Low-Income Home Energy Assistance: Legislative Changes Could Result in Better Program Management

Published by the Government Accountability Office on 1990-09-07.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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                                                             LOW-INCOME HOME
                                                             ENERGY ASSISTANCE
                                                             Legislative Changes
                                                             Could Result in Better
                                                             Program Management
             Uuited States
GAO          General Accounting Off’ice
             Washington, D.C. 20648

             Human Resources Division


             September 7, 1990

             The Honorable Christopher J. Dodd
             Chairman, Subcommittee on Children, Family,
               Drugs, and Alcoholism
             Committee on Labor and Human Resources
             United States Senate

             The Honorable Dale Kildee
             Chairman, Subcommittee on
               Human Resources
             Committee on Education and Labor
             House of Representatives

             The Honorable Tom Harkin
             Chairman, Subcommittee on Labor, Health
               and Human Services, Education
               and Related Agencies
             Committee on Appropriations
             United States Senate

             Authorizing legislation for the Low-Income Home Energy Assistance
             Program (LIHEAP) block grant requires GAO to evaluate the use of LIHEAP
             funds by states at least every 3 years. During our ongoing review, we
             identified two issues concerning LIHEAP funding that suggest a need for
             possible congressional action to help the Department of Health and
             Human Services (HHS) and the states better manage this program. First,
             use of a forward funding’ arrangement would make LIHEAP funds avail-
             able in time to allow HHS to tell states exactly how much money they
             would receive before they open their winter heating programs. Second,
             providing for some discretionary funding flexibility would enable HHS to
             quickly respond to unanticipated increases in home heating costs due to
             severe weather or a sharp rise in fuel prices. We are reporting on these
             matters now, at your request, because the Senate reauthorization bill for
             UHEAP includes a forward funding proposal. Additional reports on
             UHEAP will be forthcoming in the near future.

             Under LIHEAP, states assist eligible households in meeting costs associ-
Background   ated with home heating and cooling needs. Heating assistance makes up

             ‘Forward funding is budget authority that is made available for obligation beginning in the last
             quarter of the fiscal year for financing grant programs during the next succeeding fiscal year.

             Page 1                                                       GAO/IiRMO-166      Funding   for LIHEAP

                   over 76 percent of program expenditures. States generally accept appli-
                   cations and make awards for this assistance from the early fall until

                   The federal government distributes funds to the 60 states, Indian tribes,
                   territories, and the District of Columbia. The states2 receive their funds
                   based on a statutory formula. Each state then tailors its own program to
                   meet the needs of its low-income households. HHS administers LIHEAP.
                   Within HHS, the Office of Energy Assistance, in the Family Support
                   Administration, is responsible for overseeing LIHEAP’S implementation

Scope and          and Ohio-for our statutorily mandated review. A principal focus of our
Methodology        overall review was state responses to federal funding cuts that occurred
                   between fiscal year 1986 and 1989. We interviewed officials from and
                   reviewed records of (1) the state agency responsible for administering
                   LIHEAP, (2) a local administering agency providing LIHEAP services to an
                   urban area, and (3) a local agency providing services to a rural area. We
                   conducted our review between November 1989 and April 1990 in accor-
                   dance with generally accepted government auditing standards. At your
                   request we did not obtain written agency comments on a draft of this
                   report. We did, however, discuss it with LIHEAP officials and considered
                   their views in the final report.

Results in Brief   programs because they normally receive LIHEAP funds after the heating
                   season has begun and after they have decided on the benefits they will
                   provide to eligible participants. In addition, HHS does not have sufficient
                   flexibility to respond to unanticipated energy cost increases that can
                   occur as the result of unusually severe weather conditions or fuel price
                   increases. HHS and the states could better manage this program if (1) it
                   were forward funded so the states would know exactly how much fed-
                   eral assistance they would receive before they begin accepting and
                   approving applications for heating assistance, and (2) HHS had some dis-
                   cretion in the manner in which funds are allocated to the states to
                   enable it to react to unanticipated energy-related circumstances.

