Issue Date September 30, 2010 Audit Report Number 2010-CH-1014 TO: Vicki B. Bott, Deputy Assistant Secretary for Single Family Housing, HU Dane M. Narode, Associate General Counsel for Program Enforcement, CACC FROM: Heath Wolfe, Regional Inspector General for Audit, 5AGA SUBJECT: Consumer Credit Counseling Service of the Midwest, Columbus, OH, Did Not Materially Comply With HUD’s Requirements and Its Grant Agreement Regarding Housing Counseling HIGHLIGHTS What We Audited and Why We performed an audit of Consumer Credit Counseling Services of the Midwest (Consumer Credit), an affiliate of the National Foundation for Credit Counseling, Inc. (National Foundation). We selected Consumer Credit based on a citizen’s complaint received by our office. Our objective was to determine whether Consumer Credit complied with the U.S. Department of Housing and Urban Development’s (HUD) requirements for housing counseling. The audit was part of the activities in our fiscal year 2010 annual audit plan. What We Found Consumer Credit did not comply with HUD’s regulations and/or its agreement with the National Foundation. Specifically, it did not ensure that its (1) clients’ housing counseling action plans were accurate and/or properly completed and (2) clients’ files contained supporting documentation of the housing counseling activities. Further, Consumer Credit did not ensure that uncertified housing counselors were adequately trained and/or monitored and its housing counseling sessions were appropriately reimbursed by HUD. As a result, HUD lacked assurance that Consumer Credit’s housing counseling services were effective and resulted in the best outcome for clients. The results of this audit substantiated the complainant’s allegations regarding Consumer Credit’s failure to provide adequate housing counseling services that complied with HUD’s requirements. What We Recommend We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require Consumer Credit to: (1) reimburse HUD $8,874 from non-Federal funds for the housing counseling sessions that received duplicate reimbursements, or were funded by both HUD and an Ohio Department of Development grant, (2) maintain records of its housing counselors’ training and monitoring of its housing counselors’ housing counseling activities; and (3) implement adequate procedures and controls to ensure compliance with HUD’s requirements and its agreement with the National Foundation, if its contract is not cancelled. Such procedures and controls would ensure that more than $126,310 in anticipated HUD grant funds for fiscal year 2011 (grant year October 1, 2010, through September 30, 2011) are used in accordance with established requirements and for its intended purposes. We also recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require the National Foundation to cancel its agreement(s) with Consumer Credit to provide services under its housing counseling program(s). Further, we recommend that HUD’s Associate General Counsel for Program Enforcement determine legal sufficiency, and if legally sufficient, pursue remedies under the Program Fraud Civil Remedies Act against Consumer Credit for incorrectly submitting claims for reimbursement for housing counseling sessions that were already reimbursed or did not comply with HUD’s requirements and/or its agreement with the National Foundation. 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. Auditee’s Response We provided the results of our review to Consumer Credit’s management during the audit. We also provided our discussion draft audit report to its management and HUD’s staff during the audit. We conducted an exit conference with Consumer Credit’s management on September 8, 2010. 2 We asked Consumer Credit’s management to provide written comments on our discussion draft audit report by September 24, 2010. Consumer Credit’s management provided written comments to the discussion draft audit report, dated September 24, 2010, that generally disagreed with the finding and recommendations. The complete text of the written comments, except for appendix I, and exhibits A through K consisting of 301 pages of documentation that were not necessary to understand Consumer Credit’s comments, along with our evaluation of that response, can be found in appendix B of this report. We provided HUD’s Deputy Assistant Secretary for Single Family Housing with a complete copy of Consumer Credit’s written comments plus the 301 pages of documentation. 3 TABLE OF CONTENTS Background and Objective 5 Results of Audit Finding : Consumer Credit Did Not Comply With HUD’s Requirements and/or Its Agreement With the National Foundation 7 Scope and Methodology 16 Internal Controls 18 Appendixes A. Schedule of Questioned Costs and Funds To Be Put to Better Use 20 B. Auditee Comments and OIG’s Evaluation 21 C. Federal Requirements and the National Foundation’s Grant Agreement 46 4 BACKROUND AND OBJECTIVE Section 106 of the Housing and Urban Development Act of 1968 provides the U.S. Department of Housing and Urban Development (HUD) general counseling authority. HUD is authorized to provide counseling and advice to tenants and homeowners with respect to property maintenance, financial management, and such other matters as may be appropriate to assist them in improving their housing conditions and in meeting responsibilities of tenancy or homeownership. It may also enter into contracts with, make grants to, and provide other types of assistance to private or public organizations with special competence and knowledge in counseling low- and moderate- income families to provide such services. Consumer Credit Counseling of the Midwest (Consumer Credit) is a subgrantee of the National Foundation for Credit Counseling, Inc. (National Foundation), a HUD-approved counseling agency. It is a 501(c)(3) nonprofit organization that has provided money management and financial counseling since 1955. Consumer Credit is a HUD-approved housing counseling agency through its affiliation with the National Foundation. Consumer Credit has 63 offices located in 10 States, including Ohio, Kentucky, Tennessee, Florida, Kansas, Missouri, Indiana, Washington, Oregon, and Pennsylvania, that provide the following services: budget and credit counseling, bankruptcy counseling, and housing counseling. Consumer Credit receives funding through the National Foundation for the following Federal housing counseling grants: HUD’s Comprehensive and Home Equity Housing Conversion Mortgage Counseling Grants, and the U.S. Department of Treasury’s National Foreclosure Mitigation Counseling Grant. HUD’s Comprehensive Grant is awarded to HUD-approved housing counseling agencies to provide comprehensive housing counseling to address clients’ housing concerns. Comprehensive housing includes advice and assistance under the following components: preoccupancy, mortgage default and rent delinquency, post-occupancy, home improvement and rehabilitation, displacement and relocation, etc. The National Foreclosure Mitigation Counseling Grant is funded by the U.S. Department of Treasury. The grant funds are used to provide mortgage foreclosure mitigation assistance/counseling to homeowners. HUD’s Home Equity Conversion Mortgage (HECM) Counseling Grant is for counseling services for seniors prior to obtaining a HECM to inform them about HUD’s program, and other available alternatives. To receive and distribute HUD funds, the National Foundation submits a notice of funding availability1 and ancillary forms to HUD for review and approval yearly. For fiscal years 2008 and 2009, the National Foundation was awarded more than $1.7 and $1.6 million, respectively, to distribute to its affiliates through comprehensive housing counseling grants. Consumer Credit received $113,461 and $133,807, respectively, for those years. It also received $37,500 and $108,000 for fiscal years 2008 and 2009, respectively, to perform housing counseling for borrowers interested in participating in HUD’s HECM Program (program).Consumer Credit, in addition to receiving Federal funding, receives revenue by providing a debt management service, 1 Each year, HUD issues a notice of funding availability to the public when city, State, and local governments and other agencies offer money for programs and initiatives, usually on a competitive basis. Each notice lists the application deadlines, eligibility requirements, amount of funds available, etc. 5 using a debt management plan, to its clients. For fiscal year 2008, nearly 90 percent of its income came from creditor contributions and client fees related to its debt management service. The debt management service generally reduces its clients’ monthly unsecured debts through interest rate reductions and fee concessions from their creditors; however, the clients’ principal balances are not reduced. We performed an audit of Consumer Credit based on a citizen’s complaint to our office. The complainant alleged that Consumer Credit did not provide adequate housing counseling services in accordance with HUD’s requirements. Our objective was to determine whether Consumer Credit complied with HUD’s housing counseling requirements regarding its use of housing counseling funds. 