oversight

Review of Duplication of Participants Benefits under HUD's Katrina Disaster Housing Assistance Program and Disaster Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-03-28.

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

                                                                   U.S. Department of Housing and Urban Development
                                                                   Office of Inspector General
                                                                   Gulf Coast Region, Office of Audit
                                                                   Hale Boggs Federal Building
                                                                   500 Poydras Street, Room 1117
                                                                   New Orleans, Louisiana 70130

                                                                   Phone (504) 671- 3710 Fax (504) 589-7277
                                                                   Internet http://www.hud.gov/offices/oig/




                                                                                            MEMORANDUM NO.
                                                                                            2008-AO-0801
March 28, 2008

MEMORANDUM FOR: David Vargas, Director, Housing Voucher Programs, PE


FROM:                Rose Capalungan, Regional Inspector General for Audit, GAH

SUBJECT:             Review of Duplication of Participants Benefits under HUD’s Katrina Disaster
                     Housing Assistance Program and Disaster Voucher Program


                                                        INTRODUCTION

We audited the U.S. Department of Housing and Urban Development’s (HUD) Katrina Disaster
Housing Assistance Program (KDHAP) and Disaster Voucher Program (DVP) administered by
various public housing agencies. We initiated the audit as part of our examination of relief
efforts provided by the federal government in the aftermath of Hurricanes Katrina and Rita. Our
audit objective was to determine whether HUD established controls to ensure that the Housing
Authority of New Orleans (HANO) pre-Hurricane Katrina Housing Choice Voucher program
participants did not receive duplicate assistance under KDHAP and/or DVP.

                                                         BACKGROUND

HUD and the Federal Emergency Management Agency (FEMA), through a $79 million mission
assignment beginning October 2005, developed KDHAP in response to Hurricane Katrina.
KDHAP provided temporary monthly rent subsidies to assist families in obtaining decent, safe,
and sanitary housing in the privately owned rental market. On December 30, 2005, Congress
approved the Defense Appropriations Act (Act), 2006 (Public Law No. 109-148). The Act
appropriated $390 million to HUD for temporary rental voucher assistance for certain families
displaced by Hurricanes Katrina and Rita, thereby creating DVP. The Act also provides that
families receiving assistance under DVP shall be eligible to reoccupy their previous assisted
housing if or when it becomes available. As a result of the Act, KDHAP ended January 31,
2006.1

HUD’s Office of Public and Indian Housing developed notices for each program containing
operating requirements that set forth the policies and procedures for the programs. These
1
 Some KDHAP participants were initially ineligible for DVP; therefore, those participants continued to receive KDHAP assistance after January
31, 2006.
operating requirements explained the design features of KDHAP and/or DVP and stated,
respectively, that

      (1) A family may not receive the benefit of a KDHAP rent subsidy while receiving the
          benefit of the forms of other housing subsidies for the same unit or for a different unit 2
          and
      (2) A family receiving assistance under DVP must comply with the family obligations under
          the Code of Federal Regulations.3

During our audit review of KDHAP/DVP participant eligibility,4 we identified duplication of
benefits issues through sample testing. To address the extent of the issues, we developed a
separate audit assignment related to review of KDHAP/DVP duplication of benefits. Since the
Housing Authority of New Orleans (HANO) was the top public housing agency with participants
registered within the Disaster Information System (22.14 percent), our audit objective was to
determine whether HUD established controls to ensure that HANO’s pre-Hurricane Katrina
Housing Choice Voucher program participants did not receive duplicate assistance under
KDHAP and/or DVP.

                                                    SCOPE AND METHODOLOGY

We performed our audit work between May 2007 and January 2008, at HANO’s office located at
2511 Lafitte Street, New Orleans, Louisiana, and the HUD Office of Inspector General’s (OIG)
office in New Orleans, Louisiana. We also contacted various receiving public housing agencies
maintaining the KDHAP/DVP files of the HANO Housing Choice Voucher participants we
reviewed. The review covered the period September 1, 2005, through December 31, 2007. We
adjusted our scope as necessary.

To accomplish our objective, we performed the following:

      •     Reviewed and analyzed housing assistance payment register and bank statements data
            provided by the HANO for the review period;
      •     Reviewed and analyzed data within the Disaster Information System provided by HUD;
      •     Matched the Disaster Information System information to cashed checks within the
            HANO housing assistance payment register for the Housing Choice Voucher program
            and developed a listing of participants who received rental payments on their behalf
            under Housing Choice Voucher after a lease was executed under the KDHAP/DVP
            program;
      •     Selected a nonstatistical sample of 15 out of a universe of 431 landlords contained in the
            participant listing noted above, which accounted for 51 participants, and performed
            detailed testing of the 51 participants’ pre- and post-Hurricane Katrina assistance;
2
  24 CFR (Code of Federal Regulations) 982.352(c)
3
  24 CFR: “The family must use the assisted unit for residence by the family. The unit must be the family’s only residence ... an assisted family, or members of the
family, may not receive Section 8 tenant-based assistance while receiving another housing subsidy, for the same unit or for a different unit, under any duplicative
federal, state, or local housing assistance program.”
4
  2008-AO-0001 –HUD Had a Less Than 1 Percent Error Rate in Housing Ineligible Participants under KDHAP and DVP Disaster Housing Assistance, issued
December 4, 2007.



