Mismanagement of Taxpayer-Funded LIHEAP Program Revealed in Auditor General Report

House Republican Policy Committee takes in-depth look at hearing

Inadequate policy procedures and lack of oversight by the Pennsylvania Department of Public Welfare (DPW) led to fraud in the state’s administering of the Low Income Home Energy Assistance Program (LIHEAP), according to officials from the Office of the Auditor General at today’s House Republican Policy Committee hearing.

The hearing was held at La Roche College in Allegheny County and chaired by Rep. Bryan Cutler (R-Lancaster).
“LIHEAP is one of the most noble state initiatives we have, and to see this program, which provides heating assistance to low-income families, defrauded for personal gain is absolutely shameful,? said Cutler. “The money that was fleeced from this program was stolen from the pockets of taxpayers, and we have an obligation to make sure that this never happens again.?
LIHEAP provides grants to low income households to help reduce heating bills during the winter. It is a federally funded program administered by the state’s DPW county assistance offices. According to the audit, the county assistance offices received 689,970 applications for LIHEAP assistance and distributed $157 million during the 2005-06 heating season.
The House Republican Policy Committee, chaired by Rep. Mike Turzai (R-Allegheny), has held multiple hearings throughout the state on the state’s welfare system. Welfare reform has been a top priority of the House Republican Caucus. 
“The fraud allowed by DPW in its administration of the LIHEAP program is inexcusable,? said Turzai. “We need to bring real external controls to the administration of this program and ensure that it benefits those families who are truly in need and not those who are milking the system. We also need photo identification, finger-imaging and an income eligibility verification system to ensure integrity of the program.?
Reps. Mark Mustio (R-Allegheny), Scott Hutchinson (R-Venango/Butler), Bob Bastian (R-Bedford/Somerset), Jerry Stern (R-Blair) and Jeff Pyle (R-Indiana/Armstrong) also attended the hearing. 
Among the problem areas identified in the audit were:
Missing or incomplete documentation for applicants.
Failure of county assistance officers to properly review LIHEAP applications.
Discrepancies concerning information provided by applicants, including Social Security numbers and addresses.
Failure of DPW to employ enough monitors to check the authenticity LIHEAP applications. At the time of the audit, DPW had one monitor checking applications across the entire state.
Thomas Marks, deputy auditor general, testified on behalf of the Department of the Auditor General.
“The single biggest instance of potential fraud in all six counties we tested involved Social Security numbers,? Marks said. “Our auditors identified 429 applicants who received more than $162,000 in benefits using Social Security numbers associated with deceased persons. Auditors also found 549 applicants who received more than $182,000 for questionable water and sewer bills. Federal guidelines prohibit using LIHEAP funds for the payment of water or sewer bills, unless the home is heated with steam.?
The Office of Auditor General made the following recommendations to improve the administering of the LIHEAP program:
Improve LIHEAP’s information system to ensure validity of Social Security numbers entered into the system.
Develop edit checks to screen applications submitted with similar addresses, names and Social Security numbers.
Require county assistance offices and crisis contractors to independently verify Social Security numbers before applications are approved.
Ensure county assistance office personnel who administer LIHEAP receive training for processing cash applications and are properly supervised and have access to a policy manual with procedures on safeguarding records.
Improve monitoring and management oversight.
“DPW has a big job ahead of them to help fix the problems that have plagued its internal operation of the state’s LIHEAP program for years,? said Bastian. “If there are employees inside of DPW defrauding the system, then they need to be fired so the problem does not continue in the future.?
“LIHEAP’s funding comes primarily from the federal government, which flows through the Commonwealth of Pennsylvania, and ultimately, the federal government has the final say if DPW makes the proper changes to their systems to ensure that the funding is not being spent unwisely,? said Hutchinson.  “I know this is not going to be a quick process, but it troubles me that Pennsylvania could possibly be penalized in the future for the mismanagement of LIHEAP funds.?
“I am very troubled by the audit's finding, but I am even more troubled by the response of DPW to the problems found in the Auditor General’s report,? said Stern. “DPW continues to deny that there are widespread fraud issues within its department’s administration of the state’s LIHEAP program. The first step to fixing any problem is admitting that change needs to be made and it is very unfortunate that DPW will not acknowledge the fraud that has been occurring.?
“It is unacceptable to have in place such inaccurate and insufficient monitoring systems used by DPW to be responsible for handing out more than $19 million in taxpayer funded money during 2005-06,? said Mustio. “State government owes it to the hard-working taxpaying citizens of Pennsylvania to have more stringent policies in place to help rid the rampant fraud that is going on within DPW.?
Marks said that the Auditor General’s office will follow up within 12 months to determine whether its LIHEAP recommendations have been implemented. 
For more information on this issue, please visit www.pagoppolicy.com  .
Rep. Mike Turzai
28th District
Pennsylvania House of Representatives

(412) 369-2230
Contact: Tricia Graham
House Republican Public Relations
(717) 260-6296
August 29, 2007