6 RESULTS OF AUDIT Finding: Consumer Credit Did Not Comply With HUD’s Requirements and/or Its Agreement With the National Foundation Consumer Credit did not comply with HUD’s regulations and/or its agreement with the National Foundation. Specifically, it did not ensure that its (1) clients’ housing counseling action plans were accurate and/or properly completed and (2) clients’ files contained supporting documentation of the housing counseling activities. Further, Consumer Credit did not ensure that uncertified housing counselors were adequately trained and/or monitored and its housing counseling sessions were appropriately reimbursed by HUD. These problems occurred because Consumer Credit lacked adequate procedures and controls to ensure that it complied with HUD’s regulations and its grant agreement. As a result, HUD lacked assurance that Consumer Credit’s housing counseling services were effective and resulted in the best outcome for clients. Housing Counseling Sessions Did Not Comply With HUD’s Requirements or Consumer Credit’s Work Plan Using Consumer Credit’s data, we determined that HUD reimbursed 2,473 housing counseling sessions during our audit period of October 1, 2007, to September 30, 2009. Of the 2,473 reimbursed sessions, 624 resulted in clients being referred to Consumer Credit’s debt management plan service, and the remaining 1,849 sessions did not. We statistically selected 61 of the 624 sessions and 66 of the 1,849 sessions to determine whether the housing counseling sessions complied with HUD’s requirements. From our review of the 127 (61 plus 66) housing counseling sessions, the following deficiencies were identified. The deficiencies noted are not independent of each other as one session may have contained more than one deficiency. For 125 sessions, the clients’ housing counseling action plans did not contain actions to be undertaken by the housing counselors, or the actions taken by the housing counselors were insufficient to assist clients in accomplishing their housing goals/needs. Section IV, exhibit b(4), of the agreement between the National Foundation and Consumer Credit requires that affiliate counselors design action plans that identify and document the actions required to be taken by both the client and the counselor to address the stated need. Further, HUD’s regulations at 24 CFR 214.3 define the action plan as a plan that outlines what the housing counseling agency and client will do to meet the client’s housing goals (see appendix C). 7 For 87 sessions, the clients’ files lacked documentation to support whether the housing counselors followed up on clients’ housing concerns. Either the clients’ file did not contain documentation of any follow-up discussions, or the documented follow-up discussions were related to Consumer Credit’s debt management service, instead of the clients’ progression toward achieving their housing goals. The housing counselors contacted the clients to (1) inquire about whether the clients wanted to sign up for the debt management plan service; (2) encourage clients to continue with their debt management plan; (3) inform clients that their initial payment had been received or was due; or (4) remind them that as part of their debt management plan program, they should send a deposit. According to HUD requirements at 24 CFR 214.300(c), the counselor is required to follow up with the client to be assured that the client is progressing toward his goal (see appendix C). Additionally, Consumer Credit’s agreement with the National Foundation requires that subgrantees’ counselors monitor the client’s progress toward meeting the need or resolving the problem. For 29 sessions, Consumer Credit reported program results on its reimbursement request form and HUD form 99022 that were not accurate or properly supported. Specifically, for 19 of the 30 sessions, Consumer Credit reported to HUD that the clients enrolled in its debt management plan service; however, the clients did not complete their enrollment. For the remaining 10 sessions, Consumer Credit reported that the clients were receiving housing counseling or would receive ongoing housing counseling; however, the clients’ files did not contain documentation to support these assertions. For 73 sessions, the clients’ files did not contain documentation to determine whether the housing counselors referred the clients to local, State, and Federal resources when they expressed concerns about meeting their payment obligations under their rental agreement or mortgage. For example, client number 300090’s action plan goal was to eliminate debt, reduce interest rates, and stay current with rental payments due to becoming unemployed. However, the housing counselor did not refer the client or provide the client with information regarding available resources to assist the client in staying current with rental payments, such as rental assistance programs. The housing counselor only encouraged the client to enroll in Consumer Credit’s debt management plan service. HUD requirements at 24 CFR 214.300(b)(2) stipulate that the counseling agency is to provide the client with referrals to local, State, and Federal resources. Further, the applicant or its branches or affiliates must have established working relationships with private and public community resources to which it can refer clients who need help that the agency cannot offer (see appendix C). 2 HUD 9902 form records clients’ demographic information and results of housing counseling sessions for agencies participating in HUD’s Housing Counseling Program. The form is an on-line application filed through an agency’s Client Management System (CMS) or HUD’s Housing Counseling System (HCS). 8 For 13 sessions, Consumer Credit’s housing counselors did not discuss the items outlined in its work plan when clients disclosed that they were either delinquent or had defaulted on their rental or mortgage payments. According to section 2 of Consumer Credit’s work plan, if a client has a rent delinquency or mortgage default concern or is interested in foreclosure prevention counseling, the following would be discussed with the client during the counseling session: (1) identifying the cause of the default or delinquency, (2) determining the extent of the delinquency, (3) working with the landlord or mortgage company to cure the default, (4) working out repayment plans/loss mitigation with the mortgage company, (5) discussing foreclosure and what it is, (6) discussing alternatives to foreclosure if unable to cure default, (7) discussing alternatives to rent eviction, (8) looking at other options including family assistance, and (9) referrals to other community agencies as appropriate. Further, the clients’ files did not contain documentation showing that Consumer Credit assisted the clients with contacting their mortgage lenders when they were either delinquent or in default on their mortgage. According to article IV, A(2), of the National Foundation’s grant agreement with HUD, when providing services, the grantee and its subgrantees, as applicable, shall coordinate with