Issue Date
September 27, 2011
Audit Report Number
2011-HA-0004
TO: Shelley Poticha, Director, Office of Sustainable Housing and Communities, Y
//s//
FROM: Saundra G. Elion, Director, Headquarters Audit Division, GAH
SUBJECT: HUD Could Not Identify Whether Its Properties Had Been Included in the
Recovery Act Weatherization Assistance Program
HIGHLIGHTS
What We Audited and Why
We audited the Office of Sustainable Housing and Communities’ implementation
of the U.S. Department of Housing and Urban Development’s (HUD) partnership
with the U.S. Department of Energy (DOE) to coordinate Federal weatherization
efforts nationwide. This audit was part of our fiscal year 2010 audit plan. Our
objective was to determine whether HUD multifamily properties were eligible to
receive American Recovery and Reinvestment Act funding under DOE’s
Weatherization Assistance Program.
What We Found
We could not answer our objective because HUD did not have records on which
properties had been weatherized. Although HUD entered into a memorandum of
understanding with DOE to improve energy efficiency in its qualified housing
properties, HUD did not require DOE to provide data on which HUD qualified
housing properties had been selected to be weatherized. Specifically, HUD did
not require DOE to report which HUD properties participated in the
weatherization program. This condition occurred because HUD did not define or
communicate its expectation for measuring whether its properties had been
weatherized. As a result, HUD could not identify improved properties or cost
savings achieved through reduced energy costs.
What We Recommend
We recommend that the Director of the Office of Sustainable Housing and
Communities request reports from DOE that identify which HUD qualified
housing properties have been weatherized.
Auditee’s Response
We provided the discussion draft to the Office of Sustainable Housing and
Communities for comment on September 20, 2011. We received written
comments from the Office on September 26, 2011, that concurred with our
finding and recommendation. The completed text of the Office’s response, along
with our evaluation of that response, can be found in appendix A of this report.
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TABLE OF CONTENTS
Background and Objective 4
Results of Audit
Finding 1: HUD Could Not Identify Whether Its Properties Had Been 6
Weatherized
Scope and Methodology 9
Internal Controls 10
Appendix
A. Auditee Comments and OIG’s Evaluation 12
3
BACKGROUND AND OBJECTIVE
Historically, the U.S. Department of Energy’s (DOE) Weatherization Assistance Program mainly
served single-family properties because of the cumbersome income verification requirements in
applying for weatherization assistance and the complexities of completing the weatherization of
multifamily properties. It was less tedious for local weatherization agencies providing
weatherization services to verify the income of a single tenant in a single property and carry out
the weatherization of that property in the 6-month timeframe established by DOE. On the other
hand, to qualify a multifamily property for weatherization assistance, the income of each tenant
in each unit of a building had to be verified to ensure that at least two-thirds of the occupants in
the building met DOE’s income requirements. The local weatherization agencies then had to
ensure that the contractors engaged to provide these services were capable of completing the
weatherization of all units in the building in a timely manner.
Three events in early 2009 increased the opportunity for more of the U.S. Department of
Housing and Urban Development’s (HUD) multifamily (qualified housing1) properties to be
weatherized:
On February 17, 2009, Congress passed the American Recovery and Reinvestment Act,
which provided $16 billion to DOE and HUD that could be used to improve the energy
efficiency of existing homes and rental units as well as other activities. Of the $16
billion, DOE received $5 billion for the Weatherization Assistance Program.
On February 27, 2009, HUD and DOE established a partnership to “streamline and better
coordinate federal weatherization efforts” to make it easier for families to weatherize
their homes. This collaboration was also intended “to help catalyze a home
performance/energy retrofit industry nationwide.”
On May 6, 2009, the Secretaries of HUD and DOE signed a memorandum of
understanding to formalize the partnership relative to the use of the Weatherization
Assistance Program funds for HUD qualified housing.
This memorandum became the basis for defining and publicizing requirements and decisions that
HUD and DOE reached on eligibility requirements applicable to multiunit buildings. The
memorandum was also intended to streamline the weatherization income eligibility verification
process for residents in approximately 1.1 million public housing units, another 1.2 million
privately owned federally assisted units, and nearly 950,000 units financed with low-income
housing tax credit. In January 2010, DOE published in the Federal Register a final rule that
addressed (1) income requirements, (2) protections for rent increases, and (3) no undue or
excessive enhancements to the value of the dwelling units. Regarding income requirements and
rent increases, DOE allowed HUD to identify which of its qualified housing properties met
1
For this report, qualified housing includes HUD’s public housing and assisted housing projects that receive project-
based Section 8 assistance, Supportive Housing for the Elderly, and Supportive Housing for Persons with
Disabilities.
