[Senate Hearing 109-585]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-585
 
  HOUSING-RELATED PROGRAMS FOR THE POOR: CAN WE BE SURE THAT FEDERAL 
            ASSISTANCE IS GETTING TO THOSE WHO NEED IT MOST?

=======================================================================

                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
                     INFORMATION, AND INTERNATIONAL
                         SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 27, 2005

                               __________


       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs


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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
   Joyce A. Rechtschaffen, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL 
                         SECURITY SUBCOMMITTEE

                     TOM COBURN, Oklahoma, Chairman
TED STEVENS, Alaska                  THOMAS CARPER, Delaware
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
LINCOLN D. CHAFEE, Rhode Island      DANIEL K. AKAKA, Hawaii
ROBERT F. BENNETT, Utah              MARK DAYTON, Minnesota
PETE V. DOMENICI, New Mexico         FRANK LAUTENBERG, New Jersey
JOHN W. WARNER, Virginia

                      Katy French, Staff Director
                 Sheila Murphy, Minority Staff Director
            John Kilvington, Minority Deputy Staff Director
                       Liz Scranton, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Coburn...............................................     1
    Senator Carper...............................................     3
    Senator Lautenberg...........................................     8

                               WITNESSES
                      Tuesday, September 27, 2005

James M. Martin, Assistant Chief Financial Officer for Financial 
  Management, U.S. Department of Housing and Urban Development...     5
David G. Wood, Director, Financial Markets and Community 
  Investment, U.S. Government Accountability Office..............     7
Josephine Bias Robinson, Director, Office of Community Services, 
  Administration for Children and Families, U.S. Department of 
  Health and Human Services......................................    17
Jim Wells, Director, Natural Resources and Environment, U.S. 
  Government Accountability Office...............................    19

                     Alphabetical List of Witnesses

Martin, James M.:
    Testimony....................................................     5
    Prepared statement...........................................    30
Robinson, Josephine Bias:
    Testimony....................................................    17
    Prepared statement...........................................    54
Wells, Jim:
    Testimony....................................................    19
    Prepared statement...........................................    62
Wood, David G.:
    Testimony....................................................     7
    Prepared statement...........................................    38

                                APPENDIX

Chart submitted by Senator Coburn................................    29
Questions and responses for the Record from:
    Mr. Martin...................................................    68
    Mr. Wood.....................................................    75
    Ms. Robinson.................................................    80
    Mr. Wells....................................................    85


  HOUSING-RELATED PROGRAMS FOR THE POOR: CAN WE BE SURE THAT FEDERAL 
            ASSISTANCE IS GETTING TO THOSE WHO NEED IT MOST?

                              ----------                              


                      TUESDAY, SEPTEMBER 27, 2005

                                       U.S. Senate,
            Subcommittee on Federal Financial Management,  
        Government Information, and International Security,
                            of the Committee on Homeland Security  
                                          and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:30 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Tom Coburn, 
Chairman of the Subcommittee, presiding.
    Present: Senators Coburn, Carper, and Lautenberg.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. The Committee will come to order.
    Senator Carper will be here forthwith, and we will begin.
    We like to be on time, so you can know what your time 
constraints are. Let me welcome each of you.
    I am not going to read from a written script right now, but 
our purpose today is to make sure that the funds that we have 
to help people are doing exactly that, and they are doing it in 
a way that is done efficiently; that we are not missing some; 
that we are also not providing funds to people who don't meet 
the requirements of the programs.
    We were all stunned by the carnage that Hurricane Katrina 
left in her wake. Now Hurricane Rita is going to put some more 
burden on all of us. Hundreds of thousands of people have been 
displaced. Many will remain so for months to come.
    Federal housing assistance programs are going to be 
stretched to their limits to try to help everybody in need. The 
Congress will do its part. That is why the financial management 
of these programs matters.
    I don't know, and I am not sure, staff can tell me--when 
was the last time an oversight hearing was held on one of these 
programs? When was the last time anybody here has testified at 
an oversight hearing on one of these programs? That answers the 
question.
    Every penny that is misspent is a penny that could be 
helping families in distress. Every overpayment means somebody 
goes without help. Every underpayment means a family that 
doesn't get help--all the help that they could have gotten or 
deserved to have received.
    Some have argued that these programs are too important, too 
valuable to the country, especially during the hurricane 
recovery to open up the books and start scrutinizing. I would 
think now is exactly the time to open up the books and 
scrutinize to make sure that we do what we intend to do through 
these programs.
    Taxpayers have donated over a billion dollars to the 
recovery efforts thus far in terms of voluntary contributions. 
But they have also contributed by funding Federal agencies 
represented here today, who will be on the front lines of 
disaster assistance.
    Real compassion demands that Congress and the Executive 
Branch guard that trust with integrity and humility, ensuring 
that every dollar is spent helping people and not being lost in 
the bureaucratic morass.
    In fiscal year 2003, 75 percent of HUD's total expenditures 
went to assist low-income individuals afford decent rental 
housing. This figure totaled approximately $28 billion, 
reaching 5,000,000 low-income tenants.
    HUD also paid an estimated $1.4 billion in improper 
payments in the year 2003. $896,000,000 of these were made in 
overpayments; $519,000,000, more importantly, were dollars that 
never went to the intended recipients.
    What that means is that the net amount of taxpayer dollars 
lost was $377 million, enough to house 56,000 additional 
people--families--with rental assistance, in decent affordable 
housing.\1\
---------------------------------------------------------------------------
    \1\ Chart appears in the Appendix on page 29.
---------------------------------------------------------------------------
    It is inexcusable that the Federal Government could have 
helped these individuals that are struggling, had HUD performed 
proper oversight of its voucher program. HUD's Section 8 
program alone had an improper rate of 6.3 percent, twice the 
amount of the government-wide error rate of 3.9 percent.
    HUD's low-income public housing programs, different from 
Section 8, had an error rate of 10.4 percent. That means that 
over 10 percent of the payments made by the program were wrong.
    A 10 percent error rate for government payments is totally 
unacceptable. Of the 17 Federal agencies that are reporting 
improper payment information, the average government-wide rate 
for fiscal year 2004 was 3.9 percent. Compared to the private 
sector, even the private NGO sector, that rate is deplorable.
    HUD's public housing numbers were at least double the 
government-wide rate or more.
    One huge program at HUD, the Community Development Block 
Grant Program, isn't even reporting improper payments. So 
heaven only knows what we will find when these books are 
opened.
    This is the same program that the Louisiana delegation is 
asking us to increase by $50 billion just for that one State.
    If the rates of errors made in that program are anything 
like the rest of HUD, the taxpayers are going to get robbed if 
we increase funding by that amount.
    The taxpayers deserve better.
    The private sector has no tolerance for improper payments 
and rightly so. Any number above zero is considered an improper 
payment in any business, any organization, or any corporation.
    I have made it a top priority to see, along with Senator 
Carper, that agencies are complying with this key mechanism, 
the Improper Payments Information Act, used to locate where 
payments made by Federal agencies are unjustified.
    I would also reiterate that no agency--no agency--is exempt 
from the Federal law.
    If I have to invite agencies to testify one by one, to tell 
us what they are doing to comply with the law, to institute 
fiscal integrity of payments, then that is what this 
Subcommittee will do.
    I want to note that HUD is aware of this problem, and has 
taken necessary steps to fix it. That I am appreciative of, and 
I commend them for it. It is a necessary first step.
    Today's hearing will also look at the financial integrity 
of the Low-Income Heating Energy Assistance Program. And I 
can't emphasize enough that this year, this is going to be one 
of the most important programs that this government has to help 
those people in need.
    With natural gas prices up about 70 or 80 percent, fuel oil 
up 70 or 80 percent, it is going to be very important that the 
dollars go to the people in need, that we don't underpay 
because it is going to mean the difference between food, 
medicine, or warmth.
    Hearings on improper payments don't seem glamorous, like 
other topics that Congress talks about, but if people go to 
jail for not paying their taxes, then there certainly ought to 
be something wrong if we don't pay out the way we are supposed 
to or overpay when we shouldn't.
    I look forward to our hearing. I look forward to the status 
of the efforts that are underway to improve the improper 
payments at HUD and at LIHEAP. I think it is important to have 
financial integrity and transparency at ever level of our 
Federal Government. That is one of the things we are going to 
do. The purpose of an oversight hearing is to hold 
accountability. Here is what the law says. Here is what the 
programs are. And the purpose of this is to make sure that when 
we as taxpayers in this country reach out to help those of us 
that need help that we do it in an efficient way that helps the 
most people possible.
    I want to thank each of our witnesses for being here today, 
and especially those who left a vacation to come and testify, I 
appreciate so much your coming, and I would now yield to my 
Ranking Member, the other ``TC'' on our Subcommittee, Senator 
Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thank you, Mr. Chairman.
    To our witnesses, welcome. Who came back from their 
vacation?
    Mr. Wood. Actually, it wasn't me. I am not sure who came 
back from the vacation.
    Senator Coburn. Nobody. But somebody there right behind 
you. OK.
    Senator Carper. All right. Or whether you're back from a 
vacation or just here enjoying a beautiful fall day, welcome.
    And I want to thank our Chairman for continuing our 
Subcommittee's look into the problem of improper payments.
    Senator Coburn and I took over the leadership of this 
Subcommittee back in March, and I think we have learned a lot 
since that time about the state of our Federal Government's 
finances. One of the most disappointing things that I have 
learned--some of you may have known this; I didn't--that the 
amount of Federal agency overpayment had been quantified, and 
it was in the realm of almost $50 billion per year. Most of 
that is overpayment. Some was underpayments.
    At a time when our Federal budget is in such dire shape, 
when it is being stretched so thin by war and now by multiple 
natural disasters, I think it is unacceptable, and I suspect 
most taxpayers believe the same: That it is unacceptable that 
tens of billions of our tax dollars would be wasted on error 
and fraud that might be completely preventable. And this error 
and fraud is happening across the Federal Government, not just 
in a handful of agencies and programs.
    We are called on every day now to make tough decisions 
about how to fund important programs under a tight budget. 
Every dollar that goes to waste because we haven't done enough 
to prevent improper payments is a dollar that can't be spent on 
a worthy program that has real impacts and consequences in our 
communities. It is also a dollar that we are borrowing around 
the world.
    I am pleased to see, then, that the program that we will be 
examining today have, for the most part, a pretty good track 
record on improper payments, or at least they are improving.
    HUD's Rental Assistance programs have been under a 
financial microscope for some time now. And during that time, 
it appears that the Department has done a lot of work to get 
things right or closer to right. I believe we still have 
improper payments of about $1.4 billion, with a ``B,'' 
according to numbers from fiscal 2003. And that is a lot of 
money. That is also about a 39 percent reduction from 3 years 
prior, when HUD really started working on this problem. And I 
believe this achievement, this reduction, surpasses the 
Department's improper payment reduction goal.
    Then we have LIHEAP, which the Chairman has talked about. 
And LIHEAP has been deemed at low risk for improper payments in 
Department of Health and Human Services reports under the 
Improper Payment Information Act.
    I believe the program received good scores under OMB's 
program assessment rating tool, when it was evaluated during 
the development of the President's fiscal year 2005 budget.
    I don't believe many programs get good scores there, and 
that is especially grant programs.
    And while there is definitely work to be done at HUD, and 
despite their good reviews, I am sure there are areas that 
could be improved at LIHEAP as well.
    But I think that we are on the right track here.
    And, Mr. Chairman, you may not agree entirely on this, but 
I think in some cases the biggest obstacle to getting rental 
and energy assistance to those who need it most has been 
insufficient funding for these programs, and not always, but 
sometimes that has been the problem.
    And I want to thank you, my friend, for your commitment to 
this issue, and it is the right issue to be on. I am glad to be 
here sitting next to you as we do it, and I look forward to 
continue with you and our other colleagues who are going to be 
joining us on finding ways to eliminate spending mistakes that 
waste our scarce resources. Thank you.
    Senator Coburn. Thank you, Senator Carper, our first panel 
is Jim Martin, Assistant Chief Financial Officer for Financial 
Management at the Department of Housing and Urban Development. 
He has worked there since February 2002 to eliminate HUD's high 
risk and material weakness issues, improve the content of HUD's 
annual performance and accountability report and review; and 
coordinates the Department's efforts to implement the 
President's management agenda.
    Prior to that, Mr. Martin's work at HUD included 
implementation of the Federal Managers Financial Integrity Act 
in the Office of the Inspector General, and the development and 
implementation of the Multi-Family Housing Financial Assistance 
Subsystem to remotely monitor financial and compliance risk in 
a $53 billion portfolio.
    David Wood has been at GAO since 1977, and serves as 
Director for Financial Markets and Community Investment. In his 
capacity, Mr. Wood is responsible for leading GAO audits and 
evaluations concerning a range of Federal housing and 
financial-related issues, policies, and programs.
    Thank you, both, for being here. We will start off with 5 
minutes. Your complete testimony will be made a part of the 
record. I would also remind any in the Administration we would 
love to have testimonies 48 hours beforehand. You were very 
cooperative in giving us outlines, but, again, we would love to 
have testimonies, so we can really do the job we want to do. 
And if you can meet with us on that in the future, we would 
very much appreciate it.
    Mr. Martin, you are recognized for 5 minutes.