HUD, mortgagees, lenders, and public and private community organizations that are also working with the clients to provide maximum service to the client. They should also contact and work with the appropriate lender and HUD office to assist clients who are (1) in default on their monthly mortgage payments, (2) being considered under HUD’s Loss Mitigation Program, or (3) in financial difficulty or in default under a forbearance agreement (see appendix C). For 68 sessions, the clients’ files did not contain documentation showing that Consumer Credit provided the clients with the required disclosures. During these housing counseling sessions, its housing counselors verbally requested clients’ consent to provide counseling services and read to the clients a privacy disclosure. However, the clients’ file did not contain documentation to determine whether the housing counselors provided its clients with disclosures that (1) described the various types of services provided by the agency and any financial relationships between this agency and any other industry partners; (2) stated that the client was not obligated to receive any other services offered by the organization or its exclusive partners; and (3) provided information on alternative services, programs, and products. According to Consumer Credit’s contracts/grants administrator, clients were mailed a statement of counseling service form that contained the required disclosures after the housing counseling sessions. However, the clients’ files did not contain the forms, which were required to be signed by the clients. According to HUD Handbook 7610.1, paragraph 4-3(j), a client’s file must contain copies of pertinent records and correspondence (see appendix C). 9 For 14 sessions totaling $1,400 (14 times $100), Consumer Credit did not accurately identify the clients’ eligibility for housing counseling services. Specifically, for 12 of the 14 sessions, the clients’ action plans identified that the purpose of the session was to prevent foreclosure or rent delinquency. However, the clients’ budgets did not include a rental or mortgage payment. For the remaining two sessions, the notes in the clients’ files indicated that the clients believed that they did not have a housing problem. HUD’s regulations at 24 CFR 214.3 define “clients” as individuals or households who seek the assistance of an agency participating in HUD’s program to meet a housing need or resolve a housing problem (see appendix C). Consumer Credit Did Not Separate Housing Counseling From Its Debt Management Service Consumer Credit did not separate its housing counseling from its debt management service. For 106 of the 127 sessions reviewed, Consumer Credit prepared action plans for clients that discussed its debt management plan service. Further, the housing counselors’ review of its clients’ money management consisted of a budget that did not include their revolving accounts. Instead, the budget contained an amount for the clients’ monthly payment under their debt management plan agreement with Consumer Credit. Further, for 85 housing counseling sessions, the clients’ action plan specifically included documentation of the housing counselors’ referral to Consumer Credit’s debt management plan service without discussing alternative products or services. For 92 housing counseling sessions, the clients’ files contained documentation of the housing counselors’ discussions with the clients regarding Consumer Credit’s debt management service instead of the clients’ progression toward meeting their housing needs. According to HUD regulations at 24 CFR 214.303(g), for each session, the counselors must provide information on alternative services, programs, and procedures. Debt management service is to be an activity related to but separate from the housing counseling session. According to HUD Handbook 7610.1, paragraph 3-9(C), negotiating payment plans with creditors, handling the client’s money, and making payment to the creditors for the client are usually done under a client-counselor contract (see appendix C). However, Consumer Credit’s housing counseling sessions and debt management service were not separated. 10 Consumer Credit’s Work Plan Was Not Consistent With the Services Provided Consumer Credit’s work plan was not consistent with the housing counseling services it provided. According to Consumer Credit’s work plan, it would provide preoccupancy counseling and rent delinquency/mortgage default/foreclosure prevention counseling services. However, for 110 of the 127 sessions reviewed, the clients’ actions plans identified that the clients’ objectives were to stay current with their mortgage or rental obligation; thus, the clients were not delinquent on their rental or mortgage payments. However, they had difficulty in managing their unsecured debts. Consumer Credit Did Not Provide Documentation To Support That Its Housing Counselors Were Adequately Trained and/or Monitored Consumer Credit was unable to provide documentation to support that its uncertified housing counselors were adequately trained and/or monitored. For 145 housing counseling sessions that occurred in 2008 and 156 sessions that occurred in 2009, Consumer Credit was unable to provide documentation showing that the housing counselors who performed these sessions were adequately monitored. According to exhibit B of its agreement, all subgrantee housing counselors must be National Foundation-certified housing counselors or be supervised by a National Foundation- certified housing counselor who serves in a supervisory role within the subgrantee’s housing counseling program. HUD Handbook 7610.1, REV-4, paragraph 5-1, states that supervisors of the counselors must periodically monitor the work of the counselors. This monitoring includes reviewing client files with the counselor. The agency must document these monitoring activities and make the documentation available to HUD upon request (see appendix C). Further, Consumer Credit did not maintain adequate records to ensure that its housing counselors continuously improved their housing counseling skills. According to HUD Handbook 7610.1, paragraph 2-10, HUD expects an approved agency to ensure the upgrading of the counseling skills and techniques of its housing counseling staff (see appendix C). Consumer Credit’s management had to solicit training documentation from its staff to address our request for documentation. As of September 29, 2010, Consumer Credit had not provided all of the requested documentation. 11 Consumer Credit Submitted Duplicate Reimbursement Requests or Housing Counseling Sessions Were Reimbursed by Another Funding Source Of the 2,473 sessions, Consumer Credit submitted duplicate requests for 13 housing counseling sessions, which cost $100 per session, $1,300 total (13 times $100), to the National Foundation for reimbursement from the HUD grant funds. Further, Consumer Credit lacked sufficient documentation to support that three additional housing counseling sessions totaling $300 (3 times $100) occurred. Consumer Credit’s contract/grant administrator acknowledged that Consumer Credit submitted duplicate reimbursement requests for the same housing counseling sessions. He stated that the housing counselors did not properly code the sessions in Consumer Credit’s debt management system. For an additional 103 housing counseling sessions that were reimbursed by the HUD grant funds, Consumer Credit also received reimbursement from a grant it received from the Ohio Department of Development. The cost of the 103 sessions was reimbursed for the entire amount, instead of using HUD grant funds to offset the cost of the sessions that exceeded the State grant funding. Therefore, Consumer Credit was reimbursed $7,574 in HUD grant funds above the cost of the sessions. Consumer Credit’s reimbursement request forms required it to confirm that it had not received reimbursement for the services at the time of the request and that all services included in the request complied with the contract (agreement). However, it inaccurately submitted reimbursement requests to the National Foundation for duplicate housing counseling