AP Report Understates the Financial Impact of LIHEAP's Heap of Liars and Thieves

At the Associated Press, Kelli Kennedy's Thursday report on fraud and abuse in the Low Income Home Energy Assistance Program (LIHEAP), which is well done in several aspects, nonetheless significantly understated its losses.

The AP dispatch deals with a now-released Government Accountability Office report on the results of investigations in nine states.

Here are the first four paragraphs of Kennedy's report (HT David Freddoso at the Washington Examiner), including reference to a woman who is LIHEAP's version of a welfare queen:

A federal program designed to help impoverished families heat and cool their homes wasted more than $100 million paying the electric bills of thousands of applicants who were dead, in prison or living in million-dollar mansions, according to a government investigation.

The U.S. Department of Health and Human Services spent $5 billion through the Low-Income Home Energy Assistance Program in 2009, doling out money to states with little oversight of the program. Some states don't verify applicants' identifies or income. For example, the program helped pay the electric bill of a woman who lives in a $2 million home in a wealthy Chicago suburb and drives a Mercedes, according to the yet-to-be released report obtained by The Associated Press.

The Government Accountability Office studied the program after a 2007 investigation by Pennsylvania's state auditor found 429 applicants received more than $162,000 using the Social Security numbers of dead people.

The GAO investigated Illinois, Maryland, Michigan, New Jersey, New York, Ohio, and Virginia, which represented about one-third of the program's funding in 2009. The agency found improper payments in about 9 percent of households receiving benefits in those states, totaling $116 million.

Unless someone can demonstrate that other states' LIHEAP programs are airtight (good luck with that), the true losses in the program are far higher than the figure Kennedy cited. We already know from her report that Pennsylvania, which was outside the scope of GAO's investigation, has had serious program problems.

Since the states involved "represented about one-third of the program's funding," total losses to fraud and abuse are more than likely in the neighborhood of $350 million, or three times higher than the reported $116 million. Kennedy should have included a sentence along these lines: "If the experience of these six states is representative of what is occurring in the program nationwide, annual LIHEAP losses to fraud and abuse are about $350 million."

LIHEAP's long list of "not for profit" and corporate advocates at the Campaign for Home Energy Assistance are already defending the program in response to Kennedy's report. The following is from a statement currently on the group's home page:

We are disappointed that LIHEAP funds may have gone to ineligible parties. In this economy, more and more households cannot afford to heat and cool their homes because of financial woes. The poor, vulnerable populations that this program serves should not be denied the assistance they needs because of some bad actors or some administrative mismanagement.

They also believe that the program's scope should be quintupled:

At $5.1 billion in LIHEAP funding, only 1 in 5 eligible Americans are served, which means there are many people who need assistance and are not getting it.

A question separate from AP's report: What would happen to a business where 9% of payments to employees or vendors were improper? Answer: They'd be out of business. But in government, the easy answer is not to clamp down on fraud and abuse (later paragraphs in the AP article demonstrate a decided reluctance to do that on the part of those who should be doing it). Instead, its "answers" are to either raise taxes or borrow more money while constantly advocating even more spending. Meanwhile, the fraud and abuse go on and on. "Responsible government" and "Government oversight," once again, are shown to be oxymorons.

Cross-posted at BizzyBlog.com.