4
DOE’s income eligibility and protection from rent increase requirements. The properties
included on HUD’s lists did not need further evaluation or verification of these factors when
being considered for weatherization services.
As of May 17, 2011, HUD had provided DOE lists of its qualified housing for DOE’s
Weatherization Assistance Program funded by the Recovery Act. These lists included 41,310
public housing buildings, 10,814 multifamily housing properties, and 9 low-income housing tax
credit properties.
Our objective was to determine whether HUD multifamily properties were eligible to receive
Recovery Act funding under DOE’s Weatherization Assistance Program.
5
RESULTS OF AUDIT
Finding 1: HUD Could Not Identify Whether Its Properties Had Been
Weatherized
Although HUD had entered into a memorandum of understanding with DOE to improve energy
efficiency in its qualified housing properties, HUD did not require DOE to provide data on which
HUD qualified housing properties had been selected to be weatherized. Specifically, HUD did
not require DOE to report which HUD properties participated in the weatherization program.
This condition occurred because HUD did not define or communicate its expectation for
measuring whether its properties had been weatherized. As a result, HUD could not identify
improved properties or cost savings achieved through reduced energy costs.
HUD Dedicated
Resources to Fulfill the
Memorandum of
Understanding
In fulfillment of the memorandum of understanding, HUD dedicated personnel to
assess income eligibility, match tenants to the units of the buildings in HUD
properties, and compile lists of HUD qualified housing properties that consisted
of 52,133 income-eligible properties and buildings. HUD carried out its
responsibilities under the memorandum through the Offices of Sustainable
Housing and Communities, Policy Development and Research, Public and Indian
Housing, and Multifamily Housing.
To coordinate the DOE weatherization partnership, HUD assembled two working
groups composed of energy experts, managers, and program staff from the
Offices of Sustainable Housing and Communities, Policy Development and
Research, Public and Indian Housing, and Multifamily Housing. The initial
working group convened from January 2009 until January 2010 and met about 10
to 15 times. The second group lasted about 8 months, from January until August
2010, and the members met about 12 times. The working groups met on an “as-
needed basis” and addressed matters ranging from reducing the barrier to income
verification and increasing HUD’s multifamily properties’ participation to
outreach activities with stakeholders to implement the final rule for DOE’s
weatherization program.
The coordination of the HUD-DOE partnership consumed HUD resources
internally and externally to assemble working groups, resolve issues, coordinate
outreach, and educate stakeholders. Despite this undertaking, HUD could not
determine if it derived any direct benefits by entering into this memorandum with
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DOE. At a minimum, HUD should have required DOE to identify its properties
that had been weatherized.
HUD Did Not Request
Reports on Weatherized
Properties
As part of HUD’s fiscal year 2009 annual performance plan, strategic goal B, to
promote decent affordable housing, HUD planned to reduce energy costs in HUD-
financed, -assisted, and -insured housing. That plan reported that HUD
annually spends more than $5 billion on energy, primarily through
utility allowance to renters, housing assistance payments to private
building owners, and operating grants to public housing agencies.
Energy efficiency improvements could yield significant cost
savings; a 5 percent reduction could save $2 billion over the next
10 years.
Although HUD had as a goal the reduction of energy costs, it did not request from
DOE reports that identified which properties had been weatherized. In September
2009, shortly after signing the memorandum of understanding with HUD, DOE
issued Weatherization Program Notice 10-13A, entitled “ARRA [Recovery Act]
Reporting Requirements: OMB [Office of Management and Budget] Quarterly
and DOE Monthly Reporting Requirements Under the American Recovery and
Reinvestment Act of 2009 for the Weatherization Assistance Program.” The
purpose of Notice 10-13A was to provide guidance to weatherization program
grantees on OMB’s quarterly reporting and DOE’s monthly reporting
requirements related to Recovery Act funds.
In accordance with Notice 10-13A, DOE must provide a means to effectively
monitor and report the return on investment in terms of jobs created and homes
weatherized. Recovery Act grantees are required to report quarterly and monthly
weatherization data to DOE. Specifically, the quarterly reports require grantees to
report programmatic activity, which includes the outlay of funds, units
weatherized and re-weatherized, demographic information related to housing
type, and occupancy required. This information could be beneficial to HUD if
DOE amended this reporting requirement to include a field that specifically
identified whether the weatherized units were HUD qualified housing.
