Issue Date
June 2, 2011
Audit Report Number
2011-FW-1009
TO: Sandra H. Warren
Director, Office of Community Planning and Development, 6ED
//signed//
FROM: Gerald R. Kirkland
Regional Inspector General for Audit, Fort Worth Region, 6AGA
SUBJECT: The City of Houston, TX, Did Not Ensure That Its Homelessness Prevention and
Rapid Re-Housing Program Complied With Recovery Act Requirements
HIGHLIGHTS
What We Audited and Why
In accordance with our goal to review funds provided under the American
Recovery and Reinvestment Act of 2009 (Recovery Act), we reviewed the City of
Houston’s (City) Homelessness Prevention and Rapid Re-Housing Program
(Homeless Program). Our objective was to determine whether the City ensured
that its Homeless Program complied with Recovery Act and U. S. Department of
Housing and Urban Development (HUD) laws, regulations, and requirements.
What We Found
The City did not ensure that its Homeless Program complied with Recovery Act
requirements. Specifically, it did not ensure that subrecipients properly
documented eligibility for 13 of the 16 client files reviewed. This condition
occurred because the City did not provide appropriate guidance to the
subrecipients or properly monitor their performance. As a result, it paid $59,274
in Homeless Program assistance for tenants whose eligibility was not adequately
documented and inappropriately paid $300 directly to one tenant.
What We Recommend
We recommend that the Director of Community Planning and Development,
Houston, TX, require the City to (1) conduct quarterly onsite monitoring of its
subrecipient agencies to ensure that they comply with Homeless Program rules and
requirements and ensure that the agencies maintain adequate records of client
eligibility, (2) provide supporting documentation for 13 participants lacking
adequate documentation or reimburse its Homeless Program account $59,274 from
non-Federal funds, and (3) reimburse its Homeless Program account $300 from
non-Federal funds for ineligible expenses.
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 issued a draft report to the City and HUD on May 12, 2011, and requested
written comments by May 23, 2011. We conducted an exit conference on May 17,
2011. The City requested an extension and provided its written comments on
May 25, 2011. It generally agreed with the report.
The complete text of the City’s response, along with our evaluation of that
response, can be found in appendix B of this report.
2
TABLE OF CONTENTS
Background and Objective 4
Results of Audit
Finding: The City Did Not Ensure That Its Homeless Program Complied With 5
Recovery Act Requirements
Scope and Methodology 9
Internal Controls 10
Appendixes
A. Schedule of Questioned Costs 11
B. Auditee Comments and OIG’s Evaluation 12
C. Table of Deficiencies 15
3
BACKGROUND AND OBJECTIVE
On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of
2009 (Recovery Act), which included $1.5 billion for the Homelessness Prevention and Rapid Re-
Housing Program (Homeless Program). Funding for the program was distributed based on the
formula used for the Emergency Shelter Grants program and is administered by the U. S.
Department of Housing and Urban Development’s (HUD) Office of Community Planning and
Development.
The purpose of the Homeless Program is to provide homelessness prevention assistance for
households that would otherwise become homeless, many due to the economic crisis, and rapid
re-housing assistance for persons who are homeless as defined by section 103 of the McKinney
Vento Homeless Assistance Act (42 U.S.C. (United States Code) 11302). HUD allows grantees
the discretion to develop prevention and/or rapid re-housing programs that meet locally defined
needs. However, HUD also expects that those resources will be targeted and prioritized to serve
households that are most in need of temporary assistance and are most likely to achieve stable
housing, whether subsidized or unsubsidized, after the Homeless Program concludes. The
Homeless Program provides temporary financial assistance and housing relocation and
stabilization services to individuals and families who are homeless or would be homeless but for
this assistance.
