Low-Income Home Energy Assistance Program: Greater Fraud Prevention Controls Are Needed

Highlights

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.

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Department of Health and Human Services	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.	Closed – Implemented In May 2010, the U.S. Department of Health and Human Services, Administration for Children and Families (ACF), issued an Information Memorandum (LIHEAP-IM-2010-6) which informs LIHEAP grantees about Social Security Act provisions that allow States to require SSNs from applicants and household members as a condition of LIHEAP eligibility. Specific guidance provides that States may require that any individual applying for LIHEAP disclose his/her SSN, as part of the application, to validate identity and as a condition for the receipt of benefits. In addition, State LIHEAP administrators may require the SSNs of all household members reported in the LIHEAP application in order to qualify the household for any LIHEAP benefit and deny assistance to individuals and households upon a refusal to provide SSNs.
Department of Health and Human Services	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).	Closed – Implemented In May 2010, the U.S. Department of Health and Human Services, Administration for Children and Families (ACF) issued an Information Memorandum (LIHEAP-IM-2010-6) which informs LIHEAP grantees about Social Security Act provisions that allow States to require SSNs from applicant households as a condition of LIHEAP eligibility. In addition, States will explore using SSNs to access the Social Security Administration's Enumeration Verification system to confirm the identity of applicants and household members.
Department of Health and Human Services	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.	Closed – Implemented In May 2010, the U.S. Department of Health and Human Services, Administration for Children and Families (ACF), issued an Information Memorandum (LIHEAP-IM-2010-6) which requests States to submit, as a supplement to their State Plans, information that details their program integrity measures and other procedures that the State implements on program accountability, including controls to prevent duplicate payments.
Department of Health and Human Services	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.	Closed – Implemented In May 2010, the U.S. Department of Health and Human Services, Administration for Children and Families (ACF) issued an Information Memorandum (LIHEAP-IM-2010-6) which encourages States to access other databases that may be used to confirm applicant and household eligibility, such as State vital records registries. The guidance should deter fraud and prevent payment to deceased individuals.
Department of Health and Human Services	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.	Closed – Implemented In May 2010, the U.S. Department of Health and Human Services, Administration for Children and Families (ACF), issued an Information Memorandum (LIHEAP-IM-2010-6) which encourages States to access prisoner databases to ensure that applicants and individuals listed as household members are eligible recipients.
Department of Health and Human Services	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.	Closed – Implemented In May 2010, the U.S. Department of Health and Human Services, Administration for Children and Families (ACF) issued an Information Memorandum (LIHEAP-IM-2010-6) which encourages States to access state directories of new hires or similar systems to confirm income eligibility. The guidance should deter fraud and prevent payment to ineligible individuals that exceed the maximum income threshold.

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