  TESTIMONY OF JAMES M. MARTIN,\1\ ASSISTANT CHIEF FINANCIAL 
 OFFICER FOR FINANCIAL MANAGEMENT, U.S. DEPARTMENT OF HOUSING 
                     AND URBAN DEVELOPMENT

    Mr. Martin. Thank you. Chairman Coburn, Ranking Member 
Carper, I want to thank you for the invitation to join you 
today to discuss the important topic of reducing improper 
rental housing assistance payments at the U.S. Department of 
Housing and Urban Development.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Martin appears in the Appendix on 
page 30.
---------------------------------------------------------------------------
    As you have mentioned, HUD's various rental assistance 
programs collectively represent our largest program area, with 
over $26 billion in total payments in fiscal year 2004.
    These programs serve to house over 4.8 million low-income 
households and are administered locally, on HUD's behalf, by 
4,100 public housing agencies and another 22,000 private multi-
family housing property owners and their management agents.
    Despite, the significant size and impact of these programs, 
staff reductions and competing priorities diminished HUD's 
oversight of these programs during the decades of the 1980s and 
1990s.
    In 1996, the HUD Inspector General reported material 
weaknesses in the Department's internal controls over HUD's 
rental housing assistance payments, and in January 2001, the 
Government Accountability Office separately identified these 
programs on its list of high-risk Federal programs.
    The magnitude of the problem came into focus late in the 
year 2000, when HUD's own Office of Policy Development and 
Research completed studies that showed that 60 percent of all 
housing subsidy determinations were done in error, contributing 
to an estimated $2 billion in net annual subsidy overpayments 
and $3.2 billion in gross annual improper subsidy payments from 
both subsidy determination errors and tenant underreporting of 
income, upon which the subsidies are based.
    The significance of this problem warranted corrective 
actions through the President's Management Agenda, which was 
established in early 2001.
    Under the President's Management Agenda, HUD established 
goals to address the underlying high risk and internal control 
deficiencies and to reduce by 50 percent by fiscal year 2005 
the improper payment level.
    The Rental Housing Integrity Improvement Project, or RHIIP 
Initiative, as it's referred to within HUD, was established as 
a HUD secretarial priority to take the corrective actions 
necessary to assure that the right benefits are paid to the 
right households.
    Through the RHIIP Initiative, HUD and its housing industry 
partners at PHAs and multi-family housing properties have 
surpassed all interim improper payment reduction goals. 
Whereas, 60 percent of all subsidy determinations were found to 
be in error in 2000, that percent was reduced to 41 percent in 
fiscal year 2003 and further, to 34 percent, in 2004.
    The impact on the reduction in the dollars paid has been 
even greater. Whereas, we had a $3.2 billion gross improper 
payment in 2000, that number dropped to $1.6 billion in 2003, 
and down to $1.2 billion in the most recent numbers available 
for fiscal year 2004.
    That represents a total improper payment reduction of 62 
percent over our 4-year effort.
    These reductions resulted from HUD's extensive outreach on 
problem resolution with its housing industry partners and 
tenant advocacy groups, and through the provision of updated 
and improved program guidance and increased training, not only 
for the program administrators at PHAs and multi-family housing 
properties, but for HUD's monitoring staff.
    HUD also increased its onsite program monitoring, technical 
assistance, and enforcement efforts at PHAs and with the multi-
family property owners.
    In January 2004, the Congress enacted HUD's proposal for 
statutory authority to work with the Department of Health and 
Human Services on a more effective computer matching capability 
for up front verification of household income to avoid improper 
payments.
    HUD's new computer matching system with the HHS National 
Directory of New Hires database will be available for PHA 
program administrator use to begin fiscal year 2006. We believe 
this increased computer matching capability has the potential 
to avoid the majority of the remaining error in this program.
    HUD's new goal is to reduce the total improper rental 
housing assistance payment level from its fiscal year 2004 
rates of 6.5 percent of total program payments to less than 3 
percent of total program payments by the end of fiscal year 
2007.
    Secretary Jackson, Deputy Secretary Bernardi, and the rest 
of HUD's leadership team are committed to taking the actions 
necessary to achieve this goal for the benefit of the American 
taxpayers and for the low-income households HUD serves.
    Mr. Chairman, I hope I have been able to shed some light on 
HUD's corrective actions and progress towards eliminating 
improper rental housing assistance payments. Your 
Subcommittee's interest and oversight on this issue is 
appreciated and important. That concludes my testimony, and I 
stand ready to address any questions you may have.
    Senator Coburn. Thank you very much, Mr. Martin. Mr. Wood.

