Issue Date
February 16, 2011
Audit Report Number
2011 BO 1004
TO: Vicki B. Bott, Deputy Assistant Secretary for Single Family Housing, HU
FROM:
John A. Dvorak, Regional Inspector General for Audit, Region 1, 1AGA
SUBJECT: The Neighborhood Assistance Corporation of America Generally Administered
Its HUD Grants Used for Housing Counseling Activities in Accordance With
HUD Requirements
HIGHLIGHTS
What We Audited and Why
We audited the Neighborhood Assistance Corporation of America (NACA), a Department of
Housing and Urban Development (HUD)-approved organization providing housing counseling
services to qualified home buyers or homeowners with unaffordable mortgage payments. The
audit was initiated at the direction of HUD’s Inspector General. Our audit objective was to
determine whether NACA properly administered its HUD grants used for housing counseling
activities in accordance with HUD requirements. Since HUD has the responsibility to approve
and ensure compliance with counseling requirements, the audit did not evaluate NACA’s initial
and continued approval as a counseling agency.
To achieve our objective, we determined whether (1) NACA provided counseling services in
accordance with the HUD grants and properly addressed client complaints; (2) HUD funds were
properly accounted for and used to pay only counselor salaries; (3) NACA’s process for
documenting and reporting program results/outcomes complied with HUD grant requirements;
(4) NACA staff was adequately trained and experienced in housing counseling and whether
management staff adequately monitored the work of the counselors; and (5) NACA complied
with HUD disclosure and conflict-of-interest requirements.
What We Found
NACA generally administered its HUD grants used for housing counseling activities in
accordance with HUD requirements. With respect to HUD’s conflict of interest disclosure
requirements, NACA adequately informed its counseling clients of its relationships with major
industry partners. However, NACA needs to resolve issues raised by HUD with respect to how
it discloses relationships that its local offices may have with local industry partners, such as
lenders and realtors. This report discusses each area audited as indicated above to achieve our
objective. This report contains no recommendations because HUD has already asked NACA to
identify every industry partner with which NACA has a financial relationship, and amend their
disclosures to fully disclose these arrangements. Therefore, no further action is necessary with
respect to our report.
Auditee’s Response
We provided NACA and HUD officials with a discussion draft report on November 17, 2010 and
held an exit conference with NACA on November 19, 2010. NACA did not provide formal
written comments because the report contained no recommendations. Subsequent to issuing the
discussion draft report, HUD officials met with us and relayed a number of concerns regarding
NACA. Those concerns were formalized in a letter to NACA dated December 21, 2010. We
performed additional audit work based on HUD’s letter and the additional information HUD
provided regarding consumer complaints against NACA and determined that additional
information was either unrelated to NACA’s administration of the HUD grants, or did not
significantly impact our audit conclusion. Although OIG’s review did not disclose any
significant systemic deficiencies or concerns regarding NACA’s administration of the Housing
Counseling grant, HUD’s Office of Single Family has pending issues that they are continuing to
address with NACA.
We provided NACA with a second draft audit report on February 9, 2011, and held a second exit
conference on February 14, 2011 to discuss the draft report. NACA choose not to submit formal
comments on the report, but indicated it generally agreed with the report.
2
TABLE OF CONTENTS
Background and Objective 4
Results of Audit 6
NACA Properly Administered Its HUD Grants Used for Housing Counseling
Activities in Accordance With HUD Requirements
Scope and Methodology 14
Internal Controls 16
3
BACKGROUND AND OBJECTIVE
The Neighborhood Assistance Corporation of America (NACA) is a nonprofit home ownership
organization providing housing counseling services to low-to-moderate- income people who will
live in communities that need increased home ownership and improvement or people who have
difficulty obtaining reasonable and affordable credit.