According to the Office of Sustainable Housing and Communities coordinator for
energy policy, HUD would like to and intends to find a way to report on HUD
properties that had been weatherized through DOE’s weatherization program.
Although DOE does not collect that information as a part of its regular reporting
system, HUD continues discussions with DOE to find a solution. Also, a
representative from HUD’s Office of General Counsel said, “it would have been
7
great to be able to say that the number of multifamily participation [in the DOE
weatherization program] has increased.”
Neither HUD nor DOE could provide us with reports that identified how many
and which HUD qualified housing had been weatherized. Such reports would
have allowed HUD to estimate its annual cost savings through the reduction of
energy costs as a result of the increased multifamily participation in DOE’s
weatherization program.
During our review, Office of Sustainable Housing and Communities staff
informed us that DOE had contracted with the Oak Ridge National Laboratory to
conduct a study of its weatherization program. This study was expected to
identify the number of HUD qualified housing properties that had been
weatherized. The preliminary report is scheduled to be issued during the spring of
2012 and the final report in 2013.
Conclusion
While the barriers to income verification may have been lowered as a result of the
HUD-DOE partnership, actual participation in the weatherization program could
not be determined. Increased participation in this program by HUD’s qualified
housing properties would have directly contributed to HUD’s goal to reduce
energy costs and represented a return on investment for properties weatherized. If
HUD had received detailed reports on which properties had been weatherized, it
would have been able to determine how many of its properties had been
weatherized and estimate the resulting cost savings.
Recommendation
We recommend that the Director of the Office of Sustainable Housing and
Communities
1A. Request reports from DOE that identify which HUD qualified housing
properties have been weatherized.
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SCOPE AND METHODOLOGY
We performed our audit work at HUD headquarters, Washington, DC, between May and August
2011. Our audit generally covered the period February 2009 through May 2011.
To accomplish our objective, we
Reviewed applicable laws, regulations, and a memorandum of understanding between
HUD and DOE.
Reviewed HUD’s qualified housing lists that HUD provided to DOE for the
weatherization program partnership.
Conducted interviews with HUD personnel and DOE Weatherization Assistance Program
staff.
For this review, we did not assess the computer-processed data because the data used in the report
were not essential to our results.
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 finding 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:
Program operations – Policies and procedures that management has
implemented to reasonably ensure that a program meets its objectives.
Compliance with applicable laws and regulations – Policies and procedures
that management has in place to ensure that resource use is consistent with
laws and regulations
We assessed the relevant controls identified above.
Internal Control Deficiency
A deficiency in internal control exists when the design or operation of a control
does not allow management or employees, in the normal course of performing
their assigned functions, the reasonable opportunity to prevent, detect, or correct
(1) impairments to effectiveness or efficiency of operations, (2) misstatements in
financial or performance information, or (3) violations of laws and regulations on
a timely basis.
We evaluated internal controls related to the audit objective in accordance with
generally accepted government auditing standards. Our evaluation of internal
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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 the Office of Sustainable Housing and Communities’ internal
controls for managing its programs.
Based on our review, we believe the following item is an internal control
deficiency:
HUD could not identify whether its properties had been weatherized
(finding 1).
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APPENDIX
Appendix A
AUDITEE COMMENTS AND OIG’S EVALUATION
Reference to OIG Auditee Comments
Evaluation
Comment 1
12
Comment 2
13
14
15
16
17
OIG Evaluation of the Office of Sustainable Housing & Communities Comments
Comment 1 We concur with Office of Sustainable Housing and Communities’ planned action
to obtain from the Oak Ridge Lab survey results regarding the number of HUD
properties that had been weatherized. In the future, the Office of Sustainable
Housing and Communities should request that DOE provide HUD with current
data to track and identify the number of HUD properties that have been
weatherized.
Comment 2 We concur with the planned action to request reports from DOE that identify
which HUD qualified properties were weatherized. While HUD cannot “require”
DOE to alter its reporting requirements, we strongly encourage the Office of
Sustainable Housing and Communities to collaborate and explore methods to
enhance the reporting requirements in DOE’s Notice 10-13A that are already in
place.
18
HUD Could Not Identify Whether Its Properties Had Been Included in the Recovery Act Weatherization Assistance Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-09-27.
Below is a raw (and likely hideous) rendition of the original report. (PDF)