Low-Income Home Energy Assistance Program:

Greater Fraud Prevention Controls Are Needed

GAO-10-621: Published: Jun 18, 2010. Publicly Released: Jul 1, 2010.

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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.

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.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: 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 to evaluate the feasibility of preventing incarcerated individuals from improperly receiving benefits, for example, by verifying Social Security numbers with state's prisoner information.

    Agency Affected: Department of Health and Human Services

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: 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 to evaluate the feasibility of using SSA's or states' vital record death data to prevent individuals using deceased identities from receiving benefits.

    Agency Affected: Department of Health and Human Services

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: 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 to develop prepayment edit checks to prevent individuals from receiving duplicate benefits.

    Agency Affected: Department of Health and Human Services

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: 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 to evaluate the feasibility (including consideration of any costs and operational and system modifications) of validating applicant and household member identity information with the Social Security Administration (SSA).

    Agency Affected: Department of Health and Human Services

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: 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 to 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.

    Agency Affected: Department of Health and Human Services

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: 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 to 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 Affected: Department of Health and Human Services

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

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