HUD entered into a grant agreement with the City of Houston (City) to distribute more than $12.3
million in Homeless Program funds to entities responsible for carrying out Homeless Program
activities. HUD required the City to be responsible for ensuring that each entity fully complied
with Homeless Program requirements. HUD also required the City to submit a monitoring plan
and develop and maintain a schedule for monitoring all subrecipients or contractors1 because both
HUD and the Office of Inspector General (OIG) had previously cited the City for not adequately
monitoring its subgrantees.2
The City administered the Homeless Program through its Housing and Community Development
Department (Department). The Department contracted with the Child Care Council of Greater
Houston (Council), a nonprofit organization, to distribute program funds and manage participant
assistance payments. Through the Council, the Department allocated Homeless Program funds to
10 nonprofit agencies and the City’s Health and Human Services Department to provide direct
services to participants. The Department also contracted with the Coalition for the Homeless,
another nonprofit agency, to provide data collection and evaluation services.
Our objective was to determine whether the City ensured that its Homeless Program complied
with Recovery Act and HUD laws, regulations, and requirements.
1
HPRP [Homeless Program] Grant Agreement, Attachment A: Special Conditions
2
OIG Audit 2009-FW-1011
4
RESULTS OF AUDIT
Finding: The City Did Not Ensure That Its Homeless Program Complied
With Recovery Act Requirements
The City did not ensure that its Homeless Program complied with Recovery Act requirements.
Specifically, it did not ensure that subrecipients properly documented eligibility for 13 of the 16
client files reviewed. This condition occurred because the City did not provide appropriate
guidance to the subrecipients or properly monitor their performance. As a result, it paid $59,274
in Homeless Program assistance for tenants whose eligibility was not adequately documented and
inappropriately paid $300 directly to one tenant.
The Department Did Not
Ensure Compliance With
Documentation Requirements
The City administered the Homeless Program through the Department. However,
the Department did not ensure that 13 of 16 participant files complied with
Homeless Program documentation requirements.3 The 13 files lacked initial
and/or subsequent assessments of need, did not appropriately document evidence
of income, and contained other miscellaneous errors. The 13 erroneous files are
summarized in the table below.
Sample Unsupported Ineligible Lack initial Other error
number costs costs and/or
subsequent need
assessment
1 $4,430 X
2 1,647 X
4 8,654 X X
6 3,942 X
7 $300 X
8 4,035 X
9 5,340 X
10 3,517 X
12 6,596 X
13 8,151 X X
14 2,697 X X
15 8,985 X X
16 1,280 X X
Totals $59,274 $300 13 5
3
See appendix C for deficiencies identified in the 16 participant files.
5
Participant Files Lacked
Adequate Documentation
The Department did not ensure that four nonprofit subrecipient agencies complied
with Homeless Program documentation requirements for assessing need in 13 of
16 participant files reviewed. Eleven of the 13 files lacked required documentation
of the caseworkers’ assessment of the participant’s lack of other housing options,
lack of sufficient financial resources, and/or lack of support networks to obtain
immediate housing and/or remain in existing housing.4 The other two files lacked
other eligibility requirements. The first lacked third-party documentation or a
signed self-certification of the client’s homeless status. The second lacked
complete income documentation. In four files, caseworkers did not document the
quarterly recertification of the participants’ continued eligibility as required.5
Participant Files Contained
Other Errors
In addition to lacking documentation to support participant eligibility, five
participant files contained other errors, including incorrectly calculated length of
assistance, lack of evidence of rent reasonableness certifications, and lack of
evidence that lead-based paint testing was conducted when required.
In one case, a participant received 2 months of rental assistance from the Harris
County Homeless Program before being admitted to the City’s Homeless Program.
Although this information was noted in the case file, the case manager did not
include the 2 months of prior assistance in the calculation of the total number of
months the participant had received assistance. Further, the Council’s payment
records only included the payments that it issued. The records did not include the
payments issued by Harris County’s Homeless Program. This discrepancy in the
length of assistance provided could result in participants receiving more than the
maximum amount of assistance.6 The Department should ensure that the Council
includes in its records the cumulative number of months a participant has received
Homeless Program assistance from all Homeless Program sources.
To ensure that the amount of rental assistance paid for units complied with HUD’s
standard of “rent reasonableness,” HUD required that subrecipients conduct and
document rent reasonableness reviews for all program-assisted units.7 Of the 16
files reviewed, 3 did not contain rent reasonableness certifications.
