oversight

Harris County, Supportive Housing Grant � TX21B971306, Houston, Texas

Published by the Department of Housing and Urban Development, Office of Inspector General on 2001-04-27.

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

                                                        U.S. Department of Housing and Urban Development
                                                        Southwest District Office of Inspector General
                                                        819 Taylor Street, Suite 13A09
                                                        Fritz G. Lanham Federal Building
                                                        Fort Worth, Texas 76102
                                                        (817)978-9309 FAX (817)978-9316
                                                        http://www.hud.gov/oig/oigindex.html



April 27, 2001                                          2001-FW-1805


MEMORANDUM FOR:                  Katie Worsham
                                 Director
                                 Office of Community Planning and Development, 6AD

                 /Signed/
FROM:            D. Michael Beard
                 District Inspector General for Audit, 6AGA

SUBJECT:         Harris County
                 Supportive Housing Grant – TX21B971306
                 Houston, Texas


As part of a nationwide audit of HUD’s Continuum of Care Program, we audited the 1997 Supportive
Housing Grant awarded to Harris County (County). The County implemented its grant activities
through its subgrantee, the University of Texas – Houston Recovery Campus (Campus). Our
objectives were to determine whether the County: (1) maintained adequate management controls; (2)
implemented its grant in accordance with its application; (3) expended funds for eligible activities under
federal regulations and applicable cost principles; (4) maintained evidence of measurable results; (5)
leveraged HUD funds adequately; (6) expended funds timely; (7) expended funds for leasing in
compliance with federal regulations; (8) met the federal requirements for supportive service costs; and
(9) met the federal requirements for operating costs.

To accomplish our objectives, we reviewed applicable criteria, including Office of Management and
Budget Circular A-122, “Cost Principles for Non-Profit Organizations” (Circular A-122); interviewed
HUD, County and Campus officials; reviewed Campus policies and procedures guides; reviewed the
grant application, grant agreement, technical submission, and annual progress reports; analyzed financial
and participant records; and visited the transitional housing location.

Our audit concluded the County’s activities were eligible and consistent with its application. The
County adequately leveraged HUD funds and met the federal requirements for supportive services and
operating costs. However, the County’s subgrantee, the Campus, could not support information
contained in its annual progress report. For example, the Campus reported a 79 percent successful
graduation rate even though its files indicated a 26 percent rate. Further, the Campus did not capture
necessary housing data. We also found that the Campus did not provide its participants with decent,
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safe, and sanitary housing. Additionally, the Campus charged HUD unreasonable rents. A HUD
contractor expressed concerns about rent reasonableness and the County responded with unrealistic
comparable units. The Campus also charged participants a flat rental rate of $85 per month without
regard to the participant’s monthly income. Further, the County did not drawdown its funds timely due
to reconciliation and documentation problems.

We recommend that HUD require the County to only count as successful graduates those participants
that complete the Program; require the County to ensure that the Campus capture required data when
participants leave the Program, and in follow-up contact with previous participants; require the County
to bring the units into compliance with its habitability standards; determine rents that are reasonable and
adjust its lease payments accordingly; require the County to monitor the Campus to ensure proper
administration of its Program; require the County to follow rent income guidelines for participant rent
payments; and require the County to timely reimburse the Campus for eligible expenditures. HUD
should also deobligate any grant funds not expended as of September 30, 2001.

We sent a draft of this audit memorandum to Harris County on April 13, 2001. The County provided
oral comments on April 20, 2001, and written comments on April 25, 2001. The County believed that
it did provide some monitoring of the Campus; however, “a comprehensive monitoring procedure
should have been utilized….” In its response, the County cites new monitoring guidelines and is
requesting the Campus to provide additional information regarding rent reasonableness. We considered
its comments in preparing our final report.

Within 60 days please give us, for each recommendation made in this memorandum report a status
report on: (1) corrective action taken; (2) proposed corrective action and date to be completed; or (3)
why action is considered unnecessary. Also, please furnish us copies of any correspondence or
directive issued because of this review.

If you have any questions, please contact William W. Nixon, Assistant District Inspector General for
Audit, at 817-978-9309.

