oversight

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)

                                                                  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