TESTIMONY OF DAVID G. WOOD,\1\ DIRECTOR, FINANCIAL MARKETS AND 
  COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Wood. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Wood appears in the Appendix on 
page 38.
---------------------------------------------------------------------------
    My statement today is based primarily on our February 2005 
report concerning HUD's improper rent subsidy payments. That 
report was requested by the Chairman of the Subcommittee on 
Housing and Community Opportunity of the House Financial 
Services Committee.
    Since 2001, GAO has designed HUD's rental assistance 
programs as high risk; that is, particularly vulnerable to 
fraud, waste, or abuse. In addition, as noted, the President's 
Management Agenda for fiscal year 2002 identified HUD's rental 
assistance as one of nine Federal program areas with severe 
management challenges.
    HUD has identified three basic sources of errors that 
contribute to improper rent subsidy payments. The first. and 
likely the largest, is incorrect subsidy determinations made by 
program administrators, such as landlords or housing 
authorities.
    Determining correct subsidy amounts can be challenging. For 
example, program administrators must assess each tenant's 
eligibility for 44 different income exclusions and deductions 
when determining how much the tenant can afford to pay.
    As a result of program administrator errors, HUD paid an 
estimated $1.4 billion in gross improper subsidies in fiscal 
year 2003.
    The second source of error is unreported tenant income. 
These errors occur when tenants do not report an income source, 
either their own or another household member's, to program 
administrators.
    Such errors may be intentional or honest mistakes. HUD 
estimate that in fiscal year 2003, the Department paid $191 
million in gross improper rent subsidies due to unreported 
tenant income. However, a small number of files formed the 
basis for that estimate, and, according to HUD, there were 
large variances in the amounts of income that tenants did not 
report.
    Therefore, while we agree that the incidence of the errors 
was small, we believe the dollar estimate is not very 
meaningful.
    Finally, the third source of error is incorrect billing. 
While the specific problems vary, in general, billing errors 
arise when the amount of rent subsidy determined by the program 
administrator differs from the amount ultimately billed to and 
paid by HUD.
    The agency does not have a complete and reliable estimate 
of improper payments due to billing errors. HUD has estimated 
that billing errors in one program, Project-Based Section 8, 
amounted to approximately $100 million in fiscal year 2003.
    However, again, the small sample size and the concentration 
of errors in a small number of properties means that that 
figure might be greatly overstated or understated.
    HUD has begun a process to estimate billing error in its 
other major rental assistance programs.
    On the basis of our findings, we made three recommendations 
to HUD. First, we recommended that the agency include an 
assessment of compliance with rent subsidy determination 
policies in it regular oversight of housing authorities.
    Second, we recommended that HUD collect complete and 
consistent information from those monitoring efforts and use it 
to help focus corrective actions where they are needed.
    HUD has taken steps to address these two recommendations. 
We also recommended that HUD study the potential impacts of 
simplifying the subsidy determination process. According to HUD 
officials, the complexity of existing policies makes it harder 
for program administrators to correctly determine rent 
subsidies.
    However, simplifying the policies, which would likely 
require statutory changes by Congress, could affect the rental 
payments of many tenants, as well as the overall program costs.
    HUD has not yet done a comprehensive study of 
simplification, and its likely effects on tenants.
    Mr. Chairman, that concludes my prepared statement. I will 
be glad to answer any questions you have.
    Senator Coburn. Thank you very much, Mr. Wood.
    Senator Lautenberg, welcome. I would like to recognize you 
for 5 minutes for an opening statement.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. That is very kind, Mr. Chairman. And I 
apologize for my lateness, but I do want to say to you, Mr. 
Chairman, and to our friend, Senator Carper, as well that I 
have great respect for the things that you attempt to do in 
terms of curbing excessive expenditures.
    And while we may differ on the approach, and we may differ 
on the value of the programs, the fact is that I think Senator 
Carper, who was a governor of a State, and you, with your 
experience, bring a particular view to the subject.
    So I just wanted a moment to be able to say how important I 
think this review is and to say to those agencies that you are 
obviously have to sharpen your oversight; otherwise, what 
happens will be essentially throwing the baby out with the 
water, because there are some excellent programs here.
    And to abandon the program in order to accomplish another 
goal, in my view, is not quite the way to do it.
    And so I will forego taking any more of the time. Thank you 
very much.
    Senator Coburn. Thank you. Well, I am just going to start 
with a couple of questions.
    We are now at the end of 2005, why do we not have 2004 
numbers on improper payments?
    Mr. Martin. We just got 2004 numbers. And that is the gross 
improper payment level has been reduced to $1.2 billion.
    Senator Coburn. And how much overpayment-underpayment on 
that number? Can you recall?
    Mr. Martin. I think that is broken out in my detailed 
testimony here.
    Senator Coburn. You all are obviously making great headway 
in trying to remedy this process, and Mr. Wood brought up the 
point about the simplification of the application process and 
the complexity of it. Where are you on that? Is HUD going to 
bring us something and say here are the things we think you 
need to change statutorily to make this easier? Don't we have a 
board? Put that up for us, so you just see the progress.
    I want my fellow Senators to see--and please be critical of 
this--but as we look at this, this is where we see all the 
complexities--if you look at what all you have to go through to 
get housing, you can see where all the errors are coming from, 
or the potential for errors.
    Here is what you have to go through for the rent subsidy 
determination process, and you look at all those steps through 
there. You can see, besides the 44 questions that have to be 
answered, here are all the potential errors on the way down 
that you can find the potential for somebody to make a mistake.
    So are you all in the process, Mr. Martin, of sending some 
recommendations on changing first of all what is statutorily 
limiting you to change in terms of the 44 steps of the 
application process, but also in terms of how we go through 
eliminating the number of errors? The idea of checking with the 
employment information, check it with IRS information, in terms 
of income tax, all that is great. But unless we know what to 
change statutorily, we can't help you as much as we would 
probably like to help you.
    Mr. Martin. First off, we have approached it from better 
controlling the programs that have been enacted, and the vast 
majority of the income exclusions, the deductions, are based in 
statute, so we don't have a lot of flexibility in that regard.
    I know HUD has proposed a current proposal. The State and 
Local Housing Flexibility Act of 2005 is pending that would 
allow local public housing authorities flexibility in 
determining their own local rules on how they would apply this.
    Certainly if you went to a flat rent subsidy and eliminated 
the income-based exclusions and deductions it greatly reduces 
the risk of error. But each of those exclusions and deductions 
has a constituency that benefits from them, that fought hard to 
get those, and that is up to the Congress.
    Senator Coburn. So basically, you all haven't made a 
recommendation? The Administration has not made a formal 
recommendation to Congress on some things that could be changed 
that would help lower the error rate, statutorily?
    Mr. Martin. At this point, I am not aware of anything, 
other than proposals to allow flexibility to local program 
administrators.
    Senator Coburn. OK. In this recommendation that you say is 
in the--is it the Housing Flexibility Act?
    Mr. Martin. Yes.
    Senator Coburn. Wouldn't that make it a whole lot harder to 
audit if every housing agency had their own?
    Mr. Martin. In essence, unless you get it as a block grant.
    Senator Coburn. Yes.
    Mr. Martin. It is up to them that we would monitor 
performance in terms of the number of households served and the 
average cost per household and put some incentives in that 
regard.
    Senator Coburn. OK. Your goal for 2007 is less than 3 
percent.
    Mr. Martin. Correct.
    Senator Coburn. How did you come up with that?
    Mr. Martin. Looking at where we were and the things we had 
in place, we believe that the income-matching program is going 
to be the last big improvement we make to substantially reduce 
error; looking at what other programs, like food stamps, 
Medicare, and others have been able to do that have been at 
this issue of reducing improper payments much longer than we 
have and where they are at.
    Senator Coburn. Yes.
    Mr. Martin. And we think that is a realistic, achievable 
goal.
    Senator Coburn. Food stamps is down to the same level you 
are, about 6.5 percent.
    Mr. Martin. Right.
    Senator Coburn. But they came from, I think, 17 percent, so 
they have moved.
    Mr. Martin. Well, in terms of percent of total payments, 
our 2000 numbers were close to 17 percent of total payments 
made that year.
    Senator Coburn. Yes. OK. That is correct.
    Discuss with me the $100 million that you say are billings 