The Chief Executive Officer started the organization approximately 30 years ago. The NACA
headquarters office is located in Jamaica Plain, MA, a neighborhood within Boston. There are
38 sub offices located throughout the country with approximately 789 counselors. Of the 789
counselors, 549 are located at NACA’s Charlotte, NC, counseling center. The counselors in
Charlotte perform counseling exclusively by telephone, whereas counselors in all other locations
conduct one-on-one or face-to-face counseling. Payroll and other financial transactions are
processed exclusively through NACA’s headquarters in Jamaica Plain, MA. NACA received two
U.S. Department of Housing and Urban Development (HUD) grants of more than $1.1 and $1.2
million in October 2008 and October 2009, respectively, to be used to pay salaries of
counselors. The NACA counselors provided two types of counseling activities: prepurchase
home-buyer counseling (purchase program) and assisting with resolving or preventing mortgage
delinquencies (Home Save program).
All clients counseled are provided a purchase participation agreement to review and sign, and
under this agreement, the clients can elect either to be a NACA member or a nonmember. A
nonmember may participate in a group counseling workshop and obtain prepurchase counseling
but is not charged fees for counseling activities. However, for those trying to obtain a mortgage
through NACA, there is a minimal $20 yearly fee per household. In addition, for homeowners
who have purchased a home through the NACA program, there is a membership fee of $50 per
month over a period of up to 10 years.
Under the Home Save program, HUD funds pay counselors to evaluate a client’s existing
mortgage and document a budget to determine an affordable mortgage amount. The counselor
determines the budget based on the client’s income verifications, liabilities taken from the
client’s credit report, and expenses. The counselor reviews the affordable mortgage payment and
develops a solution, such as initiating a repayment plan, forbearance agreement, or traditional
mortgage modification. The HUD grant pays for counseling only up to the point at which the
counselor develops a solution and the client’s file is ready for submission to a lender/servicer.
All clients counseled are provided a participation agreement to review and sign, and under this
agreement, the clients can elect either to be a Home Save member or a nonmember. Neither a
NACA member nor nonmember is to be charged a fee for a service provided through the Home
Save program. Home Save clients are eligible for a broad range of home ownership services,
including extensive written materials regarding home ownership issues and budgeting;
homeowner classes, which include important budgeting information; additional telephone and
one-on-one financial counseling; and post solution follow-up and assistance. The agreement
states that NACA reserves the right to, from time to time, make special assessments on members.
4
NACA uses an internal client management system called Lynx, which interfaces with HUD’s
databases for the collection and reporting of agency and client-level data. Lynx automates much
of the housing counseling process, including client intake, file maintenance, financial and credit
analysis, outreach, client notification, and reporting. Lynx is a paperless system with clients
providing documents for scanning. Lynx requires complete information and documentation for
determination of an effective and quality counseling session. Lynx tracks information at the
individual client level, counselor level, and branch level.
Our audit objective was to determine whether NACA properly administered its HUD grants used
for housing counseling activities in accordance with HUD requirements. To achieve our
objective, we (1) determined whether NACA clients were provided counseling services in
accordance with HUD requirements and whether NACA took proper steps to address client
complaints; (2) ensured that HUD funds were properly accounted for and used to pay only
counselor salaries; (3) evaluated NACA’s process for documenting and reporting program
results/outcomes, including determining whether reports were prepared and submitted to HUD in
a timely manner, verifying the authenticity of statistics in reporting documents, and determining
how outcome/results were quantified and whether they showed that NACA was achieving its
goals; (4) determined whether NACA staff was adequately trained and experienced in housing
counseling and whether management staff adequately monitored the work of the counselors; and
(5) determined whether NACA complied with HUD disclosure and conflict-of-interest
requirements.
Our audit scope did not include determining whether NACA met all of HUD’s requirements as a
counseling agency approved to receive HUD and other federal funding since that was outside of
our objective of determining whether NACA properly administered its housing counseling grant.
In addition, our audit scope did not include reviewing NACA’s activities that were unrelated to
and outside of HUD’s counseling grant and that occurred after clients were qualified for
homeownership borrowing credit or after a mortgage modification or home save/sale solution
was submitted by a NACA specialist to a lender/servicer/investor.