sessions and housing counseling sessions that were reimbursed by another funding source. Further, as previously mentioned, all provided services did not comply with its agreement. The Program Fraud Civil Remedies Act of 1986 (231 U.S.C. (United States Code) 3801) provides Federal agencies, which are the victims of false, fictitious, and fraudulent claims and statements, with an administrative remedy to (1) recompense such agencies for losses resulting from such claims and statements; (2) permit administrative proceedings to be brought against persons who make, present, or submit such claims and statements; and (3) deter the making, presenting, and submitting of such claims and statements in the future. Although Consumer Credit did not submit its reimbursement requests directly to HUD, as an affiliate/subgrantee of the National Foundation, it is responsible for ensuring the accuracy of its requests for reimbursement from the housing counseling grant provided by HUD. 12 HUD’s Affiliate Review of Consumer Credit Identified the Same Deficiencies In 2007, HUD performed an affiliate review of Consumer Credit. The review identified that: Consumer Credit did not maintain adequate client files, clients were always referred to Consumer Credit’s debt management plan service, the housing clients’ files lacked documentation to support adequate follow-up was performed and clients termination from the program, the staff performing housing counseling lacked capacity including adequate training, and the lack of consistency between its housing counseling work plan and eligible activities under its agreement with the National Foundation, etc. As a result, HUD required Consumer Credit to correct the identified deficiencies within 90 days to continue its participation in the housing counseling program. However, we determined that many of the issues that HUD identified during its review of Consumer Credit in 2007 still existed. Consumer Credit Lacked Adequate Procedures and Controls Consumer Credit lacked adequate procedures and controls to ensure that it complied with HUD’s requirements and/or its agreement with the National Foundation in addition to detecting and preventing erroneous reimbursement requests for housing counseling sessions that had already been reimbursed. Consumer Credit’s management officials acknowledged deficiencies with its action plans, and insufficient client file documentation of the housing counselors’ follow-up discussions with the clients, in prior reviews and during our audit. Additionally, its management stated that controls have been implemented to address these deficiencies. However, based upon our review of the client files, Consumer Credit needs to continue to improve on its documentation of provided services to ensure that only eligible clients are served, and its housing counseling sessions are in compliance with HUD’s requirements. Conclusion Consumer Credit did not comply with HUD’s regulations and/or its agreement with the National Foundation. As previously mentioned, it lacked adequate procedures and controls to ensure that it complied with HUD’s requirements and/or its agreement with the National Foundation in addition to detecting and preventing erroneous reimbursement requests for housing counseling sessions that had already been reimbursed. As a result of Consumer Credit’s noncompliance, 13 HUD and the National Foundation lacked assurance that Consumer Credit’s housing counseling services were effective and resulted in the best outcome for the clients that received housing counseling services. For Consumer Credit’s fiscal year 2011, which begins October 1, 2010, it is expected to receive at least $130,756 in grant funding for housing counseling. Therefore, in applying the 96.6 percent rate of errors estimation to the anticipated funding, we estimate that if Consumer Credit does not improve its procedures and controls, $126,310 ($130,756 times 96.6 percent) would be used for housing counseling sessions that are not in compliance with HUD’s requirements and its agreement with the National Foundation (see Scope and Methodology section of this audit report). Recommendations We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing require Consumer Credit to 1A. Provide documentation to support the eligibility of the 14 housing counseling sessions in which the clients’ files did not accurately support the clients’ eligibility or reimburse HUD $1,400 from non-Federal funds for the sessions. 1B. Reimburse HUD $1,300 from non-Federal funds for the housing counseling sessions that received duplicate reimbursements. 1C. Provide documentation or reimburse HUD from non-Federal funds for the three housing counseling sessions that were reimbursed for $300 due to the lack of supporting documentation. 1D. Reimburse HUD $7,574 from non-Federal funds for the housing counseling sessions that were funded by both HUD and the Ohio Department of Development grant. 1E. Maintain records of its housing counselors’ training and monitoring of its housing counselors’ housing counseling activities. 1F. Implement adequate procedures and controls to ensure that clients’ housing counseling files and action plans are properly prepared and contain complete documentation to support its housing counseling activities. 1G. Implement adequate procedures and controls to ensure that there is a clear distinction between a housing counseling session and a debt management counseling session, such as maintaining separate files and records. 14 1H. Implement adequate procedures and controls to ensure that it complies with HUD’s requirements and its agreement with the National Foundation if its contract is not cancelled. These procedures and controls should include but not be limited to ensuring that its uncertified housing counselors are properly trained and monitored and performing reviews of clients’ files to ensure compliance with HUD’s requirements and its agreement. Such procedures and controls would ensure that more than $126,310 in anticipated HUD grant funds for fiscal year 2011 (grant year October 1, 2010, through September 30, 2011) are used in accordance with established requirements and for their intended purposes. We also recommend that HUD’s Deputy Assistant Secretary for Single Family Housing 1I. Require National Foundation to cancel its agreement(s) with Consumer Credit to provide services under its housing counseling program(s). We recommend that HUD’s Associate General Counsel for Program Enforcement 1J. Determine legal sufficiency and if legally sufficient, pursue remedies under the Program Civil Remedies Act against Consumer Credit for incorrectly submitting claims for reimbursement for housing counseling sessions that had already been reimbursed or did not comply with HUD’s requirements and/or its agreement with the National Foundation. 15 SCOPE AND METHODOLOGY We performed our audit work between October 2009 and May 2010. We conducted our audit at Consumer Credit’s headquarters in Columbus, OH, HUD’s Chicago regional office, and HUD’s Columbus field office. The audit covered the period October 1, 2007, through September 30, 2009. To accomplish our audit, we researched and reviewed applicable HUD handbooks, regulations, contracts, and grant agreements. We additionally conducted interviews with Consumer Credit’s staff, HUD’s staff, and the National Foundation’s staff. We used hardcopy documentation, that was imaged documents, maintained in Consumer Credit’s database. Therefore, since the audit was based on actual hard-copy documentation, an assessment of the reliability of computerized- processed data was unwarranted. We obtained the HUD comprehensive grant affiliate reimbursement request forms for fiscal year 2008 and 2009. These forms were submitted by Consumer Credit to the National Foundation and contain the reimbursement requests for the month along with an activity log identifying the specific session, client, counselor, outcome, and date of the sessions. There were 2,473 reimbursed housing counseling sessions during the scope of the audit. Of these, we identified a total of 507 sessions completed by counselors who had not obtained