                   ‘As used in the remainder of this report, “states” refers to the 60 states and the District of Columbia,
                   but excludes Indian tribes and territories.

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                       State heating programs generally begin before federal LIHEAP funding
Planning for Heating   allocations are known. At that time, states do not know how much fed-
Needs                  eral funding they will receive and consequently cannot efficiently plan
                       their programs.

                       States generally submit their annual LIHEAP plans to HHS in September or
                       October. These plans specify the benefits to be provided to eligible
                       households during the heating season, which for many states begins by
                       November. However, the federal appropriation for LIHEAP is usually not
                       passed by then. HHS tries to inform the states of their LIHEAP allocations
                       within 1 to 2 weeks after it receives appropriation data from the Office
                       of Management and Budget. This is, however, often weeks or months
                       after the state heating assistance programs have begun.

                       For the past 3 fiscal years, HHS has notified states of their LIHEAP allot-
                       ments in November or December. For example, in fiscal year 1989,
                       states were notified of their allotments on November 9, 1988. Thirty-
                       eight states had started their heating programs before that date.

                       One strategy used by the federal government to deal with such situa-
                       tions in other programs is forward funding, whereby budget authority is
                       made available to obligate funds in the last quarter of a fiscal year to
                       finance the next year’s activity. This strategy has been used in the
                       training and employment area to provide appropriations for a program
                       year that starts in one fiscal year and extends into the following year.
                       For example, under the Job Training Partnership Act, the program year
                       runs from July 1 to June 30. Appropriations made for any fiscal year
                       are used to fund the program beginning in July of that fiscal year and
                       extending to June of the following year.

                       Federal delays in providing allocation information, some state officials
                       said, resulted in fewer households being served and program funds
                       being carried over to the following year. For example, in anticipation of
                       fiscal year 1988 LIHFAP funding cuts, Georgia reduced the allocation of
                       funds to its local administering offices. When the state learned that it
                       would receive more federal funds than expected, it was too late to re-
                       allocate these funds. As a result, in fiscal year 1988, LIHEAP provided
                       fewer Georgia households with heating assistance and the state spent
                       less funds than it would have, had it known earlier the level of federal
                       funding it was to receive. The additional federal funds the state received
                       were carried over to the next fiscal year.

                       Page 3                                        GAO/HRIMO-166   Funding for LIHEAP

                        In fiscal year 1989, Georgia opened its winter heating program on Jan-
                        uary 3,1989, rather than the usual October l(l988) date. By waiting,
                        the state hoped it could tell its local administering agencies the exact
                        amount of funds they would receive so they could better plan their pro-
                        grams. In doing so, however, the state delayed in providing benefits to ’
                        eligible applicants.

                        The demand for LIHEAP assistance varies, depending in part on the
Responding to           severity of the weather. Demand, however, is not uniform throughout
Unanticipated Heating   the country. Weather conditions and fuel prices can and do vary by
Cost Increases      -   region and state. Consequently, the need for federal assistance will
                        vary. Three times in the past decade, the Congress has passed supple-
                        mental appropriations when funding ran short before winter ended.
                        Typically, however, these funds have arrived after the critical need for
                        them had passed. HHS would be in a position to react to unanticipated
                        circumstances and better manage the program if, in emergency situa-
                        tions, it had more discretion to allocate funds to the states, or had
                        authority to reprogram or borrow funds from other sources available
                        within the Department.

The 1984 Supplemental   The Congress passed a $200 million LIHEAP supplemental appropriation
                        on March 30,1984, in response to a colder-than-usual winter nation-
Appropriation           wide. These funds were distributed to all states on the basis of the pro-
                        gram’s statutory formula rather than just to those experiencing the
                        worst crisis. Ten states specifically informed HHS that these funds
                        arrived too late to be used that year and that they carried them over to
                        fiscal year 1986. Consequently, some of this funding was not used that
                        year; about 8 percent of fiscal year 1984 funds were carried over to
                        fiscal year 1986.