5
RESULTS OF AUDIT
NACA Generally Administered Its HUD Grants Used for Housing
Counseling Activities in Accordance With HUD Requirements
NACA generally complied with HUD requirements in administering its fiscal years 2009 and
2010 HUD grants. Specifically, it (1) provided counseling services to clients in accordance with
HUD requirements and followed adequate measures to address client complaints, (2) ensured
that HUD funds were properly accounted for and used to pay only counselor salaries, (3)
prepared and submitted accurate and reliable reports to HUD in a timely fashion and successfully
achieved its program goals, and (4) ensured that its staff was adequately trained and experienced
in housing counseling and NACA management sufficiently monitored the work of the
counselors. However, although NACA informed its counseling clients of its relationships with
major industry partners, it needs to resolve issues raised by HUD with respect to how it discloses
relationships that its local offices may have with local industry partners, such as lenders and
realtors. This report contains no recommendations because HUD has already asked NACA to
identify every industry partner with which NACA has a financial relationship, and amend their
disclosures to fully disclose these arrangements.
Counseling Services Were
Provided in Accordance With
HUD Requirements
We determined that housing counseling services provided by NACA were
performed in accordance with grant agreements and HUD regulations based on a
review of client files supporting counseling sessions in a sample of 20 NACA
clients and observations made during two counseling sessions conducted at
NACA’s headquarters office in Jamaica Plain, MA. The files showed that
housing counselors documented the activities required by the grant agreements,
including:
Preparing a budget based on an analysis of the client’s income, expenses,
spending habits, and use of credit.
Preparing an action plan that outlined what counselors and the clients would
do to meet the client’s housing goals.
Conducting a reasonable discussion of alternatives and options available to the
clients and providing a comprehensive “Community Resource Guide,” which
6
included the names of local agencies and organizations, besides NACA, that
offered mortgages as well as services related to mortgage modifications and
forbearance agreements/repayment plans.
Making an effort to have follow-up communication with the client to ensure
that the client progressed toward his/her housing goals. NACA recently
implemented a change in the NACA-Lynx system to better assist clients in
progressing toward their housing goal. The NACA-Lynx is now designed to
send out an automatic e-mail to a client if there is no update on a client file for
30 days. This e-mail will alert the client and the counselor that there has been
no contact received by the client for 30 days and advise the client to contact
his/her counselor or office manager/supervisor immediately to ensure
completion of outstanding issues.
We conducted interviews with eight of the twenty former NACA clients we
attempted to contact. Of the eight, two were pursuing loans and six were looking
for assistance under the Home Save program. Of the remaining twelve clients, six
relocated and could not be reached and six clients failed to return OIG’s repeated
phone calls. The eight clients stated they were satisfied with NACA services and
found counselors were helpful and supportive during the entire process. For
example, one NACA counselor was instrumental in preventing a foreclosure of a
client’s home and another counselor helped to modify a client’s mortgage to what
was affordable.
We followed up on 58 client complaints we received from HUD’s Office of
Single Family Program Development in September and December 2010.1 The
complaints covered the period from July 2008 to November 2010. We
determined that 17 of the complaints were related to counseling services covered
under the HUD grants.2 We found that NACA had made a reasonable effort to
address all 17 complaints. Eight of the complaints dealt with NACA’s failure to
have follow-up communication with clients, but as noted, NACA had
implemented a change that should increase communication between counselors
and clients. The remaining 41 of 58 complaints involved issues that arose after
the client was approved by NACA for qualification of a mortgage or after a
NACA counselor developed a solution for the client’s current mortgage related
problems and the client’s file was ready for submission to a lender/servicer.
Since NACA counseled more than 59,000 clients from October 1, 2008, to June
30, 2010, we determined the number of housing counseling complaints (less than
1
We did not determine the extent of the complaints because neither NACA nor HUD maintained a complaint log
showing the number of complaints made against NACA regarding the counseling program.
2
The complaints included: Lack of communication or follow up between NACA, client and/or servicer (8); Client
failed to adhere to NACA policies and procedures (2); non-specific but clients were approved for mortgage
modifications (2); and the information provided was too vague and lacked sufficient details to determine the specific
complaint or client status (5). NACA does not maintain a file or record of complaints.
7
one half percent) relating to the housing counseling grant did not warrant an audit
finding within the scope of this audit.
