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Probe Uncovers Fraud at Program to Help Poor Pay Energy Bills

Malfeasance includes paying benefits to dead woman, as well as to state employee earning $90,000 a year

weatherization attic

The Office of the State Comptroller yesterday found that a program aiding low-income households to pay heating bills is susceptible to fraud, with improper benefits often paid out, including after an applicant had died.

An investigation into the state’s administration of the Low Income Home Energy Assistance Program cited a lack of controls, as well as a failure to implement corrective actions from a previous audit in 2010 and to train and support agencies processing program applications.

In its probe, the comptroller discovered benefits were paid to three ineligible public employees, including one who earned $90,000 annually, or about $50,000 above the maximum threshold limit.

The 24-page report is the latest audit into the Department of Community Affairs oversight of federally funded programs designed to help the needy pay energy bills. Previously, at least three separate audits faulted fiscal management of its weatherization program, which tries to lower heating costs by making homes more energy efficient.

In response, DCA said the investigation focused only on one of 17 local agencies reviewing applications involving more than 265,00 applications. OSC’s conclusion that the state’s entire LIHEAP process is susceptible to fraud is not only based on a statistically invalid level of testing, but it also is erroneous.

LIHEAP is a popular energy-assistance program that funnels about $125 million a year to New Jersey to help low-income households pay energy bills. Seventeen different agencies handle applications for the program for DCA, including one in Middlesex County that triggered the probe and was the focus of the report. The other 16 agencies were not examined during the investigation.

“People in need depend on LIHEAP to help pay for heat during cold weather,’’ said Philip James Degnan, state comptroller. “The weaknesses we discovered in LIHEAP need to be addressed so we ensure this vital funding is properly provided to those it is intended to help.’’

In its investigation, the office found that some applicants received benefits as a direct result of falsifying applications — including the use of nonexistent or fraudulent Social Security numbers and/or fraudulent income information. For instance, the public employee earning $90,000 annually, only listed her secondary income and not the public salary of nearly $60,000 a year.

Underreporting of income was found repeatedly when investigators randomly reviewed files of the agency, the nonprofit Puerto Rican Action Board. In looking at a few hundred files, it found 14 cases where income was underreported by $10,000 or more.

The comptroller said it is referring six benefit recipients to the state Division of Criminal Justice for its review for potential prosecution. An additional 34 benefit recipients are being referred back to DCA for its determination whether benefits were properly paid.

In another instance, benefits for an applicant were issued eight months after she died while her house was for sale. Cross-checking with a Social Security database, investigators found 11 instances where benefits were paid after the date of death of the applicant.

The state told the comptroller’s office the issuance of a benefit after the applicant has died is not always improper, since there is a delay between the application and the issuance of a benefit. The investigators said its preliminary investigation of these files revealed that over 70 percent did not appear to reflect the applicant had died, creating the opportunity for fraud.

Among its recommendations, the comptroller urged the DCA to utilize existing access to state databases and obtain access to other agencies, to conduct income verification and vital statistic reviews.

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