that you don't have real confidence of whether that is a low 
number or a high number. Explain how that happens.
    Mr. Wood. The reason for the uncertainty is just because it 
was a fairly small sample size.
    Senator Coburn. So statistically, it is not significant?
    Mr. Wood. Right. Well, a large margin of error.
    Senator Coburn. Right. And that margin of error is plus or 
minus what percent?
    Mr. Wood. We don't have the actual number. Sorry.
    Senator Coburn. OK. All right.
    Did GAO make any recommendations about the complexity of 
the subsidized housing application?
    Mr. Wood. We made one recommendation to HUD that they study 
the impacts--do a more comprehensive study of some 
simplification approaches.
    Senator Coburn. OK. And what has been the response to HUD 
to that?
    Mr. Wood. So far, we are not aware of any comprehensive 
study that has been initiated.
    Senator Coburn. OK. Is there any response to that 
recommendation by GAO?
    Mr. Martin. I know we have studied numerous proposals for 
simplification.
    Senator Coburn. OK. So go ahead. I am sorry.
    Mr. Martin. And we have looked at the winners and the 
losers so to speak under various scenarios. I mean, if you were 
to go to a flat percentage of income, eliminating all 
exclusions and deductions, what impact would that have on 
families of young children who lose their daycare exemption? 
What impact would that have on elderly households that lose 
their medical deductions. I know that our policy development 
research staff have sliced and diced this information a number 
of different ways for our policy makers, and, as Mr. Wood has 
indicated, there are winners and losers under various 
scenarios. And it is a policy decision as to who you want to 
benefit.
    Senator Coburn. Thank you, Mr. Martin. Senator Carper.
    Senator Carper. Thanks, Mr. Chairman.
    A number of years ago, when I served in the U.S. House of 
Representatives, I recall working on an issue--I think it was 
called Tenant Income Verification--to try to make sure that 
when folks applied for assisted housing that there was an 
effort to make sure that the monies that they were reporting as 
earned were indeed correct.
    I think it involved running the numbers that were submitted 
by the person applying for assisted housing against a database 
compiled by the Department of Labor and earnings submitted to 
the Department of Labor by employers.
    And I have been out of the Congress for a while to be 
governor of Delaware for 8 years, but whatever happened to that 
approach?
    Mr. Martin. In terms of HUD, we have had a history on that 
issue. We started out--we got statutory authority to do 
computer matching with Federal tax records. The problem with 
that was that it was old information when we got it, and it 
wasn't that useful, and it was on the back end of the program. 
It was basically chasing after incorrect benefits after the 
fact. And the lion's share of these people are still low-income 
people, and it just wasn't very productive.
    So what we have tried to do is what we call an up-front 
verification process, and our public housing authorities have 
statutory authority to pursue that information directly with 
the States, because it is the State wage information that comes 
into the Federal data sources on a quarterly basis. And, that 
has taken time. We had pursued that because that is the only 
authority we had. And we got up to 30 States with agreements to 
do computer matching and share that information.
    When Congress enacted our proposal to give us that same 
information that is available through HHS, this National 
Directory of New Hires database that was created for their 
Child Enforcement Program activity, and it is all the State 
wage data in one place, plus unemployment benefit information, 
plus monthly information from employers on all new hires, so it 
is a central, much more efficient source for us to use.
    So that is the process we are opening in 2006 to our public 
housing authorities to use, and we think that is going to be a 
very effective process.
    Senator Carper. OK. Good.
    I think earlier you said that you are just getting data for 
2004?
    Mr. Martin. Right.
    Senator Carper. And would you just go back and compare 
where you are when we started doing this comparison and 
tracking? Where you were in 2003 and where HUD was in 2004?
    Mr. Martin. Our baseline was established in 2000, and that 
is when we estimated that 60 percent of subsidy determinations 
were in error and that equated to a $2 billion net overpayment 
problem, as well as a $3.2 billion gross improper payment 
problem, adding both the underpayments and the overpayments 
together. I mean there are households that don't get the full 
assistance that they are entitled to because of errors made in 
their determinations.
    So that problem is focused on two out of the three billing 
components that Mr. Wood--error components that Mr. Wood 
alluded to. That is the determination errors and the tenant 
reporting of income problem. It didn't include the billing. Two 
thousand four is the first year we are going to have the full 
billing error. Our preliminary estimates it is about $300 
million.
    So that $3.2 billion gross problem that we identified in 
2000 came down to $1.6 billion in 2003 and down to $1.2 billion 
in 2004. And you add the $300 million that we are going to have 
in the billings, so we are at a total problem of about $1.5 
billion dollars right now. And in 2004, I think we had $26 
billion in payments. So that is where we are running the 6.5 
percent rate. And our goal is to reduce that to 3 percent by 
2007.
    Senator Carper. What more do we do? I think there is value 
in what the Chairman and I are trying to do on behalf of the 
Subcommittee, and that is to hold oversight hearings, to invite 
in agencies who are not doing a very good job of complying with 
the law on overpayments or improper payments, but at the same 
time putting a spotlight on the agencies that are doing a good 
job, where there is actual improvement that is being made to 
see--one I believe in positive reinforcement. Second, our hope 
is to identify some best practices as well to hold out to other 
agencies who have their work cut out for them.
    Aside from that oversight role that we are attempting to 
play, what further can this Subcommittee or Committee or the 
Senate do to further reduce the levels of improper payments at 
HUD?
    Mr. Martin. We participate in the CFO Council's 
Subcommittee on Improper Payments. It is focused on 
implementing the Improper Payments Information Act you referred 
to. And I mean there is really disparate treatment in the 
statutory authorities various income-based programs have to do 
effective computer matching. So if there was some way of 
standardizing that across the government so that we all have 
access. It is kind of perverse that SSA keeps most of this data 
on behalf of the Federal Government, but they are not even 
allowed to use it for certain of their program purposes, 
because of the statutory barriers over concerns about the 
Privacy Act implications.
    But we think that we can--we know that we can control our 
information in a secured manner for its business intended 
purpose, and it is the same information that our program 
administrators are processing in paper form. It is just that it 
is a lot more efficient and effective to deal with it on a 
large-scale automated process of computer matching, and it is 
going to reduce program cost, because, right now our program 
administrators have to verify that income with the employer. It 
also adds dignity to the beneficiaries, because now their 
employers don't have to be notified that they are getting 
Federal assistance, because we can remotely verify their income 
levels. So there are a lot of benefits to it. But not all 
agencies have it, because it is closely controlled by statute 
as to who gets it and who doesn't.
    Senator Carper. All right. Good. Thanks very much.
    Senator Coburn. Let me just follow up for a second. Mr. 
Martin, how will the enterprise income verification system 
improve errors? Explain that to me. How is that going to 
improve the error rate, because I thought a lot of the error 
was at the program administrator level and at the determination 
level rather than at that level. Can you teach me that if you 
would?
    Mr. Martin. Sure. Yes, a lot of the program administrator 
error is in processing income information. Like I said, they 
are required to go out and verify with the employers the 
income. Often times, we will go out and we will do a monitoring 
visit, and we will find that the employer has responded to 
their certification of income letter, and they haven't opened 
it up and used it. So that's an error on the program 
administrator, not on the tenant.
    Conversely, you can't hold the program administrator 
responsible for not verifying an income source that the tenant 
didn't just divulge to them. That is where the computer 
matching will come into play, because then that precludes the 
opportunity for them to conceal income sources.
    Senator Coburn. Is there a sanction in the law if you 
falsify records to enable yourself to obtain eligibility when, 
in fact, you are not eligible for it?
    Mr. Martin. Yes.
    Senator Coburn. And what is that?
    Mr. Martin. Well, they have false statements--our 
application forms have the false statement warnings and 
penalties, and that is actually an area where our Inspector 
General has gotten much more involved. And we think they are 
having a very beneficial impact in sending a deterrent message 
to our tenant beneficiaries in that regard, going after the 
more egregious cases where tenants are failing to disclose 
their income sources.
    Senator Coburn. As Senator Carper said, for the foreseeable 
future, we are going to be on a tight budget, with everything 
that is out there. And, I kind of look at that as one citizen 
stealing from another. If you are getting a benefit you are not 