                                                                                  2
   •   Compared KDHAP/DVP payments to HANO’s Housing Choice Voucher payments to
       determine whether the checks were paid on behalf of the participant under both programs
       in the same month, which would result in a duplicate assistance payment; and
   •   Interviewed HUD officials from the Office Public and Indian Housing’s Housing Choice
       Voucher program, HANO staff, and officials and various staff at public housing agencies.

We determined that the computer data in the Disaster Information System related to determining
KDHAP/DVP participant information were generally reliable. However, we determined that the
computer data related to the HANO’s housing assistance payment register were generally
unreliable. Specifically, of the 51 participants reviewed, we identified eight discrepancies (15.68
percent) between the HANO housing assistance payment register and the Disaster Information
System in which the systems showed different names and tenant information associated with the
same Social Security number. We did not consider the eight instances as duplicate payments,
even though the Social Security number matched, as the remaining participant information did
not match. Additional testing showed that for all eight, the Social Security number matched the
name in the Disaster Information System and not the name in HANO's housing assistance
payment register. Thus, there is a risk that additional duplicate participants exist that were not
detected by our testing methodology, as Social Security number information in HANO's register
was not always reliable.

                                    RESULTS OF REVIEW

In most of the cases reviewed, HUD ensured that KDHAP/DVP participants receiving assistance
were not also receiving assistance under HANO’s Housing Choice Voucher program. However,
in a few instances (4 of 51), the participants received duplicate assistance. In all four cases, this
occurred because HUD allowed Housing Choice Voucher Homeownership program
(Homeownership program) participants to execute and receive KDHAP/DVP payments on their
behalf while continuing to receive mortgage payments under the Homeownership program.

The Homeownership program is an option that allows a first-time homeowner to use his/her
Housing Choice Voucher program subsidy to meet monthly homeownership expenses. Under
the Homeownership program, a participant is responsible for finding an eligible unit to purchase
instead of rent. Further, the public housing agency makes monthly homeownership assistance
payments on behalf of the new homeowner and may make payments to the lender or directly to
the participant.

HANO has continued to pay participants Homeownership program assistance payments after
Hurricane Katrina to avoid placing the participants into foreclosure. Testing found that four
participants executed KDHAP/DVP leases and received assistance while still receiving
Homeownership program assistance payments on their behalf. Since the Housing Choice
Voucher and KDHAP/DVP program regulations prohibit families from receiving assistance
while receiving another housing subsidy or receiving assistance for more than one unit or a unit
in which they do not reside, $13,147 in Homeownership program funds was misspent. Further,




                                                  3
HANO had a total of 36 other participants in the Homeownership program, and they may also
have received duplicate assistance.

Public housing agencies and HUD were aware that participants received assistance under both
the Homeownership program and KDHAP/DVP. Further, HUD encouraged agencies to provide
both forms of assistance. However, HUD did not provide written guidance stating that such
payments were acceptable, nor did it waive the duplicate assistance provisions of the regulations.
HUD’s actions to prevent these families from losing their Housing Choice Voucher program-
assisted homes after the disaster are commendable. HUD needs to prevent duplicate payments
by working with the lenders to rework the mortgages and suspending payment, or HUD should
seek a waiver for the duplicate payment prohibition for Homeownership program participants.

Testing also showed that two of the four participants also received Community Development
Block Grant (CDBG) funding totaling $161,090 to rebuild their property, and the other two
applied for assistance but had not received it as of October 2007. Further, all four participants
had also received rental assistance funding from FEMA totaling $14,655 as of September 2006.
HUD will need to ensure that the CDBG funding is not used to house the family while repairs
are being made and work with FEMA to recover the rental assistance as it duplicated HUD’s
housing assistance.

Although our testing disclosed that only a few instances of Homeownership program duplication
of benefits occurred, additional duplication of benefits could have occurred and not been
detected by our testing as HANO’s data were generally unreliable.

HUD generally agreed with the results, but disagreed with one of the three recommendations.
HUD will not recover the ineligible payments to families who were homeownership voucher
holders. Instead, HUD provided an alternative recommendation to publish a future notice, which
would clarify this duplication of benefits issue and its circumstances. Once that notice is
published, we will classify these currently ineligible payments as eligible. Further, HUD plans
to address any duplication of benefits instances by coordinating with the OIG Office of
Investigations. The complete text of HUD’s response can be found in Appendix A. We accept
HUD's decision and acknowledge HUD for taking a proactive approach to the subject matter.

                                   RECOMMENDATIONS


We recommend that the HUD’s Director of Housing Choice Voucher Programs

1A. Take appropriate actions to recover the ineligible funding totaling $13,147 for four
    duplicate participants.

1B. Prevent duplicate payments by working with the lenders to rework the mortgages and
    suspending payment or seek a waiver for the duplicate payment prohibition for
    Homeownership program participants.



                                                4
1C. Work with FEMA and HUD’s Office of Community Planning and Development to ensure
    that their assistance did not duplicate HUD’s rental assistance and recover any ineligible
    duplicate assistance payments, which currently total $14,655.

For each recommendation without a management decision, please respond and provide status
reports in accordance with HUD Handbook 2000.06, REV-3. Please furnish us copies of any
correspondence or directives issued because of the audit.




                                               5
                   Appendix A
AUDITEE COMMENTS
7