Attachment
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Background.

Title IV of the Stewart B. McKinney Homeless Assistance Act authorized the Supportive Housing
Program. HUD designed the program to promote the development of supportive housing and services,
including innovative approaches to assist homeless persons in the transition from homelessness, and to
promote the provision of supportive housing to homeless persons to enable them to live as
independently as possible. Eligible activities include:

      •   Transitional housing;
      •   Permanent housing for homeless persons with disabilities;
      •   Innovative housing that meets the immediate and long-term needs of homeless persons;
      •   Supportive services for homeless persons not provided in conjunction with supportive housing;
          and
      •   Administration of the grants.

On September 9, 1998, HUD entered into a grant agreement with Harris County (County) to provide
transitional housing for women.1 Under the 3-year grant, HUD would provide the County $1,096,530.
The County subcontracted with the University of Texas – Houston Recovery Campus (Campus) to
administer its Program.2 The Campus created the Women’s Discover Program to implement this grant.3
The primary focus of the Program was to assist chemically dependent adult females to achieve
independent and productive living. Under the grant, the Campus would provide 10 transitional housing
units4 to accommodate 205 women exiting residential drug and/or alcohol treatment or residence in an
emergency shelter. Further, the Campus agreed to provide up to 6 months of aftercare services and a
total of 2 years of case management.

The County’s Community Development Department, located at 8410 Lantern Point in Houston, Texas,
was responsible for the grant’s administration and oversight of Campus activities. The Campus’ housing
units, located at 5600 Lavender in the Fifth Ward section of Houston, Texas, fell under the umbrella
system of the Campus located at 4514 Lyons in Houston, Texas.

In November 1999, HUD contracted with ABT Associates Inc. (ABT) to provide on-site assessment
of the operations and technical assistance needs of its homeless assistance projects. As part of this
review, ABT visited the Campus on April 18 and 19, 2000. In its review, ABT touted the Campus’
success in accomplishing six of its seven performance goals. For example, ABT reported that 79
percent of the participants successfully completed the Program and secured permanent housing in less
than 6 months. It also reported that 95 percent of Program graduates remained in permanent housing
for at least 1 year after graduation. However, ABT based its conclusions on data from the Campus’

1
    Grant number TX21B971306.
2
    Originally funded by the U.S. Department of Health and Human Services in 1992, the Campus, since 1995, operated
    under the University of Texas Health Science Center at Houston (UT).
3
    The Campus modeled the program after its Men’s Discover Program funded by another HUD grant.
4
    Each unit contained two bedrooms.
5
    60 women per year.
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annual progress report and staff interviews. ABT did not substantiate the veracity of the annual
progress report or interviews by alternative means. ABT identified weaknesses in participant rent
charges, fair market rents, and lack of documentation for discharge plans and follow-up. Yet, ABT
only recommended technical assistance in the area of determining appropriate rents and rent
contributions. Therefore, ABT’s assessment that the Program exceeded its performance goals differs
from our audit findings.

Audit Objectives, Scope, and Methodology.

Our audit objectives were to determine whether the County: (1) maintained adequate management
controls; (2) implemented its grant in accordance with its application; (3) expended funds for eligible
activities under federal regulations and applicable cost principles; (4) maintained evidence of measurable
results; (5) leveraged HUD funds adequately; (6) expended funds timely; (7) expended funds for leasing
in compliance with federal regulations; (8) met the federal requirements for supportive service costs; and
(9) met the federal requirements for operating costs.

To accomplish our objectives, we:

      •   Reviewed applicable criteria including OMB Circulars, HUD regulations, grant agreement and
          application;
      •   Interviewed HUD, County, and Campus officials;
      •   Reviewed the Campus’ policies and procedures guides;
      •   Compared Annual Progress Reports to supporting documentation;
      •   Analyzed financial and all 47 participant records; and
      •   Visited the units to determine if they met habitability standards.

The audit generally covered the period October 1998 through May 2000. We performed our
fieldwork between May 19, 2000, and August 31, 2000, with additional audit work in March 2001.
Throughout the audit we obtained computer-generated data from HUD, the County, and the Campus.
However, we did not perform any tests on the validity or reliability of such data except as noted in the
finding. We conducted our audit in accordance with generally accepted government auditing standards.

