oversight

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)

                                                                 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