CV) JiULZIS993~ 93-16727 O (cid:127) United States General Accounting Office Washington, D.C. 20548 Human Resources Division B-239394 January 24, 1991 The Honorable Christopher J. Dodd Chairman, Subcommittee on Children, Family, Accesion For Drugs and Alcoholism NTIS CRA&I Committee on Labor and Human Resources DTIC TAB United States Senate JUunstainfincoa,u-t,in,ocne-d- The Honorable Dale Kildee J.................. Chairman, Subcommittee on By Human Resources Dist'r'ih-',' ..... .. . Committee on Education and Labor -tibto_ House of Representaives Availability Codes The Honorable Philip R. Sharp Dist Avail and/o-r Special Chairman, Subcommittee on Energy and Power Committee on Energy and Commerce House of Representatives The Low-Income Home Energy Assistance Act of 1981 requires us to evaluate the use of Low-Income Home Energy Assistance Program (LUIEAP) funds by the states at least every 3 years. This report provides information on how states responded to federal funding cuts in LnHEAP since 1986 and discusses states' compliance with key program requirements. These requirements include conducting outreach activities, targeting assistance, and establishing fiscal control procedures. We also obtained information on other types of energy assistance available in the states. We are sending copies of this report to other interested congressional committees, the Secretary of Health and Human Services (ims), and the Assistant Secretary for Family Support within uios. We also will make copies available to other interested parties on request. If you or your staff have any questions about this report, please call me on (202) 275-1655. Other major contributors are listed in appendix VI. Sincerely yours, Lida G. Morra ector, Human Services Policy and Management Issues Executive Summary Purpose The Low-Income Home Energy Assistance Program (LIHEAP) provides grants to states to assist eligible households in meeting the costs of home energy. Federal funding for LIHEAP decreased 31 percent between fiscal years 1986 and 1989, from $2.0 billion to $1.4 billion. Funding has remained at about $1.4 billion each for fiscal years 1990 and 1991. The Department of Health and Human Services (HHS) administers LIHEAP. Authorizing legislation for LIHEAP requires that GAO periodically examine states' uses of funds. The Chairman of the Subcommittee on Human Resources, House Committee on Education and Labor, asked GAO to focus this review on state efforts to respond to federal LIHEAP funding cuts between fiscal years 1986 and 1989, and state actions to comply with certain key program requirements. GAO also agreed to obtain infor- mation on other types of energy assistance available in the states. Background In response to rapidly rising home energy costs in the mid-1970's, the federal government began a series of one-time energy assistance pro- grams to aid low-income households. In 1981, the Congress enacted the Low-Income Home Energy Assistance Act of 1981, which established the LIHEAP block grant to make home-energy assistance available on a more continuous basis to low-income households. This program provides fed- eral financial assistance to eligible households to help them with heating, cooling, energy-related crises, and home weatherization needs. The Congress gave states flexibility in allocating funds among program components within certain constraints. For example, no more than 15 percent of LIHEAP funds could be used to weatherize homes and states could transfer up to 10 percent of LIHEAP funds to other block grants.' The act requires states to agree to meet certain conditions to receive fed- eral funds. States must (1) conduct outreach activities to assure that eli- gible households, especially those with elderly or handicapped individuals, are aware of help available under LIHEAP and any similar energy-related assistance; (2) target the highest benefits to eligible households with the lowest incomes and highest energy costs, taking into consideration family size; and (3) establish fiscal control procedures to assure proper disbursal of federal funds. For this report, GAO focused on the states' LIHEAP heating and crisis assistance program components because they accounted for at least 'The 1990 reauthorization of the act will modify these provisions beginning in fiscal year 1991, as discussed in ch. 1. Page 2 GAO/HRD-91-13 Cuts in Low-income Home Energy Assistance Executive Summary 85 percent of funds spent by states on the four program components in fiscal years 1986-89. GAO reviewed state and local program operations in Georgia, Idaho, New Hampshire, and Ohio. In addition, GAO surveyed by telephone state LIHEAP officials in all 50 states and the District of Columbia. It sought to determine what changes states made to their LIHEAP programs between 1986 and 1989, and the reasons for those changes. However, determining the overall impact of LIHEAP funding reductions on households' ability to meet their home energy costs was beyond the scope of this review. GAO conducted its work between November 1989 and April 1990 in accordance with generally accepted government auditing standards. Results in Brief Between fiscal year 1986 and 1989, the states offset about a quarter of the cuts in federal LIHEAP funding, mainly with oil overcharge funds resulting from legal settlements with major oil producers.2 However, most states also reduced energy assistance benefits, primarily because of the federal cuts. In addition, most states served fewer households, with 43 percent attributing the decrease to reasons other than federal funding cuts, such as improved economic conditions that reduced the