4
HUD’s Homelessness Prevention and Rapid Re-housing Program Eligibility Determination and Documentation
Guidance, Revised March 17, 2010, Chapter 2-Assessment
5
Ibid.
6
HUD Federal Register Notice, FR-5307-N-01, section IV.A.1.a.(1)
7
HUD Federal Register Notice, FR-5307-N-01, section IV.A.1.a.(4)
6
Further, all units built before 1978 and housing a child under age 6 were required by
the Residential Lead-Based Paint Hazard Reduction Act of 19928 to be assessed for
lead-based paint and to have any lead-based paint abated. Three of the files for units
built before 1978 and housing a child under age 6 did not contain evidence that
lead-based paint testing had been conducted.
Because of the missing documentation, the Department and HUD could not be
assured that the City’s Homeless Program complied with Federal regulations.
The Department Did Not
Properly Guide or Monitor
Subrecipients
The file errors occurred and were not detected or corrected because the Department
did not provide effective guidance to its subrecipients and did not monitor them in
accordance with its monitoring plan.
For example, two of the four subrecipients did not conduct habitability reviews on all
Homeless Program-assisted units as required by the Department. They only
conducted a habitability review when a client moved into a different unit under the
program. These two subrecipients were not aware of the Department’s requirement
to conduct habitability inspections on all Homeless Program-assisted units.9
In another example, the Department paid $300 in ineligible expenses for one
participant. The subrecipient did not inform the participant that a returned rental
security deposit of $300 paid with Homeless Program funds was to be used to secure
the participant’s next rental unit under the program. Instead the participant used the
returned funds for personal expenses, and the Department paid an additional $400
security deposit for the participant’s new unit.
The City did not detect or correct the errors because it did not monitor the
subrecipients in accordance with its monitoring plan. The Department had
developed a monitoring plan;10 however, it did not fully implement the plan.
Specifically, the Department
Did not conduct quarterly site visits to its subrecipients as required by its
monitoring plan.11 Department staff performed technical assistance visits
to 10 subrecipients in February 2010, when they were either beginning or
8
HUD Federal Register Notice, FR-5307-N-01, section VII.F
9
HUD Federal Register Notice, FR-5307-N-01, section VII.C. requires habitability inspections for units into
which a participant would be moving and states that the grantee may require more stringent standards. The City
required its subrecipients to conduct habitability inspections for all units in the Homeless Program.
10
City of Houston, Subrecipient Monitoring Plan for Public Service & HOPWA [Housing Opportunities for
Persons with AIDS], HUD Grant Funded Projects, Revised September 4, 2009.
11
Department managers stated that they were in the process of restructuring their Compliance and Monitoring
Division and there was confusion as to which group should have conducted the quarterly site visits.
7
about to begin Homeless Program operations, and visited an 11th
subrecipient in June 2010. Staff from another City division conducted
monitoring reviews of four direct-service subrecipients and the Council in
September 2010.
The Department did not develop required monitoring schedules.
The Department did not always send formal monitoring results letters to the
subrecipients within the required 30 days.
The City did not always ensure that responses to formal monitoring results
letters were received from subrecipients.
The Department should conduct quarterly technical assistance visits to all of its
subrecipients to ensure that participant files are adequately documented and all
Homeless Program requirements are consistently followed.
Conclusion
The City did not ensure that its subrecipients complied with Homeless Program
rules for 13 of 16 participant files reviewed. The City did not provide sufficient
guidance to the subrecipients and was unaware of the errors because it did not
monitor the subrecipients in accordance with its monitoring plan. As a result, the
City paid $59,274 in assistance for participants whose eligibility was not
adequately documented. It also paid $300 in Homeless Program funds to one
tenant who used the money for ineligible personal expenses.
Recommendations
We recommend that the Director of the Office of Community Planning and
Development, Houston, TX, require the City to
1A. Provide documentation supporting the eligibility of the 13 Homeless Program
participants listed as unsupported in appendix C or reimburse its Homeless
Program $59,274 from non-Federal funds.
1B. Reimburse its Homeless Program $300 from non-Federal funds for ineligible
funds paid to a participant.