their housing counseling certification. For the counseling session and client file review, we divided up the universe between those sessions the counselor identified as resulting in a debt management plan and those that had a result other than a debt management plan. There were a total of 624 sessions that resulted in the clients being put on a debt management plan and 1,849 that did not result in a debt management plan. Using unrestricted attribute sampling with a 90 percent confidence level, 10 percent precision, and estimated error rate of 10 percent, we statistically selected 61 of the 624 sessions that resulted in the clients being put on Consumer Credit’s debt management plan service and 66 of the 1,849 sessions that did not result in a debt management plan. In interpreting the results of the samples and projecting the sampling results to the universe, using hypergeometric3 modeling and the Office of Inspector General’s (OIG) typical safety threshold of a one-sided, 90 percent confidence interval, we can say that an error rate of 61 of 61 housing counseling sessions that resulted in the clients’ being on Consumer Credit’s debt management plan indicates that at least 96.6 percent or 603 of the 624 total debt management plan housing counseling sessions are 90 percent likely to have similar errors. At $100 per session, this equates to a projection of at least $60,300 affected by these types of errors. Similarly, with regard to the non-debt management plan housing counseling sessions, we estimate that an error rate of 66 of 66 housing counseling sessions indicates that at least 96.6 percent or 1,786 of the 1,849 total housing counseling sessions are likely to have similar errors. 3 Hypergeometric Modeling is an exact probability model of underlying error rates in a population which would yield the error rate found in the audit sample. It is the most accurate approach to interpreting a binomial error rate (i.e. pass/fail). 16 At $100 per session, this equates to a projection of at least $178,600 affected. Therefore, the likely errors resulted in an estimation of ($178,600 plus $60,300) $238,900 for its fiscal year 2008 and 2009 grant years. We conducted the audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our finding and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our finding and conclusions based on our audit objective. 17 INTERNAL CONTROLS Internal control is a process adopted by those charged with governance and management, designed to provide reasonable assurance about the achievement of the organization’s mission, goals, and objectives with regard to Effectiveness and efficiency of operations, Reliability of financial reporting, and Compliance with applicable laws and regulations. Internal controls comprise the plans, policies, methods, and procedures used to meet the organization’s mission, goals, and objectives. Internal controls include the processes and procedures for planning, organizing, directing, and controlling program operations as well as the systems for measuring, reporting, and monitoring program performance. Relevant Internal Controls We determined that the following internal controls were relevant to our audit objective: Program operations – Policies and procedures that management has implemented to reasonably ensure that a program meets its objectives. Validity and reliability of data – Policies and procedures that management has implemented to reasonably ensure that valid and reliable data are obtained, maintained, and fairly disclosed in reports. Compliance with laws and regulations – Policies and procedures that management has implemented to reasonably ensure that resource use is consistent with laws and regulations. We assessed the relevant controls identified above. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, the reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or efficiency of operations, (2) misstatements in financial or performance information, or (3) violations of laws and regulations on a timely basis. 18 Significant Deficiency Based on our review, we believe that the following item is a significant deficiency: Consumer Credit did not ensure that its housing counseling sessions met HUD’s requirements and/or the requirements under its agreement with the National Foundation in regard to (1) housing counseling action plans, (2) documentation, (3) training and monitoring of its housing counselors, and (4) controls over its request for reimbursement submissions (see finding). 19 APPENDIXES Appendix A SCHEDULE OF QUESTIONED COSTS AND FUNDS TO BE PUT TO BETTER USE Recommendation Unsupported Funds to be put number Ineligible 1/ 2/ to better use 3/ 1A $1,400 1B $1,300 1C 300 1D 7,564 1H $126,310 Totals $8,864 $1,700 $126,310 1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity that the auditor believes are not allowable by law; contract; or Federal, State, or local policies or regulations. 2/ Unsupported costs are those costs charged to a HUD-financed or HUD-insured program or activity when we cannot determine eligibility at the time of the audit. Unsupported costs require a decision by HUD program officials. This decision, in addition to obtaining supporting documentation, might involve a legal interpretation or clarification of departmental policies and procedures. 3/ Recommendations that funds be put to better use are estimates of amounts that could be used more efficiently if an OIG recommendation is implemented. These amounts include reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by implementing recommended improvements, avoidance of unnecessary expenditures noted in preaward reviews, and any other savings that are specifically identified. 20 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments 21 Ref to OIG Evaluation Auditee Comments 22 Ref to OIG Evaluation Auditee Comments 23 Ref to OIG Evaluation Auditee Comments 24 Ref to OIG Evaluation Auditee Comments Comment 1 Comment 2 25 Ref to OIG Evaluation Auditee Comments Comment 3 26 Ref to OIG Evaluation Auditee Comments Comment 4 27 Ref to OIG Evaluation Auditee Comments Comment 5 28 Ref to OIG Evaluation Auditee Comments Comment 6 29 Ref to OIG Evaluation Auditee Comments Comment 7 30 Ref to OIG Evaluation Auditee Comments Comment 8 31 Ref to OIG Evaluation Auditee Comments Comment 9 Comment 10 32 Ref to OIG Evaluation Auditee Comments Comment 11 33 Ref to OIG Evaluation Auditee Comments Comment 12 Comment 13 34 Ref to OIG Evaluation Auditee Comments Comment 14 35 Ref to OIG Evaluation Auditee Comments 36 Ref to OIG Evaluation Auditee Comments Comment 15 Comment 16 37 Ref to OIG Evaluation Auditee Comments Comment 17 Comment 18 Co 38 OIG Evaluation of Auditee Comments Comment 1 Consumer Credit contends that our audit structure was problematic because the report included items that were already identified as needing correction by HUD in October 2007 as part of its biennial review. Additionally, HUD allowed Consumer Credit 90-days to institute corrective actions to address the identified deficiencies. HUD’s review covered housing counseling sessions that occurred during Consumer Credit’s fiscal year 2007 grant. HUD notified Consumer Credit in a letter, dated October 30, 2007, of the results of its review and gave Consumer Credit until January 2008 to implement corrective action. Our audit included counseling sessions that occurred during Consumer Credit’s 2008 and 2009 grant years. For the 2008 grant year, which covered the period October 1, 2007, through September 30, 2008, we reviewed the housing counseling sessions that occurred during Consumer Credit’s 90-day corrective period because the housing counseling sessions that were reimbursed by HUD occurred during the first 2 months of the 12-month grant. Further, we wanted to obtain a complete picture of Consumer Credit’s housing counseling program before and after corrective actions were implemented. Therefore, in addition to reviewing the 61 housing counseling sessions that occurred during Consumer Credit’s 2008 grant year, we also reviewed 66 sessions that occurred during the 2009 grant year, which covered the period October 1, 2008, to September 