need for assistance. States generally complied with key program requirements, by assuring IluS they were (1) conducting outreach activities, especially for the eld- erly and handicapped, and (2) targeting benefits to households most in need. Also, the four states GAO visited had incorporated fiscal controls to prevent erroneous payments. In nearly all states, there are other government and private sector pro- grams that provide home energy assistance to low-income households. Such assistance amounted to about $200 million in fiscal year 1989, state LIIIEAP officials estimated. Further, they said, in about one-third of the states these programs provided heating assistance to more house- holds in fiscal year 1989 than in fiscal year 1986. '-wh'&..TC tteiiie , laitci LitLt(cid:127) ) p1 k I iai t, tude oil producer%n ad charged in violation of oil price (ont rols. Page 3 GAO/HRD-91-13 Cuts in Low-Income Home Energy Assistance Executive Summary GAO's Analysis States Offset Some While in total, states offset over one-fourth of the $619 million reduc- LIHEAP Funding tion in their federal LIHEAP allotments between fiscal years 1986 and 1989, the extent varied considerably by state. For example, 8 states Reductions but Also Soffset more than one-half of their cuts and 12 offset none. Most of the Back Programs offset resulted from states' use of oil overcharge funds for the LIHEAP program. In addition, some states reduced the amount of LIHEAP funds transferred to other block grants. Direct state funding for LIHEAP, how- ever, decreased between fiscal years 1986 and 1989. (See p. 13.) To compensate partially for the loss of LIHEAP funds, 36 states reduced benefits for program participants. From 1986 to 1989, average annual heating Assistance benefit levels per household dropped 15 percent- from $213 to $182. In 30 of these states, LIHEAP officials cited decreased federal funding as the major reason for the reduction in benefits. (See p. 21.) Also, 41 states provided fewer households with LIHEAP heating assis- tance in fiscal year 1989 than in 1986. For all states, the number of households served decreased by 12 percent but varied significantly among the states. Not all states, however, attributed this to federal funding cuts. In over half of the states that served fewer households, state LIHEAP officials said the primary reason was federal funding cuts. In the remaining states, other reasons, such as improved economic con- ditions and fewer households applying, were cited for the reduction in the number of households served. (See p. 22.) Other Programs Available In most states, public utility companies or cooperatives created fuel to Help Meet Home Energy funds to help low-income households pay heating costs, GAO's national Needs telephone survey showed. Some states made available no-cost loans to people unable to pay their heating bills. Some also prohibited public util- ities from cutting off gas or electricity to low-income households during the winter. Finally, certain other federal programs, such as Aid to Fami- lies With Dependent Children, provide energy assistance to low-income households. (See p. 18.) Page 4 GAO/HRD-91-13 Cuts in Low-Income Home Energy Assistance Executive Summary State Actions to Comply The most common outreach techniques states used to make eligible With Program households aware of LIHEAP were television, radio or newspaper adver- tisements, visits to local community centers, posters displayed in public Requirements places, and utility bill inserts. In addition, 46 states targeted outreach efforts to the elderly and 29 targeted the handicapped. (See p. 27.) In determining LIHEAP benefit levels, all states considered income and energy costs, they told HHS. States used a variety of factors, such as climate zones and type of fuel and housing, to target benefits to the most needy households, as shown in a 1989 report by the National Center for Appropriate Technology. (See p. 28.) In addressing the requirement that states establish fiscal control proce- dures to assure proper disbursal of funds, the four states GAO visited had incorporated controls over payments to identify erroneous pay- ments. One state reported that since 1985 it had stopped erroneous pay- ments totaling about $3 million a year. (See p. 30.) Recommendations GAO is making no recommendations. Agency Comments GAO did not obtain written comments on this report but discussed its contents with HIms officials and addressed their concerns where appropriate. Page 5 GAO/HRD-91-13 Cuts in Low-Income Home Energy Assistance Contents Executive Summary 2 Chapter 1 8 Introduction Background 9 Objectives, Scope, and Methodology 10 Chapter 2 13 States Cushioned State Actions Cushioned Federal Funding Reductions 13 States Provided Other Energy Assistance 18 Federal Funding Cuts State LIHEAP Programs Scaled Back 21 but Also Scaled Back Benefits Chapter 3 27 State Actions to Outreach Requirements Observed 27 Comply With Key States Targeted Benefits as Required 28 States Visited Established Controls to Prevent Erroneous 30 Program Requirements Payments Appendixes Appendix I:S ummary of Responses to Key LIHEAP 32 Telephone Survey Questions Appendix II: Federal LIHEAP Allotments, by State 40 (FY 1986 and 1989) Appendix III: LIIIEAP Block Grant Funds Transferred to 42 Other HHS Block Grant Programs, by State (FY 1986-89) Appendix IV: Households Served With LIHEAP Heating 44 Assistance, by State (FY 1986-89) Appendix V: Households Served With LIHEAP Winter or 46 Year-Round Crisis Assistance, by State (FY 1986-89) Appendix VI: Major Contributors to This Report 48 Related GAO Products 52 Table Table 2.1: