for the states to determine how data sources might be
accessed, to assess the cost of measures to implement additional
verification, and to plan for, secure funding, and implement system
and process changes.
Response to Ohio Cases Purported to Reflect Fraudulent or Improper
Activity:
On pages five to eight of the Draft Report, GAO summarizes four Ohio
cases purportedly involving fraudulent conduct by applicants.
Deceased Applicant Receiving a LIHEAP Benefit. OCS was able to
identify the application questioned and is currently investigating the
claim involving an apparently "doctored" SSA benefit letter attached
to the application. OCS has attempted to contact the benefit
recipient, but the telephone number listed is temporarily
disconnected. OCS does not currently have access to vital statistics
data to cross-check applicants against death records.
Incarcerated Applicant. At this time, Development has not identified
the application described in the Draft Report. Ohio does not have
access to incarceration records. If an application identifies a
household member as incarcerated, Development's current practice is to
follow-up with the applicant to determine the original date of
incarceration and the length of time the individual is expected to be
in prison. If a household member is to be incarcerated for fewer than
six months during the program year, that individual is included in the
household; if the household member is expected to be incarcerated for
more than six months, individual is excluded.
Federal Employees. Development reviewed the two files identified and
determined that in both cases, the application files did not include
Veterans Administration employment records. Therefore, calculation of
household income for determining LIHEAP eligibility did not include VA
income. OCS does not currently have access to federal salary data from
the U.S. Department of Treasury to verify income documentation
submitted with the LIHEAP application. Development's current practice
is to follow-up with the applicant to request additional income
documentation, such as tax records, in cases where fraudulent activity
is suspected. Both VA employee applications were processed at a local
LIHEAP intake agency. OCS will consider whether additional training
can be provided for intake staff to recognize potentially fraudulent
applications.
Conclusion:
Development takes the risk of fraudulent activity very seriously. In
addition to controls in place to verify eligibility in the application
process, Development has responded to fraud risks identified by
tightening internal controls and investigating and taking appropriate
administrative and legal action when warranted. Development also
actively monitors administration of the LIHEAP program to identify and
address improper or substandard performance by employees of OCS and
community action agencies in processing applications.
Thank you for your consideration of our comments on the Draft Report.
If you have any questions about the comments or information provided
in this letter, please contact Janet Cesner, Assistant Office Chief,
Office of Community Services, by phone at (614)644-6637 or by e-mail
at Janet.Casner@development.ohio.gov.
Sincerely,
Signed by:
Nick Sunday:
Chief, Office of Community Services:
Enclosure:
cc:: Lisa Patt-McDaniel, Director, Ohio Department of Development:
Footnote:
[1] Various program benefits and resources are mandated to be excluded
from income when determining eligibility for LIHEAP assistance. See U
S. Department of Health and Human Services Low-Income Home Energy
Assistance Information Memorandum Transmittal No. LIHEAP-IM-2010-7
dated May 6, 2010, for the most recent guidance on income exclusions.
The following are GAO's comments on the State of Ohio Department of
Development's letter dated May 11, 2010.
GAO Comments:
1. See our discussion in the "Agency Comments and Our Evaluation"
section.
[End of section]
Appendix IX: Comments from Commonwealth of Virginia Department of
Social Services:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
Commonwealth Of Virginia:
Department Of Social Services:
801 E. Main Street:
Richmond, VA, 23219-3301:
[hyperlink, http://www.dss.state.va.us]
May 10, 2010:
Mr. Matthew Valenta:
Assistant Director:
U.S. Government Accountability Office:
1999 Bryan Street, Suite 2200:
Dallas, Texas 75201:
Dear Mr. Valenta:
The Commonwealth of Virginia appreciates the opportunity to
participate in the Government Accountability Office's (GAO) review of
Low Income Home Energy Assistance Program (LIHEAP.) Program integrity
is a priority of the Department of Social Services; as such we are
always interested in exploring ways to improve program operation and
administration. As highlighted in the report, while there are ways to
improve fraud prevention in the LIHEAP, primarily through significant
data matches with various sources, to date Virginia has not pursued
data matches primarily due to the interpretation of the Department of
Health and Human Services that requiring social security numbers (SSN)
is not a condition of eligibility. This interpretation has recently
been modified to allow, but not require, states to ask for SSNs.
Virginia does utilize various control measures in to attempt to
prevent fraud; the state engages in significant sub-recipient
monitoring including local case reading reviews.
You cite in the report the practice of enrolling individuals in LIHEAP
based on their eligibility for another federal programs as a practice
that avails itself to fraud; you specifically reference TANF and SNAP.
