Auditor Of Public Accounts
Luallen’s Office Reviews Millions of Welfare Records to Identify Potentially High-Risk Transactions

Press Release Date:  Wednesday, January 11, 2006  
Contact Information:  Jeff Derouen
Phone: (502) 573-0050
Fax: (502) 573-0067
Pager: (888) 222-5670

State Auditor Makes 11 Recommendations to Strengthen Control Procedures

In a letter to Cabinet for Health and Family Services (CHFS) Secretary Mark Birdwhistell, State Auditor Crit Luallen’s office released results of a sophisticated computer analysis that narrows the scope for further investigation into seven assistance programs within CHFS.  The expanded procedures, conducted by the Division of Special Examinations and Information Technology, reviewed over 5.7 million records from seven CHFS programs and uncovered approximately 20,000 records that warrant further investigation.  The State Auditor made 11 recommendations to strengthen CHFS control processes.

“The purpose of the review was to systematically analyze program records to identify potentially high-risk activity that can now be investigated by CHFS or the Attorney General’s Office.  Obviously, it is much more productive to focus attention on 20,000 potentially high-risk records than to randomly select from all 5.7 million.  It is important that all of state government work together to ensure that taxpayers’ dollars are spent correctly,” State Auditor Crit Luallen said.

The seven programs which where analyzed are Family Alternative Diversion, Kentucky Transitional Assistance Program, Special Circumstances Payments, System Tracking Employability Program, State Supplemental Program, Medical Assistance Programs, and Food Stamps.  The programs were scrutinized by applying up to nine different test procedures.  These tests included comparing payments to death certificates, payments to addresses outside Kentucky, multiple benefit payments to the same address, and identifying multiple questionable records involving the same participant or caseworker.

The results of the detailed analysis have been provided to investigators at CHFS and the Attorney General’s Office on a computer disk.  The disk contains the specific information necessary to follow up on each of the 20,000 records identified as high-risk.  The letter, however, makes it clear that the results do not identify incidents of inappropriate activity, only refer investigators to areas for further investigation.  The letter, signed by Division Director Brian Lykins, adds, “The Auditor’s Office is in no way asserting that the records identified resulting from these expanded audit procedures are instances of fraud or abuse.  The purpose of this work was to identify areas or specific transaction activity that could possibly be at risk for abuse and may warrant further investigation.”

This sophisticated analytical review was instigated in response to several media reports, which stated that over the last three years, 13 state welfare caseworkers defrauded the Commonwealth of over $500,000.  Questions were also raised among the various agencies concerning what investigative work had been completed or was ongoing.  At that time the Auditor’s Office decided to perform audit procedures to identify lax program controls and to report transactions that appear to potentially be at high-risk for abuse to CHFS and the Attorney General’s Office.

Among the 11 recommendations are that CHFS should dedicate an employee to perform this type of detailed analysis on a monthly basis to strengthen program procedures; CHFS should analyze the total population of program benefits to identify anomalies in case worker program activity; and CHFS and Attorney General’s investigators should use the results of this current data match to focus further investigation on those transactions at highest risk for waste, fraud, and abuse.