really entitled to, and we don't have enough money to give 
those benefits to those who are entitled, it really says 
something about our society today. And I would just urge you to 
be aggressive in that.
    Have you thought about requesting a formal study, like GAO 
recommended on the alternatives for determination 
simplification? Have you thought about asking for help to try 
to make this simpler?
    Mr. Martin. Well, I think in our response to their draft 
report we responded that we felt we had done sufficient 
analysis of various options.
    Again, it gets down to the policy call. There are going to 
be winners and losers. And who are you trying to benefit and to 
what extent? And, I am not sure what scenario you would study.
    Senator Coburn. Well, for example, take this process. We 
can't simplify the process of an application for housing 
assistance in this country to where we eliminate how many--1, 
2, 3, 4, 5, 6, 7, 8, 9--nine potential errors that we can't 
make that to where that is down to five potential errors? I 
mean just in terms of the process? There is not a way we can 
make that less cumbersome, less bureaucratic, to where there is 
less opportunity for error?
    Mr. Martin. We think that the enterprise income 
verification system is going to simplify several steps there, 
because now when a tenant comes to recertify their benefits 
annually when the program administrator is sitting down with 
them at the table, they are going to have access to that 
computer information on all their income sources and their 
history. So they are not going to be able to conceal sources at 
that point, like they were in the past. And that negates some 
of these steps about verifying their income on outside----
    Senator Coburn. Right.
    Mr. Martin [continuing]. Going back and forth with the 
employer trying to get the information. And it even improved 
our error rate, because a lot of times they report an income 
source, and it wasn't what it appeared to be, because you have 
franchise owners and they say I work at McDonald's, but the 
employer name is a franchise holder.
    Senator Coburn. Right.
    Mr. Martin. Or we got to verify and computer match it, and 
it is an ADP payroll service or something. So there is, we 
think that this system has the potential to simplify the 
process as best we can within the current statutory structure 
of the programs.
    Senator Coburn. OK. Well, I would just encourage that the 
message ought to go back to the Administration. Reform bills 
for Section 8, the ones that are going through the Senate have 
very few sponsors. And I think we need some leadership on some 
reform proposals, and everything we do up here, there are 
winners and losers.
    I want to make sure the winners are the people that need 
us, and the losers are the people that don't need us. And I 
would just hope that you would--the Administration would come 
forward, in conjunction with some ideas, and say do we make 
this better? How do we make it do what it needs--and you all 
know the problem is taking the political heat to make the 
recommendations for what you do know. I mean that is what you 
have said. You didn't say it in my words, I said it for you.
    But that is the real thing. Because there are winners and 
losers, you don't want to touch it in terms of making the 
recommendations.
    But my hope is that the Administration would have some 
leadership because if we have three-quarters of a billion 
dollars every year that could be going to help people, or $250 
million, a quarter of a billion dollars, that is not helping 
them, that is just as bad as any other thing we might do in 
terms of wasting money anywhere else in the Federal Government, 
except morally it is worse, because now we have people that are 
depending on us that we are not helping that we should.
    And so I would just hope that you would do that. Any other 
questions? Senator Carper.
    Senator Carper. Just one more if I could.
    The Chairman and I have been working with Senator Obama and 
others to try to make sure that the enormous sums of money that 
are being spent rather quickly down along the Gulf Coast to 
help folks that are victims of Hurricane Katrina and now 
Hurricane Rita. I want to make sure that the monies that are 
being spent are being spent properly, and I am just wondering--
and I guess this is probably more for you, Mr. Martin, than for 
Mr. Wood--but with all the additional money that is going to go 
out the door from HUD, especially--as well as other agencies--
but I think it is not unlikely that some of the money is going 
to be inappropriately spent, improperly spent.
    And I guess what I would like to ask is have you all 
thought about that? Have you put any additional accounting or 
waste prevention safeguards into place? Are you thinking about 
that? Are you asking yourself that question?
    How do you plan to balance the need to get aid out quickly 
with the need to make sure we get it right?
    Senator Coburn. Good question.
    Mr. Martin. Absolutely, I have thought about it, and 
planning on it. And I think that the lessons we have learned in 
reducing this problem have carried over into our new program 
implementation or our temporary program implementation in terms 
of the disaster relief efforts. The Office of Management and 
Budget has put a call out to all agencies involved in relief 
efforts in terms of developing adequate risk matrices and 
control matrices to plan how we are going to address these 
issues.
    We are going to be using some of the tools that we've 
developed here to verify citizenship and other eligibility 
requirements; working with FEMA to try to use their data to 
match and determine up front that these are truly people that 
are affected by that disaster and need the benefit and are 
entitled to the benefit. So, yes, we are absolutely planning 
that.
    Senator Carper. All right. Thanks very much.
    Senator Coburn. Mr. Wood, I have one follow-up. The Rental 
Integrity Monitoring Program, how would you assess HUD's 
progress on this front? How is HUD doing at making GAO's 
recommended improvements, and what is the most effective way to 
get at the improper payments problem?
    Mr. Wood. I think they are making good progress. The RIM 
reviews were a very good exercise, and I think HUD learned a 
lot.
    We recommended that they institute something like that as 
part of their permanent monitoring, and, according to what 
information that we have gotten from them recently, they plan 
to do about 275 of those per year, and that will include 20 
percent of the largest PHAs each year, and then a risk-based 
sample of about 5 percent of the others.
    I just will speak to something you raised earlier about the 
simplification recommendation that we made. I think we would 
agree that the ability to verify income up front will help 
program administrators when they sit down and go through this 
process. But that alone doesn't change the fact that you still 
have to apply those 44 income exclusions and deductions.
    So it is that process that needs to be or could be 
simplified that might help reduce the overall error rate. And 
that is what we were speaking to.
    Senator Coburn. Is that statutory? In other words, does it 
require a change by Congress?
    Mr. Wood. Well, a number of the deductions and exclusions 
are statutory.
    Senator Coburn. Are there things that HUD could change that 
don't require congressional approval that would simplify that?
    Mr. Wood. I believe some of them are in regulation as 
opposed to statute.
    Senator Coburn. Would you be so kind as to make a 
recommendation to this Subcommittee of what those are? Not what 
the changes should be.
    Mr. Wood. Yes.
    Senator Coburn. But the ones that are in regulation and not 
statute?
    Mr. Wood. I can follow up with that. I don't have it at my 
fingertips.
    Senator Coburn. All right. I have no other questions.
    We will be submitting some written questions to you that we 
would like to have back within about 2 weeks if we could, and 
then I plan on looking at this again in light of what Senator 
Carper said and the tremendous amount of monies that are going 
to go out for this associated with the Katrina relief, and so 
you can kind of count on 3 months being back here. Senator 
Carper won't mind coming when we are not in session, when he is 
just over in Delaware in January where we can take a peek at 
this and just make sure how things are going.
    I think it is very important that you are on top of this 
going out.
    Mr. Martin. Yes, sir.
    Senator Coburn. Thank you both, very much.
    Mr. Wood. Thank you.
    Senator Coburn. Our next panel is Josephine Bias Robinson, 
who was appointed Director of the Federal Office of Community 
Services, OCS, on March 15, 2005. In that capacity, she is 
responsible for overseeing 11 programs, including the LIHEAP 
Program.
    I have had the great pleasure of knowing her for a couple 
of years. We both worked on the Presidential AIDS Commission, 
and she was the Director of that during my tenure as Co-
Chairman. I want to welcome her. It is great to see her smiling 
face. A lot of times in Congress, we fail to have the personal 
connection with people who are serving in the government.
    And when we get that personal connection, it really helps 
us know and see and flavor what we hear, and so I am thankful, 
and I look forward to trying to hear that and have that kind of 
relationship with other people in the Administration.
    I also want to welcome Jim Wells. He is Director with the 
U.S. Government Accountability Office in the Natural Resources 
Environmental Team at GAO, and has served there since 1969.
    He did come up here from his Florida vacation; got on the 
airplane this morning. He is going to go back this afternoon, 
and I can't thank you enough for doing that. And had I known 
that, I would have delayed this meeting even further.
    So, once again, thank you. Both are recognized for 5 
minutes, and I appreciate your being here. Ms. Robinson.

