Testimony 

Before the Subcommittee on Federal Financial 

Management, Government Information, and 

International Security, Committee on 

Homeland Security and Governmental Affairs, 

U.S. Senate

United States Government Accountability Office

GAO

For Release on Delivery 

Expected at 2:30 p.m. EDT 

Tuesday, September 27, 2005 RESIDENTIAL ENERGY

Oversight of Low-Income 

Home Energy Assistance 

Program Payments 

Statement of Jim Wells, Director 

Natural Resources and Environment 

GAO-05-1039T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-1039T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Jim Wells at 

(202) 512-3841 or wellsj@gao.gov. 

Highlights of GAO-05-1039T, testimony 

before the Subcommittee on Federal 

Financial Management, Government 

Information, and International Security,

Committee on Homeland Security

and Governmental Affairs, U.S. Senate

September 27, 2005

RESIDENTIAL ENERGY 

Oversight of Low-Income Home Energy 

Assistance Program Payments 

HHS relies on individual grantees—the states, tribal organizations, and 

territories—to oversee the LIHEAP program. Because the Single Audit Act 

made state and local governments primarily responsible for obtaining 

independent audits of funds they receive from federal programs, HHS’s 

principal oversight function is to monitor, not audit, LIHEAP payments made 

by grantees. Monitoring includes assessing the quality of single audits 

conducted under the act, reviewing audit results, and ensuring that 

corrective actions are taken to resolve audit findings. GAO’s brief review of 

relevant 2004 Single Audit Act reports showed that the only LIHEAP costs 

that were specifically questioned involved relatively small sums—for 

example, one report cited incorrect or duplicate payments totaling $8,864. 

Another audit report questioned $1,285 in LIHEAP payments because of 

inadequate procedures to prevent overpayments.

GAO’s 2001 review of the REACH program found several projects that 

included social services that were not directly related to meeting home 

energy needs. For example, six projects included job skill or employment 

development services, and one project provided funds to help clients pay 

past-due rent or mortgage payments. In addition, the report stated that 

REACH did not have performance goals that were objective and quantifiable. 

As a result, GAO did not believe HHS could effectively evaluate the 

program’s overall performance. The report also noted that such goals would 

provide a clearer basis for selecting individual projects to fund. GAO 

recommended that HHS develop performance goals for REACH that were 

objective, measurable, and quantifiable. While HHS agreed with this 

recommendation, GAO has been unable to identify any actions taken to 

implement this recommendation. According to HHS, the agency continues 

to work on the development of long-term performance measures for 

LIHEAP. 

The Department of Health and 

Human Services’ (HHS) LowIncome Home Energy Assistance 

Program (LIHEAP) is a block grant 

program with recent annual 

funding of about $2 billion that 

provides fuel payment assistance 

and payments for home energy 

efficiency improvements for lowincome households. As energy 

prices continue to rise, this 

assistance is growing more 

important to mitigate the impact of 

higher prices on low-income 

households. HHS awards LIHEAP 

funds by formula to all 50 states 

and the District of Columbia, 

federally or state-recognized Indian 

tribes and tribal organizations, and 

territories. These grantees then 

provide energy assistance 

payments to low-income 

households. Within LIHEAP, the 

Residential Energy Assistance 

Challenge Option (REACH) 

program funds demonstration 

projects to help low-income 

families reduce their energy usage. 

GAO was asked to provide 

information on (1) HHS’s oversight 

of LIHEAP payments made by 

grantees and (2) GAO’s 2001 review 

of LIHEAP’s REACH program. 

What GAO Recommends

This testimony does not make any 

recommendations. 
Page 1 GAO-05-1039T 

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to be here today to discuss the Department of 

Health and Human Services’ (HHS) Low-Income Home Energy Assistance 

Program (LIHEAP) and our observations on oversight methods for 

determining the sources and magnitude of possible improper payments. As 

you know, LIHEAP is a block grant program established in 1981 that funds 

fuel payment assistance and home energy efficiency improvements for 

low-income households. With recent annual funding of about $2 billion, 

LIHEAP seeks to increase the health and prosperity of communities and 

tribes by helping low-income households—particularly those with the 

lowest income, which pay a high proportion of household income for 

home energy—meet their immediate home energy needs. As energy prices 

continue to rise, this assistance is growing more important to mitigate the 

impact of higher prices on low-income households. HHS awards LIHEAP 

grant funds by formula to all 50 states and the District of Columbia, 

federally or state-recognized Indian tribes and tribal organizations, and 

insular areas (American Samoa, the Commonwealth of Puerto Rico, Guam, 

the Northern Mariana Islands, and the U.S. Virgin Islands). These grantees 

provide payments to households to help them meet their energy needs. 

According to HHS, in fiscal year 2004, approximately 4.6 million 

households received heating assistance; 308,000 households received 

cooling aid; 1.1 million received winter/year-round crisis aid; 92,000 

received summer crisis aid; and 112,000 received weatherization 

assistance. Households may receive more than one kind of LIHEAP 

assistance. 

Within LIHEAP, the Congress established the Residential Energy 

Assistance Challenge Option (REACH) program, which provides grants 

that fund demonstration projects to test various approaches to help lowincome families reduce their energy usage and become more self-sufficient 

in meeting their home energy needs. In a sense, the REACH program 

serves as a “laboratory” for identifying better ways to ensure that lowincome families can afford home heating and cooling. With annual average 

funding of about $6 million—less than 1 percent, on average, of the total 

annual funding for LIHEAP—REACH had provided 112 grants totaling $55 

million by the end of fiscal year 2004. Individual grants ranged in amount 

from $50,000 to $1.6 million. 

