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entitled 'Residential Energy: Oversight of Low-Income Home Energy 
Assistance Program Payments' which was released on September 27, 2005. 

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Testimony: 

Before the Subcommittee on Federal Financial Management, Government 
Information, and International Security, Committee on Homeland Security 
and Governmental Affairs, U.S. Senate: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 2:30 p.m. EDT: 

Tuesday, September 27, 2005: 

Residential Energy: 

Oversight of Low-Income Home Energy Assistance Program Payments: 

Statement of Jim Wells, Director: 
Natural Resources and Environment: 

GAO-05-1039T: 

GAO Highlights: 

Highlights of GAO-05-1039T, testimony before the Subcommittee on 
Federal Financial Management, Government Information, and International 
Security, Senate Committee on Homeland Security and Governmental 
Affairs: 

Why GAO Did This Study: 

The Department of Health and Human Services’ (HHS) Low-Income Home 
Energy Assistance Program (LIHEAP) is a block grant program with recent 
annual funding of about $2 billion that provides fuel payment 
assistance and payments for home energy efficiency improvements for low-
income households. As energy prices continue to rise, this assistance 
is growing more important to mitigate the impact of higher prices on 
low-income households. HHS awards LIHEAP funds by formula to all 50 
states and the District of Columbia, federally or state-recognized 
Indian tribes and tribal organizations, and territories. These grantees 
then provide energy assistance payments to low-income households. 
Within LIHEAP, the Residential Energy Assistance Challenge Option 
(REACH) program funds demonstration projects to help low-income 
families reduce their energy usage. GAO was asked to provide 
information on (1) HHS’s oversight of LIHEAP payments made by grantees 
and (2) GAO’s 2001 review of LIHEAP’s REACH program. 

What GAO Found: 

HHS relies on individual grantees—the states, tribal organizations, and 
territories—to oversee the LIHEAP program. Because the Single Audit Act 
made state and local governments primarily responsible for obtaining 
independent audits of funds they receive from federal programs, HHS’s 
principal oversight function is to monitor, not audit, LIHEAP payments 
made by grantees. Monitoring includes assessing the quality of single 
audits conducted under the act, reviewing audit results, and ensuring 
that corrective actions are taken to resolve audit findings. GAO’s 
brief review of relevant 2004 Single Audit Act reports showed that the 
only LIHEAP costs that were specifically questioned involved relatively 
small sums—for example, one report cited incorrect or duplicate 
payments totaling $8,864. Another audit report questioned $1,285 in 
LIHEAP payments because of inadequate procedures to prevent 
overpayments. 

GAO’s 2001 review of the REACH program found several projects that 
included social services that were not directly related to meeting home 
energy needs. For example, six projects included job skill or 
employment development services, and one project provided funds to help 
clients pay past-due rent or mortgage payments. In addition, the report 
stated that REACH did not have performance goals that were objective 
and quantifiable. As a result, GAO did not believe HHS could 
effectively evaluate the program’s overall performance. The report also 
noted that such goals would provide a clearer basis for selecting 
individual projects to fund. GAO recommended that HHS develop 
performance goals for REACH that were objective, measurable, and 
quantifiable. While HHS agreed with this recommendation, GAO has been 
unable to identify any actions taken to implement this recommendation. 
According to HHS, the agency continues to work on the development of 
long-term performance measures for LIHEAP. 

What GAO Recommends: 

This testimony does not make any recommendations. 

www.gao.gov/cgi-bin/getrpt?GAO-05-1039T. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Jim Wells at (202) 512-
3841 or wellsj@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to be here today to discuss the Department 
of Health and Human Services' (HHS) Low-Income Home Energy Assistance 
Program (LIHEAP) and our observations on oversight methods for 
determining the sources and magnitude of possible improper payments. As 
you know, LIHEAP is a block grant program established in 1981 that 
funds fuel payment assistance and home energy efficiency improvements 
for low-income households. With recent annual funding of about $2 
billion, LIHEAP seeks to increase the health and prosperity of 
communities and tribes by helping low-income households--particularly 
those with the lowest income, which pay a high proportion of household 
income for home energy--meet their immediate home energy needs. As 
energy prices continue to rise, this assistance is growing more 
important to mitigate the impact of higher prices on low-income 
households. HHS awards LIHEAP grant funds by formula to all 50 states 
and the District of Columbia, federally or state-recognized Indian 
tribes and tribal organizations, and insular areas (American Samoa, the 
Commonwealth of Puerto Rico, Guam, the Northern Mariana Islands, and 
the U.S. Virgin Islands). These grantees provide payments to households 
to help them meet their energy needs. According to HHS, in fiscal year 
2004, approximately 4.6 million households received heating assistance; 
308,000 households received cooling aid; 1.1 million received 
winter/year-round crisis aid; 92,000 received summer crisis aid; and 
112,000 received weatherization assistance. Households may receive more 
than one kind of LIHEAP assistance. 

Within LIHEAP, the Congress established the Residential Energy 
Assistance Challenge Option (REACH) program, which provides grants that 
fund demonstration projects to test various approaches to help low-
income families reduce their energy usage and become more self-
sufficient in meeting their home energy needs. In a sense, the REACH 
program serves as a "laboratory" for identifying better ways to ensure 
that low-income families can afford home heating and cooling. With 
annual average funding of about $6 million--less than 1 percent, on 
average, of the total annual funding for LIHEAP--REACH had provided 112 
grants totaling $55 million by the end of fiscal year 2004. Individual 
grants ranged in amount from $50,000 to $1.6 million. 

