Issue Date
June 7, 2011
Audit Report Number
2011-AT-1009
TO: Mary D. Presley, Director, HUD Atlanta Office of Community Planning and
Development, 4AD
//signed//
FROM: James D. McKay, Regional Inspector General for Audit, Atlanta Region, 4AGA
SUBJECT: The Georgia Department of Community Affairs, Atlanta, GA, Paid for Some
Unsupported Program Participants
HIGHLIGHTS
What We Audited and Why
We audited the Homelessness Prevention and Rapid Re-Housing Program
(Program) at the Georgia Department of Community Affairs (grantee). The audit
was part of the U.S. Department of Housing and Urban Development (HUD),
Office of Inspector General’s (OIG) national mandate to oversee and audit grant
activities funded by the American Recovery and Reinvestment Act of 2009
(Recovery Act). We selected the grantee because it received $19.1 million, which
was the largest single Program grant awarded within Georgia under the Recovery
Act. In addition, the HUD Atlanta Office of Community Planning and
Development had not conducted a monitoring review of the grantee.
The objective of our audit was to determine whether the grantee established
policies and procedures to ensure that (1) Program participants were eligible,
(2) Program expenditures were supported with adequate documentation,
(3) Program reporting requirements were met, and (4) subgrantees were
monitored and trained.
What We Found
The grantee paid for Program services for participants whose eligibility was not
supported with the required income verification documentation. As a result, 11 of
32 Program participants’ files reviewed did not include adequate income
verification documentation. Consequently, the Program participants’ eligibility
was not supported for $66,879 in Program services.
What We Recommend
We recommend that the Director of HUD’s Atlanta Office of Community
Planning and Development require the grantee to properly support or repay
$66,879 or the current amount owed in questioned costs. We also recommend
that the Director require the grantee to ensure that the subgrantees follow Program
requirements for verifying and documenting participant eligibility and review a
sample of their files, not included in our review, to verify the participants’
eligibility.
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 a draft report to the grantee on May 5, 2011, and held an exit
conference with grantee and HUD officials on May 20, 2011. The grantee
provided written comments on May 31, 2011, and generally agreed with our
report.
The complete text of the auditee’s response, along with our evaluation of that
response, can be found in appendix B of this report. Attachments to the grantee’s
comments were not included in the report, but are available for review upon
request.
2
TABLE OF CONTENTS
Background and Objective 4
Results of Audit
Finding 1: The Grantee Paid for Unsupported Program Participants 5
Scope and Methodology 9
Internal Controls 11
Appendixes
A. Schedule of Questioned Costs 13
B. Auditee Comments and OIG’s Evaluation 14
3
BACKGROUND AND OBJECTIVE
The Georgia Department of Community Affairs (grantee) was created in 1977 to serve as an
advocate for local governments. On July 1, 1996, the governor and General Assembly merged
the Georgia Housing and Finance Authority with the Georgia Department of Community Affairs.
The grantee operates a host of State and Federal grant programs; serves as the State’s lead
agency in housing finance and development; promulgates building codes to be adopted by local
governments; provides comprehensive planning, technical, and research assistance to local
governments; and serves as the lead agency for the State’s solid waste reduction efforts.
On July 16, 2009, HUD awarded the grantee a Homelessness Prevention and Rapid Re-Housing
Program (Program) grant of $19.1 million. The grantee selected seven subgrantees to administer
its Program. The American Recovery and Reinvestment Act of 2009 (Recovery Act) established
the Program, which is regulated by the U.S. Department of Housing and Urban Development
(HUD) and monitored by HUD’s Office of Community Planning and Development.
The purpose of the Recovery Act is to (1) preserve and create jobs and promote economic
recovery; (2) assist those most impacted by the recession; (3) provide investments needed to
increase economic efficiency by spurring technological advances in science and health; (4) invest
in transportation, environmental protection, and other infrastructure that will provide long-term
economic benefits; and (5) stabilize State and local government budgets to minimize and avoid
reductions in essential services and counterproductive State and local tax increases. The
Program provides homelessness prevention assistance to households that would otherwise
become homeless, many due to the economic crisis, and provides assistance to rapidly rehouse
persons who are homeless as defined by section 103 of the McKinney-Vento Homeless
Assistance Act (42 U.S.C. (United States Code) 11302).
Audit Objective
The objective of our audit was to determine whether the grantee established policies and
procedures to ensure that (1) Program participants were eligible, (2) Program expenditures were
supported with adequate documentation, (3) Program reporting requirements were met, and (4)
subgrantees were monitored and trained.
