Residents of Maryland and Virginia snagged thousands of federal dollars carved out for low-income families by fooling a federal energy assistance program, according to a Government Accountability Office report.

The report from the GAO, Congress' investigative arm, analyzed the federal Low Income Home Energy Assistance Program, which provides $5 billion in heating and cooling cost relief to poor families, and found cases of fraud and lax oversight in each of the eight states studied.

The report found Maryland's Department of Human Resources made multiple payments totaling $1,400 to a family that submitted more than one application and gave $3,600 in benefits to a resident living in a nursing home. The agency funneled federal funds to a couple living in a million-dollar home in Potomac.

Ralph Markus, director of Maryland's home energy programs, said the Potomac couple's income was low enough to qualify for Social Security -- and the program's qualifications are based on income rather than assets. Out of a pool of 144,000 Maryland applications, the GAO reviewed 46 and found problems with nine, he noted.

An applicant convicted of fraud in 1999 and 2003 claimed residences in both Maryland and Virginia and wrangled $1,100 in benefits from the two states, according to the GAO.

Another Virginia applicant used the identity of an inmate who had been incarcerated for more than 15 years to obtain federal money. The application did not contain any proof of identity, such as a Social Security or driver's license number.

But the breaches are not considered fraud in either state, because the stateagencies are not required to verify addresses with the Social Security Administration, check records of death or imprisonment or verify reported income from an outside source. The agencies' only requirement at the time of the study was to weed out duplicate applications -- which still failed in Maryland -- according to the report.

The U.S. Department of Health and Human Services -- which is in charge of the energy assistance program -- is requiring all states to address the concerns raised by the GAO in a report due in September.

Fooling the feds Findings across eight states from June 2009 to June 2010:

»  $4.9 million fraudulently awarded to applicants lacking proper qualifications

»  11,000 grant beneficiaries using the identities of dead people

»  725 grant beneficiaries using identities of prison inmates