Since 1975, the HRA has been conducting computer matches of public assistance rolls with payroll records to identify city employees whose public assistance grants are not budgeted for employment income, and by May 1977, had disclosed approximately $3.2 million in fraudulent payments. Periodic monitoring of the criminal and disciplinary dispositions of fraud cases revealed that many offenders had not been properly identified or penalized. The bureau of corruption prevention and management review in the department of investigation examined these problems through interviews with personnel in the HRA and district attorney offices, observation of working procedures, analysis of 1977 case documents and dispositions, and a review of HRA procedures. Despite the large numbers of suspected offenders initially identified by computer matches, the Bureau concluded that the case followup process was ineffective. Because of the poor quality of preliminary reviews, only a fraction of the cases were correctly referred and investigated for fraud. Then, only a small percentage of those cases which were investigated were either prosecuted or disciplined. Investigations and prosecutions were delayed by incomplete files assembled by the preliminary review staff and failure to transmit these materials promptly to the investigative office. The collections Department reported that it was not collecting from recipients who had agreed to make restitution, largely because of inadequate staff. The report recommended corrective actions for each problem identified and commented that some improvements had been instituted by the city and HRA. The appendixes contain a memorandum from the mayor on public assistance fraud, a bibliography of relevant city and State reports, correspondence between the commissioner of investigation and city officials, and a proposed form for investigation reports of welfare fraud cases. (Author abstract modified)