4
RESULTS OF AUDIT
Finding 1: The Grantee Paid for Unsupported Program Participants
The grantee paid for Program services for participants whose eligibility was not supported with
the required income verification documentation. The deficiencies included 10 files that did not
contain the required explanation for the absence of third-party verification of income and one file
that did not contain the required supporting documentation needed to determine income
eligibility for the household. These conditions occurred because the grantee did not ensure that
the subgrantees adequately followed its policies and procedures for verifying and documenting
participant eligibility in accordance with Program requirements. As a result, 11 of 32 Program
participants’ files reviewed from two subgrantees did not include adequate income verification
documentation. Consequently, the Program participants’ eligibility was not supported for
$66,879 in Program services for rental and utility assistance.
Subgrantee Files Did Not
Include Adequate Support for
Eligibility
The grantee had adequate policies and procedures to ensure that grant funds were
supported with adequate documentation, reporting requirements were met, and
subgrantees were monitored and trained. However, it did not ensure that its
subgrantees adequately followed its policies and procedures to properly establish
eligibility for Program participants and activities.
We visited two of seven subgrantees responsible for administering the grantee’s
Program.
One subgrantee was awarded $10.3 million, of which we tested $99,737, and the
other subgrantee received $1.1 million, of which we tested $98,243. The total
awarded to the two subgrantees was $11.4 million, or 60 percent, of the $19
million awarded to the grantee. We randomly selected a total of 32 of the 2,772
participants’ files for review from the 2 subgrantees.
From our review of the two subgrantees, we identified that the grantee paid
$66,879 for Program services for 11 participants whose eligibility was not
supported with the required income verification documentation. The table below
provides details on the unsupported Program funds associated with the 11
participants and the applicable subgrantee.
5
Client File Type of assistant Assistance
Number Subgrantee provided amount
1 A Rental assistance $ 1,700
Utility assistance 1,109
2 A Rental assistance $ 4,675
Utility assistance 408
3 A Rental assistance $ 2,500
Utility assistance 363
4 B Rental assistance $ 3,960
5 B Rental assistance $ 4,350
Utility assistance 592
6 B Rental assistance $ 4,625
Utility assistance 336
7 B Rental assistance $ 6,950
Utility assistance 818
8 B Rental assistance $ 9,896
Utility assistance 2,731
9 B Rental assistance $ 8,208
Utility assistance 2,357
Motel voucher 218
Moving cost 296
10 B Rental assistance $ 3,960
Utility assistance 227
11 B Rental assistance $ 5,825
Utility assistance 775
Total $ 66,879
The specific deficiencies included 10 files that did not contain the required
explanation for the absence of third-party verification of income and one file that
did not contain the required supporting documentation needed to determine
income eligibility for the household.
For example, one participant file was not documented to show that an attempt was
made by the case worker to obtain third-party income verification for the
participant’s three adult children living in the home. The self-declaration of
income form was completed by the participant’s adult children, but the case
worker did not complete the form as required.
Another participant file reviewed did not contain adequate income support (i.e.,
no pay stubs or verification of income signed by the employer). The income
documentation in the file consisted of handwritten timesheets. A subgrantee
official stated that it was not the best income documentation and acknowledged
that she should have obtained the pay stubs and the verification of income from
the employer.
6
We reviewed the grantee’s monitoring results, which did not disclose any issues
regarding income verification for these participants. However, we identified an
income deficiency in one file reviewed by the grantee. The former Program
coordinator stated that he relied on the case manager’s notes in the file and did not
look for the self-declaration of income form. However, he stated that grantee staff
normally checked for the form.
HUD Homelessness Prevention and Rapid Re-Housing Program eligibility and
documentation guidance states that grantees and subgrantees are responsible for
verifying and documenting the eligibility of all Program applicants before
providing Program assistance. They are also responsible for maintaining this
documentation in the Program participant case file once the participant is
approved for assistance.
HUD Homelessness Prevention and Rapid Re-Housing Program income
eligibility documentation requirements state that documentation standards, in
order of preference, are written third-party verification, oral third-party
verification, and applicant self-declaration.
The Homelessness Prevention and Rapid Re-Housing Program self-declaration of
income form requires Program staff members to sign a statement indicating that
they understand that third-party verification is the preferred method of certifying
income for Program assistance and that the self-declaration form is only permitted
when staff has attempted but been unable to obtain third-party verification.
Program staff members are required to complete the form, documenting attempts
made for third-party verification.