30, 2009. However, as indicated in this audit report, the same issues that were identified by HUD in Consumer Credit’s 2007 grant year also occurred in its 2008 and 2009 grant years, thus indicating that little or no improvements were made. Comment 2 Consumer Credit contends that our statistical sample is not representative because it does not contain all housing counseling sessions of the agency, including housing counseling from other grants and unreimbursed housing counseling sessions. The statistical sample was representative of the housing counseling sessions that were reimbursed by HUD for Consumer Credit’s Comprehensive Housing Counseling Program. Additionally, although the sample size of 127 of the 2,473 reimbursed sessions represents 5 percent of the total population, a probability sample, as in the one used for this audit, estimates the likelihood of finding a particular condition based on the number of draws (samples) and is little influenced by the size of the universe from which it is drawn. Our audit did not review the housing counseling sessions that were reimbursed as part of other grants (Federal or State) or not reimbursed because the audit only encompassed the housing counseling sessions that were submitted for reimbursement under HUD’s Comprehensive Housing Counseling grant, thus indicating that these sessions were in compliance with HUD’s and other related Federal requirements for housing counseling. According to Consumer Credit, it conducted a total of 35,791 housing counseling sessions, and it only received reimbursement from HUD for its comprehensive and home equity conversion mortgage housing counseling sessions. Additionally during our audit, Consumer 39 Credit’s management informed us that the housing counseling sessions were not submitted to HUD for reimbursement, lacked required data elements, and, therefore, did not meet the reporting standards of a HUD housing counseling session to qualify for reimbursement. Therefore, we did not review these housing counseling sessions. Comment 3 Consumer Credit contends that 85 of the 126 housing counseling sessions identified in this audit report contained sufficient actions by its counselors. It also contends that activities related to its debt management plan services are acceptable actions to be undertaken by the housing counselors. Therefore, for 61 housing counseling sessions, the enrollment of clients in Consumer Credit’s debt management plan service is acceptable. Additionally, for another 24 housing counseling sessions, the actions taken by the counselors were identified in the housing counseling files. We disagree. HUD Handbook 7610.1, REV-4, paragraph 6-2, states that debt management is an activity related to but apart from the housing counseling process. Further, for the 61 housing counseling sessions, the clients’ action plans did not outline the act of enrolling clients in Consumer Credit’s debt management plan service as an action of the housing counselor. Instead, the plans identified that the clients would enroll in debt management plans, thus indicating that it was an action by the client instead of the housing counselor. Additionally, we reviewed exhibit C provided by Consumer Credit as support for 33 client files it contends was erroneously listed in this audit report. Of the 33 files, based on the provided documentation, we agree that 1 of the 33 files contained actions to be undertaken by the counselor. However, the clients’ action plans for the remaining 32 files indicated that the housing counselors would follow up with the clients regarding their progress with their debt management plans or actions the housing counselors suggested for the clients. For instance, for one of the files Consumer Credit provided to demonstrate an action by its housing counselor, the client identified that she was delinquent with her housing payments and the action plan stated that the housing counselor would follow up with the client in approximately 6 months as an action of the housing counselor. Nonetheless, we adjusted this report to reflect the result of this review. Comment 4 Consumer Credit contends that the 54 housing counseling sessions that resulted in clients enrolling in Consumer Credit’s debt management plan constitutes an acceptable form of follow up since the debt management plan last an average of 48 month. Additionally, it also contends that the remaining 10 housing counseling sessions in which the clients did not enroll in a debt management program contained acceptable follow-up. As previously mentioned in comment 3, according to HUD’s requirements, debt management is related to but apart from the housing counseling process. Therefore, follow-up related to the clients’ enrollment in a debt management plan, in particular the receipt of payments is a part of a client-counselor contract; thus separate from the housing counseling session. Additionally, for the 54 housing counseling sessions, the clients’ files disclosed follow-up discussions between the clients and the housing counselors concerning the debt management plan service, such as informing the counselors 40 of the clients’ progress in the debt management program, including receipts and payments due, without discussions of the clients’ housing problems. Consumer Credit contends that 29 of the files were erroneously identified in our audit report based on the documentation provided as exhibit D. We agree that seven client files contained documentation of the housing counselors following up with the clients regarding their progress toward meeting their housing goals. However, the remaining 22 client files either identified that no follow-up was needed or the follow-up documented in the clients’ files was related to Consumer Credit’s debt management plan service. We adjusted this report as needed. Comment 5 Consumer Credit generally agreed that the results reported to HUD on the 9902 were not accurate for 19 clients. However, it contends that the results for an additional seven files were accurately reported to HUD, thus erroneously listed in our audit report. We agree based on the documentation provided by Consumer Credit, as exhibit E, that the results for two of the seven housing counseling sessions were reported accurately. Therefore, we adjusted this audit report accordingly. However, the remaining five were not. In particular, for two of the five clients, Consumer Credit provided documentation that indicated the clients were currently receiving housing counseling. However, documentation in its client management system specifically stated that more counseling would not resolve the clients’ issues. For the remaining three clients, the results reported to HUD were not consistent with documentation maintained in the clients’ files. Comment 6 Consumer Credit contends that it made referrals to appropriate sources in 58 of the 76 case files. It also contends that referrals are only required under its grant agreement with the National Foundation on an “if needed” basis. Although the grant agreement states that referrals are required on an “if needed” basis, HUD’s requirements at 24 CFR 214.300(b)(2) state that for each client, all agencies participating in HUD’s housing counseling program shall offer the following basic services: referrals to local, State, and Federal resources. For the 58 housing counseling sessions, the clients indicated that they wanted (1) to stay current with their rent or mortgage payment or (2) pre-purchase counseling. These clients were referred to Internet Web sites to obtain copies of their credit reports or for financial budgeting and/or products. We agree based on documentation provided by Consumer Credit, as exhibit G, that for 3 of the 58 clients, the housing counselors referred the clients to local, State, or Federal resources; therefore, we removed these cases and adjusted this report accordingly. Comment 7 Consumer Credit contends that it did not violate its grant agreement with the National Foundation by not contacting HUD, mortgagees, lenders, and others in every case involving a rent or mortgage delinquency or foreclosure. Further, it contends that the agreement