My statement today discusses (1) HHS’s oversight of LIHEAP payments 

made by grantees and (2) our 2001 review of LIHEAP’s REACH program. 

To address LIHEAP payment oversight, we gathered information on the 

payment oversight process and conducted a brief review of 2004 Single 
Page 2 GAO-05-1039T 

Audit Act reports that addressed LIHEAP. Specifically, we queried the 

Single Audit Database from the Federal Audit Clearinghouse to identify 

2004 Single Audit Act reports that addressed LIHEAP. We then examined 

those reports that had findings to determine the nature of the findings as 

they related to LIHEAP. Our discussion of the REACH program is based on 

our 2001 report, which we conducted in accordance with generally 

accepted government auditing standards.1

 We did not update our 2001 

report on the REACH program. 

As a block grant program, LIHEAP offers much flexibility to states and 

other grantees to manage and oversee their energy assistance programs in 

the way that they feel best serves their low-income populations. While the 

federal government establishes overall guidelines, each grantee operates 

its own program, taking applications, establishing eligibility, and making 

decisions on the kinds of assistance payments it will offer. HHS accepts 

the grantee’s interpretation of the LIHEAP statute unless HHS finds it to be 

“clearly erroneous.” 

LIHEAP payments are subject to review under the Single Audit Act. The 

Single Audit Act made state and local governments primarily responsible 

for obtaining independent audits of federal programs, including payments 

made under LIHEAP. As a result, HHS’s principal oversight function is to 

monitor, not audit, LIHEAP payments made by grantees. Monitoring 

includes assessing the quality of single audits conducted under the act, 

reviewing audit results, and ensuring that corrective actions are taken to 

resolve audit findings. Through the audit or other federal review 

processes, grantees must return funds when spent in ways contrary to the 

LIHEAP statute. Our brief review of 2004 Single Audit Act reports 

addressing LIHEAP showed relatively few specific LIHEAP-related audit 

findings. In some cases, grantees were found to have not met accounting 

criteria for managing federal funds they were awarded—both from 

LIHEAP and other programs—so it was difficult to distinguish any specific 

improper LIHEAP payments. For example, one grantee lacked adequate 

documentation to support costs it charged to manage its federal funds. We 

were able to identify only certain relatively small LIHEAP payments 

questioned in the audit reports, such as $8,864 in what appear to have been 

incorrect or duplicate payments made by one grantee. Another audit 

 1

GAO, Residential Energy Assistance: Effectiveness of Demonstration Program as Yet 

Undetermined, GAO-01-723 (Washington, D.C.: August 17, 2001). 

LIHEAP Payment 

Oversight 
Page 3 GAO-05-1039T 

report questioned $1,285 in LIHEAP payments because of inadequate 

procedures to prevent overpayments. 

In addition to the Single Audit Act, the Improper Payments Information 

Act of 2002 requires federal agencies to review their programs and identify 

those that may be susceptible to significant improper payments. Agencies 

are required to estimate the annual amount of improper payments and 

submit those estimates to the Congress; when improper payments are 

estimated to exceed $10 million, those estimates must be accompanied by 

a report of actions being taken to reduce such payments. As part of this 

process, HHS has conducted risk assessments identifying specific program 

risks and assessing related controls. Although HHS identified seven of its 

programs as high-risk, LIHEAP was not among them. We are not aware of 

any more comprehensive information on the appropriateness of payments 

made by LIHEAP grantees other than the few examples discussed above. 

While we have not reviewed overall LIHEAP compliance, at the request of 

the Senate Committee on Health, Education, Labor and Pensions and the 

House Committee on Education and Workforce, in 2001 we did review and 

report on REACH—a small part of the overall program. We found that 

many REACH projects involved energy-related repairs to homes and 

budget counseling, and three state REACH projects were developing 

consumer cooperatives to purchase electricity or bulk fuels, such as 

heating oil. However, some REACH projects made payments for social 

services not directly related to meeting home energy needs. For example, 

six projects made payments for job skill or employment development 

services, and one project provided funds to help clients pay past-due rent 

or mortgage payments. 

The legislation authorizing REACH identified three performance goals for 

individual REACH projects: reduce energy costs of participating 

households, increase the regularity of home energy bill payments, and 

increase energy suppliers’ contributions to reduce eligible households’ 

energy burden. Despite these broad purposes for the program, in 2001 

HHS had not developed performance goals that were objective and 

quantifiable. Consequently, we did not believe HHS could effectively 

evaluate the program’s overall performance and report to the Congress on 

what was accomplished for the resources expended. We also noted that 

developing such goals would provide a clearer basis for selecting 

individual projects to fund. Our report recommended that HHS develop 

program performance goals for REACH that were objective, measurable, 

and quantifiable. HHS agreed with the recommendation and planned to 

REACH Program 
Page 4 GAO-05-1039T 

develop performance goals for REACH as part of the agency’s Government 

Performance and Results Act (GPRA) plan. However, the most recent FY 

2005 Performance Plan did not include goals for the REACH program 

under LIHEAP. We have been unable to identify any actions taken to 

implement this recommendation. According to HHS officials, they have 

continued to examine this issue and work on the continuing improvement 

and development of long-term performance measures for the overall 

LIHEAP program. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 

answer any questions that you or other Members of the Subcommittee 

may have at this time. 

Contact points for our Offices of Congressional Relations and Public 

Affairs may be found on the last page of this statement. For further 

information about this testimony, please contact Jim Wells at (202) 512-

3841 or Wellsj@gao.gov. 

Contacts 

(360628) 
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