oversight

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)

                                                                  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