oversight

HUD's Oversight of the Hurricane Ike Disaster Housing Assistance Program in Texas Needed Improvement

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-FW-0004




TO:             Milan Ozdinec, Deputy Assistant Secretary
                Office of Public Housing and Voucher Programs, PE

                //signed//
FROM:           Gerald R. Kirkland
                Regional Inspector General for Audit, Fort Worth Region, 6AGA

SUBJECT: HUD’s Oversight of the Hurricane Ike Disaster Housing Assistance Program in
         Texas Needed Improvement


                                           HIGHLIGHTS

    What We Audited and Why

                 We audited the Disaster Housing Assistance Program (DHAP)-Ike as part of our
                 ongoing commitment to the U. S. Department of Housing and Urban
                 Development (HUD) to implement oversight of Disaster Recovery funds to
                 prevent fraud, waste, and abuse. HUD used local public housing agencies
                 (housing agencies) to administer DHAP-Ike rental assistance and provide case
                 management services to families affected by Hurricanes Ike and Gustav.

                 Our audit objective was to determine whether HUD ensured that four housing
                 agencies in Texas1 correctly calculated and paid DHAP-Ike payments to eligible
                 tenants and for eligible units in accordance with program requirements.




1
     The four Texas housing agencies that received the most referrals from the Federal Emergency Management
     Agency (FEMA) are Houston Housing Authority, Harris County Housing Authority, Port Arthur Housing
     Authority, and Galveston Housing Authority.
What We Found

           HUD did not ensure that the four housing agencies in Texas that received the
           most assistance followed DHAP-Ike requirements for 51 (75 percent) of the 68
           active files reviewed. Further, for 27 (40 percent) of the 68 files reviewed, the
           housing agencies’ errors affected the payment or tenant/unit eligibility. These
           errors occurred because HUD relied on its contractors, did not provide
           standardized file guidance to the housing agencies, and only performed limited
           monitoring at the housing agencies. Projecting the results of the statistical sample
           showed that of the 9,817 families assisted by the four housing agencies, at least
           6,374 (65 percent) of the families likely had an error in their file and at least 2,920
           (30 percent) of the families’ payments or eligibility was affected.

What We Recommend


           We recommend HUD perform additional monitoring of its contractor, provide
           standardized guidance to the housing agencies, and perform onsite monitoring at
           the housing agencies. We also recommend that HUD require the four housing
           agencies to correct the file documentation errors in the 51 identified files and
           repay or support the 27 questioned payments totaling $48,982.

           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 HUD our draft report on August 18, 2010 and held an exit
           conference with it to discuss the draft on August 31, 2010. We requested HUD’s
           written comments by September 17, 2010 and HUD provided its response on
           September 20, 2010. HUD generally agreed with the audit report except for the
           total number of problem files and the ineligible and unsupported dollar amounts
           paid. The complete text of the auditee’s response, along with our evaluation of
           that response, can be found in appendix B of this report.

           We agree with HUD’s planned actions for recommendations 1D, 1E, 1F, and 1I
           and will concur with them once HUD enters them into the Audit Resolution and
           Corrective Action Tracking System.




                                              2
                              TABLE OF CONTENTS

Background and Objective                                                       4

Results of Audit
Finding:    HUD’s Oversight of Texas Housing Agencies Administering DHAP-Ike   5
            Needed Improvement

Scope and Methodology                                                          12

Internal Controls                                                              14

Appendixes
   A.      Schedule of Questioned Costs                                        15
   B.      Auditee Comments and OIG’s Evaluation                               16
   C.      File Errors by Housing Agency, Type, and Amount                     27




                                              3
                       BACKGROUND AND OBJECTIVE

In 2008, Hurricanes Ike and Gustav struck the Gulf Coast of the United States. On
September 23, 2008, the U. S. Department of Housing and Urban Development (HUD) and the
Federal Emergency Management Agency (FEMA) executed an Interagency Agreement under
which HUD acted as the servicing agency of Disaster Housing Assistance Program (DHAP)-Ike.
HUD’s Office of Public and Indian Housing began administration of the program effective
November 1, 2008. HUD used local public housing agencies (housing agencies) to administer
tenant-based rental assistance and provide case management services to affected families.

