PA Auditor Says LIHEAP Fraud Continues

August 22, 2011 -- Pennsylvania Auditor General Jack Wagner said earlier this month that widespread deficiencies first identified in the Department of Public Welfare’s (DPW) administration of the state’s LIHEAP four years ago still exist today – even after seven state employees were convicted of theft and other crimes and DPW spent more than $800,000 on a private firm hired to help fix the problems.

Wagner said that a follow-up audit, released August 10, found that many of the same types of waste, abuse and potential fraud first identified in a June 2007 audit report continued to exist as of June 29, 2011. These included:

  • Applicants using the Social Security Numbers of dead people and applying for benefits by using variations of an active Social Security Number
  • Applicants receiving benefits while serving time in prison,
  • Applicants who underreported income
  • Applicants who submitted for double payments

Wagner’s follow-up special performance audit, with primary test work covering the period July 1, 2009 to June 30, 2010, was initiated to determine if DPW fixed the problems identified by his office four years ago. That audit found inadequate policies and procedures, insufficient supervision, and inadequate oversight by DPW that resulted in potential applicant and employee fraud and abuse in six counties examined.

The Philadelphia district attorney relied in part on information uncovered by Wagner’s audit to charge 18 people, including state and city employees, with stealing more than $500,000 of LIHEAP funds and related crimes. Seven state employees, and six others, either pleaded guilty or were convicted, and received sentences that included prison time or probation and restitution.

Wagner’s audit questioned DPW management’s hiring of a Philadelphia law firm through a no-bid contract for administrative assistance. Auditors noted that legal expertise was not required and that the task could have been performed by welfare department employees. In addition, the fact that DPW relied on a sole-source vendor instead of seeking competitive bids potentially inflated contract costs, Wagner said.

Other deficiencies noted by Wagner’s special performance audit were: DPW failed to monitor data exchange information used to monitor recipient eligibility; DPW does not require county assistance offices to have written standard operating procedures for processing LIHEAP applications; and DPW failed to assess the adequacy of application processing, written procedures and controls at crisis contractors who authorized LIHEAP benefits.

Wagner made 10 recommendations to address the deficiencies identified within LIHEAP that were noted in his special performance audit, including that DPW should:

  • Terminate the use of the sole source contract as soon as permitted by the terms of the contract and shift the law firm’s monitoring duties to DPW employees; contracts should be competitively bid and defined in detail; and the contract process should not be circumvented through a law firm to a subcontractor;
  • Ensure that appropriate edit checks are developed immediately to detect irregularities or potential fraud and abuse on applications submitted with similar addresses, names, and SSNs;
  • Conduct additional monitoring procedures to look for fraudulent, suspicious, and questionable transactions including performing data analysis as well as comparing LIHEAP information to exchange data for applicants who are incarcerated, deceased, receiving high wages, etc.;
  • Maintain detailed documentation to support justification of sole source procurement, payment of expenditures, and to substantiate services rendered; and
  • Strengthen the monitoring process by improving each monitor’s documentation, developing written procedures to follow-up on issues noted within the on-site monitoring process, and require that monitors’ documentation of on-site monitoring be reviewed and approved by a supervisor.

The DPW responded that it has been making changes to address waste and fraud in LIHEAP and that multiple deficiencies have already been identified, and changes are currently being implemented. 

Source:  Auditor’s press release, newspapers