The Campus could not support the information in its annual progress report.

Through its annual progress report, the Campus provided HUD with unsupported and incorrect
information on its program results. HUD awarded the supportive housing grant in part based on the
Campus’ stated ability to provide measurable results. HUD required annual progress reports detailing
the Campus’ progress in achieving its performance measures. As subrecipient, the Campus prepared
the grant application and the annual progress reports. The Campus listed the following as its
performance measures6 for the residential stability objective:


6
    Contained in its grant application.
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•     50 percent of program participants will successfully graduate from transitional housing.7
•     50 percent of program graduates will remain in permanent housing for at least 1 year after leaving
      transitional housing and drug treatment.

In its first annual progress report,8 the Campus reported the following progress:

•     79 percent of program participants successfully graduated from transitional housing.
•     95 percent of program graduates remained in permanent housing for at least 1 year after leaving
      transitional housing and drug treatment.

The Campus inflated and could not support its reported progress for residential stability. Review of
participant files confirmed only 26 percent of program participants completed the Program and
successfully graduated from transitional housing. Further, the Campus did not adequately track program
graduates; therefore, the Campus could not reliably report on the percentage of graduates that remained
in permanent housing after leaving the Program.

Only 26 percent of participants successfully graduated.

Contrary to the 79 percent graduation rate, the Campus’ files indicated only 26 percent or 12 of the 47
participants successfully graduated the Program. A Campus official explained the Campus considered a
participant successful as long as she did not test positive for drugs. However, according to the case file,
a participant stated she had relapsed and a caseworker believed another had relapsed, but the Campus
still categorized them as successfully graduating the Program.

According to the files, the Campus discharged 74 percent (35 of 47) of participants in its first year of
operation for reasons such as relapses, failure to comply with program rules, absent without leave,
family reasons, and self-discharge. These 35 participants did not complete the Program, nor did they
achieve the goals and objectives set for them. Yet, the Campus considered 25 of these participants to
be successful graduates. Clearly, the Campus is using flawed criteria in categorizing successful
participants. The County must establish clear criteria for classification as a successful graduate.
Campus officials must consistently use the established criteria for reports to the County and HUD. The
County should properly monitor the Campus to ensure it only counts as successful graduates those
participants that complete the Program.

The Campus did not capture necessary housing data.

Campus officials did not capture housing-related data for its participants. The Campus’ second goal
under the residential stability objective was for 50 percent of the graduates to remain in permanent
housing for at least 1 year after leaving the Program. The Campus used “Discharge Follow-Up Forms”
7
    The grant application did not specifically define the term “graduate from transitional housing.” From reading the
    application, it appeared that “graduate from transitional housing” meant leaving trasitional housing for permanent
    housing.
8
    Covered the period October 1, 1998, through September 30, 1999.
                                                                                                                        6


to document the participant’s discharge location and 30-day, 60-day, 90-day, 6-month, and 1-year
progress. However, the information captured on the forms mostly pertained to drug rehabilitation
issues.

As the following table illustrates, the Campus’ records did not support the Campus’ claim that 95
percent of its participants went on to permanent housing:

Annual Progress Report                 Review of Discharge Forms 9 in Participant Files Found10
                                         Discharge Location               Follow-up Notes

95 percent of participants           32 no discharge location                31 had no housing information
remained in permanent                 5 own place11                           7 went to other programs
housing for 1 year after              5 relatives                             3 moved in with relatives
leaving its Program.                  2 another program                       2 went to jail
                                      1 jail                                  1 moved for work
                                                                              1 was seen at a house
                                     45 Total                                45 Total

Campus officials did not consistently capture discharge information, nor did they inquire about housing
issues in follow-up contact with previous participants.

In addition, the participants were not out of the program for a full year when the Campus submitted its
annual progress report. The Campus attempted to submit reports that reflected expected outcomes.
To its credit, HUD rejected the reports.