Pursuant to FEMA’s grant authority, HUD provided grants to housing agencies to administer
DHAP-Ike. Housing agencies made rental assistance payments for eligible families to landlords
for a period not to exceed 17 months, beginning November 2008 and ending no later than March
2010. The DHAP-Ike program has been extended twice to May 27, 2010, and to October 31,
2010.

HUD hired a contractor to monitor DHAP-Ike. The contractor’s primary responsibilities
included validating data entered by housing agencies into HUD’s computer database, the
Disaster Information System (DIS). The contractor also resolved DHAP-Ike complaints and
answered inquires for HUD. However, the contractor submitted to HUD inquiries that it could
not answer. Further, the contractor collected issues and compiled reports, which it then
submitted to HUD. The initial contractor’s term expired in January 2010. HUD entered into
another contract with a different contractor, which had staff in place in late April 2010.

To be eligible for assistance, a family had to have been displaced by Hurricanes Ike or Gustav
and referred to HUD by FEMA. FEMA was solely responsible for determining whether a family
was initially eligible to receive assistance. The housing agencies verified a family had been
determined eligible by FEMA through DIS. They actively assisted the family in locating an
eligible unit. Housing agencies also calculated the monthly rent subsidy, made monthly rent
subsidy payments on behalf of the participating families, performed unit inspections to ensure
the units met limited housing quality standards, and provided case management services.
Further, the housing agencies were responsible for terminating a family’s participation if it failed
to comply with the program’s family obligations or was no longer eligible for continued
assistance, as well as resolving any appeals of that determination. Initially, there were no income
eligibility requirements for DHAP-Ike. However, only families with housing costs that exceeded
30 percent of the family’s monthly income were eligible for continued rental assistance and case
management services. Beginning May 1, 2009, families were required to pay a portion of their
rent, starting at $50 per month and increasing by an additional $50 each subsequent month,
except for families that qualified for an exception on the basis of economic hardship as defined
by HUD. This incremental rent transition increase was to prepare the family to assume full
responsibility for its housing costs at the end of the program.

Our audit objective was to determine whether HUD ensured that four housing agencies in Texas
correctly calculated and paid DHAP-Ike payments to eligible tenants and units in accordance
with program requirements.

                                                 4
                                     RESULTS OF AUDIT

Finding: HUD’s Oversight of Texas Housing Agencies Administering
         DHAP-Ike Needed Improvement
HUD did not ensure that the four housing agencies in Texas that received the most assistance
followed DHAP-Ike requirements for 51 (75 percent) of the 68 active files reviewed. Further,
for 27 (40 percent) of the 68 files reviewed, the housing agencies’ errors affected the payment or
tenant/unit eligibility. These errors occurred because HUD relied on its contractors, did not
provide standardized file guidance to the housing agencies, and only performed limited
monitoring at the housing agencies. Projecting the results of the statistical sample showed that of
the 9,817 families assisted by the four housing agencies, at least 6,374 (65 percent) of the
families likely had an error in their file and at least 2,920 (30 percent) of the families’ payments
or eligibility was affected.




    Four Texas Housing Agencies
    Assisted a Majority of the
    Families

                 As shown in the following graph, of the 27,354 families FEMA determined to be
                 eligible and assigned to HUD in Texas, four Texas housing agencies were
                 assigned a majority of the families seeking DHAP-Ike assistance. As of
                 November 6, 2009, the 9,817 active2 families assigned to these four housing
                 agencies accounted for 80.7 percent of all active families assigned for DHAP-Ike
                 housing assistance in Texas. A statistical sample of 68 files from the 9,817
                 families was selected and reviewed.3




2
     Although 27,354 families applied to FEMA for assistance, HUD only provided DHAP-Ike assistance to 9,817.
     Those families that received a HUD payment were considered to be “active” families.
3
     For more information on the type and selection of the statistical sample, see the Scope and Methodology
     section.

