oversight

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)

                                                               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




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                           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



                                               6
         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


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             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.




                                              8
                         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.




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