NEWS RELEASE
For Immediate Release
Contact: Steve Halvonik 717 787-1381
Audit Text

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:

• In a Delaware County assistance office, an invoice for tools from a beauty school was altered, changing the amount from $321 to $821.
  
• In Philadelphia County, the father of five children of a Philadelphia recipient received child care special allowances totaling $7,367 to babysit his own children by changing his name and SSN.
  
• In York County, two students at a beauty school each collected $637 for nail supplies that they never purchased.

Wagner’s auditors also found dozens of other questionable allowances. For example:

• 12 recipients collectively received allowance payments totaling $9,274 for 7 automobile purchases and 15 auto repairs with no supporting documentation in the case files, including one recipient who received funds for two automobiles and two repairs totaling $2,215.
  
• 20 recipients received special allowance payments totaling $22,300 for books/supplies and registration fees with no supporting documentation in the case files, including one recipient who received nine special allowances for books/supplies totaling $2,095.
  
• 26 recipients received special allowance payments totaling $40,800 for equipment/tools with no supporting documentation found in the case files.
  
• 37 recipients collectively received special allowance payments totaling $15,625 for clothing with no supporting documentation found in case files.

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:

• Provide active leadership and appropriate policies and procedures to CAOs to ensure accountability for approval and use of special allowances through adequate documentation including receipts of special allowance purchases, supervisor review, and management oversight
  
• Monitor to ensure duplicate special allowances are not issued by CAO and employment and training contractors, and ensure that training schools and other institutions notify DPW if they believe that DPW has overpaid for recipient expenses
  
• Cooperate fully with government audits and provide auditors with all requested information in a timely manner, and do not hinder the audit process by informing personnel to correct documents prior to providing them to the auditors
  
• Provide sufficient oversight with respect to all aspects of electronic benefits transfer cards, including performing a review of all management controls at each CAO related to the inventory, printing/activating, distributing, and monitoring of electronic benefits transfer cards.

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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