                                                       5
         DHAP - Ike assigned families by Texas housing agency

                                                            Galveston Housing Authority
               5,290                                        (25.02%)
                                              6,844

                                                            Harris County Housing Authority
                                                            (21.72%)
 3,541
                                                            Houston Housing Authority
                                                            (20.98%)

                                                            Port Arthur Housing Authority
                                                            (12.95%)
                                                 5,940
              5,739
                                                            34 Other Housing Agencies (19.34%)




Housing Agencies Made Errors
in 51 of the 68 Files Reviewed


            HUD did not ensure the four Texas housing agencies complied with DHAP-Ike
            requirements for 51 (75 percent) of the 68 files reviewed. Of the 51 files with
            errors, the housing agencies made errors in 27 (40 percent) files that affected the
            payment. For the remaining 24 (35 percent) files, the housing agencies’ files had
            documentation errors including assistance contracts unsigned by the housing
            agency, inconsistent information between the housing agency’s tenant file and the
            DIS database, or missing forms. The review results by housing agency are
            included in the following graph.




                                             6
                        Housing agency file review results
  30
                                                                             27

  25
                                                                                  24

                                                                                       Correct
  20
                                                                        17
                                                                                       Payment
  15                                                                                   errors
             10           11                     11
  10                                                                                   Documentation
                    7                                           7                      errors
                                   5         6
                               4
   5     3
                                                            2
                                         1                          1
   0
        Galveston       Harris County   Houston           Port Arthur   Totals
        Housing           Housing       Housing            Housing
        Authority        Authority      Authority          Authority




Four General Types of Payment
or Eligibility Errors Existed


             The housing agencies made errors which affected the payment or tenant/unit
             eligibility in 27 (40 percent) of the 68 files. The payment errors consisted of four
             broad categories:

                    Hardship errors – A hardship error included the housing agency’s making
                    some type of error that affected the hardship calculation such as a hardship
                    form not approved, a hardship applied to the wrong month, or an incorrectly
                    calculated hardship.
                    Rent transition errors – Rent transition errors included the housing agency’s
                    not properly following rent transition requirements or making a mathematical
                    error in calculating the statutory decrease in monthly rental payments.
                    Calculation/payments errors – Calculation/payment errors included the
                    housing agency’s overpaying rent due to duplicate payments, making
                    payments before the date of lease, paying the payment standard instead of the
                    lease rent, paying rent in excess of the approved rent reasonableness amount,
                    and/or making calculation errors.
                                                      7
                       Tenant/unit eligibility errors– Tenant/unit eligibility errors included the
                       housing agency’s lacking a lease agreement or not properly determining the
                       unit was eligible for assistance.
                   For these 27 files, the housing agencies’ payment errors resulted in overpayments
                   and underpayments totaling $48,982.4 The following graph shows the breakdown
                   of the payment errors into the four categories by housing agency.5


                  Payment errors by housing agency and type
       12

       10
                                                        4                                 Galveston Housing
                                                                          5               Authority
        8
                                                                                          Harris County
                                                                                          Housing Authority
        6
                                                        4                                 Houston Housing
                      1                                                                   Authority
        4                              2
                      1                                                   5               Port Arthur
                                                                                          Housing Authority
        2             3                3                3
                                                                          1
        0
             Hardship errors   Rent transition    Calculation       Eligibility
                                   errors           errors           errors




    Projecting the Sample Results
    Indicated Significant Housing
    Agency Error Rates

                   The housing agencies made some type of error in 51 of the 68 sample files.
                   Further, their errors affected the payment amount in 27 of these files. Projecting
                   the results of the statistical sample showed that of the 9,817 active DHAP-Ike-
                   assisted families, the housing agencies made errors in their files for at least 6,374
                   (65 percent) of the families. Further, at least 2,920 (30 percent) of the families’

4
      Ineligible overpayments totaled $16,266; unsupported payments totaled $33,516; and amounts underpaid, which
      are funds to be put to better use, totaled $800 (16,266 + 33,516 – 800=48,982). For complete results, see the
      table in appendix C.
5
      Housing agencies in some instances made more than one type of payment error for a family; therefore, the
      errors will not total to 27.

                                                         8
                   payments or eligibility were affected.6 A HUD Office of Public and Indian
                   Housing representative stated this was an unacceptable error rate that HUD must
                   correct and that HUD would work with the Office of Inspector General (OIG) to
                   resolve the finding.