 TESTIMONY OF JOSEPHINE BIAS ROBINSON,\1\ DIRECTOR, OFFICE OF 
 COMMUNITY SERVICES, ADMINISTRATION FOR CHILDREN AND FAMILIES, 
          U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

    Ms. Robinson. Good afternoon, Mr. Chairman and Members of 
the Subcommittee. I am Josephine Robinson. I am the Director of 
the Office of Community Services in the Administration for 
Children and Families within the Department of Health and Human 
Services. I appreciate the opportunity to appear before you 
today to talk about the Low-Income Home Energy Assistance 
Program (LIHEAP) which provides assistance to millions of low-
income Americans in meeting the cost of home energy cooling and 
heating.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Robinson appears in the Appendix 
on page 54.
---------------------------------------------------------------------------
    The Low-Income Home Energy Assistance Program, commonly 
known as LIHEAP, grew out of a series of emergency programs 
generated by the energy crises of the late 1970s.
    Today, the LIHEAP Program ensures that low-income families 
and individuals have adequate home energy through a Federal-
State partnership that provides States with the flexibility 
they need to design the best program approach to meet consumer 
needs.
    This year, States received $1.9 billion in LIHEAP block 
grant funds. States also received $250 million in emergency 
contingency funds because of the much higher fuel prices this 
past winter.
    Earlier this month, the Department released $27.25 million 
in contingency funds to Alabama, Florida, Louisiana, and 
Mississippi to help with the home energy crisis needs of 
households impacted by Hurricane Katrina.
    States and other LIHEAP grantees have great capacity in 
applying LIHEAP funds to meet local needs. States are required 
to have agreements in place with energy vendors to permit 
payments on behalf of low-income households receiving LIHEAP 
benefits.
    Payments are usually distributed in the form of a credit 
toward the household's energy bill, with the benefit applied 
automatically to the client's account.
    This process ensures that the LIHEAP assistance is provided 
for the purpose intended, and only under rare circumstances 
does the State provide a household with a direct check or cash 
to pay their home energy bills, such as when a client's home 
energy source is wood or propane.
    In such cases, the State often issues a two-party check to 
the vendor.
    The Administration is committed to ensuring that all 
Federal programs achieve their specific program objectives and 
performance outcomes. And, as such, the Office of Management 
and Budget has established the Program Assessment Rating Tool 
(PART), to evaluate program performance and take action to 
remedy deficiencies and achieve better results.
    The LIHEAP Program underwent a PART assessment in 
preparation for the President's fiscal year 2005 budget. The 
PART assessment found that the LIHEAP Program has a clear 
mission targeted to a specific problem and need; yet, revealed 
a need to develop long-term efficiency measures in the LIHEAP 
Program.
    In response to the PART findings, the President's fiscal 
year 2005 reauthorization request for LIHEAP included a 
provision to conduct and fund at $500,000 a feasibility study 
of a nationally representative evaluation of LIHEAP program 
operations.
    It is our hope that Congress will act soon on the 
President's request to grant targeted authority for a LIHEAP 
feasibility study. Additionally, as part of the President's 
Management Agenda (PMA), Assistant Secretary Wade Horn has 
launched a major initiative at the Administration for Children 
and Families (ACF), dedicated to improve financial performance 
for all agency programs.
    ACF's PMA Plan is structured to ensure that our Federal 
financial management systems produce accurate, timely, and 
useful information to support operating budget and policy 
decisions.
    Similarly, since the passage of the Improper Payments 
Information Act of 2002 (IPIA), ACF has been working 
collaboratively with the officials at the Department and OMB to 
assess whether its programs are at-risk of improper payments.
    As a result of conducting IPIA risk assessments of the 
LIHEAP Program for 2004 and 2005, ACF determined that the 
program was at low risk for improper payments.
    This conclusion was based on financial management and 
Federal programmatic monitoring of grantees established by the 
Low-Income Home Energy Assistance Act, the lack of Government 
Accountability Office or Office of the Inspector General (OIG) 
findings of improper payments in recent year studies, and also 
the proper identification of questioned costs in A-133 audits 
for LIHEAP grantees. Based on our assessments, we believe that 
LIHEAP administering agencies have satisfactory systems in 
place to address Federal financial integrity issues.
    However, the feasibility study requested by the 
Administration as part of reauthorization will allow the 
Department to institute a more thorough evaluation of the 
issue. We have also asked the Inspector General to review the 
current risk assessment model.
    In conclusion, the Administration believes that LIHEAP is a 
program that works. During 2006, ACF will closely review the 
LIHEAP risk assessment model to ensure that LIHEAP is at low 
risk for improper payments.
    We can all be very proud of how LIHEAP has worked to serve 
those most in need, including many hard-pressed working 
families, not unlike my own.
    What I would like the Subcommittee to also know is that 
this program is not only professionally important to me in my 
role as the Director of the office, but personally important as 
well, having been a recipient of LIHEAP benefits as a child 
with my family. There were a number of occasions where my 
family was faced with eviction and LIHEAP benefits actually 
assisted my mom in meeting our needs so that we were not 
evicted. I have lived in 9 homes on Long Island, 6 of which I 
was evicted from; 3 of which I was saved from being evicted 
from because of LIHEAP benefits.
    So there is a personal commitment to ensure that each and 
every family receives a LIHEAP benefit should they so deserve 
one so they don't have to face those situations.
    I thank the Committee for their time.
    Senator Coburn. Thank you. Mr. Wells.