HUD Funds Were Supported
and Used To Pay Counselor
Salaries
We determined that HUD funds were adequately supported and were used only to
pay counselor salaries by reconciling drawdowns totaling more than $1.1 million
(fiscal year 2008 grant) to bank statements and payroll records. This was the first
grant NACA received from HUD, and the funding represented only 5.94 percent
of the total funding (more than $18.8 million) awarded to NACA in that year for
its counseling activities. A review of NACA’s allocation method ensured that
each counselor was equally weighted in the allocation of salaries to the grant.
The HUD funding contributed $1,419 toward each counselor’s annual salary,
which translated to an hourly rate of $0.68 paid to each counselor for counseling
services.
Program Results Showed That
NACA Was Achieving Its Goals
We determined that NACA’s system for documenting and reporting program
results and outcomes was adequate. The quarterly reports (HUD form 9022) and
quarterly logic models (HUD form 96010) were properly prepared and submitted
in a timely manner to HUD. The quarterly reports and quarterly logic models
show goals accomplished, such as the number of people purchasing a home or
pursuing a mortgage modification. We verified the authenticity of statistics by
reconciling data from the fiscal year 2009 quarterly report to documents generated
from NACA-Lynx. When comparing NACA’s counseling volume, including
workshops, attributed to the HUD grant in all of 2009 (35,034), NACA’s
counseling volume for just the first two quarters of 2010 (58,087) had already
exceeded 2009’s counseling volume.
As previously stated, the NACA benchmark for a successful outcome or the
achievement of a goal occurs when a client receives one-on-one counseling.
Compared to counseling attributed to the HUD grant reported on the 2009
quarterly report, NACA’s counseling statistics for just the first three quarters of
2010 had already exceeded last year’s counseling activity (see table below).
8
Activity FY 2009 Oct. 2009 to Change
June 2010
Purchased housing 32 39 7
Mortgage ready in 90 days 499 746 247
Other - purchase program 5 0 <5>
Mortgages modified 8,272 22,425 14,153
Initiated forbearance 459 423 <36>
agreement/repayment plan
Currently receiving foreclosure 6,655 20,052 13,397
prevention/budget counseling
Total clients receiving one-on-one 15,922 43,685 27,763
counseling
The recipients of HUD housing counseling grants are also required to report
activities under the grant in a format prescribed by HUD, namely quarterly logic
models. The logic model established specific goals attributed to the relevant grant
and includes designated time frames required by the grant agreement. Our review
of logic models showed that NACA exceeded its goals. For NACA’s first goal of
providing information and advice regarding home buying and home ownership,
NACA projected that it would counsel 551 households for fiscal year 2009. In
just the first quarter of 2009, 306 households were counseled, which is 55 percent
of NACA’s goal. NACA’s second goal was to provide information and advice
regarding resolving or preventing mortgage delinquency or default. NACA
projected that it would counsel 551 households during the year, and in the first
quarter, 391 households were counseled, which is about 71 percent of its goal.3
Counselors Were Adequately
Trained and Experienced and
Counselor Activities Were
Properly Monitored
HUD Handbook 7610.1, states that a housing counseling agency must employ
staff trained in housing counseling and at least half of the counselors must have at
least six months experience in the job they will perform in the agency’s housing
counseling program. NACA’s 2008 grant application indicated that staff was
experienced in housing counseling with an average of 5.5 years of housing
counseling-related experience. We obtained a listing/schedule of the years of
counseling experience by counselor which showed counselors’ years of
experience outside of NACA and the years of experience in one-on-one
3
NACA submits goals for its counseling program to HUD through the annual logic model (HUD Form 96010) as
part of the application process. Subsequently, the goals are approved by HUD as part of the grant.
9
counseling with NACA. A review of a sample of personnel files substantiated
that one-half of the NACA counselors had at least 6 months’ experience in one-
on-one counseling with NACA alone. We also observed training certificates for
counselors whose counseling sessions OIG observed at NACA’s headquarters
office in Jamaica Plain, MA. In addition, NACA provides 50 hour live classroom
education required within 45 days of hire for all counselors. Other forms of
training include weekly conference calls, powerpoint presentations, and web-
based conferences for all staff nationwide with management to further develop
counseling skills and education.