    HUD’s Oversight Needed
    Improvement


                   HUD’s oversight of its housing agencies and its contractors needed improvement.
                   The housing agencies had significant error rates because HUD relied on its
                   contractors for oversight of the housing agencies and it only performed limited
                   monitoring at the housing agencies. Additionally, HUD’s contractors acted as the
                   onsite liaison and provided guidance to housing agencies. However, from
                   January through April 2010, HUD had no contractor in place when one contract
                   ended and before a new one began. HUD also monitored issues by reviewing
                   frequently asked questions and e-mails from housing agencies. Yet, HUD staff
                   members said they were not aware that the housing agencies needed additional
                   assistance. Further, HUD stated that housing agencies lacked standardization for
                   their files, as each housing agency had a different system for processing and
                   maintaining the files, and they resisted standardization.

    HUD Had Taken Corrective
    Action

                   During the audit, HUD allowed the previous contract to expire and replaced the
                   contractor to improve results because it was not completely satisfied with the
                   contractor’s performance. Once HUD was informed of our preliminary results, it
                   took immediate action by providing DHAP-Ike training to its staff, increasing
                   monitoring and site visits at housing agencies, conducting regular group
                   conference calls with all active housing agencies, and implementing a
                   standardized file format for housing agencies.

    Housing Agencies Made a Few
    Additional Improper Payments

                   In addition to reviewing tenant files, testing was performed that compared the
                   DHAP-Ike database information to Social Security number information. Testing
                   results revealed 70 instances (less than 1 percent) where the four housing agencies
                   made payments to a deceased family member or to a family member whose Social
                   Security number was invalid.7 Additional testing performed on all 70 families

6
      See the Scope and Methodology section for detailed information.
7
      The 70 families consisted of 15 families with invalid Social Security numbers and 55 families with Social
      Security numbers associated with a deceased individual.

                                                          9
             disclosed that housing agencies only made improper payments in 15 instances
             (approximately .1 percent). In 12 instances, the housing agencies made ineligible
             payments totaling $15,327 for deceased family members, and in 3 instances, they
             made unsupported payments totaling $19,994 for possibly invalid Social Security
             numbers.

             For deceased family members, the housing agencies made these improper
             payments because the landlords and/or families did not notify them of the
             deceased family member and the housing agencies did not have access to an
             Enterprise Income Verification (EIV) system report that identified deceased
             tenants. In addition, the housing agencies made most of the ineligible payments
             for only a month or two. For the invalid Social Security numbers, a majority of
             the errors were due to FEMA’s entering the tenant’s date of birth into the system
             incorrectly. For those few cases with invalid numbers, the housing agencies had
             to rely on the family to accurately report its information and lacked access to EIV
             to confirm the reported Social Security numbers. HUD agreed housing agencies
             need EIV access, but as of July 13, 2010, housing agencies did not have access.

Conclusion

             HUD did not ensure that four Texas housing agencies followed DHAP-Ike
             requirements for 51 (75 percent) of the 68 active files reviewed. Further, for 27
             (40 percent) of the 68 files reviewed, the housing agencies had errors that affected
             the payment or tenant/unit eligibility. The housing agencies made these errors
             because HUD relied on its contractors, did not provide standardized file guidance
             to the housing agencies, and only performed limited monitoring at the housing
             agencies. Projecting the results of the statistical sample showed that of the 9,817
             DHAP-Ike-assisted families, the four housing agencies made material errors for at
             least 6,374 (65 percent) of the families. Further, at least 2,920 (30 percent) of the
             families’ payments or eligibility were affected. The housing agencies also made
             improper payments for a few deceased family members and family members with
             invalid Social Security numbers because the housing agencies lacked access to
             EIV, which would identify deceased tenants and confirm reported Social Security
             numbers. HUD had taken some actions to resolve the finding.

Recommendations

             We recommend that the Deputy Assistant Secretary, Office of Public Housing and
             Voucher Programs,

             1A. Require the housing agencies to repay their DHAP-Ike accounts from non-
                 Federal funds $16,266 in ineligible overpayments.




                                              10
1B. Require the housing agencies to support the unsupported payments or repay
    their DHAP-Ike accounts from non-Federal funds $33,516 in unsupported
    costs.

1C. Require the housing agencies to reimburse families for underpaid assistance
    of $800.

1D    Require the housing agencies to correct the file documentation errors in the
      24 identified files.

1E. Provide standardized guidance to the housing agencies and perform onsite
    monitoring at random housing agencies to ensure compliance with the
    program’s requirements.