  TESTIMONY OF JIM WELLS, DIRECTOR,\1\ NATURAL RESOURCES AND 
       ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Wells. Thank you, Mr. Chairman, and Senator Carper.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Wells appears in the Appendix on 
page 62.
---------------------------------------------------------------------------
    I, too, appreciate the opportunity to be here today enough 
to return from my vacation.
    I have been doing oversight for 37 years with the 
Government Accountability Office, and I can tell you I really 
believe it is important, and I support your mission.
    Our last look at the LIHEAP Program occurred in 2001, when 
we reviewed and reported on a subprogram that is a part of 
LIHEAP called the Reach Program, which awarded about $6 million 
in grants to fund demonstration projects to help reduce energy 
usage.
    Although we were not tasked at that time by the Congress to 
look at the potential for improper payments, we did find 
payments that we believe were more related to social services 
and not specifically related to meeting home energy needs. For 
example, payments were for skill job development and paying for 
past due rent or mortgage payments as opposed to the heating 
and cooling type expenses that were spelled out in the 
authorizing legislation.
    We took issue with HHS, not that the above payments were 
not needed, but as you said, Mr. Chairman, earlier, the 
intended recipients may not be getting the maximum benefit from 
a program like LIHEAP.
    We did make recommendations and changes and suggestions on 
how they might want to develop performance goals that are more 
measurable and quantifiable. It is encouraging to hear in 
Josephine's statement today that HHS intends to relook at the 
LIHEAP Program to find out if it is, in fact, as good as it 
looks. This is very encouraging.
    Regarding oversight and audit responsibilities, I would 
like to make two points, two quick points.
    As you know, LIHEAP is about a $2 billion block grant 
program, and, as you heard today, LIHEAP offers a lot of 
flexibility to the States and the grantees to basically manage 
and oversee those programs as they see fit.
    While the Federal Government establishes guidelines, 
overall guidelines, each grantee operates its own program and 
makes most of those decisions about how it is to operate.
    My second point is that, although this sounds like the 
Federal Government has limited audit and fiscal controls, the 
LIHEAP Program is subject to review under the Single Audit Act. 
The Single Audit Act makes States and local governments 
primarily responsible for obtaining independent audits of the 
Federal programs, including payments made under LIHEAP.
    As a result, HHS, sitting here today, has a principal 
oversight function to monitor, but not audit, LIHEAP payments. 
Monitoring to us looks like it includes assessing the quality 
of the audits that are being performed, reviewing the audit 
results, and ensuring that corrective actions are taken to 
respond to audit findings.
    Perhaps in the follow-up questions, I would like to respond 
in terms of what our observations are on that task that is 
assigned to HHS.
    Clearly, the grantees should return funds that are spent in 
ways that are contrary to the LIHEAP statute.
    In our brief review, as we heard you would like us to talk 
about the LIHEAP Program, we quickly looked at about 40,000 
single audit reports that were issued in 2004, and basically 
they showed relatively few specific LIHEAP-related audit 
findings; 26 out of the 300 that we could find with LIHEAP 
coding where audits were done looking specifically at LIHEAP 
provisions.
    In some cases, the grantees were found to not meet 
accounting criteria for managing those Federal funds, both from 
LIHEAP and other Federal programs. So really it was difficult 
to determine whether this 26 number audit findings had any 
specific improper payments, LIHEAP payments, because of that.
    We were able to identify only a certain, relatively small 
number of payments that were questioned in the audit reports, 
such as about $8,800 in what appeared to be incorrect or 
duplicate payments made by one grantee.
    Another audit report questioned about $1,200 in payments 
because of inadequate procedures to prevent overpayments.
    I do need to say that in addition the Single Audit Act, it 
is not the only oversight Federal responsibility. The Improper 
Payments Information Act of 2002, Mr. Chairman, as you referred 
to earlier, requires that Federal agencies identify those 
programs that may be susceptible to significant improper 
payments.
    Agencies are required to estimate the annual amount of 
improper payments and basically tell the Congress. HHS has 
conducted risk assessments earlier and have identified specific 
programs, with specific risk.
    Although HHS has identified seven of its programs as high 
risk, LIHEAP was not among them.
    We are not aware of any more comprehensive information that 
exists on improper payments within the LIHEAP Program other 
than the few examples we discussed above. But that doesn't 
necessarily mean that they are not there.
    Mr. Chairman, the Congress has to date shown interest in 
having GAO evaluate how the money gets out to the grantees, and 
not how well it has been used.
    Given GAO's mission and statement of accountability, 
integrity, and reliability, we agree with you how important it 
is that Federal agencies get it right when they are awarding 
such large sums, and the LIHEAP Program is a $2 billion grant 
program.
    That concludes my short prepared remarks. I will be glad to 
answer any questions you may have. Thank you.
    Senator Coburn. Let me see if I understand what you are 
saying. It may be that LIHEAP is at low-risk for improper 
payments, but the basis under which that assessment was made, 
there are no data out there that would confirm that you could 
audit that and say that is necessarily a good assessment of it 
being low risk. Is that what you are saying?
    Mr. Wells. I am not prepared today to offer the conclusion 
about the success of that program. We have not been asked to 
audit the model. I understand HHS has agreed that they are 
going to revisit and look at the model that it used that 
predicted the low success. And, therefore, it would have less 
improper payments and did not meet the criteria to be put on 
its high-risk list.
    We have not looked at that.
    Senator Coburn. But basically, there has not been a good 
audit of the grantees in terms of the distribution of LIHEAP 
funds because it has been felt that there is not a problem 
there?
    Mr. Wells. That is my understanding.
    Senator Coburn. OK. All right.
    Now, you had some observations that you wanted to make in 
regards to LIHEAP.
    Mr. Wells. I did. Mr. Chairman, when you asked us to come 
up and talk about improper payments, one of the first things we 
do as auditors is to make initial inquiries to the agency, and 
we looked at the oversight responsibilities of the Federal 
agencies and determined that there were requirements for the 
Single Audit Act and the Improper Payments Act. And we asked 
some questions of the programmatic folks there at HHS, and it 
was an observation that we didn't get real quick responses 
about what they knew about the Single Audit Act.
    There didn't appear to be a lot of information quickly at 
their fingertips about how well or if they were monitoring the 
Single Audit--monitoring the audit results.
    There were some questions that we raised that perhaps they 
are not quite on top of things in terms of using the Single 
Audit Act findings that may have been generated in these 40 
some thousand audits that have been required.
    So these were just early indicators to us that holding a 
hearing like this probably serves notice to the agency that 
they need to look at their responsibilities in terms of 
oversight.
    So that would be my additional observation just based on 
not having audited the program recently.
    Senator Coburn. Well, first of all, my staff's experience 
mirrors that experience as well.
    I would note that the author of the Single Audit Act sits 
on this panel, Senator Carper, and I know he has an interest in 
it, and the motivation for doing that was accountability, and, 
as you can see, each one of our hearings is based on 
transparency.
    And, Ms. Robinson, what is your feeling about putting your 
hands down on the administration of LIHEAP in terms of here is 
what you have seen; here is what is filtered up? What do your 
people tell you?
    Ms. Robinson. One of the challenges that I have is just 
grasping, if you will, the complexity of this issue with 
respect to who has the controls within the office. We are a 
program office, and we have an Office of Administration, which 
does the actual auditing and working cooperatively with them to 
determine where, in fact, in the process we work with each 
other, and we determine where and how quickly information is 
coming in and how quickly information is dispensed to me as a 
program official; this is one of the areas that I am working 
very hard to ensure occurs.
    I am 6 months into the job, and I have announced we 
definitely moved forward in determining and ensuring that we 
are doing effective monitoring and actual follow up.
    Each of the audits that come in, after they have been 
processed within our Office of Administration are reviewed by 
our Office of Inspector General; reviewed again by our Office 
of Administration; forwarded to me with respect to the 
findings, whether they are monetary or non-monetary, and I am 
given advice as to where and how I should transmit those 
findings.
    Once the findings are signed off and sent back, then we 
have the responsibility in the Program Office to ensure that 
the findings are secondarily communicated. The principal 
responsibility is with the audit resolution office. But there 
is a secondary responsibility in my program office which I have 
to take direct responsibility with my staff. And there is a new 
found commitment to ensuring that we are working cooperatively 
with the States and we are in constant communication with them.
    It also means that we are doing additional training and 
discussion with them. We issue guidance to the States when we 
have new information or rules, and to achieve transparency; to 
ensuring that we are communicating the rules effectively; that 
we are underscoring what corrective actions are being taken; 
that we are following up; and that we are on top of things.
    Senator Coburn. Right.
    Ms. Robinson. Because there is an atmosphere of that not 
being the case with our limited resource and staff.
    Senator Coburn. Right. And there is no question you all are 
subject to the Improper Payments Audit Act.
    Ms. Robinson. Yes.
    Senator Coburn. OK. Senator Carper, and then I will come 
back.
    Senator Carper. Thanks. My wife jokes--I think she is 
joking from time to time. She says I don't want to be married 
to the Senator that no one has ever heard of; and from a little 
State on the East Coast, and I always say to her, honey, for a 
brief spell of time and at least in every state auditor's 
office in America, my name was a household word.
    It was a fleeting moment, back in the 1980s, when we worked 
on the Single Audit Act, and it is nice to hear--actually it's 
kind of interesting because we talk about this, which a number 
of us Democrats and Republicans worked on in the Congress in 
the late 1980s, and also the low-income tenant income 
verification stuff we were talking about earlier.
    And I never expected to hear both of these come up today, 
but I have kind of had a little trip down memory lane, thanks 
to our witnesses.
    I want to thank you, both, for coming today, but I 
especially want to thank Mr. Wells for coming back from Florida 
to be with us and interrupt your vacation. You are good to do 
that.
    Ms Robinson, I understand you have been on the job for what 
6 months?
    Ms. Robinson. Six months.
    Senator Carper. And you once served in another capacity 
here with our Chairman?
    Ms. Robinson. Yes, I had the absolute pleasure of serving 
with the Chairman.
    Senator Carper. All right. I know that pleasure. And I 
think I would like----
    Senator Coburn. I worked for her.
    Ms. Robinson. We worked together.
    Senator Carper. I will let you two work this out. Chain of 
command not later.
    I would like to talk about what I think are three 
components of LIHEAP. One is heating. Another is cooling. And a 
third is weatherization. And would you just talk about each of 
those and how they sort of fit together please?
    Ms. Robinson. Certainly. The program was set up to deal 
with the energy crisis, and so it was primarily a heating 
program. The cooling components are added based on the States' 
determination of what their own respective needs are. We have 
to remember that the States design their respective programs, 
and determine whether or not there is a cooling component. In 
addition, weatherization is a component of the program as so 
determined by the State.
    Each of the States then makes an assessment as to how they 
are going to determine their eligibility with respect to their 
poverty rates, and each of the programs are to complement each 
other with respect to weatherization and any educational 
awareness that goes on within the program, because you don't 
want is this to be singularly an assistance program that is not 
going about the education of consumers. I think a more 
important aspect of providing aid to families is also educating 
them about their energy usage and resources within their homes 
to improve the conditions in their homes. That is part of the 
lesson learned in my own family. The weatherization component 
is important to provide insulation and to teach about proper 
energy use.
    So all of those programs cooperatively work within the 
State to ensure that overall energy needs of a family are met.
    Senator Carper. Yes. Give us some idea, if you can, of how 
much money is being allocated for LIHEAP during this current 
fiscal year, which is about to conclude.
    Ms. Robinson. The total appropriation, was $1.9 billion for 
LIHEAP in fiscal year 2005. Of that, you have the appropriation 
for the block grant, which is allocated to the States based on 
a set formula.
    There is an additional component of that $1.9 billion that 
is set aside as part of a leveraging pot, which is 
approximately $27 million of that $1.9 billion. Of that $27 
million, 25 percent is the REACH Program that Mr. Wells was 
talking about, which is the Residential Energy Assistance 
Challenge Program.
    And so that is where the education and additional awareness 
is incorporated into the program. So it is, again, a total 
appropriation of $1.9 billion, with the pieces of leveraging 
and REACH incorporated therein.
    Senator Carper. Yes. What I am trying to get to is $1.9 
billion appropriated in 2005? How much again for 
weatherization?
    Ms. Robinson. I don't know the specific----
    Senator Carper. Just roughly.
    Ms. Robinson. I will have to provide that information to 
you at another time. I don't know it off the top of my head.