The 1990 Supplemental   On May 26, 1990, the President signed into law an emergency supple-
                        mental LIHEAP appropriation of $60 million for fiscal year 1990 (P.L.
Appropriation           101-302) in response to increased needs for heating assistance resulting
                        from the severe winter weather in December 1989, Nationwide, the
                        weather was 27 percent colder than normal for that month. The statute
                        directs that these supplemental funds remain available until October 3 1,
                        1990, and be distributed on the basis of the relative needs of states and
                        other eligible entities.

                        Page 4                                      GAO/IiRIMO-165   Funding for LUUWP
              HHS  directed the states to submit applications for assistance by June 29,
              1990, and advised them that, based on the legislative history, these
              funds must be spent for activities specifically related to the fiscal year
              1990 heating season. Funds not obligated by October 31,1990, must be
              returned to HHS. States did not, however, receive these additional funds
              until the last quarter of fiscal year 1990-months after the close of the
              heating season, when these funds were most needed.

              One state that experienced record cold temperatures in December 1989
              was New Hampshire. As of January 1990, the state had received 2,000
              more applications for LIHEAP assistance than during the same period in
              1989 (an 1 l-percent increase). The state, which uses mostly fuel oil for
              heating, attempted to cope with a rapid rise in heating oil prices and
              demand for assistance by eliminating its practice of using lines of credit
              to assure program participants that benefits would be provided. Instead,
              the state approved payments only after each fuel delivery, pending the
              availability of funds, Because of the severity of the winter and the
              increased demand for assistance, New Hampshire had insufficient funds
              to provide all the assistance requested.

              In this case, HHS might have been able to better react to the increased
              demand for assistance resulting from the severe December weather if it
              had some discretion on how to use some available funds or authority to
              borrow or reprogram other funds on an emergency basis.

              States generally do not know the amount of federal funding they will
Conclusions   receive before they open their annual heating programs. Therefore, they
              do not know how high they can set benefit payments without running
              the risk of running out of funds. In addition, unanticipated circum-
              stances, such as the extended severe cold period in December 1989,
              place HHS and the states in situations requiring flexibility. Various strat-
              egies could be used to provide HHS with such flexibility. For example,
              the Congress could (1) set aside a portion of the LIHEAP appropriation to
              be distributed at the discretion of the Secretary of HHS in response to
              unanticipated increases in home heating costs or (2) provide HHS with
              authority to reprogram or borrow funds available to it for other pur-
              poses, perhaps up to a predetermined dollar or percentage limit.

              Page 5                                       GA0/IiRD90.166   Funding for LIHEAP



                       To help HHS and the states better manage LIHEAP, the Congress should
Matters for            consider (1) forward funding the program, making funds available early
Consideration by the   enough in each year so HHS can notify states of the exact amount they
Congress       -       will receive before they open their heating programs and (23 giving HHS
                       some discretionary funding flexibility, as discussed above, to enable it to
                       quickly respond to unanticipated circumstances.

                       As arranged with your offices, unless you publicly announce its contents
                       earlier, we plan no further distribution of this report until 30 days from
                       its issue date. At that time, we will send copies to the Secretary of
                       Health and Human Services; the Director, Office of Management and
                       Budget; appropriate congressional committees; and other interested

                       This report was prepared under the direction of Linda G. Morra,
                       Director, Intergovernmental and Management Issues. Should you or
                       your staffs have any questions concerning this report, please call her on
                       (202) 275-1655. Other major contributors are listed in appendix I.

                       Lawrence H. Thompson
                       Assistant Comptroller General

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    Page 7   GAO/HRD-90-165   Funding for LIHEAP
Appendix I

Major Contributors to This Report

                      Carl R. Fenstermaker, Assistant Director, (202) 275-6169
Human Resources       Richard H. Horte, Assignment Manager
Division,             Joel R. Marus, Site Senior
Washington, D.C.

                      John M. Murphy, Jr., Regional Management Representative
Cincinnati Regional   Michael F. McGuire, Evaluator-in-Charge
Office                George J. Buerger, Site Senior

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