Without consistency, the Campus had no baseline or follow-up information to reliably track and report
what percentages of the participants were in permanent housing after leaving its Program. The Campus
must ensure that its employees capture required data when participants leave the program and in follow-
up contact with previous participants.

The Campus’ primary focus was drug rehabilitation, with limited focus on homelessness issues. The
reviewed participant files mostly made reference to the participants becoming clean and sober. In
effect, the Campus ignored the independent living aspect of its Program. While addressing the social
service portion of the Program had relevance, it was not the sole objective of the Program. The
Campus should have made helping its participants transition from homelessness a higher priority.




9
     Two participants did not have discharge forms in their files.
10
     Staff did not use systems the Campus had in place to capture relevant tracking data (i.e., discharge location or
     follow up).
11
     Only three forms had physical addresses.
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The Campus did not provide its participants with decent, safe, and sanitary housing.

Three dwelling units inspected failed to meet safe, decent, and sanitary standards.12 The Campus
subjected its participants to housing with broken smoke detectors, heaters, and toilets; electrical
hazards; holes and cracks in walls; broken door and window locks; and other problems. HUD
required the Campus to meet certain habitability standards for resident safety. The following table and
pictures show why Campus units failed to meet the minimum standards set by HUD:

     Habitability Standards 13                 Basic Requirements                              Findings
                                                                                  Houses supported by concrete
                                                                                  blocks; cracked, peeling,
Structure and materials                Structurally sound units.
                                                                                  deteriorated paint; severely
                                                                                  chipped tile.
                                       Accessible with alternate means of         Difficult access to ramps; no
Access
                                       egress.                                    railing on outside stairs.
                                       Adequate space and security for            Inoperable windows; window
Space and Security
                                       themselves and belongings.                 locks; doors.
                                       Access to sufficient sanitary              Broken toilets; inadequate hot
Sanitary facilities                    facilities in proper operating             water; missing waterspout and
                                       condition.                                 handle; smelly water.
                                       Adequate heating and/or cooling            Broken or missing heaters;
Thermal environment                    facilities in proper operating             residents used space heaters.
                                       condition.
                                       Sufficient electrical sources while        Electrical hazards above sinks;
Illumination and electricity
                                       assuring safety from fire.                 outlets painted shut.
                                       At least one smoke detector in             Inoperable or missing smoke
Fire safety
                                       proper working condition.                  detectors.




12
     The Campus had ten dwelling units.
13
     Not all standards are presented here. One failed item means the unit failed the minimum housing quality standards.
                                                                          8




Figure 1: Unit 5704 – Chipped kitchen counter presented a safety hazard
                                                                                    9




Figure 2: Unit 5712 - Missing handle and spout not sanitary




Figure 3: Outside Units - Cracked, peeling, deteriorated paint not decent or safe
                                                                                                      10




Figure 4: Unit 5712 - Missing smoke detector caused safety hazard




Figure 5: Office - Rocks and boards hindered access to handicapped ramps

The outside grounds also had severe problems including large holes in the concrete sidewalks and
driveway. There were two visits to the Campus site. On the second visit, it appeared repairs to the
                                                                                                        11


grounds were being made. However, a mound of sand blocked access to one of the entrances in the
U-shaped drive creating a potential hazard. Further, pavements and walkways were uneven and made
usable with haphazardly placed wooden boards.

The overall condition of the units and grounds was substandard. The Campus subjected residents to
unacceptable and hazardous living conditions. HUD should require the County and the Campus to
bring the units into compliance with its minimum habitability standards.

The Campus charged HUD unreasonable rents.

The Campus charged HUD unreasonable rents for its units. HUD stipulated in its grant agreement with
the County that rents paid must be reasonable in relation to rents being charged for comparable units.
HUD required the County to take into account the location, size, type, quality, amenities, facilities, and
management services. Rents for comparable units in relative proximity to the Campus units were
significantly lower than the rents paid by HUD for the Campus units.




Figure 6: The Campus’ lease agreement was for $82,224 per year.


ABT expressed concern about fair market rents and rent comparables.

