oversight

A Few Possible Duplicate Payments May Have Occurred under Phase II of the State of Mississippi 's Homeowner Assistance Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-06-12.

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.
                                                                                     2009-AO-1801

June 12, 2009

MEMORANDUM FOR: Nelson R. Bregon, General Deputy Assistant Secretary, D



FROM:           Tracey Carney, Acting Regional Inspector General for Audit, GAH

SUBJECT: A Few Possible Duplicate Payments May Have Occurred under Phase II of the
          State of Mississippi’s Homeowner Assistance Program


                                        INTRODUCTION

We audited the State of Mississippi’s (State) administration of the $5.058 billion in Community
Development Block Grant (CDBG) disaster recovery funds provided to the State in the aftermath
of Hurricane Katrina. The State allocated $2.2 billion to help homeowners in Southern
Mississippi recover from Hurricane Katrina.

We initiated the audit as part of our examination of relief efforts provided by the federal
government in the aftermath of Hurricane Katrina. During our audit on grant eligibility, we
identified a few possible duplicate payments using computer-assisted audit tools and techniques
when reviewing the State’s disbursement database. Therefore, we expanded our review to
address these potential duplicates.

                              METHODOLOGY AND SCOPE

We performed our audit work between December 17, 2008, and April 21, 2009. We conducted
our audit at the local U.S. Department of Housing and Urban Development (HUD) Office of
Inspector General field office (100 West Capitol Street, Jackson, Mississippi), the State’s
Disaster Recovery Division (Robert E. Lee Building, 239 North Lamar Street, Jackson,
Mississippi), Reznick Mississippi LLC’s former office (500 Clinton Center Drive, Clinton,
Mississippi), and other necessary sites as deemed appropriate. Our review covered the period
December 2006 through December 2008. We adjusted the scope as necessary.

                                               1
Through data analysis, we identified 34 possible issues related to duplicate addresses, duplicate
Social Security numbers, and applicants in both the Mississippi and Louisiana databases for the
homeowner assistance program. There were a total of 63 grants associated with possible issues.
We performed limited testing to determine whether an issue existed regarding duplicate
payments.

We also reviewed the HUD-approved action plans, grant agreements between HUD and the
State, homeowner assistance program written policies and procedures, the contract executed
between the State and Reznick Mississippi LLC and its amendments, the Code of Federal
Regulations, and other applicable legal authorities relevant to the CDBG disaster recovery
grants. We reviewed reports issued by the Mississippi Office of State Auditor, HUD, and
Mississippi Development Authority. We also interviewed State officials, staff, and key
personnel involved in the administration of the homeowner assistance program.

                                         BACKGROUND

One of the State’s recovery efforts is the implementation of the homeowner assistance program.
Phase II of the program provides compensation, up to a maximum of $100,000, to homeowners
who had suffered damage to their primary residence as of August 29, 2005, from Hurricane
Katrina. After certain deductions, homeowners have complete discretion in the use of the
compensation grant, as allowable by state and federal law, as they work through their personal
disaster recovery situations.

To be eligible for phase II of the homeowner assistance program, applicants must have

   •   Owned and occupied a home as a primary residence on August 29, 2005;
   •   Owned a home located in Hancock, Harrison, Jackson, or Pearl River Counties in
       Mississippi;
   •   Owned a home that received flood surge damage as a result of Hurricane Katrina; and
   •   A 2006 household income at or below 120 percent of area median income.

Only one application per home is allowed. If an applicant does not meet all requirements listed
above, he or she does not qualify for the program. Between May 31, 2007, and December 24,
2008, the State disbursed funds for 5,928 grants, totaling more than $400 million.