1F. Provide increased oversight to ensure the contractor follows the contract
    requirements. Oversight should include ensuring that the contractor
    provides training, monitors housing agencies, and performs onsite
    monitoring reviews that include file reviews.

1G. Require the housing agencies to repay their DHAP-Ike accounts from non-
    Federal funds $15,327 in ineligible costs for improper payments made to
    deceased family members.

1H. Require the housing agencies to support or repay their DHAP-Ike accounts
    from non-Federal funds $19,994 in unsupported costs for improper
    payments made to a family member with an invalid Social Security number.

1I.   Provide the housing agencies with EIV access to allow them to identify
      deceased tenants and confirm reported Social Security numbers.




                                 11
                        SCOPE AND METHODOLOGY

To accomplish our audit objectives, we

       Reviewed the Interagency Agreement between FEMA and HUD and the DHAP-Ike grant
       agreement between HUD and various housing agencies;
       Reviewed applicable HUD regulations including Office of Public and Indian Housing
       (PIH) Notice 2008-38, Disaster Housing Assistance Program - Ike (DHAP-Ike)
       Operating Requirements; PIH Notice 2008-45, Disaster Housing Assistance Program -
       Ike (DHAP-Ike) Case Management Guidelines; and PIH Notice 2010-22, Consolidated
       Guidance on Disaster Housing Assistance Program - Ike (DHAP-Ike) and Extension
       Operating Requirements;
       Reviewed DHAP-Ike policies, procedures, and prior DHAP audit reports;
       Reviewed HUD monitoring reports and related correspondence between HUD and
       housing agencies; and
       Conducted interviews with HUD, various housing agencies, and contractor staff.

We obtained a download of FEMA client assignments to Texas housing agencies from HUD’s
DIS database. We assessed the reliability of the DIS database downloads provided by HUD and
determined that the computer-processed data in our sample database were generally reliable for
the purpose of this audit. Of the 27,354 families FEMA determined to be eligible and assigned
to HUD in Texas, four Texas housing agencies (Harris County, Houston, Galveston, and Port
Arthur) were assigned a majority of the families seeking DHAP-Ike assistance. As of November
6, 2009, families assigned to these four housing agencies accounted for 80.7 percent of all
families that were assigned to Texas housing agencies for possible DHAP-Ike housing
assistance. For these four housing agencies, the original database consisted of 20,651 families
from the four Texas housing agencies with the largest number of family assignments between
November 1, 2008, and December 17, 2009. A statistical selection was made to reach
conclusions about the entire population assigned to the four housing agencies based on
projections from the sample. Using this method, we selected a statistical random attribute
sample of 68 tenant files for review. We selected our sample using a 90 percent confidence level
and a 10 percent precision rate. However, the initial sample selection from this database
included all families assisted by FEMA, but some had never received DHAP-Ike assistance from
HUD. We referred to these as “inactive families.” After reducing the database to exclude
inactive families, our universe consisted of 9,817 DHAP-Ike beneficiaries. We replaced inactive
families with additional randomly selected active families.

We performed detailed testing on the 68 files. We reviewed the client files and assistance
payment histories maintained by each of the four housing agencies. Our testing and review
included

           Ensuring the housing agency properly verified the eligibility of program participants
           in HUD’s DIS system.



                                               12
           Ensuring the sample file contained documentation showing that the housing agency
           provided required elements of the DHAP-Ike program (e.g., an executed case
           management services agreement and a disaster rent subsidy contract).
           Determining whether the housing agency ensured the unit met the program’s housing
           quality standards before being occupied.
           Verifying the accuracy of rental assistance payments made by the housing agency.


We projected the results of the number of errors and payment errors found. We did not project
monetary results. The following table contains the projection of our testing, which showed that
we are 90 percent confident that

                                    Files will have an error
                          Lower limit                       Upper limit
                            6,374                             8,185

                                Files will have a payment error
                          Lower limit                      Upper limit
                            2,920                             4,944

During the database validation, we performed 100 percent testing of the families’ Social Security
numbers. Of the of the 9,817 DHAP-Ike assisted families, we identified 70 (less than 1 percent)
instances of questionable Social Security numbers, including active beneficiaries whose numbers
indicated they were deceased or whose numbers were issued prior to their date of birth. We
performed testing on all 70 instances and obtained supporting documentation from the four
housing agencies, such as identification and payment records. Based on our testing, we
determined the housing agencies improperly paid assistance to only 15 of the 9,817 DHAP-Ike
beneficiaries (approximately .1 percent).