Specifically, the report states that "...LIHEAP's preventative
controls will only be as effective as the preventative controls for
the federal program (e.g., TANF or SNAP) that the recipient originally
received benefits." However, both the TANF and SNAP programs require
SSNs for all household members which are subsequently verified through
the Social Security Administration. Additionally, both programs
require periodic reviews of eligibility. As a result, the preventative
measures for TANF and SNAP are inherently better than those currently
required for LIHEAP. Therefore, while some federal programs may not
use the preventative measures utilized in TANF and SNAP, we do not
agree that qualifying individuals for LIHEAP based on their TANF or
SNAP eligibility is prone to excessive fraudulent activity. [See
comment 1]
We would also be interested in receiving specific information about
the four Virginia cases being referred to the Office of the Inspector
General (OIG). We do not want to delay any action to pursue
prosecution and/or overpayment recovery pending the final
determination of the OIG. [See comment 2]
Thank you for the opportunity to comment on the draft report. Please
feel free to contact Ms. Andrea Gregg, Energy Assistance Program
Manager at (804)726-7368 or andrea.gregg@dss.virginia.gov if you have
questions or need additional information.
Sincerely,
Signed by:
Thomas J. Steinhauser, Director:
Division of Benefit Programs:
The following are GAO's comments on the Commonwealth of Virginia
Department of Social Services' letter dated May 10, 2010.
GAO Comments:
1. In the report, we state that LIHEAP's preventive controls will only
be as effective as the preventive controls for the federal program for
which the recipient originally received benefits. We did not determine
that qualifying LIHEAP recipients based on their eligibility for such
programs is prone to excessive fraudulent activity.
2. We will be referring the four Virginia Cases to the Department of
Health and Human Services (HHS) Office of the Inspector General (OIG)
for further investigation. To ensure that any actions conducted by the
Commonwealth of Virginia do not impede the HHS OIG investigation, we
believe that the Department of Social Services should coordinate its
efforts with the HHS OIG.
[End of section]
Appendix X: Comments from State of West Virginia Department of Health
and Human Resources:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
State Of West Virginia:
Department Of Health And Human Resources:
Joe Manchin III, Governor:
Patsy A. Hardy, FACHE, MSN, MBA, Cabinet Secretary:
Bureau for Children and Families:
Office of Children and Family Policy:
350 Capitol Street, Room 730:
Charleston, West Virginia 25301-3711:
Telephone: (304) 558-4069 Fax: (304) 558-4623:
May 7, 2010:
Mr. Greg Kutz, Managing Director:
Forensic Audits and Special Investigations:
United States Government Accountability Office:
441 G Street NW:
Washington, DC 20548:
Dear Mr. Kutz:
This letter is in response to your electronic message dated April 15,
2010 regarding the recent United States Government Accountability
Office's (GAO) review of the Low Income Home Energy Assistance Program
(LIHEAP) which West Virginia was a participant. Upon reviewing the
draft of the GAP 10-621 Report, we are pleased to report that some of
these controls are already in place. Additionally, the recommendations
in whole are definitely being taken under consideration and will be
incorporated into WV's LIHEAP program wherever possible. The report
contained the following recommendations:
* Require applicants and household members to provide Social Security
numbers for themselves and all members of the household in order to
receive energy assistance benefits;
* Evaluate the feasibility (including consideration of any costs,
operational and system modifications) of validating applicant and
household member identity information with the SSA;
* Develop prepayment edit checks to prevent individuals from receiving
duplicate benefits;
* Evaluate the feasibility of using the Social Security
Administration's (SSA) or state vital record's death data to prevent
individuals using deceased identities from receiving benefits;
* Evaluate the feasibility of preventing incarcerated individuals from
improperly receiving benefits, for example, by verifying Social
Security numbers with state's prisoner information; and;
* Evaluate the feasibility of using third-party sources (e.g. State
Directory of New Hires) at a minimum on a random risk basis, to
provide assurance that individuals do not exceed maximum income
thresholds.
Also, West Virginia further recommends that the Health and Human
Services (HHS) be directed to work with the SSA to allow states to use
the State On-line Query (SOLO) system to determine initial and ongoing
eligibility for LIHEAP. Elderly and disabled applicants sometime omit
their Social Security income or numbers on their LIHEAP application.
If SOLO were to be available for LIHEAP, our case managers would be
able to find out the correct income amount from SOLO, which would
verify the recipient's income and Social Security number. [See comment
1]
West Virginia appreciates the opportunity to participate in this
worthwhile study and certainly plans to work on making its' LIHEAP
program more accurate and efficient in the future. We appreciate the
professional and helpful manner in which your staff has worked and
communicated with our staff. Please do not hesitate to let me know if
you have any questions.
Sincerely,
Signed by:
Charles R. Young:
Assistant Commissioner:
cc: John J. Najamulski:
Sue Ellen Buster:
Dan Hartwell:
The following are GAO's comments on the State of West Virginia
Department of Health and Human Resources' letter dated May 7, 2010.