My statement today discusses (1) HHS's oversight of LIHEAP payments 
made by grantees and (2) our 2001 review of LIHEAP's REACH program. To 
address LIHEAP payment oversight, we gathered information on the 
payment oversight process and conducted a brief review of 2004 Single 
Audit Act reports that addressed LIHEAP. Specifically, we queried the 
Single Audit Database from the Federal Audit Clearinghouse to identify 
2004 Single Audit Act reports that addressed LIHEAP. We then examined 
those reports that had findings to determine the nature of the findings 
as they related to LIHEAP. Our discussion of the REACH program is based 
on our 2001 report, which we conducted in accordance with generally 
accepted government auditing standards.[Footnote 1] We did not update 
our 2001 report on the REACH program. 

LIHEAP Payment Oversight: 

As a block grant program, LIHEAP offers much flexibility to states and 
other grantees to manage and oversee their energy assistance programs 
in the way that they feel best serves their low-income populations. 
While the federal government establishes overall guidelines, each 
grantee operates its own program, taking applications, establishing 
eligibility, and making decisions on the kinds of assistance payments 
it will offer. HHS accepts the grantee's interpretation of the LIHEAP 
statute unless HHS finds it to be "clearly erroneous."LIHEAP payments 
are subject to review under the Single Audit Act. The Single Audit Act 
made state and local governments primarily responsible for obtaining 
independent audits of federal programs, including payments made under 
LIHEAP. As a result, HHS's principal oversight function is to monitor, 
not audit, LIHEAP payments made by grantees. Monitoring includes 
assessing the quality of single audits conducted under the act, 
reviewing audit results, and ensuring that corrective actions are taken 
to resolve audit findings. Through the audit or other federal review 
processes, grantees must return funds when spent in ways contrary to 
the LIHEAP statute. Our brief review of 2004 Single Audit Act reports 
addressing LIHEAP showed relatively few specific LIHEAP-related audit 
findings. In some cases, grantees were found to have not met accounting 
criteria for managing federal funds they were awarded--both from LIHEAP 
and other programs--so it was difficult to distinguish any specific 
improper LIHEAP payments. For example, one grantee lacked adequate 
documentation to support costs it charged to manage its federal funds. 
We were able to identify only certain relatively small LIHEAP payments 
questioned in the audit reports, such as $8,864 in what appear to have 
been incorrect or duplicate payments made by one grantee. Another audit 
report questioned $1,285 in LIHEAP payments because of inadequate 
procedures to prevent overpayments. 

In addition to the Single Audit Act, the Improper Payments Information 
Act of 2002 requires federal agencies to review their programs and 
identify those that may be susceptible to significant improper 
payments. Agencies are required to estimate the annual amount of 
improper payments and submit those estimates to the Congress; when 
improper payments are estimated to exceed $10 million, those estimates 
must be accompanied by a report of actions being taken to reduce such 
payments. As part of this process, HHS has conducted risk assessments 
identifying specific program risks and assessing related controls. 
Although HHS identified seven of its programs as high-risk, LIHEAP was 
not among them. We are not aware of any more comprehensive information 
on the appropriateness of payments made by LIHEAP grantees other than 
the few examples discussed above. 

REACH Program: 

While we have not reviewed overall LIHEAP compliance, at the request of 
the Senate Committee on Health, Education, Labor and Pensions and the 
House Committee on Education and Workforce, in 2001 we did review and 
report on REACH--a small part of the overall program. We found that 
many REACH projects involved energy-related repairs to homes and budget 
counseling, and three state REACH projects were developing consumer 
cooperatives to purchase electricity or bulk fuels, such as heating 
oil. However, some REACH projects made payments for social services not 
directly related to meeting home energy needs. For example, six 
projects made payments for job skill or employment development 
services, and one project provided funds to help clients pay past-due 
rent or mortgage payments. 

The legislation authorizing REACH identified three performance goals 
for individual REACH projects: reduce energy costs of participating 
households, increase the regularity of home energy bill payments, and 
increase energy suppliers' contributions to reduce eligible households' 
energy burden. Despite these broad purposes for the program, in 2001 
HHS had not developed performance goals that were objective and 
quantifiable. Consequently, we did not believe HHS could effectively 
evaluate the program's overall performance and report to the Congress 
on what was accomplished for the resources expended. We also noted that 
developing such goals would provide a clearer basis for selecting 
individual projects to fund. Our report recommended that HHS develop 
program performance goals for REACH that were objective, measurable, 
and quantifiable. HHS agreed with the recommendation and planned to 
develop performance goals for REACH as part of the agency's Government 
Performance and Results Act (GPRA) plan. However, the most recent FY 
2005 Performance Plan did not include goals for the REACH program under 
LIHEAP. We have been unable to identify any actions taken to implement 
this recommendation. According to HHS officials, they have continued to 
examine this issue and work on the continuing improvement and 
development of long-term performance measures for the overall LIHEAP 
program. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 
answer any questions that you or other Members of the Subcommittee may 
have at this time. 

Contacts: 

Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this statement. For further 
information about this testimony, please contact Jim Wells at (202) 512-
3841 or Wellsj@gao.gov. 

FOOTNOTES

[1] GAO, Residential Energy Assistance: Effectiveness of Demonstration 
Program as Yet Undetermined, GAO-01-723 (Washington, D.C.: August 17, 
2001).