only requires that such contact be made “if needed.” Our audit report states that clients’ files did not contain documentation showing that Consumer Credit assisted the clients with contacting their mortgage lenders when they were either delinquent or in default on their mortgage. According to 41 article IV, A(2), of its agreement with the National Foundation, when providing services, the grantee and its subgrantees, as applicable, shall coordinate with HUD, mortgagees, lenders, and public and private community organizations that are also working with the clients to provide maximum service to the client. They should also contact and work with the appropriate lender and HUD office to assist clients who are (i) in default on their monthly mortgage payments, (ii) being considered under the Loss Mitigation Program, or (iii) in financial difficulty or in default under a forbearance agreement. However, based on the documentation provided by Consumer Credit as exhibit, H, we agree that housing counselors assisted the clients in contacting their lender. Therefore, we adjusted this audit report accordingly. Comment 8 Consumer Credit contends that for the 68 housing counseling sessions, its housing counselors provided verbal disclosures, and the disclosures were mailed after the sessions. It also contends that disclosure statements are not required to be maintained in client files. According to HUD’s requirements, Consumer Credit is required to maintain copies of pertinent records and correspondences related to every housing counseling session. Further, although Consumer Credit provided its clients with verbal disclosures, the content of the verbal disclosures did not cover the full disclosure requirements set forth in HUD’s requirements at 24 CFR 214.303(g). Moreover, Consumer Credit acknowledged during our audit that it mails the disclosures to its clients after the housing counseling session. In many instances, this is well after the clients have already decided to purchase a product or enroll in its debt management plan service. Therefore, without documentation and based on only the verbal disclosures provided to the clients, the clients were not provided the required disclosures. Additionally, disclosures are considered pertinent records and correspondence to ensure compliance with the consumer protections. Comment 9 Consumer Credit contends that for 11 of the 14 housing counseling sessions cited in this audit report, it identified references to housing-related expenses. Our audit report cited the 11 housing counseling sessions because the clients’ files did not indicate that they were responsible for paying a mortgage or rental expense. However, the purposes/goals of the clients’ housing counseling sessions were to prevent foreclosure or rent delinquency. Therefore, Consumer Credit did not accurately verify the clients’ eligibility. Comment 10 Consumer Credit contends that HUD regulations do not require that it separate housing counseling from debt management plan service, but acknowledged that in May 2010, a specific requirement was added to an updated version of HUD’s handbook requiring debt management and housing counseling to be separate. We disagree. As mentioned in comment 3, HUD Handbook 7610.1, REV- 4, paragraph 6-2, states that debt management is an activity related to but apart from the counseling process. The handbook also states that negotiating payment plans with creditors and handling the client’s money and making payments to the creditors for the client are usually done under a client-counselor contract. Further, 42 in reviewing the revised handbook, we determined that the requirement was the same. Additionally, according to HUD Handbook 7610.1, REV-4, paragraph 3-3(c), almost every housing problem brought to a counseling agency requires a review of how the client manages his/her money. Without this financial analysis, no matter how basic, the counselor cannot adequately advise the client. Therefore, omitting clients’ revolving accounts in reviewing their finances could not provide the housing counselors with a complete picture of a client’s housing problem. As discussed in our finding, the housing counselors’ review of the clients’ money management consisted of a budget that did not include their revolving accounts. Instead, the budget contained an amount for the clients’ monthly payment under their debt management plan agreement with Consumer Credit. Also, as previously mentioned, the debt management service should be separate from housing counseling. We acknowledge Consumer Credit’s development and implementation of procedures to ensure that it separates its debt management plan records from its housing counseling records. Comment 11 Consumer Credit contends that according to its agreement with the National Foundation, it is only required to inform clients of alternative services, programs, and procedures if such information is needed and appropriate.” We disagree. HUD’s regulations at 24 CFR 214.303(g) state that for each session, the counselors must provide information on alternative services, programs, and products. The requirement does not state, “if needed, or appropriate”. Additionally, its agreement with the National Foundation, in particular exhibit B, page 2, numbers 7-10, as identified by Consumer Credit, does not discuss alternative services. This section of the agreement addresses referrals to other resources that might help clients in solving their housing problems, other agencies, etc. It does not address information on alternative services, programs, and products that the counselor is required to provide for each session in accordance with Federal requirements. Additionally, HUD Handbook 7610.1, REV-4, does not state that debt management is an appropriate subject of housing counseling. According to the handbook, debt management is related to but apart from the housing counseling process. Additionally, negotiating payments with creditors, handing the client’s money are usually done under a client-counselor contract; thus separate from the housing counseling session. Comment 12 We acknowledge Consumer Credit for ensuring that its work plan describes all provided services. Comment 13 Consumer Credit contends that all counselors are now certified and that those counselors who were not certified are only required to be periodically monitored. As discussed in this audit report, for 145 housing counseling sessions that occurred in 2008 and 156 sessions that occurred in 2009, Consumer Credit was 43 unable to provide documentation showing that the housing counselors were adequately supervised and/or monitored. Consumer Credit provided as exhibit J a listing of its housing counselors and the dates on which they received their certifications. However, it did not provide copies of the certifications to determine whether the counselors were certified or monitored when these 301 (145 plus 156) housing sessions occurred. Comment 14 Consumer Credit contends that it has policies in place, as indicated by exhibit K, that require its counselors to complete continuing education. Additionally, in order for a counselor to be re-certified, the counselor must complete additional professional development units as required. Also, the HUD handbook or applicable regulations do not require that all documentation be maintained in a single location, nor was it improper for Consumer Credit to request training documentation from its staff to address our request. We agree that while there may be no specific requirement for Consumer Credit to maintain training documentation. HUD Handbook 7610.1, paragraph 2-10, states that HUD expects an approved agency to ensure the upgrading of the counseling skills and techniques of its housing counseling staff. Consumer Credit did not provide documentation to support its housing counselors’ continuing education. Comment 15 Consumer Credit contends that it implemented procedures to address all of the issues identified in its affiliate review. We disagree. As mentioned in this audit report, Consumer Credit had not implemented adequate procedures to become compliant with the deficiencies noted during