HARRISBURG, Pa., Aug. 10, 2011 ‘Auditor General Jack Wagner said today that widespread deficiencies first identified in the Department of Public Welfare’s administration of the Low-Income Home Energy Assistance Program 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 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.
‘The Department of Public Welfare not only has failed to address many of the problems that we identified in our audit four years ago, but it has wasted $800,000 in taxpayer money on a fix that never occurred,” Wagner said. ‘LIHEAP is a vital program helping needy Pennsylvania families heat their homes during the winter. The Department of Public Welfare must begin working now to fix LIHEAP, to make sure that funds are available for Pennsylvania families who truly need assistance.”
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 the DPW fixed the problems identified by his office four years ago. That audit found inadequate policies and procedures, insufficient supervision, and inadequate oversight by the 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 special performance audit questioned the 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 the DPW relied on a sole-source vendor instead of seeking competitive bids potentially inflated contract costs, Wagner said.
‘Competition and transparency should always be a part of the contracting process to ensure that Pennsylvania taxpayers are getting the most qualified bidder and the best possible price,” Wagner said. The special performance audit also cited the DPW for possible circumvention of the procurement process by permitting the law firm to subcontract the work to a forensic accounting firm.
From February 2009 to January 2011, the DPW paid more than $800,000 for contracted services, including $203,471 billed by the law firm to the DPW for seven months in which no on-site monitoring services were performed. In addition, Wagner’s auditors determined that the law firm failed to comply with contract provisions, which required the submission of detailed documentation supporting expenditures of services rendered for 10 of 12 months reviewed during the contract period.
Other noted weaknesses in the law firm’s monitoring process for discovering and curtailing deficiencies within LIHEAP include the failure to:
Make unscheduled visits for investigative or follow-up purposes,
Address the process and security for bar-coded applications returned by the post office,
Assess the timelines of posting LIHEAP applications to the computer system used by DPW,
Follow up with county assistance offices or crisis contractors to verify that corrective action was undertaken with regard to incomplete supervisory reviews, or
Disclose or report significant program weaknesses in monitoring reports.
Wagner’s auditors also noted similar weaknesses in monitoring reports completed by a team of four DPW monitors.
Wagner issued his special performance audit today, to allow adequate time for the DPW to begin appropriate corrective action to fix the identified program deficiencies before the start of the next heating season. In addition to the Department of the Auditor General contacting the DPW in July 2008 to conduct a follow-up of the LIHEAP audit, in response to which the DPW failed to provide documentation to demonstrate how the DPW addressed the 25 recommendations issued in the June 2007 audit report, the office also has continued to follow up on most of these recommendations as part of other audits, which encompass auditing federal funds spent by the Commonwealth. However, most of these recommendations have not been adequately implemented by the DPW.
‘Our patience is wearing out,” Wagner said. ‘The Department of Public Welfare must tighten its oversight of this vital program with great haste, because every dollar wasted is a dollar that will not be available to families who need assistance during these tough economic and budgetary times, and neither Pennsylvania government nor its citizens can continue to bear this type of wasteful spending.”
Other deficiencies noted by Wagner’s special performance audit were: the DPW failed to monitor data exchange information used to monitor recipient eligibility; the DPW does not require county assistance offices to have written standard operating procedures for processing LIHEAP applications; and the 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 the 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.
For the 2010-11 heating season, the DPW provided LIHEAP grants to low-income households that met eligibility limits of 160 percent of federal poverty income guidelines, meaning a family of four earning up to $35,280 can receive benefits. LIHEAP consists of cash benefits to help pay for home heating fuel; crisis payments to resolve emergencies; and energy conservation and weatherization measures to address long-range solutions. Wagner’s special performance audit report can be obtained at www.auditorgen.state.pa.us.
Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly. He is the commonwealth’s elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations. The Department of the Auditor General conducts thousands of audits each year. To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department’s website at www.auditorgen.state.pa.us.