HUD Homelessness Prevention and Rapid Re-Housing Program requires
adequate documentation (i.e., third-party verification or other supporting
documentation) to support client and household members’ incomes. Without
adequate documentation, we were unable to establish whether the households’
gross income met Program requirements.
Conclusion
The grantee paid $66,879 for 11 Program participants whose eligibility was not
supported. By ensuring that its subgrantees properly establish and document that
Program participants are eligible, the grantee will reduce the risk of paying for
participants who do not meet the Program income requirements.
7
Recommendations
We recommend that the Director of the Atlanta Office of Community Planning
and Development require the grantee to
1A. Provide supporting documentation for participants’ eligibility or reimburse
its Program account from non-Federal funds $66,879 or the current amount
owed for participants lacking adequate documentation.
1B. Ensure that the subgrantees follow its policies and procedures for verifying
and documenting participant eligibility in accordance with Program
requirements.
1C. Ensure that the subgrantees review a sample of their files, not included in
our review, to verify the participants’ eligibility in accordance with Program
requirements and reimburse its Program account from non-Federal funds for
participants lacking adequate documentation.
8
SCOPE AND METHODOLOGY
To accomplish our objectives, we
Researched applicable laws and regulations, including guidance issued by HUD and
Office of Management and Budget circulars;
Conducted site visits and interviews with pertinent personnel at HUD, the grantee, and
the subgrantees;
Reviewed the grant agreement, waivers, correspondence, consolidated plan substantial
amendment, and audited financial statements for the grantee;
Reviewed the grantee’s policies and procedures for reimbursement requests and
drawdowns;
Reviewed the grantee’s monitoring policies and procedures, monitoring reports, and files;
Reviewed subgrantees’ client files and policies and procedures for eligibility,
verification, and documentation requirements; and
Reviewed accounting policies and procedures and accounting records of the grantee and
the subgrantees.
The review generally covered the period July 16, 2009, through December 31, 2010. We
performed the review from January through March 2011 at the offices of the grantee and two of
its subgrantees and HUD’s Office of Community Planning and Development, all located in
Atlanta, GA. We adjusted the review period when necessary.
We visited two of seven subgrantees responsible for administering the grantee’s Program. One
subgrantee was awarded $10.3 million, of which we tested $99,737, and the other subgrantee
received $1.1 million, of which we tested $98,243. The total awarded to the two subgrantees
was $11.4 million, or 60 percent, of the $19 million awarded to the grantee. We selected one
subgrantee because it received the most funding and the other subgrantee because of a complaint
received from a Program participant. The complaint involved denying the participant continued
Program assistance, but the decision was reconsidered and reversed. We randomly selected a
total of 32 of 2,772 participants’ files for review from the 2 subgrantees.
We did not review and assess general and application controls over the grantee’s and its
subgrantees’ information system. We conducted other tests and procedures to ensure the
integrity of computer-processed data that were relevant to the audit objectives. The tests
included but were not limited to comparison of computer-processed data to written agreements,
contracts, and other supporting documentation. We did not place reliance on the grantee’s and
its subgrantees’ information and used other supporting documentation for the activities reviewed.
9
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.
10
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:
Policies and procedures for compliance with Program eligibility
requirements,
Policies and procedures for ensuring that grant funds are supported with
adequate documentation,
Policies and procedures for reporting Recovery Act funds, and
Policies and procedures for subgrantee training and monitoring.
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.
11
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:
The grantee did not ensure that the subgrantees adequately followed its
policies and procedures to properly establish eligibility for Program
participants.
12
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
Recommendation
number Unsupported 1/
1A $66,879
1/ 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.
13
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
14
Comment 2
Comment 3
Com
15
OIG Evaluation of Auditee Comments
Comment 1 We recognize the urgency of the participant’s request for assistance; however, the
Program has income documentation standards that must be followed. The grantee
recognizes the importance of the documentation standards in its household
eligibility form, which states that households must be certified as eligible before
they are accepted into the program. The form also states that households may not
receive any services until eligibility is established, and the documentation
supporting statements made on the form must be attached. Simply filling out the
form does not make the household eligible.
Comment 2 We maintain that the files we reviewed did not contain the required verification
information to demonstrate fundamental household income eligibility.
Comment 3 The grantee’s general agreement with the finding and recommendations indicates
its willingness to make necessary improvements to its Program. The grantee
stated it will work with HUD’s Community Planning Development Division to
ensure all HUD program requirements are followed.
16
The Georgia Department of Community Affairs, Atlanta, GA, Paid for Some Unsupported Program Participants
Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-06-07.
Below is a raw (and likely hideous) rendition of the original report. (PDF)