the affiliate review. Consumer Credit acknowledged in its response that better documentation is needed in some cases, and it is developing and has implemented procedures in the preliminary plan of correction to address any deficiencies in this area. Comment 16 Consumer Credit contends that the identified deficiencies resulted from a lack of clear guidance and that all deficiencies relate to insufficient documentation and books and records violations, rather than a lack of providing counseling services. We disagree. Consumer Credit was aware of HUD’s documentation requirements because it was reviewed by HUD and the National Foundation, in which the issues similar, as identified in this audit report, were cited. Additionally, without maintaining proper documentation, Consumer Credit would not be able to support the services it provides. We acknowledge that Consumer Credit implemented procedures to ensure compliance with HUD’s requirements. However, HUD’s requirements and the requirements outlined in its agreement with the National Foundation were not reinterpreted by us. We obtained an understanding of HUD’s requirements and Consumer Credit’s agreement requirements from HUD and/or the National Foundation. Comment 17 Consumer Credit contends that the extrapolation set forth in our draft audit report with payment for noncompliant sessions is inflammatory, extremely unfair, and 44 misleading. We disagree. The audit report identified that Consumer Credit received duplicate reimbursements for 126 (13 plus 103) housing counseling sessions, which Consumer Credit also acknowledged. However, we clarified that the 126 sessions was from the 2,473 total reimbursed sessions. In addition to receiving duplicate payments, it did not comply with HUD’s requirements and its agreement with the National Foundation. The issues identified in the audit report were similar, if not the same, as the issues that were identified by National Foundation and HUD. Therefore, Consumer Credit was aware of its noncompliance; however, it neglected to correct the deficiencies. Therefore, the recommendations cited in the audit report were substantiated. Further, Consumer Credit contends that it has a preliminary plan for corrective action and will seek guidance from HUD OIG to ensure that it adequately addressed the concerns of our office. Consumer Credit should consult with HUD regarding its corrective action plan and the items identified in this audit report. Comment 18 Consumer Credit disagreed with recommendation 1I in this audit report. It provided appendix I to dispute our recommendation. However, based on the issues identified in this audit report, we did not remove the recommendation. 45 Appendix C FEDERAL REQUIREMENTS AND THE NATIONAL FOUNDATION’S GRANT AGREEMENT National Foundation for Credit Counseling, Incorporated, subgrantee agreement, effective 2008 and 2009, exhibit b(2), states that all affiliate housing counselors must be National Foundation- certified counselors or be supervised by a National Foundation-certified counselor who serves in a supervisory role within an affiliate’s housing counseling program. All National Foundation housing counselors should be either book seven certified or actively working toward achieving book seven certificationSection IV, exhibit b(4), of the agreement requires that affiliate counselors design action plans that identify and document the actions required to be taken by both the client and the counselor to address the stated need. HUD Handbook 7610.1, REV-4, paragraph 5-1, states that supervisors of the counselors must periodically monitor the work of the counselors. This monitoring includes reviewing client files with the counselor. The agency must document these monitoring activities and make the documentation available to HUD upon request. Paragraph 3-1 of the handbook states there is to be follow-up communication with the client to ensure that the client is progressing toward his or her housing goal or that the agency should modify or terminate housing counseling. Paragraph 2-10 of the handbook states that HUD expects an approved agency to ensure the upgrading of the counseling skills and techniques of its housing counseling staff. Paragraph 3-9(C) of the handbook states that almost every housing need and problem brought to a counseling agency requires at least a review of how the client manages his or her money. Without this financial analysis, no matter how basic, the counselor cannot adequately advise the client. Depending upon whether the client is or seeks to be a renter or homeowner, counseling in this area might include any or all of the following components: 1. Review of client’s income and expenses 2. Determination of how the client spends money (Does he or can he save? Does she spend beyond her income? Does he make prudent use of credit? Do her spending habits fit better into renting or owning, etc.?) 3. Creating a budget suitable to the housing the client can afford. 4. Review of interest rates at the time the client wants to purchase housing 5. Use and cost of credit 6. Shopping for a loan to purchase housing 7. Effect of property taxes and mortgage interest on income taxes--cash flow 8. Homeowner’s insurance covering property and liability 9. Downpayments and rent escrow 10. Bankruptcy 46 HUD’s regulations at 24 CFR 214.300(c) state that follow-up is making a reasonable effort to have follow-up communication with the client, when possible, to ensure that the client is progressing toward his or her housing goal, to modify or terminate housing counseling, and to learn and report outcomes. HUD’s regulations at 24 CFR 214.3 define the action plan as a plan that outlines what the housing counseling agency and client will do to meet the client’s housing goals. HUD’s regulations at 24 CFR 214.300(b)(2) states that for each client, all agencies participating in HUD’s housing counseling program shall offer the following basic services: referrals to local, State, and Federal resources. HUD’s regulations at 24 CFR 214.303(g) state that a participating agency must provide to all clients a disclosure statement that explicitly describes the various types of services provided by the agency and any financial relationships between this agency and any other industry partners. The disclosure must clearly state that the client is not obligated to receive any other services offered by the organization or its exclusive partners. Further, the agency must provide information on alternative services, programs, and products. HUD’s regulations at 24 CFR 214.103(g)(2) state that the agency must employ staff trained in housing counseling, and at least half the counselors must have at least 6 months of experience in the job they will perform in the agency’s housing counseling program. HUD’s regulations at 24 CFR 214.303(g) state that for each session, the counselors must provide information on alternative services, programs, and products. Further, debt management service is to be an activity related to but separate from the housing counseling session. HUD form 9902, frequently asked questions reference sheet, states that HUD uses the HUD 9902 numbers to justify proposed appropriations, develop proposed indicators, and report accomplishment of performance goals. The National Foundation’s agreement, article IV, A(2), states that when providing services, the grantee and its subgrantees, as applicable, shall coordinate with HUD, mortgagees, lenders, and public and private community organizations that are also working with the clients to provide maximum service to the client. They should also contact and work with the appropriate lender and HUD office to assist clients who are (i) in default on their monthly mortgage payments, (ii) being considered under the Loss Mitigation Program, or (iii) in financial difficulty or in default under a forbearance agreement. 47
Consumer Credit Counseling Service of the Midwest, Columbus, OH, Did Not Materially Comply With HUD's Requirements and Its Grant Agreement Regarding Housing Counseling
Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-09-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)