GAO Comments:
1. See our discussion in the "Agency Comments and Our Evaluation"
section.
[End of section]
Appendix XI: GAO Contact and Staff Acknowledgments:
GAO contact:
Greg Kutz, (202) 512-6722:
Acknowledgments:
In addition to the contact named above, the following individuals made
major contributions to this report: Erika Axelson, Assistant Director;
Matthew Harris, Assistant Director; Matthew Valenta, Assistant
Director; Randall Cole; Erica Estrada; Grant Fleming; Deanna Lee;
Barbara Lewis; Olivia Lopez; Jeff McDermott; Vanessa Taylor; and Tim
Walker.
[End of section]
Footnotes:
[1] To be eligible for LIHEAP, individuals must meet the LIHEAP
statute's definition of an eligible household and must be responsible
for energy costs either directly or through their rent. LIHEAP also
provides weatherization assistance, which states can provide up to 15
percent of its LIHEAP funds. Because many of the states combine
LIHEAP's weatherization with the Department of Energy's weatherization
program, we did not investigate this component of LIHEAP for this
review.
[2] LIHEAP block grants are also provided to the District of Columbia,
U.S. territories, Indian tribes, and tribal organizations.
[3] The files cover July 2008 through June 2009 for Illinois,
Maryland, Michigan, New Jersey, Ohio, and Virginia, and October 2007
through September 2008 for New York.
[4] The Department of Treasury is the central disbursing agency for
most federal agency payroll centers. For example, federal salary
payments that are processed by the Department of Agriculture's
National Finance Center are paid through the Department of Treasury.
The U.S. Postal Service processes payments for postal employees. DFAS
processes payments for Department of Defense employees and employees
of certain other federal agencies.
[5] The cases were chosen using a nonrepresentative selection approach
based on type of fraud and improper benefit, location of the
application, availability of documentation, and other criteria that
provided indications of fraud and abuse.
[6] Forensic audit is the application of methods for tracking and
collecting evidence for investigation and prosecution of criminal
acts, such as fraud.
[7] Pub. Law No. 97-35 (Aug. 13, 1981).
[8] Grantees can use up to 10 percent of the block grant for
administrative costs of the program.
[9] Each state has flexibility in the acceptance of application and
approval of eligibility. For certain states, the application is
processed and approved by nonprofits or local governments. In other
states, the application is processed and approved by state employees.
[10] Approximately 299,000 individuals (LIHEAP applicants and
household members) could not be validated by SSA for the 260,000
applications. Certain applications had more than 1 individual whose
identity could not be validated by the Social Security Administration
(SSA). We used SSA's Enumeration Verification System (EVS) to
determine the validity of the application information contained in the
LIHEAP databases. EVS provides Social Security number validations to
companies and agencies, including states' benefits-paying agencies.
[11] GAO, Hurricanes Katrina and Rita Disaster Relief: Prevention Is
the Key to Minimizing Fraud, Waste, and Abuse in Recovery Efforts,
[hyperlink, http://www.gao.gov/products/GAO-07-418T] (Washington,
D.C.: Jan. 29, 2007) and GAO, Hurricanes Katrina and Rita Disaster
Relief: Improper and Potentially Fraudulent Individual Assistance
Payments Estimated to Be Between $600 Million and $1.4 Billion,
[hyperlink, http://www.gao.gov/products/GAO-06-844T] (Washington,
D.C.: June 14, 2006).
[12] 42 U.S.C. § 8624(b).
[13] 45 C.F.R. § 96.84(c).
[14] According to HHS, Section 7 of the Privacy Act of 1974 (5 U.S.C.
§552a note) prohibits states from denying an individual a benefit
because of the individual's refusal to disclose his or her social
security number (SSN), unless disclosure is required by federal
statute. HHS states that because there is nothing in the LIHEAP
statute requiring individuals to provide their SSN, states should not
require that LIHEAP applicants provide it. A state may request that an
applicant voluntarily provide an SSN, but if they do this, they must
inform the person whether the disclosure is mandatory or voluntary, by
what statutory or other authority such number is solicited, and what
uses will be made of it.
[15] 74 Fed. Reg. 62866 (Dec. 1, 2009).
[16] The weatherization portion of the LIHEAP program was beyond the
scope of our investigation and therefore not included in our analysis.
[17] The files cover July 2008 through June 2009 for Illinois,
Maryland, Michigan, New Jersey, Ohio, and Virginia, and October 2007
through September 2008 for New York.
[18] One of the states did not provide the identities of all household
members; thus, the overall magnitude of identity-related fraud is
understated in our analysis.
[19] Data validation edits include (1) tests to see if numeric fields
contain nonnumeric data and (2) tests on a value to see if it falls
within the range established for the data element.
[End of section]
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