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Auditor General Jack Wagner: DPW’s Special Allowance Program Rife with Mismanagement, Potential for Fraud
Forty-five percent of special allowance payments issued without documented justification
HARRISBURG (August 20, 2009) – Auditor General Jack Wagner said today that a Department of Public Welfare program that provides cash assistance to welfare recipients seeking employment was rife with mismanagement and poor oversight, creating an environment for potential fraud and abuse that could cost taxpayers tens of millions of dollars.
In a special performance audit released today, Wagner’s auditors found insufficient documentation to justify 45 percent of the 3,201 special allowance payments examined. Specifically, auditors found insufficient documentation for 163 recipients totaling $564,700 in cash for clothing, child care, tools, transportation and other expenses.
Wagner said his concern over potential fraud stemmed, in part, from the fact that DPW has acknowledged potentially fraudulent handling of special allowance funds in Philadelphia and reported cases to the Office of Inspector General for further investigation.
“With the commonwealth facing its greatest budgetary challenges since the Great Depression, all of us in state government must do everything we can to stretch every dollar and eliminate the potential for waste, fraud and abuse,” Wagner said. “Department of Public Welfare management must provide greater leadership and be held accountable for its mishandling of taxpayer dollars, and must ensure that these vital funds are not wasted and are used appropriately so that these funds are available to assist some of Pennsylvania’s most vulnerable citizens who are eligible and truly need the benefits.”
DPW agreed with the audit findings and most of the recommendations.
DPW’s special allowance program is approximately 75 percent state funded. According to state law, welfare recipients participating in employment and training programs are eligible to receive special allowances to offset expenses like books, tools, clothing, transportation and child care. Eligible recipients either receive special allowance payments on an Electronic Benefits Transfer card, which can be used to withdraw cash at an ATM machine or used as a debit card at a point of purchase, or are issued checks by DPW, which are sent directly to vendors.
Welfare offices in Allegheny, Dauphin, Delaware, Philadelphia and York counties disbursed $205.9 million in special allowances during the audit period July 1, 2006 to Dec. 31, 2007, Wagner said. In many instances, there were insufficient receipts and other forms of documentation to prove that the allowances were legally permissible.
Based on the audit findings, Wagner said that he believed problems in the special allowance program were systemic, meaning they existed in assistance offices in every county in the commonwealth.
Auditors detected instances of potential fraud in at least three counties:
Wagner’s auditors also found dozens of other questionable allowances. For example:
Auditors found that duplicate payments may have been issued and went undetected because special allowances issued by employment and training contractors were not recorded in the county assistance office’s computer system. Wagner said his auditors attempted to determine the severity of this control flaw, but Department of Public Welfare officials refused to provide necessary information.
Wagner said his auditors found four systemic control weaknesses affecting special allowance processing at the audited assistance offices. The weaknesses included a lack of adequate documentation, lack of adequate supervisory review, inadequate monitoring of recurring special allowance payments, and inconsistent application of special allowance policies and procedures.
Wagner’s auditors also found weaknesses in the accounting, processing and controlling of electronic benefits transfer cards. During the audit period, the Department of Public Welfare placed $127.7 million on cards without having proper controls to compel recipients to make only authorized purchases. Auditors also noted failure by assistance office employees to properly store benefit cards, increasing the potential for theft. In addition, auditors found excessive card usage by recipients, with at least one person receiving 99 electronic benefits transfer cards. The auditors found these weaknesses despite DPW failing to provide an electronic benefit transfer data file, which precluded the auditors from performing procedures that may have resulted in further identifying potential fraud and abuse with regard to how recipients spent special allowances placed on their cards.
Wagner’s audit made 32 recommendations. It said the Department of Public Welfare should:
A complete copy of the audit report, including DPW’s response, can be found at www.auditorgen.state.pa.us.
Auditor General Jack Wagner is responsible for ensuring that all state money is spent legally and properly. He is the Commonwealth’s elected independent fiscal watchdog, conducting financial audits, performance audits and special investigations. The Department of the Auditor General conducts more than 5,000 audits per year. To learn more about the Department of the Auditor General, taxpayers are encouraged to visit the department’s Web site at www.auditorgen.state.pa.us
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