We performed our fieldwork with HUD between January and July 2010 at our offices in Houston
and Fort Worth, TX. We conducted our site work at the Houston Housing Authority, Houston,
TX; Harris County Housing Authority, Houston, TX; Galveston Housing Authority, Galveston,
TX; and Port Arthur Housing Authority, Port Arthur, TX, between February and June 2010. We
expanded our scope as necessary to accomplish the objective.

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 findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                               13
                              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 control was relevant to our audit
               objective:

                  Policies and procedures established by HUD to ensure that Texas public housing
                  agencies correctly calculated and paid rental assistance in accordance with
                  DHAP-Ike requirements.

               We assessed the relevant control 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.

 Significant Deficiencies


               Based on our review, we believe that the following item is a significant deficiency:

                  HUD did not have adequate policies, procedures, and controls in place to
                  effectively monitor the housing agencies administering the program (finding).




                                                 14
                                              APPENDIXES

Appendix A

                     SCHEDULE OF QUESTIONED COSTS
                    AND FUNDS TO BE PUT TO BETTER USE

            Recommendation               Ineligible 1/         Unsupported 2/          Funds to be put
                number                                                                 to better use 3/

                     1A                    $16,266
                     1B                                             $33,516
                     1C                                                                      $800
                     1G                      15,327
                     1H                                              19,994

                   Totals                  $31,593                  $53,510                  $800




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. In
     this instance, it represents the amount of underpayments that should be made to eligible DHAP-Ike families.



                                                          15
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         16
Ref to OIG Evaluation   Auditee Comments




                         17
Ref to OIG Evaluation   Auditee Comments




Comment 2



Comment 3




                         18
Ref to OIG Evaluation   Auditee Comments




Comment 4




Comment 5




                         19
Ref to OIG Evaluation   Auditee Comments




Comment 6




                         20
Ref to OIG Evaluation   Auditee Comments




Comment 6




Comment 6




                         21
Ref to OIG Evaluation   Auditee Comments




Comment 7




Comment 7




Comment 7




                         22
Ref to OIG Evaluation   Auditee Comments




Comment 5




Comment 8




Comment 1




                         23
Ref to OIG Evaluation   Auditee Comments




Comment 6




                         24
                         OIG Evaluation of Auditee Comments

Comment 1   HUD generally agreed with the audit and welcomed recommendations that
            improve program management and oversight. We acknowledge HUD’s
            comments and we appreciate its cooperation throughout the audit and its
            willingness to implement corrective actions.

Comment 2   HUD said that two housing agencies had already found the overpayments and
            addressed them prior to the audit. As HUD did not provide which two cases it
            was referring to, we are unable to agree. However, one Galveston Housing
            Authority file had errors including not performing an inspection and paying the
            lease amount, which was more than the rental standard. Neither error had been
            detected by the housing agency, but no amounts were reported as ineligible, due
            to it recovering all assistance amounts as the individual never occupied the unit.

Comment 3   HUD also disagreed with OIG questioning payments on two units that did not
            meet housing quality standards. HUD asserted that one unit with a
            malfunctioning air conditioner met limited housing quality standards. We
            disagree. This housing agency stated it performed full housing quality standard
            inspections, which is allowed per PIH Notice 2008-38; a “PHA may choose to
            apply additional criteria to this inspection, including the application of the
            Housing Quality Standards (HQS).” The housing agency performed an inspection
            at the tenant’s request and found the air conditioning was not working. Thus, the
            housing agency should have failed the unit and should not have paid assistance
            from the time that it noted the fail item until the deficiency was corrected. For
            another unit, HUD said that the housing agency was only required to repay
            assistance after the unit failed the second inspection. OIG only questioned
            amounts paid after the unit failed three inspections and the amount paid for one
            month’s duplicative rent; the housing agency paid assistance twice in February
            2009, which was before the unit failed the inspections.