1C. Implement procedures to ensure that it administers its Homeless Program in
accordance with requirements, including ensuring that (1) subrecipients
sufficiently document participants’ initial and continued program eligibility and
(2) it develops monitoring schedules and conducts quarterly monitoring of its
subrecipients as required, which includes reviewing a sample of participant case
files to ensure program compliance, notifying subrecipients of monitoring
results, and documenting the subrecipients’ responses.
8
SCOPE AND METHODOLOGY
We performed our audit work at the Department’s and five subrecipients’ offices and at the HUD
OIG Houston, TX, office. The audit generally covered the period June 1, 2009, through
December 31, 2010. We expanded our audit period as needed to accomplish our objective. To
accomplish our objective, we reviewed
Relevant criteria governing the program, including Recovery Act regulations, the Code of
Federal Regulations, Homeless Program laws and policies, HUD’s guidance regarding the
Homeless Program, the grant agreement between HUD and the City including the
substantial amendment, contracts between the Department and the Council, and contracts
between the Council and the subrecipients providing direct services to participants.
The City’s audited financial statements for 2009 and 2010, and the Council’s audited
financial statements for 2009.
The City’s and Council’s accounting policies and procedures as well as accounting
records to ensure compliance with Recovery Act regulations.
The Department’s and subrecipients’ organizational charts and written policies covering
the Homeless Program.
City and Council supporting documentation for invoices for reimbursement of Homeless
Program expenses. All invoices reviewed were adequately supported and for eligible
expenses.
Letters sent to subrecipients regarding City monitoring findings and responses.
A random, nonstatistical sample of 16 participant files.
We also interviewed appropriate HUD program staff and Department, Council, and subrecipient
management and staff.
We selected our sample of 16 participant files to review from 4 of the 11 subrecipient agencies that
provided direct services to Homeless Program participants. We selected samples from the three
agencies that had expended the most funds as of December 31, 2010, and an additional agency at
random that had expended a lesser amount of funds. We randomly selected between two and six
participant files for each agency, with a higher number of participant files selected from agencies
that had spent the most money.
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.
9
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:
Controls to ensure that subrecipients comply with applicable Recovery Act
and Homeless Program laws, regulations, and policies.
We assessed the relevant controls identified above.
A deficiency in internal controls 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 Deficiency
Based on our review, we believe that the following item is a significant deficiency:
The Department did not adequately provide guidance to or monitor its
subrecipients to ensure that they complied with Homeless Program laws,
regulations, and policies (finding).
10
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
Recommendation Ineligible 1/ Unsupported 2/
number
1A $59,274
1B $300
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.
11
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
CITY OF HOUSTON Annise D. Parker
Housing & Community Development Department Mayor
James D. Noteware
Director
601 Sawyer Street
Houston, Texas 77007
T. (713) 868-8300
F. (713) 868 8414
www.houstonhousing.org
May 23, 2011
Gerald R. Kirkland
Regional Inspector General for Audit, Forth Worth Region, 6AGA
U.S. Department of Housing and Urban Development
Office of Inspector General, Region VI
819 Taylor Street, Suite 13A09
Forth Worth, Texas 76102
Subject: Response to Audit Report Number 2011-FW-100X Finding
Dear Mr. Kirkland:
Finding: The City Did Not Ensure That Its Homeless Program Complied With Recover Act
Requirements.
Condition: The City did not ensure that its Homeless Program complied with Recovery Act
requirements. Specifically, it did not ensure that subrecipients properly documented eligibility for 13
of the 16 client files reviewed. This condition occurred because the City did not provide appropriate
guidance to the subrecipients or properly monitor the performance. As a result, it paid $59,274 in
Homeless program assistance for tenants whose eligibility was not adequately documented and
inappropriately paid $300 directly to one tenant.
Criteria: HUD’s Homelessness Prevention and Rapid Re-housing Program Eligibility Determination
and Documentation Guidance, Revised March 17, 2010, Chapter 2-Assessment; Ibid; HUD Federal
Resister Notice, FR-55307-N-01, section IV.A.1.a(1); HUD Federal Resister Notice, FR-55307-N-01,
section IV.A.1.a(4)
Cause: Lack of understanding of Departmental reorganization and responsibilities assigned.