In April 2000, ABT visited the Campus and reported to the County its concern that the Campus had no
documentation available regarding fair market rents and rent comparisons in the neighborhood. On
May 19, 2000, the County requested a rent reasonableness report from its Community Programs
Department.
                                                                                                           12


The County responded with unrealistic comparables.

In its response, the County did not use equivalent comparables. On June 29, 2000, the County
completed its comparables. Houses used by the County were not comparable when taking into account
location, type, and quality. For example, County officials used two single-family houses as
comparables. One house was brick while the other had a fenced-in yard. Both houses had decks. The
Campus had wood-framed dilapidated houses on cinder blocks, all situated in a U-shaped design.
Additionally, the houses the County used as comparables were 2.5 and 1.8 miles away from the
Campus units and rented for $500 and $480.




Figure 7: The County used this unit as a comparable for the Campus units to address rent reasonableness. When
taking into account location, type and quality, this house was not comparable.


The County did not need to go far to determine the reasonableness of rents for the Campus units.
Apartment complexes directly across the street and one street over had similar U-shaped designs.
Actually, both brick complexes appeared to be in much better shape than the Campus complex, with
one complex offering amenities such as central air and heat. In July 2000, two-bedroom, one-bath units
listed for $475 and $350 per month, respectively.
                                                                                                        13




Figure 8: These units located directly across the street from the Campus units were $475 per   month.
The brick units offered amenities such as central air and heat.


The comparables completed by the County as well as the units closer in proximity all charged lower
rents than the rent the Campus charged HUD for its units. A Campus official presented as rent
reasonableness documentation, a rent scale from the Harris County Homeless Coalition’s Consolidated
Plan. However, the Campus did not take into consideration the condition of the units it rented nor rents
charged in the area for comparable space. Due to the County’s inability to provide adequate
comparables to support the reasonableness of rent, HUD should determine the reasonableness of the
rents. Further, the County should reimburse the grant for any excess rent.

The Campus did not enforce its admissions criteria.

The Campus did not enforce its admissions criteria. For example, the Campus stated in its application
that as a part of its admission criteria it would require residents to pay 10 percent of their monthly
income toward rent. The Campus instead charged all participants a flat rental rate of $85 per month
irrespective of the participant’s monthly income. Further, the Campus also stated that as a condition of
admission, participants would establish savings accounts. However, documentation in the Campus’ files
only verified savings for 2 of the 47 participants.

Also, the County did not provide sufficient monitoring of the Campus’ administration of its Program.
The County and the Campus should follow rent income guidelines for participant rent payments.
                                                                                                         14


The County did not draw down its funds timely.

The County did not draw down its funds timely. As of March 29, 2001, the County had completed 83
percent of its Program, yet it had only drawn down 37 percent ($406,796 of $1,096,530) of its grant
funds from HUD. It had not drawn down any funds since February 10, 2000. Of the $545,382 paid
to the Campus, the County used $138,586 from its general fund.

As of April 2, 2001, the County had not reimbursed the Campus for January 2000 and July 2000
through January 2001 even though the Campus submitted timely reimbursement requests. Further, the
County had not requested payment from HUD for an entire year, January 2000 through January 2001.

The County had reconciliation and documentation problems.

There appeared to be two reasons for the lack of timely drawdowns: the County’s reconciliation
troubles with HUD and discrepancies over what documentation the County required from the Campus.
Harris County had financial management problems concerning its CDBG programs. HUD sent a letter
to a Harris County Judge recommending an independent accountant reconcile Harris County’s 1994 to
2000 grants.14 As a result of HUD’s recommendation, Harris County’s priority had been CDBG
programs.

Further, in the County’s 1999 Single Audit Report, auditors reported that the County failed to fully
support all expenditures. On December 2, 1999, HUD required the County to ensure full support of all
expenditures. Effective January 1, 2000, the County required that all subrecipients attach supporting
documents to each expense reimbursement request. The County and the Campus disagreed about what
documentation the County needed before it would release funds.

The County’s failure to draw down grant funds exacerbates the County’s reconciliation problems with
HUD. HUD should require that the County timely reimburse the Campus for eligible expenditures.
HUD should also deobligate any grant funds not expended as of September 30, 2001.