Estimated State Funding for LIHEAP 18 (FY 1986-89) Figures Figure 11.: Federal Funding for LItIEAP (FY 1982-91) 10 Page 6 GAO/HRD-91-13 Cuts in Low-Income Home Energy Aseistance Contents Figure 2.1: How States Made Up the Cuts in Federal 14 LIHEAP Funding Between FY 1986 and FY 1989 Figure 2.2: Use of Oil Overcharge Funds by States for 15 LIHEAP (FY 1986-89) Figure 2.3: State Transfers of LIHEAP Funds to Other 17 Block Grants (FY 1986-89) Figure 2.4: Primary Reasons Cited by States for Reduced 21 Benefits in FY 1989 Compared With FY 1986 Figure 2.5: Number of Households Given LIHEAP Heating 23 Assistance in FY 1989 Compared With FY 1986 Figure 2.6: Primary Reasons Cited by States for Fewer 24 Households Served in FY 1989 Than in FY 1986 Figure 2.7: Households With Elderly or Handicapped 25 Individuals in Heating and Crisis Assistance Programs (FY 1986-89) Figure 3.1: Types of Outreach Activities Used by States 28 Figure 3.2: Outreach Activity Cited by States as Most 29 Effective Abbreviations AFDC Aid to Families with Dependent Children GAO General Accounting Office [ifs Department of Health and Human Services LIHEAIP Low-Income Home Energy Assistance Program NCAT National Center for Appropriate Technology PIP Percentage-of-Income Payment Page 7 GAO/HRD-91.13 Cuts In Low-Income Home Energy Assistance Chapter 1 Introduction The Low-Income Home Energy Assistance Act of 1981 established the Low-Income Home Energy Assistance Program (LIHEAP) block grant. Under the act, the federal government distributes funds to the 50 states, Indian tribes and tribal organizations, territories, and the District of Columbia according to a statutory formula. States then tailor their own assistance programs to meet the needs of low-income households., The Department of Health and Human Services (HHs) administers LIHEAP. Within HIIS, the Office of Energy Assistance in the Family Support Administration oversees LIHEAP'S implementation nationwide. The program's purpose is to help eligible households meet home energy costs. States can assist low-income households through four program components focused on home heating, cooling, crisis assistance,2 and home weatherization. While states have flexibility in allocating funds among various activities within their LIHEAP programs, the 1981 act established certain require- ments (although the 1990 reauthorization of the act made some modifi- cations to these). For example, no more than 15 percent of LIlIEAP funds could be used for weatherization. States also could transfer up to 10 per- cent of their funds to certain other block grants to be used for those programs' purposes. Further, states could carry over up to 15 percent of their allotments to the succeeding fiscal year.t' To receive funds, states must agree to comply with several conditions. For example, they must target the highest benefits to eligible houscholds with the lowest incomes and highest energy costs, taking into considera- tion family size. Also, they must conduct outreach activities to assure that eligible households, especially those with elderly and handicapped individuals, are aware of help available under LIHEAP and any similar energy-related assistance. Further, states must establish fiscal control procedures for proper disbursement of federal funds. 'As used in the remainder of this report, "states" refers to the 50 states and the District of Co(4mbia but excludes Indian tribes and tribal organizations, and the territories. 2Crisis assistance provides benefits to help meet emergency needs such as preventing service from being shut off. :'Beginning in fiscal year 1991, states can, under certain conditions. use up to 25 percent for weather- ization and can carry over no more than 10 percent of their funds. Beginning in fiscal year 1994. transfers will no longer be allowed Page 8 GAO/HRD-91-13 Cuts in Low-Income Home Energy Assistance Chapter 1 Introduction Background Over time, the federal government's objectives in helping low-income households meet their energy needs have changed. In the mid-1970s. federal energy assistance for the poor consisted of a series of one-time crisis assistance programs and help in meeting rapidly rising energy costs. It since has evolved into a continuing program of general assis- tance for a variety of home energy needs. In providing this help, the federal approach also changed over time from a program administered by the federal government through the states to a state-run block grant. In addition to LIIIEAP, most states have in place a number of other pro- grams to help low-income households meet their energy needs. For example, some states provide no-cost loans, prohibit public utilities from cutting off poor customers during the winter, and encourage utility- sponsored fuel funds. Customers can contribute to these funds to help pay the costs of low-income households. Federal funding for LIIIEAP, the main federal source of energy assistance to the poor, amounted to about $1.4 billion for fiscal year 1989. Each fiscal year between 1982 and 1985, it had increased (see fig. 1.1). For fiscal year 1986, the Congress appropriated the same level of funding as the prior year. However, a 4 3 percent Gramm-Rudman sequester in Jan- uary 1986 reduced the appropriation made for that year. For the next 3 years, the Congress enacted continually lower appropriations for LIIIEAP. Funding for fiscal years 1990 and 1991 was slightly higher than for 1989. S',e lAow-Income home Energy Assistance: A Program Overview (GAOIIID-9I-1 IMt, CkOtV. IM9) Swct, 2, for more detail on the program's history. Page 9 GAO/HRD-91-13 Cuts in Low-Income Home Energy Assistance