Effect: Failure to conduct quarterly technical assistance visits and ensure participants files were
adequately documented all Homeless Program requirements are consistently followed.
Corrective Action: The City must provide documentation supporting the eligibility of the 13
Homeless Program participants listed as unsupported in appendix C, of the above referenced audit
report, or reimburse its Homeless Program $59,274 from nonfederal funds. The City must
reimburse its Homeless Program $300 for ineligible funds paid to a participant. The City must
implement procedures to ensure that it administers its Homeless Program in accordance with
requirements, including
Council Members: Brenda Stardig Jarvis Johnson Anne Clutterbuck Wanda Adams Mike Sullivan Al Hoang Oliver Pennington Edward Gonzalez James G. Rodriguez
Stephen C. Costello Sue Lovell Melissa Noriega C.O. “Brad” Bradford Jolanda “Jo” Jones Controller: Ronald C. Green
12
ensuring that (1) subrecipients sufficiently document participants’ initial and continued program
eligibility and (2) develops monitoring schedules and conducts quarterly monitoring of its
subrecipients as required, which includes reviewing a sample of participant case results, and
documenting the subrecipients’ response.
Comment 1 City Response: The City has cured all of the 13 files that lacked documentation supporting the
eligibility of Homeless Program participation. The 13 files are at the various agencies’ location and
ready for immediate review by HUD.
Comment 2 The City agrees to pay the $300.00 to the Homeless Program out of non-Federal funds, for ineligible
funds paid to a participant. The City is currently working on drafting procedures to address future
Security Deposit concerns. The City will seek guidance from our HUD Field Office when drafting this
procedure.
The “but for” rule will be included on the Intake Form and not just case notes written by case
managers.
Comment 3 Prior to the audit report listed above, the City implemented the monitoring schedules and conducts
the quarterly monitoring/technical assistance visits to each of the Homeless Program subrecipients.
These visits include reviewing a sample of participant case files to ensure program compliance,
ensure subrecipients sufficiently document participants’ initial and continued program eligibility,
notify subrecipients of monitoring results, and documenting the subrecipients’ responses.
If you have any questions, I may be reached at 713-868-8305 or you may contact Derek Sellers, our
department’s HUD liaison, at 713-868-8428.
Sincerely,
//signed//
James D. Noteware
Xc: Derek Sellers
JN:ST:BB:mnb
13
OIG Evaluation of Auditee Comments
Comment 1 The City said that it had corrected all 13 files that lacked adequate documentation
of eligibility and made a change to its procedures to ensure eligibility is
documented. We acknowledge the City’s timely action; however, we did not
review the files to confirm that the City corrected them.
Comment 2 The City agreed to repay the $300 from non-federal funds for ineligible funds paid
to a participant and to draft procedures to address future security deposit issues.
We agree with the City’s response to this issue.
Comment 3 The City said that it had fully implemented its monitoring plan. We did not
confirm that the City implemented the plan.
14
Appendix C
TABLE OF DEFICIENCIES
Assessment of other Assessment of No lead-
Agency/ housing support No income based paint
sample options/homelessness networks not documentation/ Reassessment certification
no. Unsupported Ineligible not documented documented determination not performed Other12
A-01 $ 4,430 X X X
A-02 $ 1,647 X X X
A-03
A-04 $ 8,654 X X X X
A-05
A-06 $ 3,942 X X
B-07 $ 300 X
B-08 $ 4,035 X X X
B-09 $ 5,340 X X X
B-10 $ 3,517 X X X
B-11
C-12 $ 6,596 X X
C-13 $ 8,151 X X X
C-14 $ 2,697 X X
D-15 $ 8,985 X X X
D-16 $ 1,280 X X X
Totals $59,274 $ 300 11 10 4 4 3 3
12
Includes the lack of a rent reasonableness certification and/or inaccurate number of months
15
The City of Houston, TX, Did Not Ensure That Its Homelessness Prevention and Rapid Re-Housing Program Complied With Recovery Act Requirements
Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-06-02.
Below is a raw (and likely hideous) rendition of the original report. (PDF)