Budget Secretary Defends Rendell Administration’s Stimulus Accountability

By THE OFFICE OF GOV. ED RENDELL

HARRISBURG – Governor Edward G. Rendell’s office today released Budget Secretary Mary A. Soderberg’s April 22 letter to the United States Government Accountability Office. Soderberg wrote in response to a letter from the Pennsylvania Auditor General. The text of the letter follows:

April 22, 2009

Phillip R. Herr
Director, Physical Infrastructure Issues
United States Government Accountability Office
441 G Street, N.W.
Washington, D.C. 20548

Dear Director Herr:

I would like to respond directly to some of the points that Pennsylvania Auditor General Jack Wagner made in an April 8, 2009, letter to you about Pennsylvania’s ability to monitor federal stimulus funds.

Mr. Wagner has made some serious allegations about previous commonwealth spending of federal funds that are unsupported by the facts. Let me address each of these allegations in turn.

The 2006-07 Single Audit Report. The Auditor General, and independent auditors at Ernst & Young, attested to the soundness of commonwealth accounting practices when they signed the state’s Comprehensive Annual Financial Report and Single Audit Report last year. If the “scope limitation” related to these documents was as serious as the Auditor General asserts, Generally Accepted Auditing Standards would have compelled his office, and our independent auditor, to qualify the audit opinion with respect to the commonwealth’s basic financial statements. That did not happen. In addition, it should be noted that the commonwealth’s basic financial statements have never received anything but a “clean” (unqualified) audit opinion.

The “internal control weaknesses” in the Single Audit Report do not indicate that any fraud exists. They indicate only that there exists the potential for a problem to develop. In addition, all of these “weaknesses” have either been addressed or will be addressed this year, in accordance with the corrective action plan in the Single Audit Report. In his letter to you, the Auditor General neglected to note that this corrective action plan exists. Finally, these “weaknesses” are not uncommon in other states; they are characteristic of the kind of issues that large, complex government entities routinely face and address.

With respect to our procurement process, fair competition and rigorous analysis are at the heart of the commonwealth’s procurement practices. After the issuance of the 2006-07 Single Audit Report and the passage of the commonwealth’s new right-to-know law, documentation that the Auditor General most recently requested about competitively bid contracts for goods and services was provided to him.

Audits of Medicaid Eligibility Determinations. The Pennsylvania Department of Public Welfare provides health care for approximately two million people. In his audits of the Pennsylvania Medical Assistance program, the Auditor General drew his conclusions based on incorrect assumptions. The Auditor General reviewed 1,600 cases over a three-year period, or 533 cases a year. This represents less than 0.05 percent of the average caseload – fewer than five out of 10,000 cases.

The Department of Public Welfare is in the process of reviewing all 1,600 cases that the Auditor General flagged. The department’s review, which is complete for 1,200 of these cases, thus far has found that the Auditor General’s office had incorrectly flagged more than 400 cases as problematic. State workers go through many months of training to learn all the federal and state requirements of the Medical Assistance program. For that reason, it is not surprising that the Auditor General and his team would make errors in their review. Each error by his office had a compounding impact on distorting his overall findings because of the small sample size.

Moreover, Pennsylvania since 2003 has received accolades and financial awards from the United Stated Department of Health and Human Services for accuracy and high performance in numerous public-benefit systems. For instance, over the last six years the federal government made $13.3 million in cash awards to the commonwealth for the accuracy of the Food Stamp records and enrollment systems. More than $9 million was awarded in incentive bonuses for effectively managing our Medicaid programs. In the last four years alone, more than $100 million was awarded in Child Support Incentive payments to the commonwealth for effective management of this critical federal program.

LIHEAP. To restate the point made earlier, potential fraud does not equal actual fraud. The Auditor General released a special audit conducted in 2006 of the administration of the LIHEAP program that identified more than 250,000 cases of potential fraud. When the Department of Public Welfare did a thorough review of each of the cases, however, it determined that 99.96 percent of the applications that the Auditor General flagged as potential fraud (and totaling $57.8 million) had been paid correctly. More than two years later, only 21 cases out of the 250,000 cases of potential fraud were forwarded to the District Attorney for possible prosecution for actual fraud.

Weatherization Assistance Program. In June 2008, the Secretary of the Department of Community and Economic Development sent a detailed letter to the Auditor General describing the significant improvements made in administrative controls and oversight of the weatherization program since the audit covering July 2001 to June 2006. These improvements vastly reduce the potential for abuse in the use of funds while assuring that all eligible clients receive the benefits to which they are entitled.

One of the hallmarks of Governor Rendell’s administration has been transparency and openness in government operations. Governor Rendell has created a special accountability function to focus on federal stimulus spending and make sure that outcomes are clearly communicated. He has also set up a bipartisan, 14-member Stimulus Oversight Commission that includes representation from the Pennsylvania General Assembly and the Pennsylvania Congressional delegation. The commission will provide an additional level of monitoring, advising and communicating how federal stimulus funds are spent in Pennsylvania. The Governor appointed Ronald Naples to the position of chief accountability officer for Pennsylvania’s share of the American Recovery and Reinvestment Act funds. Mr. Naples, a lifelong Republican, also chairs the Stimulus Oversight Commission.

Mr. Naples comes with a wealth of experience in oversight and accountability. He served for nearly three decades as the CEO of two successful and respected companies. He also has a strong record of government service, including serving as executive director of a Presidential Task Force on energy problems and spending a year as a White House Fellow. The Governor has charged Mr. Naples with tracking how the stimulus funds are used to revive Pennsylvania’s economy and put Pennsylvanians back to work. Mr. Naples will also lead the administration’s effort to ensure that the public is informed and aware of how the stimulus funds are being spent.

The end result of the Governor’s accountability commitment is to create a window on stimulus spending that will show our citizens not only what we are doing with the stimulus spending, but also what the stimulus spending has achieved – in terms most relevant to citizens’ daily lives.

The administration of Governor Rendell understands well both the gravity of the economic crisis and the seriousness of the mission to wisely invest the federal recovery funds to restore the economy to vitality. Pennsylvania is honored to be one of just 16 states selected to help the federal government develop and refine state reporting practices for federal recovery funds. As we focus on investing federal recovery funds to create jobs and stabilize the commonwealth’s economy, it is our highest priority to provide our citizens with a comprehensive and direct view of how these funds are being spent on their behalf. The trust placed in us by the federal government, and by the people of Pennsylvania, demands that we do nothing less.

Sincerely,
Mary A. Soderberg, Secretary of the Budget

cc: Auditor General Jack Wagner
Ronald Naples, Chief Accountability Officer
Greg Fajt, Chief of Staff, Governor’s Office
Jim Creedon, Chief Implementation Officer and Secretary, Department of General Services

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April 23, 2009 at 10:05 am

--pa2010.com Staff