A state audit of money distributed in 2011 as part of a home energy assistance program for low-income Nebraskans shows millions of dollars were mishandled by the state Department of Health and Human Services.
State Auditor Mike Foley said Monday the audit questioned $17.6 million spent on 43,000 separate payments. And $7.7 million spent in 19,000 payments violated the state plan, he said.
Health and Human Services CEO Kerry Winterer acknowledged mistakes were made and said HHS will take responsibility and fix the problems that led to errors. But he did not agree with all of the auditor's findings.
The audit focused on the Low Income Home Energy Assistance Program, a federally funded block grant program that helps pay the costs of home heating and cooling for those who apply for basic or crisis payments.
In this case, the state received a supplemental payment of $20.2 million in January 2011 from the federal government -- in addition to the seasonal allotment the previous October of $20.6 million -- to give to people eligible for the program. The error occurred when the state's own plan, rules and regulations were not followed, Winterer said.
For some reason -- Winterer couldn't explain why -- the supplemental payments were not distributed until August 2011, past the season they were intended for, and then sent directly to the people eligible, rather than to utility companies.
The decision was made to ensure the money was distributed by an Oct. 1 deadline, he said. Otherwise, it would have gone back to the federal government.
Foley said the audit showed serious concerns that the majority of additional payments were never used to pay utility bills. A sampling showed that utility bills were paid in only a "handful of instances," he said.
More typically, he said, recipients paid utility companies less than $100 of the $250 or $500 checks, leaving their accounts in arrears.
A random sample of 135 payments identified one cashed at Ralston Keno, 19 at Walmart, 24 at grocery stores, restaurants and Paycheck Advance.
In some instances, program participants were not behind in their utility bills or had credit balances, yet they received and spent the supplemental checks, Foley said.
Auditors also found 261 payments totaling $112,000 were sent to recipients who had died, and their checks were cashed after their deaths. In some cases, HHS had records of the recipients' deaths before the checks were sent. And in one case, HHS knew the dead person's food stamps had been used fraudulently.
The audit team also identified 1,300 payments totaling more than $500,000 that were never cashed, and were then put into the state's general fund. The legality of that is suspect, Foley said.
He called the problems a "systematic breakdown."
"It's not a pretty picture," he said.
Foley did give credit to HHS for fully cooperating with the audit. And he said he had "great confidence" in the abilities of Winterer.
Winterer said the program is now part of the department's computer system -- N-FOCUS -- that contains the most current eligibility information for HHS public assistance programs. Decisions are being made in a timely manner on distribution of payments, he said.
"We have new leadership in the division and the new leadership understands the importance of making timely decisions," Winterer said.
Also, the state plan and regulations will be amended to clarify procedures for the payments, he said.
With that said, Winterer noted that federal administrators have said other states have used similar payout practices to make sure funds are distributed before they expire.
Also, he said, the payments in Nebraska were intended as reimbursements to recipients for utility payments already made, since they were sent late in the season.
And, just because checks were cashed at a particular store or location doesn't mean the money was spent there, he said, noting that some people do not have checking accounts.
Payments went to households, and if the person who received a check had died, the household may still have been eligible to receive the money. If names of dead recipients were forged on checks, that could be an offense that could be prosecuted, he said.
Winterer said there is no reason to believe federal program administrators would require a refund of the money or disallow any funds in the future.
Nevertheless, Foley said, taxpayers will be disappointed.
"Nebraska taxpayers are also federal taxpayers, and I think they will be greatly disappointed ... that the monies that are supposed to go into the social safety net are not spent properly."