                  INFORMATION SUPPLIED FOR THE RECORD
         States can choose to use up to 15 percent of their LIHEAP 
        block grant funds (25 percent with a waiver from HHS) for low-
        cost residential weatherization or energy-related home repair. 
        For FY 2004, 45 States obligated $220,927,883 (11.3 percent) in 
        available LIHEAP funds for weatherization. Seventeen of the 
        States reached the funds cap of 15 percent.

    Senator Carper. OK. All of us, particularly those who live 
in the northern part of our country, are probably thinking 
about our energy bills for the winter.
    And I know some of our colleagues are--I think it is 
Senator Snow, maybe Senator Reed from Rhode Island have been 
circulating letters I think to send to the appropriators for 
the Appropriations Subcommittee asking that some additional 
monies be provided for LIHEAP in 2006.
    I think the argument is bolstered for those monies to the 
extent that we can ensure our colleagues and others that the 
money is being appropriated and properly spent.
    And to the extent that we can do that, all the better.
    I am one who believes that there is great value in energy 
conservation and weather proofing our homes, and it is all well 
and good that we give people money, as your family benefitted 
from on several occasions as you were describing in order to 
help keep them in their homes and from being literally 
displaced.
    There is also great value I think in providing folks with 
the wherewithal to reduce long-term----
    Ms. Robinson. Right.
    Senator Carper [continuing]. Their energy bills, heating 
bills, and cooling bills. And I would be interested to know how 
much of the need that we are actually meeting through this 
program?
    Ms. Robinson. Certainly. That is what the REACH Program, in 
part, is about; it is actually educating consumers about the 
reduction and overall awareness of energy use.
    It is a competitive program and not all of the States will 
receive funds from the REACH Program, because they make the 
determination if they would like to participate in that 
discretionary component of the LIHEAP Program. There is 
approximately $6 million that is allocated across applicant 
States. Not very many States participate in it, but it is, in 
fact, to deal with the educational awareness and decrease in 
energy usage among low-income families.
    So there is a small component in that. The larger component 
is encompassed within the LIHEAP Program in general. Any time 
you apply for assistance through the LIHEAP Program, energy 
usage information is made available to you.
    I had the pleasure of participating in the District of 
Columbia's Energy Fair that they held recently a little over a 
week ago. They brought together all of the utility companies 
within the District of Columbia. In the District, Washington 
Gas provides your heat and PEPCO provides your electricity; 
and, therefore your cooling.
    But they also had Verizon and other partners there, and 
what they did in that venue was, as people were applying for 
LIHEAP benefits, they were actually educating them as well 
about other options available to them--insulation, energy, 
budget programs that are at the gas company. All of those 
things are usually components of the overall LIHEAP Program. I 
think it speaks to your question with respect to overall 
awareness, because you don't want LIHEAP to singularly be an 
aid program. You want a larger educational awareness going to 
reduce energy consumption.
    Senator Carper. All right. Thanks so much.
    Ms. Robinson. Thank you.
    Senator Coburn. Ms. Robinson, in the fiscal year 2003, the 
Single Audit Act has 28 management decisions that will have to 
be made, and I notice that there are 10 missing that aren't 
even addressed on that, and I am not going to go into that 
other than to say we are going to invite you back and just get 
a commitment from you that all 28 will be complied with in 
terms of the Single Audit Act, in terms of those management 
decisions.
    Ms. Robinson. You will have that commitment. I have already 
talked with the staff, and we are determining a timetable. We 
should have those resolved by January 2006.
    Senator Coburn. OK. I want to talk a little bit about the 
REACH Program, and feel free, either one of you, to jump in 
here.
    Is that a program that was authorized by statute?
    Ms. Robinson. Yes.
    Senator Coburn. OK. And that was in 1996?
    Ms. Robinson. In 1996.
    Senator Coburn. And can you explain the relationship 
between the REACH Program and LIHEAP. I think you have already 
done that.
    Has it been successful in doing what it is supposed to do--
the REACH Program?
    Ms. Robinson. I think that is one of the questions that was 
encompassed within the 2001 GAO report. I would like to note 
that that assessment in 2001 was 5 years after the program's 
initiation, so there is some degree of learning, if you will, 
of how to manage that program at the time. We have discussed 
with States some of the findings of the 2001 report that they 
have been fully educated with respect to what is an allowable 
cost and activity within that program.
    Senator Coburn. Within the PART assessment program, the 
program has to have defined specific goals.
    Ms. Robinson. Yes.
    Senator Coburn. What are the defined specific goals of--you 
don't have to answer that, but they are there, I presume?
    Ms. Robinson. We have developed performance measures and 
performance outcomes as part of the overall LIHEAP program and 
REACH is encompassed in that process.
    Senator Coburn. Why would REACH not have been one of the 
programs that failed the PART assessment analysis? If it has no 
defined goals that are written out, why would it not have----
    Ms. Robinson. I think it does have defined goals within 
what the program is structured to be. I can--if you give me a 
moment----
    Senator Coburn. OK.
    Ms. Robinson. There are no separate goals for REACH. Under 
the statute, REACH grantees must have an independent evaluation 
of their projects. We are working on evaluating how REACH 
operates and how we can best use these evaluations.
    Senator Coburn. So we are 9 years out, and we are just now 
developing performance measures?
    Ms. Robinson. I think they have learned, and they have 
incorporated, and we have not yet gone back formally to do the 
evaluation.
    Senator Coburn. Are there other Federal programs that do 
some of the same things that the REACH Program does?
    Ms. Robinson. I don't think so.
    Senator Coburn. I think there are. Mr. Wells.
    Mr. Wells. Just this year, we released a report where we 
looked at all the Federal agencies that had energy-related 
expenditures, of 18 Federal agencies, over $10 billion worth of 
energy expenditures. The Department of Energy has a 
weatherization program. I believe funding this year was around 
$224 million a year, a grant program that helps teach people 
how to weatherize a facility--building--to help contain heat or 
cooling to make it more efficient and use less energy.
    Senator Coburn. So actually in our analysis, looking at 
what the GAO has done and what my staff has found, there is 
somewhere between 15 and 20 different Federal agencies that do 
the same thing as the REACH Program. What I am going to do is I 
am going to ask GAO to come back and look at that again, and 
make a comparison. This has nothing to do with the intentions.
    I haven't found a Federal program since I have been here 
that doesn't have a well-intended purpose. What I have found is 
tons of Federal programs whose intended purpose is the same as 
some other intended purpose somewhere else and one doesn't know 
what the other one is doing.
    Mr. Wells, does the GAO believe that money is lost in the 
REACH program?
    Mr. Wells. No, sir. We don't have evidence to support money 
has been lost in the program. When we looked at the program, 
wherever our auditors went, there always appeared to be a far 
greater need for assistance than what the limited funding 
provided could provide.
    Even as we talked about the payments that were given out in 
the REACH Program to assist in rent assistance, I mean it did, 
in fact, help, and it was needed, but it didn't necessarily 
relate to the specific goals of that particular program.
    But I do not have any instances where money was actually 
wasted that I am aware of, nor did I see anything in the Single 
Audit Act that would indicate that money was wasted.
    Senator Coburn. OK. But the point being that this program 
has parameters and goals; that it may be reaching beyond or 
other programs have that will--so we have duplications, but not 
necessarily delivery to those people who are needing it? I 
mean, if, in fact, there are 16 other programs out there that 
do similar things to REACH, my question is do we need to beef 
up REACH and cut the money over here or why do we do that? Why 
do we have 16 programs?
    Mr. Wells. I would certainly hope that if there are 16 
programs, which I do not know if there are 16 programs doing 
exactly the same thing, but I would hope that it is a 
coordinated effort and there are not duplications and wasted 
expenditures.
    Senator Coburn. OK. That is one of the things that we are 
going to ask you all to find out.
    Mr. Wells. That is our job.
    Senator Coburn. Any other comments for us? I have several. 
I have pages of questions here that I am not going to put you 
through that we want to know in terms of follow up. I think it 
is very important, Josephine, that this next winter is going to 
be the toughest winter the people in need who are depending on 
us in this country are going to have. Not only is it forecast 
to be a harsh winter, but with natural gas at eleven dollars 
and sixty something cents a thousand BTUs and heating oil at an 
all-time high, making sure the money gets to the people who 
need it, and the money doesn't go to the people that don't--and 
so I have implicit trust in your management. I just want to 
make sure it gets carried all the way down; and I am sure we 
are going to appropriate more money for this program. But we 
are going to have to find it by taking it from somewhere else. 
And maybe it is from some of the wasted money that is not going 
out for housing, but we are going to find it.
    I appreciate each of you being here. We will have a 
submitted list of questions, if you would please respond.
    I have one other observation, one of the things that we 
want to avoid doing is putting a ceiling on people. And, as we 
were listening to the HUD testimony, one of our problems with 
Medicaid today is that we don't have a transition program. We 
have a cutoff on eligibility, and so what we do is we are 
ceiling people in so that they can't go anywhere, because they 
have got to keep their Medicaid.
    And I am worried that we are about to do that in housing 
and now with energy assistance if you don't meet the 
requirements, you are going to have to limit your income so you 
can maintain this.
    We need the help to figure out how to take the ceilings off 
so that people can continue to prosper and grow and take 
advantage of opportunities, but not have it go from help to 
nothing. And I would hope that in light of this program, 
especially LIHEAP, that we are not doing that, and, if we are, 
I would love to hear back from your how we can change that 
program to where we transition people as they up their incomes 
so that they don't lose the benefit, so we stimulate their 
seeking of opportunities. I think too often we put a ceiling on 
people and say if you want to keep this, you can't go above a 
certain income level. And so I would love that recommendation 
coming from you as well.
    Ms. Robinson. Well, I think you would be pleased to note 
that States do actually have some flexibility in determining 
the eligibility of individuals, and it is not singularly based 
on the poverty level of the respective State.
    Senator Coburn. Right.
    Ms. Robinson. It also has something to do with the energy 
burden in the house with respect to what their bills are. Some 
of the States take a larger look at the households and what the 
households are spending as a whole with respect to their 
current needs and their energy needs.
    Senator Coburn. So there is a transitioning mechanism?
    Ms. Robinson. I think there is, sir.
    Senator Coburn. Great. All right. Thank you all, very much.
    The hearing is adjourned.
    Ms. Robinson. Thank you.
    [Whereupon, at 3:55 p.m., the Subcommittee was adjourned.]


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