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 2 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. 3 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. 4 Appendix A AUDITEE COMMENTS 5 6 7 8
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)