NACA’s quality control staff ensured that counseling activities were performed in
compliance with HUD Handbook 7610.1, which stipulates that supervisors must
review client files to determine the adequacy and effectiveness of the housing
counseling and document results. We determined that NACA complied with
these requirements through our review of logs maintained by supervisors to
document and track counselor work activities and performance. In addition, we
reviewed reports documenting supervisor evaluations of specific counseling
sessions. NACA procedures state that a counselor’s written narrative and
recorded phone calls are reviewed and rated to ensure that the counseling is
comprehensive, accurate, and professional, and grades based on these ratings are
posted in the Lynx system.
NACA’s Conflict of Interest
Disclosures Informed Clients of
Relationships with Major
Industry Partners
NACA provided its clients with a disclosure statement/participation agreement
that described the various types of services provided and identified entities with
which NACA had a financial relationship. The disclosure statement stipulated
that NACA had agreements with major servicers and investors to restructure loans
by reducing the interest rate to a mortgage payment the client could afford. The
disclosure further stated that the client was not obligated to receive any other
services offered by NACA or its exclusive partners. In addition, the disclosure
provided information on alternative services, programs, and products. One of the
options included in the disclosure statement involved the short sale designed for
clients at risk of foreclosure. All clients whose files we reviewed signed the
disclosure document acknowledging that they were informed about what was
contained in the document.
We assessed a concern stated by HUD as to whether or not a potential conflict of
interest existed because NACA provides both counseling services and mortgage
brokerage services to its clients. HUD had also expressed concerns about the fact
10
that NACA receives funds from other entities and was using those funds to
compensate counselors. While this was not a major component of our audit, we
did assess these concerns. Our legal counsel researched the conflict of issue
provisions related to housing counseling services and reached the following
conclusions.
Housing counseling services are governed generally by 24 CFR Part 214 and
HUD Handbook 7610.1. Conflict of interest matters are specifically addressed at
24 CFR § 214.303, and HUD Handbook paragraph 6-2. In drafting its conflict of
interest regulation, HUD clearly contemplated circumstances in which housing
counseling agencies would provide more than just housing counseling services4.
In response to a comment suggesting that the definition of a conflict of interest
should not prevent housing counseling agencies from providing opportunities in
mortgage underwriting, pricing, houses, or services to its clients, the preamble to
HUD’s final rule implementing the Housing Counseling Program clearly states
that HUD “believes the conflicts of interest requirements should not limit the
housing counseling agency from providing additional, related services. Therefore,
HUD has revised the conflicts of interest provision to allow for additional
flexibility in agency activities.5” Moreover, HUD revised the proposed rule to
clarify that it intended to allow employees of housing counseling agencies to
provide additional related services as long as the provision of those services were
occurring as part of an employee’s employment with the housing counseling
agency.6
24 CFR Section 214.303(f)(1) and HUD Handbook 7610.1, paragraph 6-2.B.
generally prohibits a NACA employee from engaging in activities that create a
real or apparent conflict of interest. Such a conflict would arise if the employee
has a direct financial interest in the client. Our audit found no instance where a
NACA counselor obtained a direct financial interest in the client (the person being
counseled) such as being the client’s landlord, broker, creditor, underwriter of a
mortgage, or collection agent as to the property. The audit found that the
counselors employed by NACA were just that, NACA employees. The audit
found no violation of this conflict of interest regulation.
24 CFR Section 214.303(f) (2) and Handbook 7610.1 paragraph 6-2.C. prohibit a
NACA employee from referring clients to mortgage lenders, brokers, builders, or
real estate sales agents or brokers in which the employee has a financial interest,
4
See 24 CFR 214.303(f)
5
See 72 FR 55638, 55644
6
Conclusion based upon a comparison of section 214.303(e) in the proposed rule, 69 FR 77118 to section
214.303(f) in the final rule, 72 FR 55638. Further, HUD’s “Application for Approval as Housing Counseling
Agency” reaffirms that HUD fully anticipated that some housing counseling agencies would engage in additional,
related services and that doing so would not necessarily disqualify them from serving in such a capacity. The
application asks to “Describe any other housing programs or activities the applicant agency and branches or
affiliates offer. Examples include administering down payment assistance programs, developing housing projects,
managing apartment buildings, rehabilitating and reselling HUD homes, and selling real estate.” See form HUD-
9900, section B, Part 1, subsection 5.
