by Timothy McQuiston Vermont Business Magazine The Vermont state auditor’s latest investigation was made public today on how much fraud plagued the Vermont Department for Children and Families. State Auditor Doug Hoffer reported that the DCF substantially investigated alleged beneficiary fraud on two of the programs, but not all, and improper payments were not effectively collected. Only 3SquaresVT disqualified fraudulent recipients for a period of time. The DCF budget in FY 2015 was $101.2 million (the fraud amount was $1.8 million on 1,036 improper payment claims over 40 months).The auditor also questioned how hard the DCF was trying to collect improper payments. For instance, DCF could work with the Tax Department to garnish income tax refunds.He also believes that if a recipient is cheating on 3SquaresVT, it’s reasonable to investigate whether that same person is cheating the fuel assistance or another program, but DCF did not take that initiative.The auditor can investigate and make recommendations, but he does not have enforcement authority. The report can be found HERE.(link is external)DCF Commissioner Ken Schatz said in a written response to the report, in part, that: “Overall, we agree with most of the findings and recommendations of the draft report, although we do not believe the title of the report (“Alleged Beneficiary Fraud Investigated, but Improper Payments Not Effectively Collected”) accurately reflects the reasonable efforts made to collect on improper payments and respectfully request it be changed. As you found in your audit, the scope of the improper payment is tiny when compared to the very sizeable amount of benefits issued by ESD programs and the integrity of the program administration is strong.”He goes on to say that some of the recommendations will be implemented as soon as possible. However, because of the cost of the technology involved and the time involved, “We need to be mindful of the cost benefit analysis of implementing changes within the availability of program resources.”Typically in an audit report, the department targeted defers to the auditor more so than is found in this case. Schatz not only pointed out the relatively small amount of money involved, but also stressed that DCF must focus on its ultimate mission.“Our programs serve Vermont’s most vulnerable citizens,” Schatz wrote, “and we need to make sure implementing any proposed recommendations does not inadvertently jeopardize their health and safety. The recent policy shifts in Vermont support this approach, such as the current implementation of significantly reduced traffic fines for indigent Vermonters to allow them to regain driving licensees to support them in becoming more financially self-sufficient as well as waiving the normal General Assistance rules to implement cold weather exception in the emergency housing program to ensure all homeless Vermonters have a safe, warm place to stay during very cold winter weather.”According to the report issued September 12, in fiscal year 2015, the Department for Children and Families’ (DCF) Economic Services Division (ESD) distributed millions of dollars in benefits to, or on behalf of, low and moderate income Vermonters.These programs provide help to families with children for their basic needs and services that support work and self-sufficiency (Reach Up program), food assistance (3SquaresVT program), home heating assistance (Seasonal Fuel Assistance program), and emergency assistance (General Assistance program).Because of the magnitude of these federal and state-funded programs, the auditor decided to conduct an audit of how DCF was addressing the risk of beneficiary eligibility fraud. Our objectives were to:(1) determine whether and how DCF’s ESD prevents and detects beneficiary eligibility fraud and(2) determine the extent to which claims are established, beneficiaries are disqualified, and improper payments are recovered for ESD programs.The audit found that ESD’s fraud unit prevented and detected beneficiary eligibility fraud by conducting investigations of potential fraudulent activity based on information contained in referrals from internal and external sources.The fraud unit documented its investigations, which generally met the unit’s internal standard for timely completion.However, ESD did not have assurance that all allegations of fraud were reviewed as they did not record and track to resolution all allegations made by the public. Without such tracking, ESD management cannot be certain that the allegations were handled properly.Between January 1, 2013 and April 21, 2016, ESD’s fraud unit determined that $1.8 million was owed by program beneficiaries resulting from 1,036 improper payment claims.However, all of the cases were in the 3SquaresVT and Reach Up programs with no claims having been established in the Seasonal Fuel Assistance or General Assistance programs.ESD’s fraud unit did not check whether overpayments in these programs also occurred when they substantiated client violations that resulted in overpayments in the 3SquaresVT and Reach Up programs. As a result, ESD may not be seeking repayment for all inappropriately obtained benefits.Moreover, if an individual is found to have intentionally misrepresented his/her income or household composition, the only program that disqualifies beneficiaries from receiving benefits for a period of time is the 3SquaresVT program.Except in very limited circumstances, beneficiaries in the other programs may continue receiving benefits if they continue to meet eligibility criteria, without consideration given to previous intentional misconduct.Lastly, ESD did not utilize all available methods to collect the improper payment claims. For example, ESD did not send bills to individuals that defaulted on their debt, with the exception of when a 3SquaresVT debt was sent to a federal offset program for interception of federal payments.Nor did ESD use the Vermont income tax refund offset program, which allows any State agency to send their debt to the Department of Taxes for offset against personal income tax refunds and homestead property tax income sensitivity adjustments. As a result, ESD is losing opportunities to recoup additional improper payments.“We made a variety of recommendations to DCF,” Hoffer wrote in the report, “including establishing a system to track all allegations and utilizing the State’s income tax refund offset program to collect defaulted debts.”Recommendations:1.Direct ESD to create a system to track allegations of fraud from inception to resolution and periodically review whether the allegations are being handled appropriately.2.Enable the public to submit an allegation of beneficiary fraud electronically.3.Direct the FACU to develop a mechanism to track the confirmations sent out regarding potential fraudulent activities identified via the Department of Labor wage data match and Public Assistance Recipient Information System data match and follow-up as necessary.4.Fix the ACCESS software problem that isresulting in too many matches with theVermont Department of Labor’s wage data.5.Direct ESD to regularly perform a computer data match between ACCESS and the Department of Corrections’ case management system to identify prisoners who may be receiving benefits.6.Direct the FACU to check whether changes in income or household composition detected during investigations would have affected whether or how much a client received in Seasonal Fuel Assistance or General Assistance benefits and seek recoupment of overpayments when found.7.Direct ESD to modify program rules to disqualify Reach Up clients for a period of time if they are found to have intentionally violated rules in the program in order to fraudulently obtain benefits.8.Direct ESD to modify program rules to disqualify Seasonal Fuel Assistance clients for a period of time if they are found to have intentionally violated rules in the program in order to fraudulently obtain benefits.9.Direct ESD to modify program rules to disqualify General Assistance clients for a period of time if they are found to have intentionally violated rules in the program in order to fraudulently obtain benefits.10.Direct the FACU to set a standard for a reasonable maximum repayment period in negotiating the monthly repayment amount for overpayment claims.11.Direct ESD to periodically bill clients who are in default in repaying overpayment claims.12.Direct ESD to use the State’s income tax refund offset program to collect ESD’s delinquent debt for overpayment claims.13.Direct ESD to review the duties of the FACU supervisor and reduce her capability to control or perform all key aspects of the investigation and claims process.Source: Vermont Auditor. 9.12.2016. In accordance with 32 V.S.A. §163, the auditor is also providing copies of this report to the commissioner of the Department of Finance and Management and the Department of Libraries. In addition, the report is also available at no charge on the state auditor’s website, http://auditor.vermont.gov/(link is external).