The County did not properly monitor the Campus.

The County did not properly monitor the Campus’ Women’s Discover Program and the Campus’
progress in achieving the goals it set for itself. In agreements with HUD and the Campus, the County
acknowledged that it was responsible for ensuring that the Campus properly administered its Program.
As a result of inadequate monitoring, the County did not detect that the Campus reported misleading
and unsupported information to HUD or that the units did not meet housing quality standards.

County officials admitted that in the past, due to staffing shortfalls, it did not monitor the Campus as it
should have. County officials, acknowledging a disconnect between those that write the grant proposal
and those that administer the programs, recognized that the individuals on the front lines actually

14
     There were several news reports regarding the matter.
                                                                                                         15


administering the programs must be aware of grant requirements. The County hired a new program
monitor for the Campus. By March 2001, it appeared the new program monitor was providing
improved technical assistance and monitoring of the Campus. According to the County’s response, it
has included additional policies in its monitoring guidelines and in service training material. The County
should continue its efforts to provide technical assistance and monitoring to the Campus.

Recommendations:

We recommend that HUD:

1A.     Require the County to only count as successful graduates those participants that complete the
        Program.

1B.     Require the County to ensure that employees capture required data when participants leave the
        Program and in follow-up contact with previous participants.

1C.     Require the County and the Campus to bring the units into compliance with its habitability
        standards.

1D.     Determine rents that are reasonable and require the County to reimburse the grant for any
        excess rent paid.

1E.     Require the County to monitor the Campus to ensure proper administration of its Program.

1F.     Require the County to follow rent income guidelines for participant rent payments.

1G.     Require that the County timely reimburse the Campus for eligible expenditures. HUD should
        also deobligate any grant funds not expended as of September 30, 2001.
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DISTRIBUTION

Secretary's Representative, 6AS
Comptroller, 6AF
Director, Accounting, 6AAF
Director, Office of CPD, 6AD
Deputy Secretary, SD (Room 10100)
Chief of Staff, S (Room 10000)
Office of General Counsel, C (Room 10214)
Assistant Secretary for Housing/FHA, H (Room 9100)
Assistant Secretary for CPD, D (Room 7100)
Assistant Secretary for Public & Indian Housing, P (Room 4100)
Office of Policy Development and Research (Room 8100)
Assistant Secretary for FHEO, E (Room 5100)
A/S for Congressional and Intergovernmental Relations, J (Room 10120)
Assistant Secretary for Administration, A (Room 10110)
Assistant Secretary for Public Affairs, W (Room 10222)
FTW ALO, AF (2)
CPD ALO, DOT (Room 7220) (2)
Dept. ALO, FM (Room 2206) (2)
Acquisitions Librarian, Library, AS (Room 8141)
Director, Hsg. & Comm. Devel. Issues, US GAO, 441 G St. NW, Room 2474
      Washington, DC 20548 Attn: Stan Czerwinski
Henry A. Waxman, Ranking Member, Committee on Govt Reform,
      House of Rep., Washington, D.C. 20515
The Honorable Fred Thompson, Chairman, Committee on Govt Affairs,
      U.S. Senate, Washington, D.C. 20510
The Honorable Joseph Lieberman, Ranking Member, Committee on Govt Affairs,
      U.S. Senate, Washington, D.C. 20510
Cindy Fogleman, Subcomm. on Gen. Oversight & Invest., Room 212,
      O'Neill House Ofc. Bldg., Washington, D.C. 20515
The Honorable Dan Burton, Chairman, Committee on Govt Reform,
      House of Representatives, Washington, D.C. 20515
Deputy Staff Director, Counsel, Subcommittee on Criminal Justice, Drug Policy & Human Resources,
      B373 Rayburn House Ofc. Bldg., Washington, D.C. 20515
Steve Redburn, Chief, Housing Branch, Office of Management and Budget
      725 17th Street, NW, Room 9226, New Exec. Ofc. Bldg., Washington, D.C. 20503
Inspector General, G
Harris County
University of Texas – Houston Recovery Campus
University of Texas – Health Science Center at Houston