11
or accepting a fee or any other consideration for referring a client to mortgage
lenders, brokers, builders, or real estate sales agents or brokers. The audit did not
find any evidence that the counselors received a fee or other
compensation directly from NACA partners for informing the clients about
NACA related services and did not find any “steering” of clients to NACA-related
entities. Accordingly, the audit found no violation of this conflict of interest
regulation.
HUD Needs to Assess NACA’s
Disclosures of Its Relationships
with Local Industry Partners
24 C.F.R. Section 214.303(g) and Handbook 7610.1 paragraph 4-10.G. require
NACA to provide all clients with a disclosure statement that explicitly describes
the various types of services provided by the agency and any financial
relationships between the agency and any industry partners. The very fact that the
disclosure rules require disclosure of any financial relationships between NACA
and other industry partners, such as lenders, realtors, and perhaps title and escrow
companies, demonstrates that such relationships were anticipated by HUD and are
permissible, so long as they are fully disclosed. The disclosure rules also require
that when clients are counseled, they be advised that they are under no obligation
to receive any other service provided by the agency or its exclusive partner.
Furthermore, the agency must provide information on alternative services,
programs, and products. The audit found that NACA generally provided the
above disclosures with regard to its major industry partners and is generally
meeting the disclosure requirements with respect to those partners.
However, NACA disclosures did not list individual industry partners having a
relationship with its local offices, particularly smaller entities or individuals, such
as real estate agents. In responding to this issue that was raised by HUD during
its monitoring reviews, NACA stated that its industry partners were constantly
changing so they could not continually update the disclosure statements to reflect
all financial relationships with the specific entities. Also, NACA further contends
that it is meeting its disclosure obligations by generally disclosing that they are
mortgage brokers and receive fees from various partners for home purchase loans,
restructuring/modifying loans, and real estate activities. Moreover, it contended
that maintaining and keeping such lists current would be unreasonable and
administratively difficult. Whether or not this disclosure meets applicable
requirements is ultimately for HUD to determine. Our audit did not address the
extent to which such local relationships may exist and was limited to assessing the
content of NACA’s standard disclosures. However, if financial relationships
between the local partners and the local NACA office exist and the specific
partners are not identified, NACA’s standard disclosure might not meet the
regulatory requirement.
12
Although OIG’s review did disclose a potential deficiency regarding NACA’s
standard disclosure, HUD’s Office of Single Family had formalized and
addressed this issue in the letter they sent to NACA dated December 21, 2010.
Therefore, this report does not contain any recommendations regarding the
potential deficiency identified since HUD has already asked NACA to identify
every industry partner with which NACA has a financial relationship, and amend
NACA’s disclosures to fully disclose these arrangements.
Conclusion
NACA generally complied with HUD requirements in administrating its fiscal years
2008 and 2009 HUD housing counseling grants. Specifically, it (1) provided
counseling services to clients in accordance with HUD requirements and followed
adequate measures to address client complaints, (2) ensured that HUD funds were
properly accounted for and used to pay only counselor salaries, (3) prepared and
submitted accurate and reliable reports to HUD in a timely fashion and successfully
achieved its program goals, and (4) ensured that its staff was adequately trained and
experienced in housing counseling and counseling activities were sufficiently
monitored. However, there is a potential deficiency regarding NACA’s standard
disclosure, namely a possible failure by NACA to include all local partners with
which it has financial relationships with in its standard disclosure as required by
regulation. Since HUD has already asked NACA to identify every industry partner
with which NACA has a financial relationship, and amend its disclosures to fully
disclose these arrangements, this report does not contain any recommendations
regarding this potential deficiency and requires no further action with respect to this
report.