                                   RESULTS OF REVIEW

Of 5,928 grants disbursed, the State may have funded 34 (less than 1 percent) duplicate grants.
As shown in the table, we identified the following issues:

                    Issue                        Number of instances         Total number of
                                                                                  grants
Duplicate Social Security number                          15                        30
Duplicate address with different applicants               14                        28
Applicant in both Mississippi and Louisiana               5                         5
                   Totals                                 34                        63

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Testing on 3 of the 34 issues, for a total of six grants reviewed, showed that

     •   Three grants, totaling $174,770, were eligible;
     •   Two grants, totaling $128,267, were ineligible; and
     •   One grant, totaling $53,604, was unsupported.

Based on the three grants identified as ineligible and unsupported, it is possible that the State
may have funded duplicate grants. However, we believe that only half of the grants for the 28
duplicate addresses and remaining 24 duplicate Social Security numbers were possible
duplicates, since one may have been eligible. Therefore, we are only questioning the lower
amount of the grants associated with those issues.

The State will need to coordinate with HUD to recover the ineligible payments totaling $128,267
and support or recover the unsupported payment totaling $53,604. Further, the State will need to
review the remaining 57 grants associated with the remaining 31 issues, totaling nearly $1.7
million,1 as those grants appear to have been duplicate payments. The State must coordinate
with HUD to recover any of the funds associated with these grants that are deemed ineligible.

We also coordinated with the Mississippi Office of State Auditor, which informed us that 32 of
the 63 total grants were being reviewed. Therefore, we believe that the State’s controls were
generally functioning properly. However, if these three grants were ineligible, the State will
need to coordinate with HUD to recover the funds.

During the audit, we provided the results of our review to the State and HUD. We conducted an
exit conference on May 13, 2009. At the exit conference, the State provided additional
information concerning the ineligible and unsupported grants. We asked the State to provide
comments on our draft memorandum by May 19, 2009, and it provided written comments on
May 18, 2009. We reviewed the information at the State’s request, along with its written
comments.

The State concurred that its controls were generally functioning properly but did not concur with
the conclusions and recommendations. The State’s complete response can be found in appendix
A. The State claimed that it had thoroughly reviewed each of the 63 grant files and with the
exception of five grants that were possible duplications between the Mississippi and Louisiana
databases, all of the other grants were eligible and properly awarded. We acknowledge that the
State took action on the potentially duplicate grants. However, we disagree that all of the other
grants were eligible and properly awarded, since three of the grants were under review by the
Mississippi Office of State Auditor, indicating eligibility issues. Thus, we stand by our original
conclusion and did not change our recommendation.

Further, for one ineligible and one unsupported grant, documentation did not support that the
grants were disbursed to the property owners. Based upon the disbursement data provided by the
State, these two grants were disbursed in the names of the property owners’ power of attorney.

1
   The total includes the lower amount of the grants associated with the duplicate addresses and Social Security
numbers plus the grants associated with the applicants in both states.   
2
   We did not determine the eligibility of these grants.
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For the remaining ineligible grant, the documents did not support the sale of the property. We
question whether there was an agreement in place for the sale of the property, since the sale was
claimed to have been completed in January 2005, seven months before Hurricane Katrina, and
the property was not transferred until October 3, 2008. In addition, the grant file included a
general power of attorney, executed on July 25, 2006, indicating that the applicant may have
initially applied3 for grant assistance on behalf of the property owner, who had received grant
assistance for another property. Further, the property was transferred for $10, which was
$20,978 less than the claimed sale price. Thus, we stand by our original conclusions and did not
change our recommendations.


                                                RECOMMENDATIONS

We recommend that the HUD’s General Deputy Assistant Secretary for Community Planning
and Development require the State to

1A.         Coordinate with HUD to recover payments totaling $128,267 for two ineligible grants.

1B.         Support or coordinate with HUD to recover payments totaling $53,604.

1C.         Review the remaining 57 grants, of which 31, totaling $1,695,935, were unsupported, and
            appear to have been duplicate payments to an applicant. The State must also coordinate
            with HUD to recover any funds associated with the grants that are deemed ineligible.

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.




3
     The applicant initially applied on or about April 13, 2007.
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                       Appendix A
AUDITEE COMMENTS




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