Comment 4   HUD stated that one unit identified as ineligible due to the owner leasing a
            bedroom in her home was eligible. HUD said it had issued a Frequently
            Answered Question (FAQ #78) that allowed a room, rather than a unit, to be
            leased, if “the room is rented under a legal lease and otherwise meets all other
            DHAP-Ike requirements for a rental unit.” We disagree that the FAQ can
            overrule the DHAP-Ike requirements in HUD PIH Notice 2008-38, which states;
            “Ineligible Units and Prohibition Against Other Subsidy The following types of
            housing may not be leased under DHAP-Ike: … A unit occupied by its owner
            or by a person with interest in the unit …”

Comment 5   HUD stated that housing agencies stopped payments for deceased family
            members within days of their deaths, but in some cases were unable to stop
            payments. Further, HUD said that subsequent payments after the family
            members’ deaths were unsupported rather than ineligible. We disagree. For the
            12 deceased individuals whose payments we questioned, the housing agencies

                                             25
            were only aware that two individuals were deceased when we contacted them.
            Thus, we question HUD’s assertion that payments were stopped within days of
            their death. Further, our testing did not question payments until the end of the
            month following the person’s death; thus, we allowed a minimum of 30 days prior
            to determining that a payment was ineligible.

Comment 6   HUD said that it reviewed the files and reached different conclusions regarding
            amounts listed as ineligible and unsupported. We do not agree with HUD’s
            revised amounts. We met with each housing agency and reviewed the files with
            them, including ineligible and unsupported amounts. The housing agencies
            agreed with our conclusions and amounts. However, we are willing to review
            each individual case with HUD as part of the audit resolution process.

Comment 7   We agree with HUD’s planned actions and will concur with the management
            decision once HUD enters it into the Audit Resolution and Corrective Action
            Tracking System.

Comment 8   HUD stated that it did not consider payments for an invalid Social Security
            number to be unsupported. HUD listed circumstances in which it would consider
            payments to be supported per DHAP-Ike rules. However, the instances found in
            two of our file reviews were not one of the circumstances cited by HUD. In these
            cases, the Social Security number was valid. However, the birth date information
            provided by the individual did not match the Social Security Administration’s
            data, which indicates potentially improper payments were made. The third case
            may be a data entry error, but additional work will need to be performed to ensure
            the housing agency made supported payments. We will work further with HUD
            during the management decision process to address these cases.




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Appendix C

FILE ERRORS BY HOUSING AGENCY, TYPE, AND AMOUNT

                                                              Funds put to
                   Payment   Ineligible         Unsupported    better use    Documentation
  Housing agency    error     amount              amount        amount           error
  Galveston          X                               $1,800
  Galveston          X              $690
  Galveston                                                                       X
  Galveston          X                                3,978
  Galveston                                                                       X
  Galveston          X              1,250
  Galveston          X              6,909
  Galveston          X              1,260
  Galveston                                                                       X
  Galveston                                                                       X
  Galveston                                                                       X
  Galveston          X              1,065
  Galveston          X               150
  Galveston                                                                       X
  Galveston          X                    0
  Galveston                                                                       X
  Galveston          X                                4,650
  Harris                                                                          X
  Harris             X              2,318
  Harris             X                                               $150
  Harris             X                    77
  Harris                                                                          X
  Harris                                                                          X
  Harris             X               866
  Harris                                                                          X
  Harris                                                                          X
  Houston                                                                         X
  Houston                                                                         X
  Houston                                                                         X
  Houston                                                                         X
  Houston            X                                5,100
  Houston                                                                         X



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                                                            Funds put to
                 Payment   Ineligible         Unsupported    better use    Documentation
Housing agency    error     amount              amount        amount           error
Houston            X                                                250
Houston            X                                  449
Houston                                                                         X
Houston            X                                6,454
Houston                                                                         X
Houston            X                                4,140
Houston                                                                         X
Houston                                                                         X
Houston            X                                2,940
Houston                                                                         X
Houston                                                                         X
Port Arthur        X               269
Port Arthur        X               750
Port Arthur        X                                4,005
Port Arthur                                                                     X
Port Arthur        X                                                200
Port Arthur        X                    50                            50
Port Arthur        X               312
Port Arthur        X               300                              150
Totals             27          $16,266            $33,516          $800         24




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