13
SCOPE AND METHODOLOGY
We performed our audit work between August and October 2010. We completed our fieldwork
at the auditee’s office located at 3607 Washington Street, Jamaica Plain, MA. Our audit covered
the period October 1, 2008, through September 30, 2010, and was extended as necessary to meet
our audit objectives. To complete our audit , we
Researched and reviewed applicable HUD handbooks, regulations, grant agreements,
and HUD noticies.
Reviewed NACA’s policies and procedures related to housing counseling and
reviewed the organization’s monitoring policies and procedures to ensure that they
were consistent with HUD requirements.
Interviewed NACA, and HUD program staff.
Evaluated the internal controls and conducted sufficient tests to determine whether
controls were functioning as intended, including making an assessment of the
reliability of financial data.
Reviewed independent auditors’ reports.
Evaluated NACA’s computer system (NACA-Lynx) to determine the nature of the
system, extent of use, NACA’s experience with the computer system, its ability to
operate and maintain the system, how access to the system is controlled, who assigns
access, and how results are monitored.
Traced two Line of Credit Control System drawdowns totalling more than $1.1
million to bank statements and operating accounts and reconciled amounts from
operating accounts to payroll records.
Evaluated NACA’s allocation method and determined the amount of HUD funding
allocated per counseler.
Evaluated NACA management practices for monitoring counselor activities and
determined whether staff was adequately trained and experienced in counseling
activities. We tested the years of counselors’ experience by selecting the first ten
counselors as their names appeared on a listing/schedule showing years of experience
by counselor to experience shown on staff resumes and other documents from
personnel records.
Evaluated NACA’s counseling sessions for assurance that counseling was performed
in accordance with HUD rules and regulations. We selected a random sample of 20
identification (ID) numbers generated by NACA’s computer system and representing
an intake counseling session for individuals either pursuing home ownership (5) or a
mortgage modification /forbearance agreement (15). The sample size of 20 was
obtained from a universe of 6,245 ID numbers that represented intake or new
counseling activity that took place in June of 2009 for all NACA sub offices. The
universe was too large for a 100 percent selection and there was insufficient
information available to make a risk-based selection. Based on discussions with
NACA staff, June of that year was least likely to include counseling activity from a
“Save the Dream” event. Any of these events would include massive counseling
sessions, and our universe was large enough without having to include such an event.
14
Verified the authenticity of data in HUD 9022 reports and logic models and
determined whether reports were submitted to HUD in a timely manner and whether
NACA achieved its goals established for counseling activities.
Determined whether NACA complied with HUD disclosure and conflict-of-interest
requirements.
After the November 2010 draft report was issued, we performed additional audit
work as follows: interviewed HUD general counsel staff regarding their position on
NACA conflict-of -interest issues; reviewed and evaluated separate performance
reviews HUD conducted at 18 NACA sub offices; conducted interviews with eight of
the 20 clients whose files were initially subject to OIG review; and reviewed all HUD
provided client/congressional complaints on NACA and evaluated NACA’s efforts to
address the counseling related complaints.
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
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.
15
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:
Procedures to ensure that HUD funds are properly accounted for and used to
pay only counselor salaries.
Procedures to reasonably ensure that clients are provided counseling
services in accordance with HUD requirements.
Procedures to ensure that program outcomes/results are reported
accurately and in a timely manner.
Procedures to ensure compliance with HUD disclosure and conflict-of-
interest requirements.
Procedures to ensure that staff is adequately monitored.
We assessed the relevant controls identified above.
We evaluated internal controls related to the audit objective in accordance with
generally accepted government auditing standards. Our evaluation of internal
controls was not designed to provide assurance on the effectiveness of the
internal control structure as a whole. Accordingly, we do not express an opinion
on the effectiveness of NACA’s internal controls.
16
The Neighborhood Assistance Corporation of America Generally Administered Its HUD Grants Used for Housing Counseling Activities in Accordance With HUD Requirements
Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-02-16.
Below is a raw (and likely hideous) rendition of the original report. (PDF)